The Federal Trade Commission has been looking into whether Facebook is in violation of a 2011 agreement promising to protect user privacy.
SAN FRANCISCO (AP) — Facebook said it expects a fine of up to $5 billion from the Federal Trade Commission, which is investigating whether the social network violated its users’ privacy.
The company set aside $3 billion in its quarterly earnings report Wednesday as a contingency against the possible penalty but noted that the “matter remains unresolved.”
The one-time charge slashed Facebook’s first-quarter net income considerably, although revenue grew by 25% in the period. The FTC has been looking into whether Facebook broke its own 2011 agreement promising to protect user privacy.
Investors shrugged off the charge and sent the company’s stock up more than 9% to almost $200 in after-hours trading. EMarketer analyst Debra Aho Williamson, however, called it a “significant development” and noted that any settlement is likely to go beyond a mere dollar amount.
“(Any) settlement with the FTC may impact the ways advertisers can use the platform in the future,” she said.
Facebook has had several high-profile privacy lapses in the past couple of years. The FTC has been looking into Facebook’s involvement with the data-mining firm Cambridge Analytica scandal since last March. That company accessed the data of as many as 87 million Facebook users without their consent.
The 2011 FTC agreement bound Facebook to a 20-year privacy commitment; violations could subject Facebook to fines of $41,484 per violation per user per day.
