Expecting to pay up to $5B for Cambridge Analytica, Facebook sets aside $3B for FTC fines

Facebook is preparing to pay a record-setting fine to the U.S. Federal Trade Commission for privacy violations following the Cambridge Analytica fiasco, as the social network is earmarking $3 billion to go towards its expenses and a potential $5 billion fine, depending on how it negotiates with the regulator.

The FTC has been in negotiations with Facebook for a few months, with both sides keen to work out some kind of settlement over the matter to avoid heading towards a protracted and expensive courtroom tussle. While the value of the fine remains unknown, it has the potential to be the highest the FTC will ever level against a tech firm, far above the 2012 fine paid by current record holder Google of $22.5 million.

In its first-quarter earnings report, Facebook advises it estimated "a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices." While it has set aside $3 billion, it is prepared to pay more, estimating the loss could be in the range of $3 billion to $5 billion.

"The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome," the filing advises. The amount could even end up being smaller than $3 billion, as Facebook could in theory agree to changes in how it operates its business and increased security in exchange for a smaller fine.

While substantial, the quarterly results also reveal the estimated fine may not affect Facebook's finances that much, now that it has set aside cash. The $3 billion is approximately 6% of its on-hand cash and marketable securities, with the company reporting $2.4 billion in profit on $15.1 billion in sales, up 26 percent year-on-year.

The Cambridge Analytica data collection lasted for over two years. Over that time, Facebook generated approximately $19 billion in profit alone.

The FTC started its investigation into Facebook in March 2018, after the discovery of the Cambridge Analytica scandal, where Facebook user data and that of their connected friends were compiled and used to build voter profiles for some 71 million Americans, even those not opting in to the data collection, which may have been used by participants in the 2016 US Presidential Election.

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15 Comments

macseeker

said about 4 years ago

facebook should lose more than 100 billion dollars or even more. They have the money. An old axiom here, never trust advertisements where ever they're published.

ArloTimetraveler

said about 4 years ago

Whatever happened to the good all days, like tar and feathering, he has the money, I want to see him humiliated in some public manner.

ols

said about 4 years ago

Pay the fine and then business as usual - I don’t think so

1STnTENDERBITS

said about 4 years ago

"In terms of average revenue per user, Facebook reported $6.42 for the first quarter of 2019, up 16 percent year-over-year. It also reported daily active users of 1.56 billion, up 8 percent year over year." - from 9to5Mac article
Until this is negatively affected, FB is going to be FB and continue FB'ing. They will weather any storm because their users typically don't care about the things that matter to the tech nerd crowd. They are well on their way to building a WeChat type of environment where almost every aspect of a users digital life can be accessed and managed through their software... without leaving... ever. FB allows the masses to live their best life, be it real or imagined. This fine, as large as it may be, will be viewed as the cost of doing business as long as the revenue per user and daily active user numbers remain positive.