Facebook’s chief financial officer in a fourth-quarter earnings call Wednesday revealed the company has reached a $550 million settlement in principle in connection with a class-action lawsuit it faced in Illinois over violations of a state biometric law.
Dave Wehner disclosed the proposed settlement figure while speaking to the company’s expenses in the fourth quarter of 2019. He noted the agreement was reached this month though “most of it” was assessed in Q4 due to a prior accrual.
Facebook faced potential fines north of $1 billion if it was found to have violated Illinois’ Biometric Information Privacy Act (BIPA). The law calls for fines of up to $5,000 per person for intentionally breaking the law and $1,000 per for being found negligent; Facebook has millions of users in the state that could stake their claim as part of the class action.
The $550 million is the largest cash settlement ever resolving a privacy-related lawsuit, according to Labaton Sucharow, one of three law firms to file suit in 2015.
An initial complaint was filed by three Facebook users who claimed the social media giant was illegally collecting, using, and storing biometric data from their photos through its facial recognition technology in violation of sections 15(a) and 15(b) of the BIPA. The feature alleged to be at fault was Facebook’s photo tag suggestions, launched in 2010, and the lawsuit sought to apply to Facebook users located in Illinois for whom Facebook created and stored a face template after June 7, 2011.
The 9th U.S. Circuit Court of Appeals in San Francisco, where the case was relocated to, unanimously ruled in August to reject Facebook’s argument to dismiss the lawsuit.
“The panel concluded that the development of a face template using facial-recognition technology without consent (as alleged in this case) invades an individual’s private affairs and concrete interests,” the ruling stated.
The Supreme Court declined to review the case.
Along with Labaton Sucharow, law firms Edelson PC and Robbins Geller Rudman & Dowd also filed suit. The proposed settlement will next be brought to district court in San Francisco for approval. Facebook did not admit wrongdoing in the agreement.
In a follow-up to Wednesday’s earnings call, Wehner acknowledged fines and the threat of fines “are a reality” that comes with Facebook’s standing in the regulatory environment. The company was fined a record-breaking $5 billion by the Federal Trade Commission over its handling of users’ privacy last year, and regulatory scrutiny is still being paid toward its antitrust compliance and cryptocurrency project.
“We’re focused on investing to be compliant with new evolving regulations, so there is expense that comes with that to us and obviously to everyone else in the industry, as well,” Wehner said.