Facebook has settled a long running privacy investigation with the FTC, agreeing to pay a record US$5 billion fine and upgrade its privacy measures. The Australian privacy watchdog has welcomed settlement but says it will continue its own investigation into the social media giant.

The FTC settlement was just one data point in a busy news day for the social media giant, which revealed it is the subject of two new US antitrust investigations while still beating Wall Street expectations in Q2.

The Office of the Australian Information Commissioner (OAIC) began its investigation of Facebook in April last year following revelations that the personal information of more than 300,000 Australians may have been improperly shared with Cambridge Analytica, the data firm at the heart of Facebook’s most public privacy scandal.

Today the OAIC confirmed the investigation is ongoing, touting its new powers to regulate digital platforms, holding them to “the highest standard”, in an online statement.

“This [FTC] order reinforces the need for corporate entities to be transparent and accountable for the way they handle consumers’ personal information,” the OAIC statement said.

The FTC formalised its settlement with Facebook overnight, following a year long investigation into a breach of a 2012 privacy order. Today the FTC announced “sweeping new privacy restrictions” on the company in addition to the US$5 billion fine in an unprecedented action.

Source: Federal Trade Commission.

“The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations,” said FTC Chairman Joe Simons.

“The Commission takes consumer privacy seriously, and will enforce FTC orders to the fullest extent of the law.”

In an increasingly familiar statement, Facebook CEO Mark Zuckerberg said Facebook had to do better on privacy.

“We have a responsibility to protect people’s privacy. We already work hard to live up to this responsibility, but now we’re going to set a completely new standard for our industry,” Zuckerberg said in a Facebook post.

According to Zuckerberg, Facebook will now treat privacy compliance with the same urgency as financial controls. He said the company will add a new privacy committee to its board to oversee a privacy program, similar to the way an audit committee oversees financial controls.

Facebook executives, including Zuckerberg, will now be responsible for certifying that all the work they oversee meets privacy requirements.

FTC pursues Cambridge Analytica

The US regulator also announced overnight it has also settled with two other parties involved in the Cambridge Analytica scandal but is still pursuing the company.

“As part of a proposed settlement with the FTC, two of the defendants—app developer Aleksandr Kogan and former Cambridge Analytica CEO Alexander Nix—have agreed to administrative orders restricting how they conduct any business in the future, and requiring them to delete or destroy any personal information they collected,” the FTC said in a statement.

The regulator also filed an administrative complaint against Cambridge Analytica alleging it violated bilateral privacy agreements between the US and EU. However, the data firm filed for bankruptcy in May last year.

Bigger problems

The increased scrutiny leading to the settlement did not stop Facebook from growing its users and revenue, with the company reporting better than expected financial results for Q2 today. 

The results announcement did, however, confirm two new antitrust investigation by US regulators.

In the statement reporting the Q2 financials, Facebook said it is facing two antitrust investigations; one by US regulator the FTC and another by the US Department of Justice.

“The online technology industry and our company have received increased regulatory scrutiny in the past quarter,” a company statement said under the heading “Other Matters” .

“In June 2019, we were informed by the FTC that it had opened an antitrust investigation of our company. In addition, in July 2019, the Department of Justice announced that it will begin an antitrust review of market-leading online platforms.”

The Department of Justice investigation, which is expected to include several technology giants, was reported yesterday and confirmed by Facebook today. The new FTC antitrust probe was revealed today and appears to focus only on Facebook.

Investigations into possible anticompetitive practices of tech giants will potentially pose a much more serious threat to Facebook as US regulators have broken up tech giants before.

Q2 Results

The growing scrutiny of Facebook does not appear to be hurting the company financially. Today, in Q2 results, it announced it had grown revenue by 28 per cent from a year ago, users by 8 per cent and its average revenue per user from $5.97 to $7.05.

Facebook’s preferred growth metric, monthly active uses, rose to 2.4 billion people, according to the company.

The company earned US$16.9 billion in revenue, up 28 per cent from a year ago, resulting in US$2.6 billion profit, even with a US$2 billion expense for the FTC fine (Facebook had already set aside $US 3 billion for the fine last quarter). 

The results, when adjusted for the FTC fine and tax changes, beat out earnings expectations, according to The Wall Street Journal.

Source: Facebook Q2 2019 earnings presentation.

The company also continued to grow users, with results showing Facebook has 1.59 billion daily active users and 2.41 billion monthly active users. Extending that measure to the Facebook “Family” of apps, including Instagram, Whatsapp or Messenger, and DAU climbed to 2.1 billion people while MAU rose to 2.7 billion.

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