What you need to know
Did you hear that Facebook may be paying somewhere between $3 and $5 billion dollars to the Federal Trade Commission for privacy related violations?
That’s a lot of money.
But how does one determine amount? Especially when it’s a range. Three to $5 billion dollars is a wide range; in my world $2 billion dollars is a lot of money.
We know the settlement might be in that range because Facebook said so in its financial statements. And we also know Facebook brings in about $56 billion a year in revenue based on recent reports. As one Senator pointed out Facebook is being fined about 2 weeks of revenue for a major privacy violation.
But why not fine 4 weeks revenue? Or 1 weeks revenue? Or 10 weeks revenue?
While $5 billion sounds like a lot The New York Times reported that the fine could have been $41,000 per user affected for 87 million users. That would have been a fine of about $3.6 trillion dollars.
Even Facebook would be shut down by a $3.6 trillion dollar fine.
So should the fine be $3 billion, $5 billion or the full $3.6 trillion? Who decides?
In this case someone, or a group in leadership, in the Federal Trade Commission literally gets to decide if Facebook lives or if Facebook dies. Further if they decide that Facebook lives they get to decide whether the fine will have a big impact or a small one.
In this case it appears they are option for a fine which really won’t have much long-term impact on Facebook.
So a major decision that impacts the future of how technology companies use – or abuse – personal information and the consequences thereof is made by unelected officials.
This Has Been Going On A Long Time
This isn’t the first time this has happened. The power to levy and adjust fines has long been in the purview of unelected government officials. Some commentators have come to call the administrative arm of the US Federal Government to be an unofficial 4th Branch which may wield as much power as the others – the executive, the legislative and the judiciary.
A 1970 Washington University Law Quarterly article recognized, almost 50 years ago, this amazing power of the administrative portion of the government.
For a long time the government and its administrators, through the use of fines or lowering fines, has had a lot of power to decide which businesses in the private sector live and die.
But this long history becomes more important as we move into an era where the private entities they regulate are becoming such important drivers of our economy. And not just our economy but over of society. Few would argue that Facebook has not have a substantial impact on modern society.
And It Continues In The Modern Era
In one of the most influential cases so far this century the US government and the German governments went after Siemens, AG for paying bribes to foreign officials. Total fines were about $1.4 Billion US Dollars (based on then-current exchange rates in 2008). That amount is staggering.
However what was not very well covered in the mainstream press was the calculation and final amount of fines in the light of the maximum fines that could have been levied. The fine paid was $450 million to the US Department of Justice, about $350 million to the US SEC and about $569 Million to German authorities.
Buried in the footnotes of history was that the DOJ, along, who walked away with $450 million dollars could have walked away with $1.35 billion to $2.7 billion under the then current federal guidelines. That’s an over 2 billion dollar swing in the amount of the fine. Especially when you consider that Siemen’s profits were about $35 Million Euros for 2008.
Even for a company like Siemens $2 billion dollars is a lot of money. And yet again some internal government officials made a major decision on the fate of the economy and it’s players with little or no oversight.
Who Polices This?
One of the age-old questions is a democracy is “who polices the police”?
So who is watching over these unelected officials? We are supposed to have checks and balances, right?
Well in theory we do. Our congress writes the laws (what compliance is and the fine levels) and our executive branch/present is supposed to oversee these agencies. So we should have checks in two areas over these agencies and their decisions.
But in practical reality these agencies act more and more independently. And the agencies of the US federal government that oversee these important economic activities often simply answer to themselves.
Baring something highly unusual getting a lot of attention in the mainstream press we can expect that the agencies will continue to make major decisions affecting the future of our economy and society.
What Happened To What The Founders Intended?
So we have to wonder was this what was intended? Many constitutional scholars think that the size of today’s federal government was completely unforeseen by the founding fathers.
For one, the scope of the commerce clause – allowing the federal government to regulate commerce between the states was a bit of a sleeper in the federal constitution. I think few foresaw how technology – particularly transportation and communication technology – would make so much economic activity interstate commerce by default.
In the constitution the founders did create some unelected officials, namely within the courts system. But they were very careful about the power and vetting of these officials.
I doubt the founders thought about the size and scope of today’s federal agencies and how much power they have over the economy despite being led by unelected officials.
What’s The Future?
We know today that our unelected officials are making live and die decisions for major players in our economy. We know they have great power.
It could be imagined that if our heads of agencies wanted Facebook gone they could go for the $3.6 Trillion fine instead of the $3 to $5 Billion. And the ripple effects to all of us, from that, are huge.
So what do we do?
It’s time for us to come together and have a conversation about our government and our future. What do we want? How much power do we want centralize?
More importantly who do we want to make the decisions on who lives and dies. Facebook is more than a company. Facebook is an agent of societal change.
And some folks that were never elected just made the decision that they can continue in business.
What do you think about that? Is it fair or unfair? Join me in the comments below.
By: The Our Shawn McBride, a speaker, trainer and consultant on The Future of Business, the host of The Future Done Right(TM) Show and long-term business attorney. If you want regular content on the future of business subscribe to get new blog posts from us here.
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