WASHINGTON — Facebook’s announcement in late April that it had put aside $Three billion to $5 billion to settle claims that it mishandled customers’ private knowledge prompt a robust consensus by federal regulators that the social media large wanted to be held accountable.
But the truth behind the scenes on the Federal Trade Commission is way extra sophisticated, reflecting the politics and give-and-take of the negotiations.
The F.T.C.’s 5 commissioners agreed months in the past that they needed to pursue a historic penalty that may present the company’s tooth. But now, the members are cut up on the scale and scope of the tech firm’s punishment, based on three folks with information of the talks who spoke on the situation of anonymity.
The division is complicating the ultimate days of the talks.
Along with disagreement concerning the applicable monetary penalty, one of the vital contentious undercurrents all through the negotiations has been the diploma to which Mark Zuckerberg, Facebook’s chief government, needs to be held personally accountable for any violation of a 2011 settlement, based on two of the folks.
Facebook has put up a fierce combat, saying Mr. Zuckerberg shouldn’t be held legally accountable for the actions of all 35,000 of his staff.
The talks might crumble, but negotiations are transferring ahead and are anticipated to conclude inside days, with an announcement made quickly after. This account of the F.T.C.’s investigation of Facebook is predicated on interviews with a half dozen folks.
Joseph J. Simons, the fee’s Republican chairman, appeared to have the votes of the opposite two Republican commissioners, giving him the three wanted to approve a deal. But a Three-to-2 resolution alongside celebration traces, which Mr. Simons has mentioned he needs to keep away from, might result in robust rebukes on Capitol Hill.
The stakes are monumental for the company and Mr. Simons. The case is being intently watched globally as a litmus take a look at on how the United States authorities will police the nation’s tech giants.
The fee has a repute of pulling some punches, notably in distinction with regulators in Europe, who’ve pursued forceful motion on each privateness and antitrust points. The largest F.T.C. tremendous in opposition to a tech firm was $22.5 million against Google in 2012, for misleading users about how some of its tools were tracking them.
Any settlement will also be looked at as a measure of the Trump administration’s willingness to penalize one of the country’s most valuable and influential companies. The administration has whittled away regulations in many industries, but President Trump has repeatedly said tech giants like Facebook and Amazon have too much power.
Many Democrats have led efforts to rein in Silicon Valley’s power.
“This is a hugely important decision because it will be watched by all these big companies to see if there is actually going to be a new day on the enforcement front,” said Senator Ron Wyden, an Oregon Democrat who has pushed for Mr. Zuckerberg to be held personally liable in any settlement.
Rohit Chopra, one of the two Democrats on the commission, has publicly urged stronger punishment of repeated offenders of F.T.C. rules.
But Mr. Simons has appeared unwilling to force the issue and drag the case to court, which could be a risky move. He has recently intensified his efforts to get at least one of the two Democrats on his side, according to one of the people with knowledge of the talks. But the internal disagreements have held up a final agreement.
In addition to the fine, Facebook has agreed, as part of a proposed settlement, to create new positions that would be focused on privacy policies and compliance, two of the people said. The agency, in coordination with the company, would set up an independent committee to oversee Facebook’s privacy efforts. That committee and the F.T.C. would appoint an outside assessor to monitor the company’s handling of data.
The company has also agreed to assign an executive as a privacy compliance officer, making privacy oversight a job within the top ranks, the people said. Mr. Zuckerberg could be given the job, according to one person with knowledge of the talks, although another person expressed doubts.
But the settlement probably won’t include limits on Facebook’s ability to track users and share data with its partners, mandates that privacy advocates have raised as important for regulation in the United States, and that Facebook has fought. Mr. Simons has argued that the settlement proposal sets a new bar for enforcement of privacy violations and wants to avoid litigation that risks losing that opportunity.
“Five billion dollars is a lot of money,” said David Vladeck, a law professor at Georgetown University and a former head of consumer protection for the F.T.C. “And at the end of the day, it is not in the commission’s interest to go to trial, because there is no guarantee they will get relief beyond what’s already on the table.”
The F.T.C. and Facebook declined to comment for this article.
