Wednesday 24 July 2019 10:49 pm

Facebook beats estimates after record $5bn fine over privacy violations

Revenue at Facebook in its second quarter has topped analysts’ estimates, hours after it agreed to pay a record $5bn penalty to the US Federal Trade Commission (FTC) relating to violations of its users’ privacy rights.

In the second consecutive quarter for beating expectations, Facebook’s revenue rose to $16.9bn from $13.2bn a year ago, surpassing the average estimate of $16.5bn. Shares bounced as much as two per cent in after-hours trading.

The $5bn settlement is the culmination of a probe into the role of Facebook in 2017’s Cambridge Analytica scandal, in which the personal data of millions of users was misused for political purposes.

The social media giant also today settled an investigation by the US Securities and Exchange Commission on the same topic, agreeing to a further $100m penalty.


Facebook had set aside $3bn in anticipation of the settlement last quarter, and said tonight that it took a $2bn charge in the second quarter to account for the remainder. It reported 2.7bn monthly users and 2.1bn daily users across its portfolio of apps – Facebook, Messenger, Instagram and Whatsapp – showing little growth from last quarter.

The FTC said Facebook will create an independent board to handle privacy issues at all of its companies as part of the deal, and will better police its app developers.

The social media giant also revealed in its results that it now faces another investigation by the FTC into whether it engages in anti-competitive practices, alongside a slew of other major digital firms.

The FTC alleged in its settlement today that Facebook deceived users about their ability to control the privacy of their personal information, and in turn provided that data to third-party apps.

“Despite repeated promises to its billions of users worldwide that they could control how their personal information is shared, Facebook undermined consumers’ choices,” said FTC chairman Joe Simons.

“The magnitude of the $5bn penalty and sweeping conduct relief are unprecedented in the history of the FTC. The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.”

The FTC said the penalty against Facebook is the “largest ever imposed on any company for violating consumers’ privacy, and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide”.


The regulator added that the fine “raises the bar for civil penalties in future matters involving privacy violations”.

Facebook’s general counsel Colin Stretch said the settlement will “mark a sharper turn toward privacy, on a different scale than anything we’ve done in the past”.

The FTC also announced today separate law enforcement actions against Cambridge Analytica, its former chief executive Alexander Nix, and Aleksandr Kogan, an app developer who worked with the company.

The regulator alleged they used false and deceptive tactics to harvest personal information from millions of Facebook users. As part of a proposed settlement deal, Kogan and Nix have agreed restrictions on how they conduct any business in the future.

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