Put Another Zero on Facebook’s Fine. Then We Can Talk
nytimes.com
nytimes.com
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".
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’.
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.
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).
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> 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.
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?
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.
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.
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Later
Oh, you mean, about the tickets? Because I spent a long time amassing a lot of parking tickets. Sorry!
Of the shareholders. Not the executives.
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.
~$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.
Consider the case if a parking ticket was 5c - why would (absent other disincentives) delivery drivers ever obey parking signage?
"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."
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.
Crimes were committed. Crimes continue to be committed.
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.
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.
For real changes in behavior though, it'd probably take something radical like fining their board directly instead of punishing the shareholders.
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).
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.
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".
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.
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"?
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.
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.
Perhaps we should. I believe some countries do.
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.
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