Facebook agrees to pay $5bn fine to settle allegations over users’ privacy

Facebook has agreed to pay $5bn (£4bn) as part of a settlement over allegations it mishandled users’ privacy, according to two people briefed on the case.

The US Federal Trade Commission is also set to announce on Wednesday that Facebook will create a board committee on privacy and will agree to new certifications by executives that users’ privacy is being properly protected, the people said. The fine will mark the largest civil penalty ever paid to the FTC.

The Washington Post reported on Tuesday that the FTC will allege Facebook misled users about its handling of their phone numbers and its use of two-factor authentication, citing two people familiar with the matter.

According to The Post, the FTC also plans to allege that Facebook provided insufficient information to about 30 million users about a facial recognition tool, an issue identified earlier by non-profit organisation Consumer Reports.

Apple reported revenue of $265 billion worldwide in 2018

US policymakers are increasingly concerned about the privacy of online users, and the settlement has sparked calls for new legal protections in Congress. In another sign of intensifying pressure on companies like Facebook, the US Justice Department said late on Tuesday that it is launching a broad antitrust probe into the competitive practices of large tech companies.

The Post reported that the FTC will not require Facebook to admit guilt as part of the settlement, and this was confirmed by two people briefed on the matter. They added that the settlement will contain other significant allegations of privacy lapses and will need to be approved by a federal judge.

The FTC and Facebook declined to comment.

The FTC confirmed in March 2018 it had opened an investigation into allegations Facebook inappropriately shared information belonging to 87 million users with the now-defunct British political consulting firm Cambridge Analytica. The probe has focused on whether the data sharing violated a 2011 consent agreement between Facebook and the regulator and then widened to include other privacy allegations.

A person briefed on the matter said the phone number, facial recognition and two-factor authentication issues were not part of the initial Cambridge Analytica probe.

Some in Congress have criticised the reported $5bn penalty as too small, noting that in 2018 Facebook had $55.8bn in revenue and $22.1bn in net income. Senator Marsha Blackburn, a Republican, said last week the fine should be $50bn.

Separately, the US Securities and Exchange Commission is expected to announce a related settlement with Facebook for around $100m over allegations it failed to disclose risks to investors over its privacy practices. The Wall Street Journal reported the SEC settlement earlier.