Put Another Zero on Facebook’s Fine. Then We Can Talk(nytimes.com)
nytimes.com
Put Another Zero on Facebook’s Fine. Then We Can Talk
https://www.nytimes.com/2019/04/25/opinion/facebook-fine.html
84 comments
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’.
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’.
> 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.
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.
I'd suggest that in the other cases it was far worse... In the housing crisis we bailed them out. WTF did we bail out a company that backed a bet they couldn't afford to pay? Let them fail. As to the acts of pharma companies, some of them rightly deserve to be crushed. You can execute a person for killing, you should be able to execute a corporation for the same.
Facebook is hardly even comparable. I don't think FB should be crushed, but I think FB should be more transparent (as should most corporations imho).
Facebook is hardly even comparable. I don't think FB should be crushed, but I think FB should be more transparent (as should most corporations imho).
[flagged]
> This is complete nonsense
Please read the site guidelines.
> This is complete nonsense and shows you weren't paying attention or have forgotten what happened after the GFC.
We're not talking about jail, though that's an interesting conversation to have. We're talking about fines big enough to put a company out of business. What banks went out of business because of government action? What pharmaceutical companies? What tobacco companies. I'll bet I was paying much closer attention than you, and I didn't see anywhere this level of "add another zero" hysteria then. Even people who didn't totally agree with "too big to fail" seemed to agree with enough of it to stop short of where they are now regarding Facebook.
> I'm hoping for a GDPR clone to come out of the tech industry's GFC
So am I. It just has to be general regulation that can be enforced fairly on anyone who transgresses, not a targeted hit against the pundits' favorite target.
Please read the site guidelines.
> This is complete nonsense and shows you weren't paying attention or have forgotten what happened after the GFC.
We're not talking about jail, though that's an interesting conversation to have. We're talking about fines big enough to put a company out of business. What banks went out of business because of government action? What pharmaceutical companies? What tobacco companies. I'll bet I was paying much closer attention than you, and I didn't see anywhere this level of "add another zero" hysteria then. Even people who didn't totally agree with "too big to fail" seemed to agree with enough of it to stop short of where they are now regarding Facebook.
> I'm hoping for a GDPR clone to come out of the tech industry's GFC
So am I. It just has to be general regulation that can be enforced fairly on anyone who transgresses, not a targeted hit against the pundits' favorite target.
And: I pretty much loathe Facebook, but that doesn't mean I like being pandered to by Kara Swisher.
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?
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?
> 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?
Blaming Facebook is a way of the media class and voters obsolving themselves of their part in the original sin of electing Trump.
It's a convenient fiction that Facebook swung the election, and it's one that if the Democrats have any aspirations of winning in 2020, they would do well to acknowledge.
I'm no fan of Facebook either. But however much Facebook is fined, that sin can't be purged. It's the voters that elected him, and the media that ensured that Trump was the story for much of 2016.
Blaming Facebook is a way of the media class and voters obsolving themselves of their part in the original sin of electing Trump.
It's a convenient fiction that Facebook swung the election, and it's one that if the Democrats have any aspirations of winning in 2020, they would do well to acknowledge.
I'm no fan of Facebook either. But however much Facebook is fined, that sin can't be purged. It's the voters that elected him, and the media that ensured that Trump was the story for much of 2016.
I'm going to really stretch credulity for a moment for my own amusement. In the wake of losing the 2016 election, it appears the Clinton campaign may have picked some poorly constructed Russian ads as a scapegoat. This rather arbitrary and somewhat random decision by some campaign worker may ultimately topple a multi billion dollar tech giant. And I wonder if the campaign worker who made the original suggestion to blame Russian ads at an otherwise standard/boring messaging meeting connects the two things.
>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.
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.
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.
Here's a nice infographic with some of the settlements.
https://dmxvlyap9srmn.cloudfront.net/production/articles/353...
https://dmxvlyap9srmn.cloudfront.net/production/articles/353...
[deleted]
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?
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.
> the main point of a corporation is a shield of liability.
Of the shareholders. Not the executives.
Of the shareholders. Not the executives.
Let's not forget board and large shareholders that shape direction for executives and the board.
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.
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.
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.
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.
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.
If you were a delivery driver you would consider parking tickets a cost of doing business too.
It's as if legal parking costs $20, the parking ticket is $5. However you may not even get the parking ticket, so obviously you would never pay for parking.
This was the situation for bicycle parking in Japan.
~$5 a day to park my bike legally.
~$25 ticket if my bike got confiscated for being parked illegally.
It got confiscated twice in 3 years. Needless to say, basically everyone parked illegally.
~$5 a day to park my bike legally.
~$25 ticket if my bike got confiscated for being parked illegally.
It got confiscated twice in 3 years. Needless to say, basically everyone parked illegally.
When I was a kid, Brussels public transport was purely proactive payment. Hop on a bus/tram/subway, scan your card. I didn't ride enough for it to matter, and it was cheap (1 euro per trip), so I didn't game the system but many of my friends just decided it was either going to cost them $500/yr in fines or it would cost them $500/yr in tickets, so they just rode without a ticket.
The difference is it is quite likely that the parking ticket cost is higher than the profit, even revenue you made while parked there. So there is a real incentive to at least try and avoid them.
Consider the case if a parking ticket was 5c - why would (absent other disincentives) delivery drivers ever obey parking signage?
