In an earnings call with investors yesterday, Facebook publicly disclosed for the first time that it was anticipating hefty fines from the Federal Trade Commission. While the two entities are still in talks over the exact agreement and final tally, Facebook told investors that it estimates getting hit with a fine between $3 billion and $5 billion.
In his remarks, Zuckerberg repeated his interest in reorienting Facebook toward privacy (encryption, messaging, closed groups, etc.) and away from the public-facing, feed-based monster he helped create. “I understand that any regulation may hurt our business. But I think it’s necessary. Getting these issues right is more important than our interests,” he said. “Over the long term, I believe that that increase in the trustworthiness of the internet can have a much larger positive impact for our community and our business than any short-term hit that we’re going to take.”
Despite news of the fine, Wall Street institutions didn’t really seem to care, and stock jumped from around $183 dollars a share to $192 when the stock market opened this morning. This could be because Wall Street assumes that Facebook sending the FTC a big check with “I’m reawwy sowwy” written in the memo line is enough fend off business-model-altering regulation for the near future. Facebook CFO Dave Wehner had no answer when asked if the impending FTC agreement will affect how Facebook’s ad-targeting business actually operates.
Compare this reaction from the finance industry to its reaction last summer, when investors balked. In July of 2018, Facebook announced that it expected revenue growth to slow as it began “putting privacy first,” making significant investments in user safety and security. Facebook’s ad-targeting business doesn’t work as well when users have strong privacy and control over how Facebook uses their data. Upon the announcement, Facebook’s stock dropped 20 percent. (It has since recovered, duh.)
With the FTC settlement looming, some regulators are singling out Zuckerberg for censure as well. This week, Oregon senator Ron Wyden sent a letter to the FTC demanding that Zuckerberg be personally reprimanded as well. Facebook’s corporate governance is structured in such a way that it gives the CEO complete control over the company, with little to no checks and balances. “Given Mr. Zuckerberg’s deceptive statements, his personal control over Facebook, and his role in approving key decisions related to the sharing of user data, the FTC can and must hold Mr. Zuckerberg personally responsible for these continued violations,” Wyden wrote, according to the Washington Post. Zuckerberg was not personally named in the company’s previous FTC agreement in 2011.
A $3 billion fine would easily be the largest one levied against a tech company in history, eclipsing the $22 million fine the FTC hit Google with in 2012 by a magnitude of about 150. And still, looking at Facebook’s stock price, it’s tough not to get the sense that even this enormous onetime fee is viewed by Wall Street as a slap on the wrist, a toll that Facebook needs to pay once to get the monkey off its back. Should the terms of the settlement require Facebook to actually change how it does, well, anything, then you might see investors start to panic. Until then, however, the flimsy current state of tech regulation doesn’t seem to have anyone at Facebook, or on Wall Street, worried.