Facebook's $5 billion fine adds $10 billion to company's value
This isn't how punishment is meant to workBy James Miller 12 comments
What just happened? The big story yesterday was the FTC hitting Facebook with a record fine of $5 billion, following numerous scandals around the handling of personal data. But markets appeared happy with the fine, and sent Facebook's market-cap up by over $10 billion, entirely negating the punitive action.
Yesterday, we reported that the Federal Trade Commission (FTC) had levied a $5 billion fine against Facebook as punishment for a string of breaches, scandals and controversies.
In almost any other context a $5 billion fine would be huge - not only as a punitive measure, but also in signalling just how poorly the business in question had behaved. But in the context of Facebook, given its size, reach and worth, $5 billion is little more than a slap on the wrist. So much so, that following news of the FTC's decision, the social media giant's stock price rose by 1.81%, adding $10.4 billion to their market valuation.
Markets have rewarded Facebook for getting off so lightly, covering the cost of the fine and adding another $5 billion to the company's coffers.
Many have been quick to point out the flaw in this effort to hold such a mammoth company to account. Senator and Democratic Presidential candidate, Elizabeth Warren, called it a "drop in the bucket penalty," tweeting our renewed calls for Facebook to be broken up.
Facebook made $5 billion in profits in just the first three months of last year. The company is too big to oversee, and this drop-in-the-bucket penalty confirms that. The FTC should break Facebook up, plain and simple. Enough is enough.--- Elizabeth Warren (@SenWarren) 12 July 2019
There's no question that $5 billion is a lot of money, but given that Facebook made $22 billion in profit last year, and another $15 billion in revenues last quarter, many people think that the punishment doesn't fit the crime.
It should be said that the FTC's decision wasn't only monetary. The Washington Post reports that Facebook "may have to document every decision it makes about data before offering new products, keep closer watch over third-party apps that tap users' information, and require its top executives, including CEO Mark Zuckerberg, to attest that the company adequately has protected privacy." Though it seems reasonable to wonder why none of those things were mandatory to begin with.