Facebook Expects $5 Billion Fine From FTC for Data Privacy Violations

In yet another hit to the company’s reputation, Facebook announced on Wednesday that it is expecting a fine as high as $5 billion USD from the Federal Trade Commission over its alleged data privacy violations. David Wehner, Facebook’s CFO, said in a conference call with analysts:

“This matter is not resolved so the actual amount of payment remains uncertain. However, we are estimating this range of loss to be $3 to $5 billion.”

The rumor about the multi-billion dollar penalty has been going on for months now and has reportedly scared some of the social networking site‘s investors. According to initial reports, the fine is mostly related to the Cambridge Analytica scandal from last year which severely damaged Facebook’s public image.

The Cambridge Analytica scandal shook Silicon Valley, causing people to question how technology companies protect the data they collect from online users. The issue also launched a seemingly endless series of data breaches and leaks which saw Mark Zuckerberg, Sheryl Sandberg, and Sundar Pichai summoned to public Congressional hearings.

Data Privacy Violations

According to Facebook, the company’s first-quarter earnings this year increased by 26 percent, a $15.1 billion mark up that surpasses Wall Street expectations. The company is reportedly keeping $3 billion on hand for the FTC penalty that it expects to be imposed later this year. Facebook wrote in its quarterly report:

“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 FTC into our platform and user data practices, which accrual is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet.

We estimate that the range of loss in this matter is $3 billion to $5 billion. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”

To date, Facebook’s monthly active users have grown by 8 percent to roughly 2.38 billion. On average, 2.1 billion people use one of the company’s services – Facebook, WhatsApp, Instagram, and Messenger – every day.