Google's Alleged FTC Trouble: Would A Huge Fine Change Anything?

Another day, another Google privacy misstep: according to the Wall Street Journal, the Federal Trade Commission is close to hitting Google with a $22.5 million penalty for bypassing a privacy setting on Apple's Safari web browser that allowed Google to illicitly track individuals as they browsed the web.

The rumored fine would be the largest in FTC history. But what could a multi-million dollar government fine over privacy violations possibly mean to a company the size of Google, which is worth around $186 billion?

While it would have a negligible effect on Google's financial health, it would further erode the public's trust in a company that has struggled with a number of privacy issues over the years, experts say. But will anyone actually stop using Google products because of it? Doubtful, they say.

This wouldn't be the first time the FTC has called out Google for bad behavior: the agency charged it with violating its "privacy promises" to users in the rollout of social network Google Buzz. Buzz launched in 2010 with a privacy flaw that inadvertently revealed the people Google users email or chat with the most. As part of a settlement signed last fall in response to the controversy, the FTC took the unprecedented step of requiring Google to submit to privacy audits by an independent third party for 20 years.

Google, for its part, remained relatively mum on Tuesday's report. “We cannot comment on any specifics,” the company wrote in an email to The Huffington Post. “However we do set the highest standards of privacy and security for our users.”

So what would this (alleged) settlement and fine mean for the company? We turned to some experts.

$22.5 Million Doesn’t Matter Much For Google’s Profits...

And how could it, when the company raked in nearly 500 times that -- or $10.6 billion -- during the first three months of 2012 alone?

“Of course, the financial impact is nominal,” said Fatemeh Khatibloo, an analyst at the research firm Forrester.

Alan Webber, principal analyst for Altimeter Group, concurs that Google wouldn't feel much of a sting from an eight-figure fine, which would perhaps be more newsworthy for being the FTC's biggest ever rather than for the fact it was being levied on Google.

“It is less a question about the size of the fine relative to Google and more the size of the fine in the context of the FTC," said Webber. "The size of the fine to Google is relatively small and not a big deal.”

…But It Does Matter For Google's Image

For a company that's already weathered its fair share of privacy problems, whispers of a record-setting fine from the government over its use of personal information can’t be good news.

“While the number itself will not significantly affect Google's profitability, the loss to goodwill and public perception from being the target of the largest FTC fine in history is going to really sting,” said Justin Brookman, director for Center of Democracy & Technology’s Project on Consumer Privacy.

And the deeds may be doubly damaging for a company that insists it has good intentions.

“The bad PR for a company like Google whose motto is ‘Do no evil’ is a stronger deterrent than a penalty at this level,” Webber said.

Privacy issues have repeatedly thrust Google into the hot seat. The company faced a backlash from users and privacy advocates after it decided to place its many services under a single privacy setting in February, making it easier for it to collect data, and for the aforementioned issue with Google Buzz, settled in October. As if that weren't enough, a class-action lawsuit was filed in 2010 against Google for stealing people's Wi-Fi information from its Street View cars.

But as the long list of violations indicates, Google's privacy issues are well-known. And despite whatever public ire this latest fine evokes, users of Google's tools are unlikely to turn away from the products to which they've grown accustomed.

"Google and Facebook, of course, are perceived as the worst offenders [of privacy]," Khatibloo says. "But there are alternatives to Google -- many of them, in fact -- and we still don’t see any substantial migration away from the platform."

So Are Google's Privacy Missteps Finally Over?

As far as the Safari privacy violation is concerned, it seems as though Google has already tried to make amends. "This settlement reflects a nearly three-year-old situation that’s unlikely to be repeated," said Khatibloo. "Their updated privacy policies, along with the general confusion and lack of actual protocols around Do Not Track make a repeat of this scenario unlikely."

But Google, of course, is a company that does much more than install cookies on web browsers. And Jules Polonetsky, the director of the Future of Privacy Forum, argues that Google’s culture, where groups of engineers work on developing products largely on their own, lends itself to more reputation-tarnishing privacy violations, even if this specific snafu isn’t repeated.

“[W]ithout a lawyer looking over the shoulder of every developer, mistakes at companies working on lots of projects will continue to happen," Polonetsky said.

And to boot, Google may take steps to render the FTC powerless to penalize it for some future privacy snafus.

"There's an argument that Google only got in trouble for violating their own statements," said Brookman.

Come again? In the agreement Google signed with the FTC in 2011, the company promised it would not misrepresent its privacy practices. Violating that agreement is what caused the alleged $22.5 million fine, according to the Journal. To avoid getting caught lying in the future, Google may just start making vague -- and thus unenforceable -- privacy promises with users to avoid the wrath of the government.

"If Google had never made those statements, it's unclear whether the FTC would interpret the law to forbid what Google did," Webber adds.

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