Put Another Zero on Facebook’s Fine. Then We Can Talk

https://www.nytimes.com/2019/04/25/opinion/facebook-fine.html

by juokaz • 7 years ago

130 72 7 years ago

paulcole• 7 years ago

Serious question: Has there EVER been a case where a fine has been truly damaging/punitive to a company? Every instance I remember seems to be of the parking ticket variety.

javagram2• 7 years ago

When the government wants to destroy a company they have a mechanism for it. https://en.m.wikipedia.org/wiki/Judicial_dissolution

Edit: Arthur Andersen, for instance, was convicted of a crime and had to surrender its CPA license, putting the company out of business.

Fines are just supposed to change behavior. $3 billion is a lot of money regardless, and it’s likely Facebook will invest additional resources in the future to help avoid future such fines.

ianai6• 7 years ago

They should add 2 zeros to the fine and offer FB the option to be broken apart instead.

Crimes were committed. Crimes continue to be committed.

thaumasiotes• 7 years ago

Arthur Andersen, for instance, was convicted of a crime and had to surrender its CPA license, putting the company out of business.

It was my understanding that Arthur Andersen went out of business as soon as it was indicted, such that there was no point in actually convicting it. And that that experience mostly defeated the purpose of having that process exist, since it isn't appropriate to kill a company without showing that it did anything wrong.

ianai6• 7 years ago

There’s an “operational understanding” that companies should rarely be prosecuted or fined substantially because it can easily bankrupt them. I find this mindset ridiculously offensive.

Arubis• 7 years ago

Imagine if we could backport that understanding to people.

6gvONxR4sf7o• 7 years ago

They are worse than parking tickets. A parking ticket is a loss in most all circumstances. It may be small, but the incentive is there to avoid the ticket. In these business cases, they are a net gain. The company does something illegal, makes a bunch of money off of it, and gets a fine for less than they made. They earn more by breaking the law and are incentivized to do so.

dsfyu404ed2• 7 years ago

If you were a delivery driver you would consider parking tickets a cost of doing business too.

dsfyu404ed2• 7 years ago

Happens all the time to small businesses. You piss of the wrong person, phone calls get made and crippling fines are levied. At least that's how it works in my state. I can't think of it ever happening to a big business though.

klank• 7 years ago

I feel like our legislature hasn't scaled up with the economy and inflation.

I feel this not just in the corporate world, but individuals as well. Only financially speaking, parking tickets and speeding tickets are an annoyance to me. If I didn't have an ulterior motive of being a good citizen, I could easily rationalize tickets as a tax. For others, they are oppressive given the severity of the offense. I don't think this is right.

alyandon2• 7 years ago

I don't like Facebook and I don't like their privacy practices. However, $5B is approximately 20% of their cash on hand so I think that we aren't talking about "parking ticket" level fines.

For real changes in behavior though, it'd probably take something radical like fining their board directly instead of punishing the shareholders.

ianai6• 7 years ago

The fine could be 100% of cash on hand and they would still have too strong an incentive to not change.

gyaniv• 7 years ago

Whenever they want to actually damage a company they just don't fine them. They pass a new bill, create new regulations, or take action against individuals in the company in order to "send a message" without hurting the business as a whole, to avoid scaring off other companies. which is exactly what a serious fine would do, as it should, and as everyone (but the investors) want.

refurb• 7 years ago

Read up on the SNC Lavalin affair going on in Canada right now and you'll understand what typically happens.[1]

Company pays bribes in Libya. Attorney General presses charges. Prime Minister gets scared that company will go under if severely punished (lost jobs = lost votes) so puts pressure on Attorney General to "go easy on them".

[1]https://en.wikipedia.org/wiki/SNC-Lavalin_affair

whynyc2• 7 years ago

This fine-as-tax trend is worrying. I propose crypto burn instead. It hurts the wrongdoer while not creating bad incentive for regulators. Win-Win.

cowpig• 7 years ago

What does "crypto burn" mean?

whynyc2• 7 years ago

Transfering money to unspendable address. For example, $11M in 1CounterpartyXXXXXXXXXXXXXXXUWLpVr are unspendable.

https://www.blockchain.com/btc/address/1CounterpartyXXXXXXXX...

Expez• 7 years ago

It's when you send cryptocurrency to an address nobody has the keys to, or that is the cryptographic equivalent of a black hole (provably inaccessible).

