Facebook finds itself in an uncomfortable position. Recently, Facebook received terrible news from Germany’s regulators regarding the recent and ongoing data collection scandal. German regulatory edicts may force Facebook to change certain practices. As troubling as the ruling might be, Facebook can likely navigate the directives. In the United States, however, Facebook could soon find itself paying a massive sum of money in fines. The Federal Trade Commission appears ready to levy a colossal penalty on the social media giant. Word has it Facebook would pay a “record-breaking fine” for its data collection maneuvering.
Facebook is worth billions upon billions of dollars. Fining the company a paltry sum wouldn’t automatically guarantee the company makes a course correction with its data collection practices. Levying millions of dollars in fines would lead to Facebook’s upper management getting the message. Previously, Google paid $22.5 million in fines. A report in the Washington Post indicates Facebook will pay far more.
The message could ripple into other areas of the corporation’s operations. According to Time.com, Facebook’s improper data collection actions might not be the only egregious actions the company greenlighted. Fears about another fine combined with a public relations disaster could lead to the company cleaning up its act.
Fines don’t only punish a company for bad behavior. Penalties and other sanctions also lead to action and decision-making changes. And Facebook won’t be the only company choosing to rethink current and future strategies. Other companies in and outside the tech industry may worry if unethical practices could soon lead to a massive FTC fine. The levying of an enormous penalty against Facebook won’t go unnoticed in corporate boardrooms across the globe.
As a publicly traded company, bad news won’t help Facebook’s stock much. The price declined a bit when the Washington Post report appeared, but the impact was — so far — negligible. Any form of bad news and undesirable monetary expenses won’t be helpful to a company. Shareholders don’t like either.
Facebook may suffer serious branding problems if the scandal doesn’t go away. The social media company isn’t likely to collapse overnight, but bad press and scandals could dissuade users from frequenting the site. Advertising revenue may suffer leading to additional suffering in the stock price.
The message delivered from the fine and its encompassing ripple effect may be more impacting than the penalty itself. Facebook will probably be a lot more careful with data in the coming months.
Dil Bole Oberoi
