Facebook is bracing for a massive fine from federal regulators after a year of data privacy scandals.
Facebook (FB) said Wednesday that it expects an ongoing investigation from the Federal Trade Commission could result in fines ranging from $3 billion to $5 billion.
The company set aside $3 billion in legal expenses related to the investigation, which cut into its profit for the first three months of 2019. Facebook’s profit for the quarter was $2.4 billion, a decrease of 51% from the same period a year ago.
“This matter is not resolved so the actual amount of payment remains uncertain,” David Wehner, Facebook’s CFO, said on a conference call with analysts on Wednesday after the earnings report. “However we are estimating this range of loss to be $3 to $5 billion.”
An FTC spokesperson declined to comment.
Facebook’s confirmation of a massive fine, which had been rumored in recent months, didn’t appear to unnerve investors, though. Shares of Facebook rose as much as 10% in after hours trading Wednesday following the news.
The fine would mark the first financial penalty for Facebook in the US since the Cambridge Analytica scandal came to light last March. Since then, Facebook has also come under public scrutiny for offering more of its users’ data to companies than it had previously admitted.
Both incidents raised the prospect that Facebook had violated a 2011 consent agreement with the FTC, which required the social network to have a “comprehensive privacy program” and to get the “express consent” of users before sharing their data.
Previous FTC fines against technology firms had minimal teeth. In 2012, the FTC fined Google $22.5 million for violating an earlier privacy agreement with the agency. That same year, Google topped $50 billion in annual revenue for the first time.
But former FTC officials previously told CNN Business the agency may feel more pressure to make a statement with its fine against Facebook in light of all the public attention the company’s data privacy scandals have received.
Even without the fine, analysts had expected the company to post a rare profit decline, as Facebook had indicated it would invest heavily in infrastructure and efforts to protect the platform from abuse.
The company previously said it expects its total expenses to increase by 40% to 50% in 2019 compared to the year prior, as it puts more money in data centers, augmented and virtual reality technology, and in safety and security.
At a conference in February, Wehner called the safety and security efforts “a big multi-billion dollar investment,” which is “important for the long-term sustainability of the business.” But on the call Wednesday, Wehner signaled expenses this year may be lighter than expected, not counting the money set aside for the FTC fine.