The problem GP is addressing is that the regulators aren't really incentivized to make the bad behavior stop because they are collecting revenue by letting it continue.

okket• 7 years ago

No, please not. Crypto burn only makes crypto coins owner richer. That is the opposite of what taxes, even as fines, are for.

andjd• 7 years ago

Agree that crypto-burn is a bad idea. But I am curious what that 3-5 billion government windfall will go towards.

soup103• 7 years ago

Not a fan of facebook but $5B is a big fine, NYTimes hosting multiple OP EDs claiming its not is disingenuous shilling more about them seeing FB as a competitor for advertising dollars and news.

braythwayt• 7 years ago

That’s like saying that $5,000 is a big fine. If you make $50,000 a year or less before tax, $5,000 is hefty. If you make $20,000 a year or less before tax, and have no savings, it will probably bankrupt you. iIf you don’t have any significant income, you will probably never pay it off.

But if you make $200,000 a year, it’s depriving you of a new carbon-fibre gravel race bike this season. Annoying, but you can handle it.

“Big” is relative to your financial situation. For Facebook, it’s a parking ticket. For a startup, it would destroy them.

Jyaif• 7 years ago

Facebook earned $2.43 billion during the first quarter of 2019.

You say "If you make $50,000 a year or less before tax, $5,000 is hefty". Well in this case it's like a $25,000 fine. Is this still a "parking ticket"?

tptacek5• 7 years ago

This analysis doesn't make any sense, because it's not connected to the offense. I can laugh off a speeding ticket, but that same ticket could throw the monthly finances of a low-income person into disarray. But we don't scale the fine with offender income; we scale it with how fast we're driving.

It seems to me that what's important is that the fine is big relative to the offense. If Facebook generated $5B from the behavior they're being fined for, it's not a big fine. If they generated $100MM from it, it's a huge fine.

soup103• 7 years ago

Overyhped stock market cap aside, their annual revenue(not profit mind you) in 2018 was 50B, a fine of 10% of yearly revenue is a huge hit for any company, another 0 would of put them out of business.

guymcgwire• 7 years ago

I'm struck by how often I see these types of comments these days, both on this site and others. "Not a fan of facebook, but..." or "I hate facebook, but..." It reminds me of the shift in discourse around Hillary Clinton in the run-up to the 2016 election. I'd talk to reasonable people who'd say, "Well, Clinton is certainly evil, but she's the lesser or two evils" or "I hate Hillary, but Trump isn't qualified." It was basically a case of an entire population trying to process the cognitive dissonance created by a massive disinformation campaign. Every time I see a negative article posted about fb (and it's pretty much daily now), I see in the comments some variation of this same struggle to reconcile our (probably neutral) feelings about fb against this rolling tide of propaganda. It's disheartening how quickly we've accelerated to this dystopia of mass-manipulation of public opinion through social media.

germinalphrase2• 7 years ago

Alternatively, people have strong feelings both ways (fb as a product vs fb as a company) causing ambivalence.

soup103• 7 years ago

I don't visit facebook anymore, its just filled with low quality content from people I barely know, nothing to do with propaganda.

tptacek5• 7 years ago

You can get a parking ticket practically every day and continue living your life as usual (ask me how I know).

It does not seem at all clear to me that any tech company could sustain routine fines of this scale and remain a going concern. By Swisher's numbers in this post, 3 more fines of this size would deplete Facebook's cash reserves. A $5B fine represents most of the valuation of Slack, and an integer multiple of Discord, or any of a number of other "unicorn" companies Facebook could have bought, rather than shoveling that cash, in effect, into a furnace.

It's also not clear what the underlying violations of the consent decree are. What this analysis loses sight of is that the deterrence question isn't simply about what it would take to stagger Facebook as a company, but rather what it would take to deter them from the particular violations they're charged with. If this is about lax controls over data exposed in Facebook's API (generalizing from the Cambridge Analytica scandal), what's our guess as to how much money Facebook made by allowing partners to do that, or how much money they saved by not building and managing better controls? It seems unlikely to be an amount denominated in billions.

A company can be a goliath with hundreds of billions in reserve, but if a group inside that company that generates just tens or hundreds of millions of dollars reliably generates 5 billion dollar fines, that group is getting "reorganized".

Despegar3• 7 years ago

It does not seem at all clear to me that any tech company could sustain routine fines of this scale and remain a going concern.

