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I mean first fines pretty much have to scale with total revenue to deter behavior

second 5 billion won't even lead to an unprofitable quarter at 2018's numbers so there's a loooot of room between 5B and an existential fine, we aren't any where near the slippery part of the slope.

> I mean first fines pretty much have to scale with total revenue to deter behavior

That's only an effective approach if your goal is to cripple many of the companies that you fine. Almost no large companies on the planet have the extreme profit margins of Facebook. Alternatively to avoid that kind of damage you have to adjust the percentage scale to each individual company's profit margins (25% revenue fine for Facebook, N% for a retailer with microscopic 3% profit margins), which instantly makes the revenue approach absurd.

Slap 3M, Walmart, Caterpillar or Costco with the equivalent of a ~25% quarterly revenue fine, and you'll do severe damage to the company. A 25% quarterly fine on Walmart's revenue would nearly bankrupt them. As opposed to Facebook which has profit margins 15-20x greater than eg Costco and can more or less absorb the fine directly out of its quarterly profit.

I don't see the argument behind using fines as a means to intentionally severely damage companies, which is what huge revenue-based fines accomplish.

Fair enough I used 'total revenue' instead of total profit to make it clear which part of the paragraph is was arguing with. However it's not profit margin but overall profit: Walmart might have thin margins but they still made ~20B in profit: they too could absorb a $5B fine. Costco could eat a billion.

But purposely damaging a company is exactly what a fine is for. It's punishment and deterrent.

> That's only an effective approach if your goal is to cripple many of the companies that you fine

Yes, some companies should be crippled. With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration. With criminals, judges or magistrates would level higher-end sentences as an example and you won't hear many people arguing against a criminal's 15 year sentence by saying it would cripple their economic output.

Society owes nothing to corporations and this "too big to fail" mentality creates a system where corporations are above ethics.

Seeing Facebook fined into to a point where they are seriously crippled as a company will make a lot of other companies change their tune, internationally, for the better.

TBTF has nothing to do with this. What's being proposed is basically the exact opposite of TBTF --- that Facebook is too big not to fine unusually.

If you believe there should be a notion of SITCs --- Systemically Important Tech Companies --- lobby to pass that law in such a way that it survives judicial review. But it can't simply be up to the FTC to make that rule up.

> With criminal sentencing, the first goal is to isolate that person from society as a punishment with reform being a second consideration

A lot of people would argue that this is the root of most problems in our justice system.

> That's only an effective approach if your goal is to cripple many of the companies that you fine.

Don’t screw up egregiously and repeatedly and you won’t get burnt. ¯\_(ツ)\_/¯

Taking the gently-gently approach with fining companies has totally failed: they simply incorporate the cost into their margins and continue on like nothing actually happened; so yes, it is time to start burning companies that don’t do the right thing.

Maybe some will fail as a result, that’s ok: simply existing is not carte balnche permission to continue existing. At least the new gap in the market will probably make room for a new company that will play by the rules.

Nobody has taken a "gently-gently" approach here. $5B is a record-setting fine, the largest in the FTC's history I believe, and situated nicely in the middle of the fines the big banks got for the 2008 crisis. I reject the premise that people are suggesting we have to be careful not to kill Facebook; that's not what's being said. What's being said is that if you're going to try to cripple Facebook, you have to have a rational basis in law for doing so.

We use percent of person's total life revenue (jail time) for non-violent crimes (theft, fraud, etc.) all the time. It's not clear why corporations should get a pass.

No, fines don't have to scale with total revenue. If most of Facebook's revenue has nothing to do with the incident the FTC is fining it for, all the fine needs to do is make that specific business activity irrationally risky to do in the future.

that specific business activity is 7 years of non-compliance on top of however many years they had no actual user privacy before their 2012 agreement.

That specific business activity is selling information to advertisers, which is their entire business model.

So scale the fine to make 10 years of selling ads irrationally risky? I'm okay with that.

See, there's the problem. The FTC lacks the authority to fine Facebook for "10 years of selling ads", or really, anything outside of behavior they can prove violated Facebook's consent decree. The distinction here is behavior that we disapprove of and behavior the FTC does (or should) have the ability to sanction.

If the FTC can fine Facebook $5B† for a (comparatively) minor violation as a way of expressing the agency's disapproval for all the rest of Facebook's business practices, it can do that to anyone. It can, for instance, fine Apple tens of billions for minor, provable violations as a way of coercing them into cooperating with law enforcement to unlock phones.

Again, I do not like Facebook, broadly agree with 'idlewords testimony before the Senate today that his necktie is more tightly regulated than our industry, and want that to change. I do not think the FTC should be able to make up the rules as it goes, especially not as a way for politicians to showboat.

† or whatever you think the appropriate number is; I'm happy to stipulate that $3-5B is the appropriate range for the fine

The FTC not having the legal authority is a very different argument than your first post which just stated they shouldn't... as a principle.

