Facebook’s privacy missteps are once again coming with a hefty price tag. Months after the company faced a $5 billion fine from the Federal Trade Commission over its data privacy practices following the Cambridge Analytica scandal, the social media giant revealed Wednesday that it’s reached a $550 million settlement in a class-action lawsuit over the company’s facial-recognition software. According to lawyers involved with the suit, the settlement marks the largest cash settlement ever for a privacy related lawsuit, and though the settlement now has to be approved by the presiding District Court, each class member is expected to be compensated at least $200.
The lawsuit was brought by Illinois-based Facebook users, who alleged that Facebook’s “tag suggestions” feature, which automatically predicts which Facebook users appear in photos, improperly gathered users’ biometric facial data without their permission and with no disclosure as to how long the data was being kept. By doing so, Facebook was allegedly in violation of Illinois’s biometric privacy law, which is one of the strictest such laws in the country and the only one entitling consumers to monetary damages. (Facebook has denied any wrongdoing.) “The Illinois law has real teeth. It pretty much stopped Facebook in its tracks,” Marc Rotenberg, executive director of the Electronic Privacy Information Center, told the New York Times. “Tech firms and other companies that collect biometric data must be very nervous right now.” By paying a settlement now rather than taking the case to trial, Facebook potentially skirted paying even higher fees, as the Illinois law stipulates that companies can be fined $1,000-$5,000 each time someone’s image is used without consent. Should that have happened in Facebook’s case, the company could have had to pay as much as $6 billion, a Bloomberg analysis calculated.
The $550 million settlement comes as Facebook has increasingly come under fire for a myriad of practices spanning everything from user privacy and antitrust concerns to its political advertising policy. But the hefty payment is also notable as criticism against facial-recognition software throughout the tech sphere continues to escalate. In recent months, critics have decried Amazon’s Rekognition facial software and the use of facial recognition by police, even spurring San Francisco to ban the use of such software by law enforcement entirely. “Biometrics is one of the two primary battlegrounds, along with geolocation, that will define our privacy rights for the next generation,” attorney Jay Edelson of Edelson PC, one of the lawyers behind the Illinois Facebook suit, said in a statement. And this isn’t the first time that Facebook has been targeted for its own facial-recognition practices: The company was forced to deactivate the technology for European users in 2012 in response to criticism from regulators, and has since updated some of its settings. The company also agreed to provide “clear and conspicuous notice” of the software and obtain additional permissions as part of its agreement with the FTC.
Of course, $550 million is a mere drop in the bucket for Facebook, who reported in their quarterly earnings report Wednesday that their revenue rose to $21 billion in the final quarter of 2019, beating analyst expectations. The company’s earning report also revealed that Facebook’s user base had outperformed expectations and rose by nine percent—yet the company’s increased expenses, which included the Illinois settlement and were up 51% from the year prior, still sent the company’s stocks tumbling by more than seven percent in after-hours trading. “The market expects more from Facebook,” analyst Melissa Parrish told MarketWatch. “Its impressive revenue and user gains just don’t seem to be good enough.”