Its share price jumped by nearly 2% after reports of the record-breaking fine emerged on Friday.
The news: Facebook is set to be fined $5 billion by the Federal Trade Commission, the US competition watchdog, according to reports from the Wall Street Journal and the Washington Post. The 3-2 vote in favor of the settlement stuck to party lines, with Republicans voting for it and Democrats against. It’s the largest fine ever levied by the FTC, yet when the news broke, Facebook’s share price rose by nearly 2% during late trading on Wall Street on Friday. That added about $10 billion to its market value, more than double the cost of the fine.
Why? It’s because the settlement doesn’t challenge anything about the way Facebook collects and shares data, and thus won’t affect its very profitable business model, which relies on advertising.
Other terms: The FTC’s settlement isn’t just financial. Facebook will now have to document its decisions on data before offering new products, keep a closer eye on how third-party apps tap users’ information, and its top executives will have to attest that the company has protected privacy, the Washington Post reports. You might have thought these were mandatory already, but apparently not. Perhaps that’s partly why the settlement was received so badly by so many politicians and industry-watchers.
Next steps: The FTC has now referred the settlement to the Justice Department for sign-off.
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