As to blackmailing Apple:

while Cambridge analytical is a (maybe) minor violation the fact that it happened is again evidence of 7 years of non compliance with a previous settlement and it is a fundamental part of their business model.

I would probably have a different stance if Facebook was being fined umpteen billion for like bribing a doctor for unneeded handicap parking placards.

If the people want to elect representatives who pass a law declaring companies like Facebook systemically risky and authorizing their breakup, I'm ambivalent. What I have a real problem with is the federal government seizing on an offense that would ordinarily merit a $10MM fine (or $100MM or $5B) and ratcheting it way up as a way of signaling disapproval for actions not part of the underlying offense, which is essentially what I believe everyone advocating for higher fines is doing.

I think there's some blurriness here because people seem to believe that the violation FTC is pursuing had something to do with Facebook's whole business. That is not my understanding. As I understand it, what set FTC off here was the pattern of violations surrounding the Cambridge Analytica scandal, in which Facebook partners were given more access to user profile data than users expected or would have consented to. That's bad! But it is hard to argue, knowing a little bit about Facebook's business, that those violations were a major component of Facebook's revenue. Thus: Facebook's revenue is not the figure of interest in deriving a fine.

Facebook giving advertisers more access to user profile data than users expected is AGAIN the entire fucking point of the 2012 settlement. That Facebook was capable of giving a relatively tiny ass ad company that access is AGAIN evidence that they had been in non compliance with that settlement for 7 years.

And when selling access to user profile data is their entire value-add over any other given ad network AND rando-ass companies (which CA definitely was) can pay for data that Facebook told users was private: there is no untangling it from revenue from companies that didn't take advantage of that abuse of privacy, there is just what companies we know for sure and what companies could have.

That they did it AGAIN is the basis for there being a relatively significant fine in the first place. It does not follow that the purpose of that fine should be to cripple Facebook, not because crippling Facebook is bad, but because there is no reasonable basis in law to do so.

Again, the significance of the fine is relative to the offense, not the entity. We also don’t fine Mark Zuckerberg 10MM for being late (AGAIN) for paying parking tickets.

That they could do it again is clear evidence that they never complied.

Separately a 4x, a 20 billion dollar, fine still wouldn't cripple them.

Also I'm actually strongly for fining Zuckerberg personally 10mm for his personal traffic violations because the point of fines is punishment and deterrence and thus should be scaled to the individual.

Nobody is debating whether they complied. They didn't. They got a fine. The fine is good. What we're debating is how big the fine should be, and my argument is, the notion that the fine should scale with Facebook's overall revenue, unmoored from the specific offense, is both irrational and dangerous.

How else do fine a company for a decade of knowingly bad behavior except looking at what they afford and setting it accordingly. This wasn't a whoopsie, it was a deliberate choice made consistently for years with the knowledge and budgeting that they might get fined for it.

Also this behavior is inextricable from their overall revenue.

Also also are we back to should as opposed to the FTC's legal authority? I think it should be enough to change the entire culture of Facebook because selling user data is their business model and so anything short of changing the entire culture of Facebook will just result in selling more and more user data as soon as no one is looking. I think it should be enough to prevent Facebook from not just repeating current behavior but to prevent them from coming up with functionally identical but legally distinct behavior. I think it should be enough that Facebook management starts playing whack-a-mole with unethical behavior before the government has to play it after a decade of damage.

You can't just make things up because you don't like the company. If you can do that, so can people whose views you'd find odious.

What is he making up? This seems like Facebook's MO as far as I can tell.

They absolutely do have to scale with revenue. Maybe a small fine, enough to cover API revenues, will deter them from that the very specific behaviour around API data they got fined for however it won't make them think twice about taking a chance on the next unrelated opportunity to be nefarious. A large fine will.

They need to scale with the revenue derived from the offense, if the goal is to deter them from that behavior in the future.

FWIW, I see you saying this, but there are running examples of fines scaling to income, e.g. personal income and speeding tickets.

https://en.wikipedia.org/wiki/Day-fine

https://www.theatlantic.com/business/archive/2015/03/finland...

I'm also not sure that "scaling with the offense" makes sense -- If company A and B can do the same thing, receive equal fines, but company B can continue to exist as if nothing happened, did the fine mean anything? Would your argument in this case be that the fine should be high enough to be damaging enough to both companies, approximately equal to the social value of discouraging that behavior?

Curious especially because you said if the laws changed, you'd be ambivalent. I think there's a structural problem here, I'm not sure any amount of fining particularly will solve the real problem.

FWIW my personal opinion is the the goal should be to deter from unethical and/or (borderline) illegal activity in the future, not only that specific behaviour. Anything else turns into a game of whack-a-mole which is long term damaging to the economy and competitive environment.

How would that deter them though?

This just allows corporations to compartmentalize their risks. They can put all their illegal activities in a side division, and if they don't pan out no worries since we only get fined on the revenue of the failed project.

