Last week, we discussed the FTC’s (Federal Trade Commission) $5 billion fine on Facebook (FB). On July 24, the FTC formally announced the fine along with statements of support and dissent from commissioners. The fine is the second-largest in the FTC’s history and the largest on any tech company. Google had to pay $22.5 million to the FTC back in 2012. The fine on Facebook makes Google’s fine look minuscule.
Three Republican commissioners voted for the fine, while two Democratic commissioners dissented, calling it inadequate. Facebook is set to announce its second-quarter earnings results after the market closes on July 24. Reuters-surveyed analysts expect it to post EPS of $1.88 on revenue of $16.5 billion. In short, the fine is less than a month’s worth of revenue for Facebook.
The fine print
Apart from paying the fine, Facebook will have to conduct a thorough privacy review of each of its new products. It will then submit reports to CEO Mark Zuckerberg and a third-party assessment agency quarterly. Facebook will also have to obtain purpose and use certificates from third-party developers who want to access its user info. The FTC’s order also says Facebook has to create a new corporate governance structure to monitor processes, identify data breaches, and improve accountability.
Why did Democratic commissioners dissent?
FTC commissioners Rohit Chopra and Rebecca Kelly Slaughter dissented against the order. Both dissent notes called the fine insufficient and raised concerns about the failure to hold Zuckerberg liable. The order makes it necessary for Zuckerberg to submit quarterly and annual compliance certificates. False certificates could land him in trouble via civil and criminal penalties.
How is Facebook stock responding?
News of the fine has been circulating for the past few days, so earnings-related news and speculation will be a greater driver for the stock today. At 1:00 PM ET, FB was down 0.6%.
Big tech in trouble?
On July 23, the Wall Street Journal reported that the US Department of Justice was opening a broader antitrust probe into big tech companies. The probe could spell trouble for big tech companies, including Google (GOOG) (GOOGL), Apple (AAPL), Amazon (AMZN), and Facebook. EU agencies also have Amazon on their radars. Amazon and Google are set to release their earnings results tomorrow. Apple is scheduled to announce its earnings results on July 30.