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The fine that the FTC will impose on Facebook will not change its practice

The $ 3 billion to $ 5 billion fine Facebook expects to pay to determine a Federal Trade Commission inquiry sounds great, but for the company it really is not. As part of its earnings report on Wednesday, Facebook announced that it had set aside $ 3 billion to pay for the possible fine, even though it was noted that an agreement with the agency has not yet been made. Facebook has $ 45 billion in cash and securities at hand and generates $ 5 billion in cash every quarter, even after investing in real estate and equipment, so it can more than bid on the fines. The fine will probably not change Facebook's behavior. instead, the company is likely to see it as just an easy cost for doing business. Visit Business Insider's website for more stories. Facebook seems to be making one of its biggest legal issues go away for what it is a little more than chump change. It sounds like a bad joke, but it is true. And you can almost hear Mark Zuckerberg guffawing from here. As part of its performance report on Wednesday, the social media giant announced that it is expected to pay fines from $ 3 billion to $ 5 billion in connection with the Federal Trade Commission investigation "in our platform and user data practices." Consequently, the company deposited $ 3 billion, which lowered its reported profit for the period. The FTC has yet to provide an update on its Facebook…

  • The $ 3 billion to $ 5 billion fine Facebook expects to pay to determine a Federal Trade Commission inquiry sounds great, but for the company it really is not.
  • As part of its earnings report on Wednesday, Facebook announced that it had set aside $ 3 billion to pay for the possible fine, even though it was noted that an agreement with the agency has not yet been made.
  • Facebook has $ 45 billion in cash and securities at hand and generates $ 5 billion in cash every quarter, even after investing in real estate and equipment, so it can more than bid on the fines.
  • The fine will probably not change Facebook’s behavior. instead, the company is likely to see it as just an easy cost for doing business.
  • Visit Business Insider’s website for more stories.

Facebook seems to be making one of its biggest legal issues go away for what it is a little more than chump change.

It sounds like a bad joke, but it is true. And you can almost hear Mark Zuckerberg guffawing from here.

As part of its performance report on Wednesday, the social media giant announced that it is expected to pay fines from $ 3 billion to $ 5 billion in connection with the Federal Trade Commission investigation “in our platform and user data practices.” Consequently, the company deposited $ 3 billion, which lowered its reported profit for the period.

The FTC has yet to provide an update on its Facebook survey, which has been going on for more than a year, and the agency spokesman Juliana Gruenwald declined a request for comment from Business Insider Wednesday. Facebook, meanwhile, acknowledged in a statement that it has not yet reached an agreement with the agency and does not know exactly when it comes.

But you can bet that the company would not have announced that it would spend the money if it did not believe that a deal was complete and if it did not have a pretty good idea of ​​the amount of any fine the agency would pay for it. You can also bet by Ashkan Soltani, former FTC’s chief engineer, that the settlement will be inclusive covering all potential violations of the Facebook consent declaration signed with the agency 2011.

Read this : An Internet Pioneer is hesitant Mark Zuckerberg can refocus Facebook on privacy. Here’s why.

What is great for the FTC is not great for Facebook

The FTC has investigated Facebook’s privacy practices since the Cambridge Analytica scandal broke last year. Since then, many cases have arisen where Facebook seems to have violated the privacy of users or the data it contained on them was damaged. Last week, as Business Insider reported, Facebook confirmed that it harvested 1.5 million users ’email contacts without the users’ consent.

Former Cambridge Analytica employee Chris Wylie helped reveal leakage of Facebook user information to the data exchange. Neil P. Mockford / Getty Images

Further to the FTC inquiry, several states have applied for a civil case against the company and both the US Department of Justice and the Securities and Exchange Commission have launched their own investigations, which they have overseas oversight authorities. But the FTC fine is likely to be the big one in terms of the monetary impact that Facebook will face from its seemingly endless stream of privacy and security breaches over the past year.

A fine of $ 3 billion to $ 5 billion would be the largest ever issued by the FTC far, a fact that will undoubtedly require. But it will be all but meaningless to Facebook. The company can easily shake it off as a cost to do business and continue to do what it has done.

Let’s assume $ 5 billion – the high portion of the Facebook range offered for the fine – is the number it and the FTC redeems. That amount represents about one third of the revenue generated by the company during the first quarter, traditionally a seasonally slow period for it. This essentially corresponds to how much money Facebook generated during the first quarter, even after reporting on the money it used to buy long-term assets such as computers and property. And that’s about 11% of the $ 45 billion in total cash and Facebook’s marketable securities are at hand.

In other words, the company will easily be able to pay the fine in a quarter of the business if it were not only going to withdraw money from its bank.

Facebook is likely to consider the fine a cost of doing business

Let’s put another way. According to Forbes, Zuckerberg has a net worth of nearly $ 68 billion, almost entirely from its share in Facebook. Even at the high end, the FTC’s fine would not amount to 10% of it.

As big as $ 5 billion sounds, and as large as it may be in relation to what the FTC has done before, it’s just not that much money on Facebook or Zuckerberg. A fine that is large will not lift the company. It will not force it to undergo huge changes. Heck, it’s a good chance that a fine of that size doesn’t even encourage the company to think twice about breaking the user’s privacy again.

Keep this in mind: Facebook knew as far back as September 2015 that Cambridge Analytica had illegally received data on Facebook users, as Business Insider reported. Since then, the social network giant has generated about $ 52 billion in cash from its business, even after deducting its investment in property and equipment. Seen from an ethics-free point of view, a $ 5 billion charge when making $ 52 billion in cash is an amazing deal.

Facebook investors and analysts really seemed to see things that way. In trading after its report, the company’s shares increased by 8%. In a brief comment on the report, Gene Munster, a long-standing financial analyst who is now a management partner at Loup Ventures, stated “Facebook storm storm, is looking forward to.”

Now, it is quite possible that the FTC, along with the fines, will force Facebook to approve some restrictions on its business. But the company is certainly not worried about them. The FTC fell asleep in the boot for several years when it came to monitoring that Facebook was in agreement with the last agreement reached by the two sides last time the agency got it breaking the users’ privacy.

If the past is any indication, Facebook stands a good chance of not being caught again, at least not for several years, if it breaks the impending settlement. And even if it does, the FTC indicates that the worst thing that can happen is a fine that the company can pay for three months.

So you better think somewhere Zuckerberg is laughing loudly. Because jokes are on the rest of us.

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