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The largest penalty of a whopping $5 billion levied against Facebook by FTC. A move will see Zuckerberg surrenders sole dominance over privacy decisions.
The Federal Trade Commission disclosed the details of Facebook Inc. acceptance to cough a whopping $5 billion to settle a U.S investigation into years of privacy violations. The agreement announced on Wednesday included new restrictions to the way the social media powerhouse safeguards subscribers data in anticipation that it would revolutionize the company’s entire privacy culture.
In a statement, FTC revealed:
“The $5 billion penalties against Facebook is the largest ever imposed on any company for violating consumers’ privacy and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide,”
This is one of the historical penalties ever imposed by the United States government for any infringement.
The sealed agreement which runs for 20 years orders tech giant to modify their approach on data privacy. This will mark the end of Mark Zuckerberg, Chief Executive Officer’s dominance authority over privacy decisions, forming an independent privacy committee at the board level and in a fashion, the company will manage interaction with third-party developers. The agreement also stipulates the latest guidelines for how the firm will be responsible for future privacy offenses.
The agreement involves multiple provisions that weaken the authority of the Chief Executive Officer’s decision making. The 35-year-old CEO will also be expected to send reports to FTC on a quarterly and yearly basis, verifying that the firm is adhering with the settlement.
How Facebook Deceived its Users
The settlement is the climax of a years` lengthy investigation into whether the company breached the initial deal with the FTC over subscribers’ Privacy after it reported on an explosive newspaper investigation, that it had authorized subscribers` individual data to be accessed illegally by Cambridge Analytica, a political targeting firm, which was popular in the 2016 American presidential election. Pundits, including the two Democrats on the commission, observe that it did not stretch far enough.
Rohi t Chopra, Democratic Commissioner in his dissent argued:
“Facebook flagrantly violated the FTC’s 2012 order by deceiving its users and allowing pay-for-play data harvesting by developers. … The settlement imposes no meaningful changes to the company’s structure or financial incentives, which led to these violations.”
Another Democratic Commissioner Rebecca Kelly Slaughter mentioned in her dissenting statement:
“Even though this settlement is historical, to support it, I would have to be confident that its combined terms would effectively deter Facebook from engaging in future law violations and send the message that order violations are not worth the risk. I do not believe that is the case.”
Zuckerberg’s Take on The New Privacy
In a statement posted on the Chief Executive Officer’s Facebook page on Wednesday, he said the firm would implement a completely different standard for the industry:
“Going forward, when we ship a new feature that uses data, or modify an existing feature to use data in new ways, we’ll have to document any risks and the steps we’re taking to mitigate them.”
He went ahead to say that:
“We expect it will take hundreds of engineers and more than a thousand people across our company to do this important work. And we expect it will take longer to build new products following this process going forward.”
Zuckerberg mentioned that one of the company’s most competent product leaders would occupy the new duty of chief privacy officer of products to spearhead the firm’s latest privacy efforts.
Hours after making history for $5 billion FTC penalty on privacy issues, Facebook records Q2 earnings hit with $16.9 billion revenue with adjusted EPS of $1.99 compared to the Zacks Consensus Estimate of $16.45 billion with $1.90EPS.
Facebook (FB) stock hit about 3% mark after-hours trading.