Facebook share price rises 2% as the FTC approves record-breaking fine

With a 3 to 2 majority, the Federal Trade Commission has approved a landmark $5 billion fine against Facebook.

The Facebook Inc (All Sessions) share price was up 1.81% last Friday, following an announcement that the Federal Trade Commission (FTC) had approved a record-breaking $5 billion fine against the social media giant.

The massive fine would have been of little surprise to Facebook’s investors, with the company previously flagging the potential costs of the FTC investigation during its Q1 earnings release in April.

Moreover, with first quarter revenues of $15 billion and a balance sheet that boasts $45 billion dollars in cash and cash equivalents – the fine, though large, is unlikely to prove very damaging to Facebook’s long-term prospects.

That indeed was the sentiment expressed by politicians and journalists following the FTC’s $5 billion-dollar decision, with many arguing that a monetary penalty does not actually address the underlying issues.

$5 billion too little too late

In response to the FTC’s approval of the fine, Mark Warner, a Virginian US senator, tweeted:

‘Given Facebook’s repeated privacy violations, it is clear that fundamental structural reforms are required. With the FTC either unable or unwilling to put in place reasonable guardrails to ensure that user privacy and data are protected, it’s time for Congress to act.’

Connecticut Senator, Richard Blumentanthal echoed this sentiment, tweeting:

‘Will Facebook be compelled to alter its present, systematic abuse of privacy? Based on the reported settlement, the answer is sadly, no.’

Finally, Sheera Frenkel, a reporter for the New York Times pointed out that while $5 billion is indeed a large fine – even for the $584 billion Facebook – a large fine was never what concerned the company. ‘In fact, they [Facebook] see it as a good thing because people will feel the company was adequately punished and (the hope) move on’, tweeted Frenkel.

It was always the potential of ‘non-monetary’ penalties and their impact on Facebook’s business model that worried investors, not a simple fine. Yet on this front, it looks as if the FTC is ‘unwilling’ to or is ‘unable’ to act.

More scrutiny to come

Investors hoping that this will be Facebook’s final showdown with regulators are likely to be disappointed.

Investor response following the FTC’s decision was decisively positive, with the Facebook Inc (All Sessions) share price rising 1.81% during last Friday’s trading session and 0.21% in afterhours trade.

Yet with the House of Representatives committee set to hold its own hearing into ‘Online Platforms and Market Power’ this Tuesday the 16th, it will be interesting to see if Facebook’s share price momentum can be sustained.

As part of the House of Representatives upcoming hearing into the growing power and influence of big tech, executives from Facebook, Google, Apple and Amazon.com Inc (All Sessions) are all expected to testify.

Though the potential outcome of this hearing remains uncertain, the focus will squarely be on the monopolistic practices of big tech. This hearing – opposed to the FTC’s investigation – may prove the real threat to Facebook’s share price long-term if the company’s highly lucrative business model is disrupted.

Lastly, if this recent push from the House of Representatives is anything to go by, it’s unlikely that concerns (or formal investigations for that matter) over big tech’s growing influence will abate any time soon. Whether this means breaking up companies like Facebook, as has been proposed in the past, will ultimately be for regulators to decide.


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