FTC’s $5 billion deal with Facebook is a paper tiger with a partisan tail

When a large number hides a plethora of flaws.

(Photo by Mustafa Yalcin/Anadolu Agency/Getty Images)
(Photo by Mustafa Yalcin/Anadolu Agency/Getty Images)

The Federal Trade Commission’s Republican majority wants you to believe they’ve just dunked all over Mark Zuckerberg. But the $5 billion Facebook fine and related settlement conditions the commission rolled out with great fanfare Wednesday morning are actually far less than meets the eye.

A few hours after issuing a triumphant announcement, the trio of commissioners who approved the deal were scrambling to defend their work at a press conference.

The deal closes a year-long FTC investigation into Facebook business practices exposed by journalists who were working on stories about psychological manipulation of voters during the 2016 election.

The investigation found that the company misled users about how various privacy settings worked, and in effect facilitated the sorts of tricks Cambridge Analytica employed to extract user data — the same data used to build political weapons. Once a federal judge approves the settlement, it will indemnify Zuckerberg and other top executives from liability for the privacy lies told to users during the period of time covered by the FTC’s year-long investigation.


This was, in effect, a narrow decision along party lines. Two of the five commissioners, both Democrats, voted to reject the deal, registering a litany of dissents including objections to the broad liability shield the deal extends to Zuckerberg and other executives. The three commissioners who approved the settlement were Republicans. (All of the current commissioners were sworn in between May and September of 2018; by rule, no more than three of the five commissioners may be from the same political party.)

The committee’s majority believed Wednesday’s settlement was the best that the FTC could manage – and far better than what the government might have won had it taken Facebook to court.

Though Facebook is now out of the FTC woodshed, the commission’s broader exploration of the voter-duping campaign continues in the form of a separate enforcement action against Cambridge Analytica. But rather than soothe critics of the Facebook deal, the contrast between the Commission’s treatment of the two firms only underscored one dissenter’s argument against settling with Zuckerberg in this manner:

The three Republican commissioners’ primary argument that Facebook has, in fact, been held accountable for their conduct is the size of the financial penalty. The majority took pains to emphasize that it’s the largest such fine in history, by a factor of 20.

“The price of privacy violations just went up,” Commissioner Noah Phillips told reporters Wednesday.

But this focus on dollar figures is a swindle, Commissioner Rohit Chopra argued in his written dissent from the decision.


A comparison of one fine to others is not actually a meaningful rubric for grading an enforcement action. The purpose of such actions is to penalize past misconduct and discourage future misconduct. The face-value dollar figure – and the fact that it’s more than other, past face-value dollar figures – doesn’t tell you anything about what the fine means to Facebook.

To understand whether the $5 billion deal is severe or silly, you have to figure out how much money Facebook made from the misconduct you’re trying to penalize. Chopra’s dissent makes clear that the FTC doesn’t really know how much profit Facebook turned off of all this, and therefore cannot say that this fine is a meaningful punishment.

Moreover, the market has determined that Facebook is worth hundreds of billions of dollars. So while this settlement may be large relative to past fines, it is, for Facebook, relatively insignificant.

“A civil penalty should exceed unjust gains – otherwise we are allowing a defendant to break even or even profit by breaking the law,” Chopra wrote. Previous commissions have sought penalties five times the amount of established profit from a given violation. That the commission’s majority would emphasize the large numbers involved in this instance, rather than the well-established effective-punishment ratios of old should invite skepticism.

The Republican commissioners’ fallback argument on behalf of their settlement involves the new rules the government is imposing on Facebook alongside the fine.

The company will have to create a new board-level committee on privacy and fill it with actual experts selected by an independent nominating panel rather than by Zuckerberg or other insiders. It will also have to: conduct and document a much more thorough review of potential technologies and features to protect user privacy; record why it decides not to use a given potential option; and get executives including Zuckerberg to sign legal documents asserting the firm’s compliance with those paper-trail requirements under the deal.


Yet these measures do not force Facebook to behave any differently than it does now, as Chopra and others were quick to note. Indeed, the settlement effectively allows Facebook to gather the same user data and sell targeted ads in largely the same way it always has, with more extensive record-keeping and more robust in-house critique providing the only hope for future accountability.

The Republican commissioners defended these new documentary requirements as “far more than documentation,” as Commissioner Christine Wilson put it.

“It focuses the mind when an executive has to sign something under penalty of perjury,” she said.

But that argument appeared inconsistent with the Republican appointees’ first-order defense of the deal, in which they argued that litigating something as obtusely technical as Facebook’s privacy practices would be too slow, too expensive, and too risky to be worthwhile. Facebook’s deep pockets can buy it the best possible representation in court cases that hinge on matters so technical that the judiciary may struggle to understand them. Justice delayed, the trio of Commissioners argued, would have been justice denied.

And the notion that the new required documentation would “focus the minds” of Facebook executives under the potential threat of a perjury charge would face, for all practical purposes, the same impediments. The merits and factual disputes of any such case would still hinge on similarly technical and abstruse points of fact, potentially beyond the ken of judicial officials. Facebook’s legal team would be just as robust, patient, and stall-prone.

The Republican commissioners are therefore deploying a moebius-strip logic. Facebook’s deep pockets, elite legal team, and technical sophistication guaranteed a slow, drawn-out court case — and because “our authority in such cases is quite limited,” Chairman Joe Simons said, the FTC’s “only real choice here was to take a historic settlement.” But in response to criticisms of that settlement, the Republican commissioners insisted that next time a government body faces the same sort of choice between taking Facebook to court and striking a deal, it would make the opposite decision.

“Even though this settlement is historic, in order to support it I would have to be confident that its combined terms would effectively deter Facebook from engaging in future law violations and send the message that order violations are not worth the risk,” dissenting Commissioner Rebecca Slaughter wrote. “I do not believe that is the case.”

Even that hypothetical “next time” is highly unlikely to come soon enough to matter to the next round of voter manipulation and weaponized misinformation rings across social media firms. The president who appointed these commissioners after winning an election tainted by intentional weaponization of Facebook will go into his reelection campaign with the terrain largely the same: Social media companies still make their own rules.

Indeed, the trio of commissioners who support the deal acknowledged that users would likely notice no changes when they interact with Facebook.

In summation: A company founded under the motto “move fast and break things” helped break American democracy. Its only official punishment for that activity is, in effect, the federal government taking Zuckerberg’s lunch money and sending him on his way with a stern but hollow warning that next time they won’t be so nice.