Agreed, it's hard to believe that if $5B isn't enough some larger amount will be, unless it's enough to completely wipe out Facebook. This has become a litigation of whether or not Facebook is a good idea, and these Senators are out for blood. Because I think they perceive that their constituency just wants to see Facebook get it, and I think their perception is correct. While I certainly don't think this is fair, or the way these regulations should be enforced, I do think that Facebook has brought this upon themselves, they've peddled their wares as the solution to so many of societies ills and people eventually woke up and realized not only were they not solving these problems, they were making them worse. Furthermore Facebook seems to have gotten stuck in a rhetorical loop wherein their response to every scandal is more of the same rhetoric about how they're building this hopefully new world, people are just sick of it, and want to see Facebook punished. I don't think these Senators are going to get what they want in this case, what they will get though is that Facebook is going to pay $5B and people are going to look back on it and think, astonishingly, that Facebook "got off easy."

> the amount needed to deter the behavior

What's happening here is that $5B is believed to be insufficient, and the market cap reaction to the announcement is proof of that. I'd be willing to believe that the fine deters future behavior if the market cap reacted negatively to the settlement, but celebration probably means it isn't enough

In fact the "market cap reaction" shows us nothing of the sort. A large fine was predicted long ago and has been priced into the stock for many months. The most you can say --- and it's a dubious claim still --- is that the market priced a higher fine in. But you still don't know what Facebook's market cap would have been with no fine, and so don't know how the market values this.

Equally likely, though, is that the market doesn't believe Facebook meaningfully benefited from the actions they've been sanctioned for, and that they'll simply comply going forward, making this fine a one-time event that doesn't need to be factored into Facebook's forward revenues (minus what Facebook could have done productively with the $5B that it lost).

Another key point. It should not just deter Facebook but OTHER companies considering the same action.

Sure! Facebook makes more money managing private information than virtually any other company. What's the larger company they'd need to deter?

Every single company that collects, stores and uses any personally identifiable information should be deterred from abusing their privilege of doing so.

Yes, and how does a $5B fine not accomplish that? It's not like any smaller company can look at this and say "well, the total valuation of all firms pursuing these activities is larger than the fine, so it's rational to continue doing that". By all means, fine every company that does this $5B, though.

It may deter smaller firms. It's won't deter Facebook.

Why won't a $5B fine deter Facebook? That's a huge amount of money, even to Facebook. More importantly: it is almost surely a giant multiple of the revenue Facebook obtained from the specific behavior that violated the consent decree.

Maybe. On the other hand, historically there have been too many 'slap on the wrist' punishments that don't even reach the total profit that was by the illegal activity....and that definitely sends the wrong message.

The problem being solved here is not "punish Facebook" but "make the tech oligopoly take the FTC seriously." The fine has to bite to achieve that goal.

I don't disagree even a little bit. My position is that this fine is of a scale that has teeth at virtually every company in America. I remain frustrated, however, that people generally believe that an existential fine is called for, since the underlying conduct was not itself existential to Facebook.

If we passed a law outlawing targeted advertisement driven by behavior tracking, and Facebook ignored that law, a $20B fine would be reasonable to me. And I'd be OK with that law!

> If we passed a law outlawing targeted advertisement driven by behavior tracking, and Facebook ignored that law, a $20B fine would be reasonable to me. And I'd be OK with that law!

i think i would really like that law.

How else do you give a sufficient deterrent if the fine doesn’t hurt and make you reconsider future actions?

A couple hundred dollar fine is not a deterrent to me speeding in my car, but multiple thousands of dollars would be.

You can absolutely make the case that 5bil is not much to Facebook, especially if it solidifies their safety going forward without any real behavioral changes / enforcement.

> the greater of the harm done and the amount needed to deter the behavior

Shouldn't it be the lower of the two? If deter < fine < harm, then they wont do it. And if harm < fine < deter, then they will do it but everyone comes out ahead (assuming the fine money is distributed properly).

Human beings as persons face existential punishment every day.

Corporations a persons -- never.

That's why they get away with this stuff no one thinks is good.

Something, something, two wrongs, something.

The implication you're making is that a larger fine or existential threat to the company is somehow 'wrong'.

I would disagree, as would many others.

This is absolutely wrong. Fines scale with revenue because they are supposed to deter behavior. If I get fined $1000 the change in my behavior is different from that of a minimum wage earner and a multibillion dollar company.

FB has egregiously harmed consumers and has engaged in behavior that is criminal. In no way should they be left off the hook.

FB has egregiously harmed consumers

If that were true, you'd see consumers quitting en masse—yet that's not what we see, no? https://jakeseliger.com/2018/11/14/is-there-an-actual-facebo...

If heroin were really harmful, you'd see users quitting en masse too, surely?

And what about Palm Oil? If those plantations were really a major contributing factor in climate change people would stop using it surely?

Come on. The popularity of something is no measure of the harm it causes.