Last year, the US Federal Trade Commission (FTC) launched an investigation into Facebook’s privacy practices, hoping to determine whether or not the social network violated a 2011 agreement. The company isn’t holding its breath for the verdict however, as its first quarter financial reports earmark $3 billion for a potential fine.
The 2011 consent order was put in place by the FTC to ensure that Facebook sought the permission of its users before collecting and sharing data beyond what established privacy settings allowed. This was once again called into question when the Cambridge Analytica scandal reared its ugly head last year, using the data from millions of accounts to further political agenda.
“We reasonably 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, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet,” reads the financial report. “
Facebook admits that this loss can range as high as $5 billion under current law, which would be the highest penalty given to a technology company in US history. “The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”
The company has unfortunately seen a 51% year-over-year decline in net income as a result of this expense, claiming that without it, operating margins would have been 20% higher, tax rates would have been 14% lower and analyst expectations would have been surpassed. Despite this, Facebook’s overall user base totals a staggering 2.3 billion, increasing 8% year-over-year.
“We had a good quarter and our business and community continue to grow,” explained Zuckerberg. “We are focused on building out our privacy-focused vision for the future of social networking, and working collaboratively to address important issues around the internet.”
KitGuru Says: While we have no idea which way the FTC will sway with its conclusion, the regulator is running out of mercy for the controversial company. At the very least, Zuckerberg is taking steps to fully realise its newfound privacy-focus, even if it will take a few more years yet.