The roots of the investigation stem from a case that Facebook settled with the agency in 2011. The company was accused of deceiving consumers about how it handled their data. As part of the settlement, it said it would overhaul its privacy practices.
In March 2018, The New York Times and The Observer of London reported that Cambridge Analytica, a British political consulting firm that had worked for Mr. Trump’s presidential campaign, had used a vast trove of Facebook data to compile voter profiles. The agency then opened an investigation into whether the company had violated the 2011 agreement.
Facebook has apologized for reacting slowly to the revelations about Cambridge Analytica. But the company has said an academic researcher with access to the data broke its rules by sharing he data with the consulting firm.
At the same time, sentiment in Washington was turning against Big Tech. It had become clear that Russia used online services to interfere in the 2016 presidential election. YouTube, Twitter and Facebook were being blamed for the spread of harmful content and fake news. Politicians like Senator Bernie Sanders of Vermont, who is now running for the Democratic presidential nomination, were accusing Amazon of unfair labor practices.
Weeks after the investigation started, Mr. Simons, a longtime Republican antitrust lawyer, was sworn in to lead the agency. Two other Republicans, Noah Phillips and Christine Wilson, and two Democrats, Rebecca Slaughter and Mr. Chopra, were confirmed by the Senate as the other commissioners at the same time.
All five first met to discuss the Facebook case in December. The commission’s staff said they had found several violations of the 2011 agreement and a corporate culture that did not make privacy a priority, according to two people with knowledge of the talks.
There was wide agreement among the commissioners that the charges against Facebook appeared strong and that they should respond vigorously, according to the two people.
In the days and weeks after that meeting, staff members began to discuss a potential fine and other penalties with the commissioners. A fine far above $7 billion appeared to have strong agreement, according to one of the people.
Staff members and commissioners also began talking about making Mr. Zuckerberg personally liable, meaning that he could be named as a defendant in a future case.
In an early version of the complaint and proposed settlement, Mr. Zuckerberg was named as a responsible party, the two people said. The focus on Mr. Zuckerberg was first reported by The Washington Post.
Facebook pushed back on the inclusion of Mr. Zuckerberg, saying it would not agree to that in a settlement.
Democrats in Washington have recently been pushing for more accountability for top executives of companies under scrutiny.
Soon after he joined the F.T.C., Mr. Chopra wrote a memo to all staff members saying the agency should address “management deficiencies through structural remedies, including the dismissal of senior management.”
Mr. Simons has also publicly called for stronger enforcement of tech companies. But at a privacy conference in Washington on Thursday, he described the “big trade-offs” in naming chief executives in complaints.
“When you get to a position when threatening to name individuals and make them personally liable, companies are less likely to settle and you end up having to litigate a lot more than you would otherwise,” Mr. Simons said. “You have to think are you getting sufficient relief for consumers without having to name these people as a sufficient deterrent.”
Republican lawmakers would probably criticize an order that included Mr. Zuckerberg in the complaint.
“It’s one thing if Facebook were an entity that itself couldn’t be held liable,” Senator Mike Lee, a Utah Republican, said in an interview.“To hold a C.E.O. liable is extraordinary and not needed here.”
A few weeks ago, the commissioners were shown an updated proposed deal. It had a fine of around $5 billion and no mention of liability for Mr. Zuckerberg.
The proposal set off a frenzy of discussion among the commissioners and staff members. Soon, details about the discussion began to leak out in the news media.
Senior executives at Facebook believed that people within the F.T.C. were divulging details to influence negotiations, according to two people.
Facebook, which had $56 billion in revenues in 2018, responded by announcing the expected $3 billion to $5 billion penalty, partly in an effort to set expectations for what the company thought it would finally have to pay, the two people said.
Talks between Facebook and agency officials have continued over the past several days. Mr. Simons was trying to persuade Ms. Slaughter, who appeared to side with Mr. Chopra, to see his perspective. The commissioners are expected to vote on the settlement in the coming days.
“Having a good bipartisan consensus makes a huge difference to the effectiveness of the agency,” Mr. Simons said in an interview in February. “So I think it’s very important, and we are trying very hard to do that.”
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