Facebook said Wednesday it expects to shell out between $3 billion and $5 billion to settle the FTC's ongoing investigation into its handling of user data, foreshadowing a potentially massive penalty from the nation's top consumer protection agency.
The company said it set aside $3 billion during the first quarter to handle the expected expense, though it insisted the "matter remains unresolved" and it was not clear when the investigation would come to an end.
A settlement of that size — unprecedented for the FTC — would be a striking hit to the social networking giant's global reputation and a clear sign that U.S. regulators are no longer cowed by the Silicon Valley behemoth.
Still, even with the money set aside, Facebook posted a net profit of $2.4 billion for the first quarter, showing the enduring power of its advertising-driven business model. Investors appeared to initially shrug off the news of the anticipated penalty, with the company's shares up in after-hours trading.
A $3 billion to $5 billion settlement would dwarf the FTC's largest penalty to date against a tech company over privacy: the 2012 settlement with Google that required the search giant to pay $22.5 million to settle charges of misleading users of Apple's Safari browser.
The FTC investigation began last spring after reports that political data firm Cambridge Analytica, which did work for President Donald Trump's 2016 campaign, improperly obtained information on some 50 million Facebook users via an academic researcher. That number was later revised upward to as many 87 million affected users.
The controversy raised new questions about Facebook's privacy controls, as details emerged that the social network had known about the issue since 2015 and had failed to verify that Cambridge Analytica deleted the data once the violation was discovered.
The scandal has remained a persistent problem for Facebook. The FTC as well as the Justice Department, FBI and SEC have all directed questions at the company about the data controversy. In the UK, Facebook was fined £500,000 for failing to protect people’s online data connected to Cambridge Analytica.
At issue for the FTC is a consent decree the agency signed with Facebook in 2011, requiring the company to give consumers clear notice and obtain their expressly stated consent before sharing their information with outside parties. That settlement, which followed a series of Facebook missteps like making user friend lists public without notification, imposed restrictions over the social network’s privacy practices for 20 years.
There have been a cascade of other privacy mishaps at Facebook over the past year. Researchers this month, for example, revealed hundreds of millions of records on Facebook users were left unprotected on Amazon's cloud servers. Facebook also disclosed in March that it had insecurely stored hundreds of millions of user passwords.
Facebook has taken a number of steps in the wake of the Cambridge Analytica controversy, including suspending 200 apps as part of a post-scandal audit. The company later cut off access for hundreds of thousands of inactive apps that had not submitted themselves for the review process. The moves are part of a broader set of Facebook policy changes — including new transparency requirements for political ads — adopted in the wake of the 2016 election.
The privacy flareups are just one facet of Facebook's deepening problems in Washington. Democrats have accused the company of not doing enough to combat Russian election interference, following revelations that Kremlin-linked trolls used the social network to inflame social and political tensions in the U.S. during the 2016 campaign and promote Trump over Democrat Hillary Clinton.
Trump and Republicans, meanwhile, have ramped up accusations that Facebook and its fellow social media companies are biased against conservatives in the way they manage content — something the companies strongly deny. Facebook also faces frequent criticism for not taking down hoaxes and conspiracy theories.
Article originally published on POLITICO Magazine