It will be fine if they stop doing the things that cause the fines. A $3-5B fine is nothing compared to the settlements that were extracted from banks, and the tech industry is much more profitable.

tptacek5• 7 years ago

In fact, no, this FTC settlement is in line with the settlements the banks got for their 2007 abuses. As I recall, some banks paid higher, by single digit billions, and some lower.

kristianc2• 7 years ago

The debate has lost sight of even 'how can we punish Facebook for CA' and moved into 'how can we punish Facebook simply for being Facebook'.

At that point, there's no need to tie the figure to anything - someone could (and probably will) come along and say 'make the fine 500bn instead' and it will have just as much basis in reality.

Which is fine - many do think that the world without Facebook in it would be a better place. But this is certainly not about ‘how can we coerce Facebook into being a more responsible actor’.

tptacek5• 7 years ago

And: I pretty much loathe Facebook, but that doesn't mean I like being pandered to by Kara Swisher.

Consultant324522• 7 years ago

It is really interesting. I don't have strong opinions about FB privacy and fines. To the extent I think they're a problem, I also think they're on their way out. I do believe that the public focus (as opposed to HN focus) turned to FB because they got a healthy portion of the "blame" for Trump winning in 2016.

I find this situation to be hilarious in a cynical way. This marketing company got credit for helping elect someone to the most powerful position on the planet, and somehow that worked out REALLY poorly for the marketer. Who would've thought?

notacoward2• 7 years ago

how can we punish Facebook simply for being Facebook

Exactly. Let's pursue the idea of fines big enough to cripple a company. Why stop at Facebook? Couldn't you apply the same policy arguments to the banks that brought us the housing crisis, to the pharmaceutical companies that brought us the opioid crisis, to oil companies, tobacco companies, and so on? Why didn't the people calling for Facebook's death by fine make the same arguments in these other cases? Because they don't really believe in this as a general policy. It's stupid as a general policy. It puts the government in charge of picking winners and losers, and even as a pretty extreme leftist I don't think that's right.

Regulation should be general, not targeted to favor or punish one company, and I think proponents of a "kill the company" fine know that. They just want to kill Facebook, and a fine is just the tool that comes to hand. It's dishonest, and it's bad general policy. People who truly care about privacy would be proposing regulations and fines that can apply to anyone, not just to their self-chosen nemesis.

bpchaps• 7 years ago

So, uh. How do you know?

tptacek5• 7 years ago

I don't!

Later

Oh, you mean, about the tickets? Because I spent a long time amassing a lot of parking tickets. Sorry!

return1• 7 years ago

Well that money would partially fund the NSA, so it evens out a bit

throwaway_9168• 7 years ago

Why does everyone talk about increasing fines? Wouldn't it be a far more effective deterrent to charge some FB exec team for breaking some law (haven't they already done that in the "friendly fraud" case?) and put them in jail?

Frost1x• 7 years ago

Let's not forget board and large shareholders that shape direction for executives and the board.

bsenftner• 7 years ago

Yes, let's see Facebook executives going to jail, with Mark first in line. The duration is almost irreverent, as they'd forever be labeled "ex-con". Plus the fine, too, needs to be real.

JudgeWapner• 7 years ago

the main point of a corporation is a shield of liability. both morally and legally. In a corporation, nothing is anybody's fault. Everyone, even up to the CEO, is a process that runs a script commonly called a policy. So you can't even be a member of the corporation without "following policy". But following policy shields you from any blame or accusation of wrongdoing, because it is always acceptable to say "wasn't our choice we were just following policy". The policy just comes out of nowhere. Nobody puts their name on the policy and says "This is what you do because I say so". So you can never track down who created the policy. It was created by people, but those people quickly disbanded and are not traceable to its inception. The CEO has a policy which is simply a contract to "shareholders". But not any individual shareholder, even "the board" isn't accountable, because they "represent" the "millions of shareholders". So no, it wasn't their idea. And you can't hold millions of people responsible. So no, there is no such thing as holding a corporation responsible.

mpweiher• 7 years ago

the main point of a corporation is a shield of liability.

Of the shareholders. Not the executives.

sandworm101• 7 years ago

Being fined /= paying a fine.

I would be interested to hear exactly how much is handed over at the end of the day. How much is forgiven? How much can they deduct from their taxes somewhere else? How much is quietly renegotiated a couple years after the headlines disappear.

lazyjones• 7 years ago

At this point we might just as well introduce a hefty "privacy violation tax" (though with an euphemistic name) and treat FAANG as the new tobacco industry. Because these kinds of issues will never go away, they are firmly woven into these corporations' business models. Fines can't change that.

Put Another Zero on Facebook’s Fine. Then We Can Talk

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