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Facebook may have overpaid privacy fine by $4.9B

The overpayment may have been to protect Mark Zuckerberg

Facebook may have paid $4.9 billion more than it had to in a settlement with the Federal Trade Commission (FTC) over allegations of privacy mishandling.

According to a Delaware court ruling yesterday, Vice Chancellor Joseph Slights of the Court of Chancery public released information from papers prepared by a law firm advising Facebook’s board of directors as they debated a proposed $5 billion settlement with the FTC. According to reports, the agreement also protected CEO Mark Zuckerberg.

Slights cited the paper in a ruling that directed Facebook to turn over internal documents to Rhode Island’s public employee pension fund. The fund is questioning how the FTC came to an agreement with Facebook over personal data misuse.

The fund is investigating whether Facebook executives agreed to pay billions more as part of a settlement over Cambridge Analytica’s misuse of personal data to shield Zuckerberg from personal liability in the case. Delaware law allows investors access to internal files if they have legitimate questions over directors’ mismanagement.

Cambridge Analytica harvested millions of Facebook users’ personal data and helped Donald Trump win his presidential bid in 2016. The data was also used to win a referendum that saw the UK leave the EU. 

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“The documents already produced provide no insight into why Facebook would pay more than its (apparently) maximum exposure to settle a claim,” said Slights in the ruling reported by Reuters. He added that shareholders were “right to question whether internal communications among Facebook fiduciaries might shed light on the Board’s thinking in this regard.”

According to the Gibson Dunn paper, slights said Facebook faced a maximum penalty of about $104 million. The FTC deal with Facebook in July 2019 was thought to resolve issues around how Facebook handled user privacy. At the time, the company admitted no wrongdoing.

According to Reuters, Slights hasn’t ordered Facebook to turn over documents it claims are protected by attorney-client privilege. Slights’ reasoning was in part because shareholders could gain insights from non-privileged electronic communications he ordered Facebook to disclose.

The FTC and Facebook are yet to make a response to these reports.

The ruling comes as the FTC probes how major tech companies’ collect and manage user information, including minors’ data.

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