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Comment by qwerty456127 | Hacker News Reader

Do fines to big corporations even work? I tend to suspect paying them is a part of the business model - they will keep doing whatever they want to generate huge profits covering whatever fines they may have to pay.

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Corporate Crime and Punishment: An Empirical Study

"Put simply, for large companies, criminal penalties may be just another cost of doing business—and quite a low cost at that."

source: https://scholarship.law.upenn.edu/faculty_scholarship/2147/

It's even more insulting than a fine. It's a voluntary payment in settlement that admits no liability or wrongdoing.

Well, I would expect that, in addition to paying money, this settlement also obliges Meta to stop doing whatever they were doing. And if they don't, then I would expect fine for repeated offense to be much higher, like 10x. At some point that would make ignoring law unprofitable.

Meta had already ceased facial tagging over a year before the suit was filed, according to Ars.

https://arstechnica.com/tech-policy/2024/07/meta-to-pay-1-4-...

Incentives always work.

If the expected fine for X is larger than the expected profit, companies will not do X.

That's actually kind of the problem here. The assumption built into this is that the company is doing the math. More likely the company is just so big that if even one mid-level person makes a bad call, the consequence gets propagated across a billion users. But there are so many mid-level people that it's guaranteed to happen.

Which is the same reason that "higher penalties" wouldn't work either. The problem is not that the penalties aren't sufficient to deter, the problem is that the right hand doesn't know what the left hand is doing, so even if the lawyers tell them "you must never do this" they've got thousands of independent chances to screw it up. One person who doesn't heed their training and oof.

The actual problem is that these companies are too big. Mistakes will always happen, but one mistake by one team in a huge bureaucracy shouldn't affect a population the size of a major country.

Let’s go nuts and just take for granted the good faith and best intentions of megacorp, against all evidence. Even then, we all know that ignorance of the law doesn’t get people out of a speeding ticket. Why should the argument from ignorance hold up then with megacorp, who is staffed with hundreds of legal compliance professionals? Better yet, why should it hold up for their nth example of systematic abuse?

I have some sympathy for the idea that these fines are a form of "stochastic taxation". There are so many rules, arbitrarily enforced and ever changing, that a large company will bleed off a billion now and then whatever you do.

I think that definitely happens, but I'd guess it's the smaller part of the equation.

Seems to be a pretty strong incentive for companies to make sure that, for anything unethical that they actually want to do, the fines will be large enough to satisfy the median voter, but small enough not to impede their business.

Empirically, large companies seem to have little problem following this incentive.

from the better ap-news article linked by the top comment:

> The company announced in 2021 that it was shutting down its face-recognition system and delete the faceprints of more than 1 billion people amid growing concerns about the technology and its misuse by governments, police and others.

It works to a certain degree.

The corporation cannot repeatedly violates nor make a policy that violates the same thing over and over. The punishment would be increased exponentially...

So if every US state sues Meta and settles for ~1.5B that's halved the value of the company.

One more infraction with the same consequences and the company has no money left.

That sounds pretty effective to me?

Their market cap is approximately 1000x larger.

Their annual income is approximately 100x larger.

Wrong. This is 3.5% of their annual income.

Your figure is net income, not gross. They can arrange those numbers as they like.

That doesn't work, though. In practice, most states probably won't sue for this. And even if they do, Texas is one of the most populous states in the US. Presumably the per-state settlements will be proportionate to the number of people harmed. So it's not going to be 1.5B * 50 = $75B.

It doesn't matter if the states do or not. It's a deterrent.

You go into your quarterly earnings call and say "we're conducting illegal business practices which expose us to up to $75B of risk" and see how the investors like that.

You don't get caught every time you speed, but the fine certainly is a deterrent against doing 100mph everywhere.

But that's not what they say to shareholders. These deals always come along with "admitting no fault", so they don't have to say to anyone that they're conducting illegal activities. They're perfectly free to cite the fine up to overzealous prosecution or whatever. I think that usually the case that's made is "we didn't do anything wrong, but it was cheaper to settle than to fight".

Venture capitalists aren't stupid. Even if Zuck says everything is okay they come to their own conclusions.

Obviously everything is NOT okay, otherwise the company wouldn't be getting fined in court for breaking the law.

VCs know just as well as we do that Facebook's business model (privacy-invading targeted advertising) exists because law has not caught up to technology yet. That's starting to change, as this settlement shows.

If Meta suffer many more of these legal settlements which wipe >1% off the annual profit then investors will start to divest. The value of the company will fall.

Keep in mind this was a settlement amount which suggests the legal liability was actually a lot higher than $1.5B

So I think my statement is supported: fining corporations works.

Under GAAP, the company is legally mandated by law to disclose it in the FS. Since the FS is the primary was the company communicates performance to investors, they in fact are saying this to investors.

Its called a legal provision or legal reserve. they need to set aside money for the eventual expense of the setlement. This is going to eat right into EPS.

And, any material change in provision will be discussed. Plus, any investor worth their salt is going to be poring over FS disclosures, including any legal provisions.

Admission of fault has nothing to do with FS. Its purely an insurance topic

I can report yes. California has been using them for years afer passing the CCPA to motivate better data privacy policy and procedure.

Based on how long this was going on, its about $5 per user per year.

Not really imo.

Getting fined for doing something illegal just really means its legal for a price.

They stopped doing facial recognition, so yes.

Nope. They get passed on to the consumer, anyway.

The only way to stop this type of behavior is to throw execs in jail and take their personal assets off them.

For facial recognition in 2011? Extreme take.

Facebook annual revenue last year was $134.90 billion.

https://investor.fb.com/investor-news/press-release-details/...

That’s still a fine of 1% of revenue, which seems like a small percentage, but is still a sizable hit. It’s enough to make investors notice, but probably not substantially if it is a once-off event. If it isn’t a one-off event though and states/countries start fining it all over the place, then there might be more of an issue.

as noted in the AP article, it's at least a second settlement:

> In 2021, a judge approved a $650 million settlement with the company, formerly known as Facebook, over similar allegations of users in Illinois.

Ain’t no amount of money that can compare to infinite growth and mass media control.

This is just factually incorrect. Facebook doesn't have "infinite growth"

Tell big tech leadership and investors that

The entire economy is based on infinite growth, and most of it is based on exponential growth, which is of course a problem.

Indeed the concept of the infinite growth may well explain the Fermi paradox through the concept of a "light cage"[0]

https://pureportal.strath.ac.uk/en/publications/the-light-ca...

If the illegal practice raised $5b in extra revenue then that's just good business sense.

You should cite net income when trying to make a point on this.

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