Facebook Probe Wraps Up in Ireland: Is a Fine Coming?

Ireland’s privacy watchdog has concluded its investigation into Facebook over its compliance with the European Union’s data protection law, called the GDPR (General Data Protection Regulation), CNBC reports. The Irish Data Protection Commission also investigated Twitter’s (TWTR) compliance with the GDPR. The Twitter probe is also complete.

Ireland could slap Facebook with a privacy fine of over $2.2 billion

In the case of Facebook (FB), the now-completed Irish privacy investigation focused on its WhatsApp subsidiary specifically. After completing the probe, the next step is for Irish authorities to determine whether Facebook’s WhatsApp broke GDPR rules. If the authorities conclude that WhatsApp breached the European Union’s data protection rules, then Facebook would be fined. A company can be fined up to 4.0% of its global revenue for breaking the European Union’s GDPR law. Facebook generated $56 billion in global revenue in 2018. That indicates that Ireland could slap the company with a fine of more than $2.2 billion.

We believe such a fine would come as a huge blow to Facebook’s bank account and development projects. Just a few months ago, the company agreed to pay $5.0 billion to settle a privacy investigation by the FTC. In Turkey, it’s taken on privacy fines exceeding $0.5 million so far in 2019.

Moreover, Facebook could part with $40 million to compensate advertisers who accused it of providing false ad measurements. As if all that isn’t enough, Facebook remains the subject of multiple antitrust investigations in the US. We believe these antitrust probes could result in more fines for the company, thereby slashing its cash reserve even further.

Fines risk derailing FB’s development programs

Right now, Facebook is undertaking several capital-intensive development projects that could suffer if the company continues to lose money via fines. It will spend over $1.0 billion to complete the construction of a data center in Singapore. This will be its first data center facility in Asia, where its social media user base continues to swell.

Facebook may also need upward of $1.0 billion for its African undersea cable ring project. What’s more—it continues to push for a more diversified business, which has seen it venture into the hardware market. The company has thusfar been making VR headsets under its Oculus subsidiary. Now it wants to start producing augmented reality devices as well.

Facebook recently entered the streaming media device market through its Portal unit. Through Oculus and Portal, Facebook hopes to break its overreliance on the advertising market. However, Oculus and Portal still require huge investments before they can begin to contribute materially to Facebook’s top line.

Given Facebook’s many cash needs, we believe a huge Ireland privacy fine could temper the company’s development plans.