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Facebook is under an increasingly bright spotlight in Washington as lawmakers push for an inquiry into how a firm tied to President Donald Trump’s campaign gathered data from the social-media giant’s users without authorization. But it’s Wall Street that‘s likely to impose the bigger penalty on the company, one analyst says.
Stefanie Miller of Height Securities writes in a note on Tuesday the current state of politics favors a lack of action by Congress against Facebook FB, -4.51% . She cites reasons including Congress’ inaction on punishing Equifax EFX, +0.75% after its 2017 security breach; and how targeting Facebook with legislation would quickly run the risk of hitting other companies. Many companies rely on Facebook’s ability to package and sell consumers’ data to third parties, Miller notes.
Facebook said last week it suspended the firm Cambridge Analytica from its platform after reports the firm had broken Facebook policies on how third parties can employ user data.
Also read: Cambridge Analytica caught on hidden camera pitching bribes and sex workers.
Facebook shares have slid in the wake of those revelations, and Miller suggests that losses aren’t finished.
See: Stock market tries to rebound from tech-fueled rout; Facebook’s stock struggles.
“Facebook must reckon with investors who are upset that the company appears so reckless in the face of focused regulators, and this could be reason enough for portfolio turnover away from FAANG stocks,” Miller wrote, using the acronym for Facebook, Apple AAPL, +0.35% , Amazon AMZN, +1.72% , Netflix NFLX, +1.07% and Google GOOG, -0.31% .
Meanwhile, lawmakers have begun calling for the CEOs of tech companies including Facebook to testify about the amassing and use of personal data. Sens. Amy Klobuchar, a Minnesota Democrat, and John Kennedy, a Louisiana Republican, have jointly called for Senate Judiciary Committee Chairman Chuck Grassley to hold a hearing.
Miller writes the greater threat from Washington to Facebook is the Federal Trade Commission, which has the authority to fine the company as much as $40,000 per customer leak.
Bloomberg reported Tuesday the FTC is probing whether Facebook violated terms of a 2011 consent decree of its handling of user data that was transferred to Cambridge Analytica without their knowledge.
Miller said the FTC could fine Facebook as much as $2 trillion -- although she called that amount “highly unlikely.”
“We think Trump’s FTC is unlikely to fine Facebook out of business; there is no political will for that action,” she said.