Facebook Faces Potential Record U.S. Fine on Privacy Violations

(Bloomberg) -- A U.S. privacy investigation of Facebook Inc., begun after a major data breach was exposed in March, is likely to result in a record fine against the company, according to a person familiar with the matter.

The Federal Trade Commission, the nation's chief privacy watchdog, is weighing a penalty against the social-media giant for violating a 2011 settlement with the agency that required the company to take a series of steps to protect users' personal information, said the person, who asked not to be named because the investigation is confidential. The probe may be months from completion, the person said.

The size of the Facebook fine couldn't be learned. It's also not clear whether the agency has settled on how much to seek from the Menlo Park, California-based company or whether it will also require changes to Facebook's data collection and sharing practices.

Still, the likelihood of the penalty seems to indicate officials have determined there was a violation of the 2011 settlement. The agency opened it's investigation after the disclosure that political consulting firm Cambridge Analytica gained access to information on about 70 million Facebook users in the U.S. The company has denied the incident was a violation.

FTC Chairman Joe Simons is under growing pressure to come down hard on Facebook after a series of data-privacy scandals at the company. The revelations have galvanized efforts in Washington to pass comprehensive legislation to better protect the personal information collected by the nation's technology firms. Lawmakers and advocates have criticized the FTC for not doing enough to crack down on privacy violations even with its limited authority.

Facebook Faces Intensifying Pressure From Washington on Privacy

The agency's previous record fine in a privacy action came in 2012, when Google paid $22.5 million for misrepresenting to users of the Safari internet browser that it wouldn't place advertising trackers known as cookies on their computers. The amount was minuscule for Google, which reported net income of $10.7 billion that year.

The FTC and Facebook declined to comment about the investigation. The Washington Post reported earlier on the fine and said the agency's five commissioners met recently to discuss it.

The former head of the FTC's consumer protection division has said the fine could reach hundreds of millions of dollars. Bloomberg Intelligence estimates it could reach into the billions. The investigation is just one the social-media giant is facing in the U.S. The attorney general for the District of Columbia sued the company in December while other states have opened investigations. Facebook has said the Securities and Exchange Commission and the FBI are also investigating.

The FTC's 2011 consent decree with Facebook settled claims that the company deceived consumers by telling them they could keep data private, but allowed it to be shared and made public.

The commission's complaint included a litany of deceptive practices, such as allowing wider dissemination of profile information like photos, education and place of employment that a user had restricted to “Only Friends” or “Friends of Friends.” Facebook also promised users that it wouldn't share personal information about them with advertisers when, in fact, the company identified to advertisers the users who clicked on their ads or to whom ads were targeted. Advertisers could then take steps to get detailed information about users, the FTC said.

--With assistance from Sarah Frier.

To contact the reporter on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Andrew Pollack, John Harney

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