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How Facebook’s $5 Billion Fine Should Be Spent

The Federal Trade Commission voted last week to fine Facebook $5 billion after the company violated an earlier pledge not to misuse consumer data. Critics argue the penalty is too low—one scholar likened it to a "parking ticket"—but it's still big money. Meanwhile, the SEC has piled on with a $100 million fine of its own over Facebook’s misuse of consumers’ phone numbers.

Five billion dollars could do a lot to educate Americans about online privacy perils or allow the FTC to put hundreds of more privacy cops on the beat. Alas, that's not what will happen.

Federal law requires that the money go to the U.S. Treasury's general fund, which means the Facebook fine could be spent on any federal expenditure—Congressional haircuts, tax rebates, and new post offices—unrelated to online privacy.

This is perhaps surprising in light of a recent a poll, which reported that 61% of Americans regard the threat to online privacy as "crisis." Like earlier FTC fines, as well as numerous class action judgments, the Facebook penalty will do little to address the causes of the crisis.

Namely, the money will not be used to stop the pervasive surveillance, data gobbling and hard-to-understand privacy problems that make consumers feel so helpless. The only direct impact of the record Facebook fine may be to scare other companies into shaping up their privacy practices—though even that is uncertain given how earlier FTC fines have failed to spur the tech industry to change its ways.

According to Charlotte Slaiman, a former FTC lawyer who now works at the advocacy group Public Knowledge, the agency does have powerful levers to pull when it reaches financial settlements like the Facebook one. She says an especially important one can be requiring tech companies to allow more competition on their services.

Slaiman added, however, that a real change in privacy practices would depend on consumers understanding what companies are doing with their data—a daunting challenge, she said, given that tech companies are masters at persuading people to share personal information and stay on their apps.

On July 24, the FTC announced a series of measures as part of the $5 billion settlement that are intended to change Facebook’s privacy practices. Critics, though, quickly dismissed the measures—including an “independent privacy committee” of Facebook directors—as unlikely to make a difference to consumers. “The proposed settlement does little to change the business model or practices that led to the recidivism," a dissenting FTC Commissioner wrote. "Nor does it include any restrictions on the company’s mass surveillance or advertising tactics.”

More broadly, the FTC may stand little chance getting the upper hand on big tech companies anytime soon. A big reason is resources. While the likes of Facebook and Amazon have nearly unlimited budgets for litigation and lobbying, the agency is stretched thin.

Last fall, an FTC commissioner told Congress that the number of FTC staffers is 50% below what it was at the start of the Reagan Administration in 1981. Meanwhile, the FTC chairman said agency staff are "almost killing themselves" in the face of unprecedented litigation.

An FTC spokesperson declined to comment to Fortune about the Facebook fine.

All of this points to the need for a new law allowing the FTC to keep more of the privacy penalties it imposes, according to Slaiman. While $5 billion not faze Facebook, which declined to comment for this article, it could go a long way to providing America's leading privacy cop with some teeth.

Editor's note: This article was updated on July 24, 2019.

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