SAN FRANCISCO (AP) — The possibility of a $5 billion federal privacy fine for Facebook suggests that U.S. regulators may be taking a cue from the large penalties their European counterparts have been handing out to U.S. technology giants.
While investors appear to have shrugged it off for now, the potential fine from the U.S. Federal Trade Commission would be more than a slap on the wrist for Facebook, especially if it comes with strings that limit how the company targets advertising to its massive user base.
Facebook said Wednesday it is planning for a fine between $3 billion and $5 billion and formally set aside $3 billion for the FTC, which is investigating whether the social network violated its users’ privacy. The amount is a contingency against a possible penalty; Facebook noted that the “matter remains unresolved.”
The company’s disclosure is the latest indication of U.S. moves toward tighter regulation of the technology industry, which has enjoyed years of nearly unrestricted growth with little oversight. Talk of a national data-privacy law is swirling around Capitol Hill, states like California have already forged ahead with their own measures, and U.S. presidential candidate Elizabeth Warren has proposed breaking up the biggest U.S. tech companies.
In Europe, regulators have routinely slapped Google and other U.S. firms with major fines. Google now owes almost $10 billion in such penalties for alleged anticompetitive behavior; its parent company Alphabet is appealing. EU watchdogs also hit Apple with a back-taxes bill of more than $15 billion .
Facebook, meanwhile, is already preparing for a future where targeted ads play a smaller role in its business, flexing its muscles in e-commerce and payments and touting a coming shift toward private communications.
The one-time charge slashed Facebook’s first-quarter profit considerably, although revenue grew by 26% in the period. The FTC has been looking into whether Facebook broke its own 2011 agreement promising to protect user privacy.
Investors shrugged off the charge and sent the company’s stock up more than 9% to nearly $200 in after-hours trading. Wall Street in general tends to forgive one-time accounting dents in companies’ earnings reports and focus instead on how the overall business is doing. Besides, even if Facebook ends up paying $5 billion this year, it’s unlikely to seriously harm a company that’s expected to rake in profit of $22 billion this year...
