There's no guarantee Facebook will reach a settlement agreement with the FTC: The agency could instead pursue a federal court case.
Settling with the FTC would resolve one of the biggest liabilities hanging over the company in the wake of news that data on tens of millions of users was obtained by now-defunct consulting firm Cambridge Analytica. An agreement with the agency could also impose changes to the company’s business practices.The news of the $3-billion charge came as Facebook reported its first-quarter financial results.
That pleased investors. The stock, which had edged down less than 1% in regular trading, jumped as much as 5.7% in after-hours trading after the earnings report. Facebook is reaching saturation in its most lucrative advertising markets, the United States and Europe, while faster growth is coming from developing countries that aren’t as profitable. The company’s sales gains are increasingly being driven by photo-sharing app Instagram and advertising in its Stories feature, a Snapchat copycat.
The charge related to the FTC case doesn’t guarantee the company will reach a final agreement with the agency. The FTC has the option of pursuing a federal court case to enforce the 2011 consent order if it can’t reach an acceptable agreement. The FTC declined to comment on Facebook’s disclosure. A $3-billion settlement would be a record for the agency in a privacy case.
Although the amount of money at issue in the talks with the states couldn’t be learned, states have a track record of extracting significant penalties from companies for wrongdoing, most notably a sweeping $246-billion settlement with the tobacco industry in the 1990s. In September, Uber paid $148 million to 50 states and the District of Columbia to settle claims related to a large-scale data breach in 2016 that exposed the personal information of more than 25 million of its U.S. users.
Are we supposed to feel sorry for them?
Facebook's investors should really be thinking about getting out of this sinking ship.