Can someone please sum up the wider context? What is happening to FB and what lawsuits are in play? Is this a civil case or a criminal case? Can Zuckerberg and co face jail time? Or is this just routine cost-of-business some-state-shaking-down pay-fine-and-carry-on for FB?
From a layman picking up occasional news, it feels like states and countries and even investors often shake down the big tech companies, using court cases to extract money from tech companies for arbitrary perceived transgressions but really the money just goes to some unaffected government to fund other purposes and that these states and investors and things just take it in turns to demand money.
Shake down is a completely unfair characterization of what's happening here. Facebook is being sued because they're alleged to be damaging their shareholders in three ways.
1. They're using corporate funds to protect Zuckerberg personally.
2. They're in violation of an FTC Consent Decree relating to Cambridge Analytica which poses a material risk to shareholders as there are financial penalties for violating the agreement.
3. They're misleading Government and Customers about what data they're collecting and how they're protecting it, which opens them up to more lawsuits and further puts shareholders at risk.
Running a public company is a two-way street. If you want access to public financing and the ability to shield individuals from personal financial/legal risk, you need to abide by certain rules relating to reporting and transparency.
If you don't want to be transparent, you don't have to IPO.
Yes. There are many other threads being pulled here as well. Another is the indication of evidence of criminal acts by executives and the Board- insider trading.
From a long term perspective, the only potential significant outcome of this activity is Zuck being forced to divest.
It's a shake down if the plaintiffs (who in this case are pension funds with big amounts of shares? When I first read the article, where it talked about Rhode Island etc, I assumed it was a state and not their pension fund) are just going to settle for some money in return for shutting up and letting everything continue as normal afterwards?
Why would shareholders sue the company they own shares in if their goal was to get a payout? Surely when the company reports such a payout the share value will reflect that. It seems like this case should be taken at face value, the shareholders want the company to change its behavior so that their shares can be worth more in the future.
If all the shareholders were to sue and divide the payout according to the number of shares they hold then yes, that would be a losing proposition. If only some of the shareholders sue, however, the payout from the suit might exceed the drop in the value of their own shares, at the expense of other shareholders who are not parties to the suit.
Using the tech company label as if it was a random startup is not really relevant given the place Facebook has in our societies. Also it's not 00's "don't be evil" anymore, governments should absolutely shake down ad tech IMHO.
Shake down is sort of a silly phrase but I mean I run an adtech startup and the space could use more regulation to be sure. Right now its not really serving anyone except the adtech companies themselves. Neither consumers (privacy violations) nor advertisers (dealing with fraud both explicit and implicit through friendly fraud with bunk data) are getting what they want out of it unless you're an F500 bullying your way into solutions with cash (but even then not always)
Abuse? Ad tech doesn’t give a shit. Ad tech is complicit. And it isn’t just dictatorships - it’s the powerful in general (eg how they censor pro-Palestinian content [1]).
What do you do in a situation like this? Simple. Let Facebook open source it’s policies and algorithms which regulate its platforms. Let us see what the watchers have deemed worthy of censorship and intervention. Let Facebook publish how much the Egyptian and Saudi governments spend on their platforms to undermine their citizens. They won’t though because Facebook, in this area (foreign power related) has carefully ensured that it remains aligned with US foreign policy positions.
Modern day ad tech is all about tracking and targeting groups based on their interests, something any government trying to deal with dissidents will be interested in.
I’m curious whether things like this ever lead to the state declaring: “we’ve had enough of you, your company and product must be dissolved (not sold) and be no more”. Or whether they’ve ever used genuinely massive fines to deliberately achieve almost this effect. I imagine the number of employees that would be displaced would make this a hard sell politically quite apart from the matter of whether they can actually do it.
Originally corporations were given permission by the government to exist individually based on them serving some public good. That's why the owners were given limited liability.
"In summary, all corporations are state-chartered; given special privileges by the state, which used to be conditional on them serving some public good. Public corporations are directly owned by the public via equity shares. And large corporations are the beneficiaries of both state and federal sponsorship, which includes subsidies funded by the tax paying public." [0]
There are certainly cases where from a legal perspective the company is no longer permitted to operate. Arthur Anderson following the Enron fraud is a good example.
Not in the realm of possibility here, for many reasons. Even if it were, the number of employees issue- 50,000- would be quite minor in the list of considerations. Amazon would just hire them all outright.
Right now lots of parties are pulling on threads, seeing what unwinds. The most significant possible outcome I see is Zuck being forced to divest- the only change which could impact governance- and relatedly several senior execs and Board members being faced with criminal charges.
Another potential significant outcome is a mandated break up, similar to AT&T, though exactly on what lines and terms is extremely challenging to conceive.
If its proven that Facebook intentionally allowed the data to flow out to third parties as opposed to a 'hack' as they put it, of which the data wasn't consented to be given, then I think there is a duty of the regulators / authorities to protect the interests of the public who are effected.
> “we’ve had enough of you, your company and product must be dissolved (not sold) and be no more”.
I think US govt last did this with Arthur Anderson in early 2000's and lot of people lost their jobs, after that US Govt and private companies just pay fines and call it a day.
Lawsuit refers to civil cases, but legal authorities can and do file lawsuits. For example, the DOJ just recently filed a lawsuit to block the American Airlines-JetBlue merger.
I appreciate the sentiment, but I'm pretty sure there were protection rackets and shakedowns long before someone got the idea to rebrand them as "governments" and "taxes".
From a layman picking up occasional news, it feels like states and countries and even investors often shake down the big tech companies, using court cases to extract money from tech companies for arbitrary perceived transgressions but really the money just goes to some unaffected government to fund other purposes and that these states and investors and things just take it in turns to demand money.