Facebook expects to be hit with $3-5 billion fine by the FTC
The record-breaking, multi-billion dollar penalty relates to FTC's ongoing investigation following the Cambridge Analytica scandalEuropost
In its quarterly results reported to investors, Facebook said on Wednesday that for now it was setting aside $3bn to pay in potential penalties to the Federal Trade Commission, but that the eventual number could be much higher by the time the FTC’s investigation is over. The possible FTC penalty “is not expected to be tax-deductible,” the company added in a footnote.
“We estimate that the range of loss in this matter is $3.0bn to $5.0bn. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome,” the company said, adding that at the end of March it had $45.2bn in cash, cash equivalents and marketable securities.
Yet, this would be the largest ever fine by the FTC. Such a fine would be also the largest monetary penalty the company has ever faced to date for its missteps, even though it still pales in comparison to its billions in annual profits.
News comes after last year, FTC announced it was investigating reports that the British consulting firm Cambridge Analytica improperly gained access to the data of tens of millions of Facebook users, seven years after Facebook previously agreed to improve its privacy practices to settle an earlier dispute with the FTC. The commission is also weighing whether and how to hold Facebook CEO Mark Zuckerberg personally accountable for mismanaging users’ private data, two sources familiar with the discussions told NBC News last week.
Facebook did not say how close it was to a possible settlement agreement with the FTC. Bloomberg News, however, reported on Wednesday that the company was in “advanced talks” with a group of state attorneys general to resolve a parallel investigation by them.
On a conference call with Wall Street analysts, Chief Financial Officer Dave Wehner was asked how an FTC case might force changes to Facebook’s business model. He declined to comment. “Can’t really comment further, as this is an ongoing matter,” he said.
Meanwhile, Facebook said in its results that its platform had 2.38 billion monthly active users worldwide at the end of March, an increase of 8 percent from a year earlier. It reported revenue for the first three months of the year of $15.1bn, an increase of 26% from the same period a year earlier.
Zuckerberg told analysts on the conference call that Facebook would spend much of the next five years focusing on a shift toward private encrypted messaging, with less of an emphasis on the public posts and news feeds that have been at the company’s core.
He said, though, that the shift won’t have an immediate impact on the company’s ad business, telling analysts he’s “confident that won’t be a significant issue.”