Consider the case if a parking ticket was 5c - why would (absent other disincentives) delivery drivers ever obey parking signage?
This is a bit old but AFAIK still in place.
http://www.nbcnews.com/id/14602712/ns/business-us_business/t...
"Under the program, the type of violation determines the ticket’s outcome. For example, double-parking in some parts of the city is a violation that can be erased completely for commercial vehicles. Violations for blocking a crosswalk or a bike lane can only be reduced by about 15 percent. Fines for blocking a driveway can be knocked down by 75 percent. To date, 312 companies are enrolled in the program, including heavyweights like UPS, FedEx, Verizon, Coca-Cola and Time Warner Cable, which are the city’s biggest commercial offenders."
"Under the program, the type of violation determines the ticket’s outcome. For example, double-parking in some parts of the city is a violation that can be erased completely for commercial vehicles. Violations for blocking a crosswalk or a bike lane can only be reduced by about 15 percent. Fines for blocking a driveway can be knocked down by 75 percent. To date, 312 companies are enrolled in the program, including heavyweights like UPS, FedEx, Verizon, Coca-Cola and Time Warner Cable, which are the city’s biggest commercial offenders."
crazy
That's pretty much how it works with delivery services and ride shares where I live. Tickets are of course discounted by the chance of actually getting one during the time you are in violation, which seems to be small. They are close to useless as a disincentive.
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.
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.
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.
Crimes were committed. Crimes continue to be committed.
> 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.
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.
According to Wikipedia the firm wasn’t completely put out of business until the conviction. I don’t know how accurate that is.
They did win a unanimous ruling on appeal to the Supreme Court years later but by then it was too late to save the company.
They did win a unanimous ruling on appeal to the Supreme Court years later but by then it was too late to save the company.
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.
For real changes in behavior though, it'd probably take something radical like fining their board directly instead of punishing the shareholders.
The fine could be 100% of cash on hand and they would still have too strong an incentive to not change.
What is the incentive exactly? What do they really gain by having such crappy security practices, other than just not having to spend the time and money to improve security?
I simply do not believe that but everyone is certainly entitled to their opinion.
What ever cash FB has on hand is what they want to have on hand. They’ve got plenty of ways to raise whatever cash they want or need in no time.
But not for free, and not forever. I've got ways I could raise some cash too, but not for free, and not forever. It may seem like it, since the cash I could raise is denominated in thousands and theirs in billions, but it's still true.
Personal finance is not corporate finance. You’re not worth north of 500 billion with probably millions of difference sources of revenue. (Billions since they’re clearly turning each user into revenue.)
Are you claiming that Facebook can raise money forever and without cost?
Because if not, that was not a very useful post, and if so, it's obviously not true on the ground that if it was that easy, they'd simply do so and have All The Money (TM).
Because if not, that was not a very useful post, and if so, it's obviously not true on the ground that if it was that easy, they'd simply do so and have All The Money (TM).
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.
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.
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.
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.
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
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
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.
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.
[deleted]
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.
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.
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.
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"?
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"?
It is if Facebook can issue debt to stretch the fine payment into several years or longer. If you make $50k a year, get a $25k fine, and stretch it out into 50 $500 payments, then it's about fifty parking tickets. Which is hard, but doable. And when you're a PM, or somewhere else nice and well far removed from the corporate bank accounts which are paying the fine, then you don't even notice. Actually, you notice something positive since your compensation took a nice bump when your stock options became worth more as a result of investors responding positively to the news.
The amount of money needs to be commensurate with a level at which shareholders feel like they're taking a hit. It's not about the size of the fine, it's about how the fine makes investors feel.
The amount of money needs to be commensurate with a level at which shareholders feel like they're taking a hit. It's not about the size of the fine, it's about how the fine makes investors feel.
Where do you live that parking tickets are $500?
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.
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.
> But we don't scale the fine with offender income
Perhaps we should. I believe some countries do.
Perhaps we should. I believe some countries do.
The Swiss do it. They charged a wealthy repeat offender 300k for going 85mph in a 35mph zone.
In Finland, speeding tickets are pegged to income. A Nokia director was fined over 100,000 euro for speeding.
http://news.bbc.co.uk/1/hi/world/europe/1759791.stm
http://news.bbc.co.uk/1/hi/world/europe/1759791.stm
If fines don't scale with the offender, then you get a scenario where you stop being punished if your income is sufficiently large.
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.
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.
Alternatively, people have strong feelings both ways (fb as a product vs fb as a company) causing ambivalence.
I don't visit facebook anymore, its just filled with low quality content from people I barely know, nothing to do with propaganda.
Well that money would partially fund the NSA, so it evens out a bit
mikece(3)
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.
No, please not. Crypto burn only makes crypto coins owner richer. That is the opposite of what taxes, even as fines, are for.
Agree that crypto-burn is a bad idea. But I am curious what that 3-5 billion government windfall will go towards.
What does "crypto burn" mean?
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.
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.
Transfering money to unspendable address. For example, $11M in 1CounterpartyXXXXXXXXXXXXXXXUWLpVr are unspendable.
https://www.blockchain.com/btc/address/1CounterpartyXXXXXXXX...
https://www.blockchain.com/btc/address/1CounterpartyXXXXXXXX...
[deleted]
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".