In anticipation of the FTC’s response, Facebook acknowledged in its 2019 first-quarter results on April 24 that it has set aside $3 billion, which would be the largest fine ever against a tech company by a U.S. regulator. As impressive as that may sound, though, it likely won’t even put a dent into Facebook’s wallet nor change its behavior, and the government should do more.
By this point, everyone knows the story all too well. Facebook granted access to its users’ information without their consent, including to the now infamous consulting firm Cambridge Analytica. This action represented not only a blatant violation of its users’ trust and privacy, but also a predatory business practice that required federal involvement.
Thankfully, the government already had a solution in place to rectify the matter: consent decrees.
Consent decrees are agreements that institutions assent to with the federal government, usually for damage-control reasons. Companies accused of foul play sign off on these binding legal documents, which stipulate that they quit behaving in ways that many perceive to violate antitrust laws or else face consequences.
In other words, they have a choice: conform or die.
Facebook agreed to such terms in 2012, but now that regulators are finally in the enforcement phase of the decree, there’s one problem: When considering the net worth of this Silicon Valley titan, $3 billion is practically peanuts. It isn’t enough to make them sweat.
The best time to have Facebook agree to better terms is right now, while it’s still in the hot seat. By forcing the company to make a public decision on whether to accept or reject more forceful terms, it will essentially make it choose between demonstrating to its users whether its word means anything or not. And we all know which option it will take. After all, who would believe a company that says, “We promise to never do it again, but we won’t accept a $10 billion penalty if we do”?
While the FTC should unquestionably hit Facebook’s wallet with far more force, some say that it’s not the dollar amount that’s the problem here; rather, it’s the remedy itself. This assessment could not be further from the truth. As an alumnus of the Justice Department, I have seen how effective that consent decrees—when they have enough teeth—are at curtailing bad behavior firsthand.
Consent Decrees Can Work
A great example is in the music industry. Any business that wants to play music must receive the licensing rights to do so, but two companies, called ASCAP and BMI, control the song rights to 90 percent of the marketplace. The Justice Department came in in 1941 and threw consent decrees together to stop predatory pricing. These settlement agreements have worked extremely well, and seldom have any complaints arisen about their pricing modules ever since.
The threat of further court or legal action has made them stop squeezing small businesses for every penny with any chance they get.
How much ASCAP and BMI still detest their consent decrees to this day proves the worth of these antitrust tools. They hate them so much that the presidents of ASCAP and BMI recently sent a letter to the Department of Justice, run by my former boss, William Barr, asking for the decrees to be removed or significantly altered. If they weren’t serving their purpose of restraining their bad behavior, why would they be asking?
The success of the consent decrees like those in the music industry proves that they can work on tech giants such as Facebook, as well, if they are just kicked up a notch to reflect Facebook’s higher net worth. To say we should amend or get rid of the Facebook decree entirely is just ridiculous. In fact, it’s exactly what any monopolist, from ASCAP/BMI to Facebook itself, would want.
The $3 billion may not be much when considering what Facebook brings in, but at the same time, it will still amount to the biggest punishment in the tech world to this point. No company, regardless of its size, would take pleasure in forfeiting such a figure.
The FTC deserves praise for using every tool at its disposal to punish Facebook. Now, it just needs to leverage the opportunity of this time frame to up the ante even further, making it far more difficult and costly for Facebook to breach the user privacy agreement in the years to come. Doing so will inevitably help to bring about a world largely free of its predatory practices.
Peter Ferrara served on the White House Domestic Policy Council under President Ronald Reagan, and as associate deputy attorney general for Attorney General William Barr under President George H.W. Bush. He is the Dunn Fellow Liberty Fellow in Economics at the Kings College in New York, a senior policy adviser to the National Tax Limitation Foundation, and a freelance author.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.