Facebook Settles Privacy Complaints With FTC Without Fines

Facebook (Nasdaq: FB), the No. 1 social networking site, has finally settled charges with the U.S. Federal Trade Commission that it deceived members about their privacy. Although it won't pay a fine, it agreed to be monitored by the FTC for 20 years. If violations are found, it could be subjected to civil penalties up to $16,000 per offense.

Facebook, of Menlo Park, Calif., had agreed to a preliminary settlement with the FTC last November, while still a private company. "We intend to monitor closely Facebook's compliance with the order," a filing by FTC Chairman Jon Lebowitz said.

The move follows by a day settlement of similar charges of privacy violations by Google (Nasdaq: GOOG), the No. 1 search engine, which also agreed to pay a record $22.5 million fine to the FTC. Both companies have now signed consent decrees with the agency in which they promise not to abuse customer privacy.

Three FTC commissioners voted to approve the settlement. One voted against, and another didn't participate in the vote. Commissioner Thomas Rosch, in a dissent, expressed concern that Facebook could be counted upon to respect its promises.

Last November, Facebook CEO Mark Zuckerberg personally commented on the preliminary settlement that "the company had a made a small number of high-profile mistakes" in the manner that it handled customer privacy preferences. The company didn't make any announcement Friday when the FTC released the text of the settlement and consent decrees.

Legally, the consent decrees signed by both Facebook and Google suggest that consumers won't have the ability to sue either company in federal court if they believe their rights have been abused, said Marc Roth, a partner with Manatt, Phelps and Phillips in New York, as well as a former FTC lawyer. That's because in the consent decrees, neither company has specifically acknowledged committing an infraction.

Shares of Facebook rose 81 cents to close at $21.81 on Friday after the settlement was announced. Google shares fell 35 cents to $642.