FTC: Facebook's Zuckerberg Must Give Progress Reports To Regulators
STEVE INSKEEP, HOST:
Mark Zuckerberg has a stunning new responsibility. The founder of Facebook is now required personally to give regular progress reports directly to federal regulators. He needs to show Facebook's progress in protecting the privacy of users. This is part of a newly announced settlement between Facebook and the Federal Trade Commission, a settlement that also includes a $5 billion fine for past violations. NPR's Aarti Shahani is on this story. Hi there, Aarti.
AARTI SHAHANI, BYLINE: Hi.
INSKEEP: What does Zuckerberg himself have to do exactly?
SHAHANI: So Zuckerberg, who dropped out of Harvard, has homework to do. Under the government's order being filed today, he'll have to sign the dotted line on a brand-new compliance document. He's in charge of submitting it every quarter - four times a year - to the FTC and to the Facebook board. This has been a long road, OK? Back in 2011, Facebook entered a settlement with the FTC for violating user privacy. And then it looks like they violated again and also engaged in brand-new deception.
INSKEEP: Which was what?
SHAHANI: So basically, according to regulators, Facebook lied to users in two new ways. Facebook asks for phone numbers. Give us your cell, so if we need to reset your password, we can verify it to you with a text.
SHAHANI: Millions of people trusted the company. Maybe you did, too. And then Facebook took those phone numbers and used them not just for security but for advertising purposes. OK, lie number two - Facebook wrote up some terms on facial recognition and then switched them up and tracked people who never consented. So we can expect to see about 60 million users get notices asking if they'd like Facebook to delete all the facial recognition tracking it's been doing unlawfully.
INSKEEP: OK, 60 million people.
SHAHANI: That's right, according to FTC.
INSKEEP: That suggests the scale of this company because that's just a tiny fraction of their users. Weren't they already under scrutiny for the sheer extent of their power and how they'd been using it?
SHAHANI: That's right. The Justice Department announced it's starting an antitrust review of a handful of Internet giants who've gotten very big and powerful. And I would point out, Steve, about the FTC action that's focused on consumer privacy, it's holding the CEO accountable. Facebook is agreeing to abide by federal privacy rules. And if Facebook fails, if its compliance reports are inaccurate, Zuckerberg himself could face civil and criminal penalty.
SHAHANI: So that's significant.
INSKEEP: That's quite a threat over his head. Now, the $5 billion fine - is that a lot for a company as big as Facebook?
SHAHANI: Well, it depends. Facebook's revenue in just the first quarter of this year was 15 billion. After the company announced in its last earnings call that it expected to pay a multibillion-dollar fine, its stock price jumped. That means investors believe the future of a company is solid. That said, the FTC's James Kohm. He really disagrees with critics who say who say the fine was not big enough.
JAMES KOHM: The idea that $5 billion is a slap on the wrist just doesn't pass the laugh test. It is an enormous amount of profits. They didn't give it up easily. It is way higher than any case in U.S. history other than Deepwater Horizon, where there was massive amounts of harm.
SHAHANI: So data privacy harm is less tangible than oil spill harm. But the FTC says the 5 billion is for deterrence, to send a message to other tech companies and that Facebook fought tooth and nail against it. Facebook, which is an NPR sponsor, declined to comment.
INSKEEP: OK. Aarti, thanks for the update. Really appreciate it.
SHAHANI: Thank you.
INSKEEP: NPR's Aarti Shahani covers tech. Transcript provided by NPR, Copyright NPR.