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Facebook and the FTC

Our resident Product Compliance Director, Kelly Jacobson Collins, gives us the lowdown on big stories happening in our industry. This week she talks about the significance of Facebook’s latest FTC fine.

What’s happened?

In the US, the FTC (Federal Trade Commission) fined Facebook $5billion last week and ordered it to restructure its approach to privacy across the company including new mechanisms for accountability and better processes.

What does this mean?

The FTC fined Facebook for using “deceptive disclosures and settings” that eroded user privacy, misleading users over facial recognition software and for misusing phone numbers obtained for account security purposes to also target advertisements to its users.

The fine equates to about a month’s revenue for Facebook. The FTC is also seeking to change Facebook’s privacy culture by imposing a 20-year order which requires the company to create an independent privacy committee at the board director level, which can make regular assessments of the company’s practices, and waterfall these practices throughout the organisation. An independent third party will assess and audit Facebook’s privacy processes.

FTC fines

What does this mean for advertisers and publishers?

Facebook has warned investors that these processes and changes (not to mention hefty fines) will bring higher costs, restrict revenue and thereby reduce profit. But the restrictions do not stop Facebook innovating, creating new products or using personal data for targeted advertising or product development.

Facebook will still be as competitive as ever although the FTC is believed to be now investigating Facebook for anti-competitive behaviours. Commentators have speculated restrictions of the FTC may limit (or enable Facebook to say it is limited) from sharing data with third parties.

The Unruly view

This isn’t the first time this year a large tech company has been fined for data privacy practices. Google was fined in January this year by the French DPA (CNIL) for data privacy practices which included lack of transparency, inadequate information and lack of valid consent regarding ad personalization.

In this new era of data privacy expect more fines and warnings across the industry. Whether these fines will be enough to change behaviour remains to be seen.

In reality, the settlement is almost meaningless. Facebook makes more than $5 billion in many quarters. Wednesday, it reported a second-quarter profit of $2.6 billion, after accounting for some of the costs of the settlement. It’s sitting on nearly $50 billion in cash.

Critics of the FTC’s settlement have said that it is too retrospective, focussing on past mistakes rather than ensuring behavioural change. Although it’s prescriptive policy changes should change some behaviours. Ultimately these regulations and fines are there to protect users and are a positive change for the ad tech industry.

It’s not all doom and gloom though, in June, alongside Unruly and 15 of the world’s leading advertisers, Facebook announced they were part of the new WFA Alliance. The alliance was formed in a bid to bring together companies from across the advertising and media industries to rapidly improve digital safety. Find out more about the alliance here.