It might’ve seemed like Facebook got away lightly in the wake of the Cambridge Analytica scandal, with no long-term effects after the initial wave of bad publicity. However, the company expects it will soon have to pay the price for its lapses: a sum between $3 billion and $5 billion.
Facebook has just released its results for the first quarter of 2019, with a bleak prediction for shareholders.
“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the [Federal Trade Commission] into our platform and user data practices, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet,” the company said.
“We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”
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The fine, whatever it eventually amounts to, is the result of an investigation by the FTC following the Cambridge Analytica data scandal in 2018, which involved the personal data of up to 87 million users being shared without their permission.
Why is Facebook being fined?
As Facebook was quick the explain at the time, the scandal wasn’t a security breach, and none of Facebook’s systems were hacked. Instead, it was the result of a third-party app called thisisyourdigitallife, which took the form of a personality test.
It looked benign, but the app also pulled data about their test-taker’s friends on Facebook and sent it to Cambridge Analytica, which was able to use it to target voters with specific messages.
This was seriously bad news for Facebook, which had reached a settlement with the FTC in 2011, in which it agreed that third parties would be unable to get their hands on users’ data without those users’ explicit permission.
In a statement released on March 26 2018, the FTC said it “takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices.”
What happens next?
As Wired reports, the FTC and Facebook have spent months in negotiations, but there were also rumors that Facebook might fight against the fines. Now, however, it appears to have resigned itself to a sizable bill hitting its mailbox very soon.
A fine that size certainly won’t bankrupt Facebook (it was possible that it could have been even higher, considering the number of people affected), but it’ll certainly be felt.
“The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome,” the company said in its report. The final cost is likely to be revealed in the coming months.