In July 2019, the U.S. Federal Trade Commission (FTC) imposed a roughly $5 billion fine on Facebook for mishandling its users’ personal data. It was the biggest penalty the U.S. government has levied against a technology company, yet in Congress and beyond, praise for the settlement was muted. The agreement highlights the difficulty of negotiating with a counterpart that has abundant financial resources—and suggests how to draw on other sources of leverage, including parties’ BATNA in negotiation, or best alternative to a negotiated agreement.
In a 2012 settlement with the FTC, Facebook promised to take steps to better protect consumers’ sensitive data. Six years later, the FTC began investigating whether Facebook had allowed Cambridge Analytica, a British consulting firm that worked for Donald Trump’s 2016 presidential campaign, to apply its users’ personal information without their consent to create political messages that would influence voters.
By the end of 2018, FTC investigators concluded that Facebook had, indeed, breached the 2012 consent decree by misleading tens of millions of people about how the site had used their personal information, the Wall Street Journal reports. The FTC believed Facebook’s fine should be in the tens of billions of dollars, according to the Washington Post.
Citing a different formula, Facebook calculated that the fine should be well below $1 billion. The company reportedly believed it would prevail if it challenged a high FTC penalty in court—yet it had a strong motivation to settle, notes the Post. Facebook CEO and board chair Mark Zuckerberg and other executives wanted to avoid testifying and facing public scrutiny.
The FTC was also motivated to settle. The agency’s legal budget was no match for Facebook’s, and losing such a high-profile lawsuit could lessen its ability to hold other tech companies accountable for similar violations. Even if the government prevailed in court, a judge was likely to hand down a much lower fine than what the FTC had in mind.
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Ultimately, Facebook agreed to pay $5 billion—significantly more than it said it believed was required—to win a series of concessions from the FTC.
The two Democrats on the commission had argued for placing Zuckerberg under an FTC order, which would open him up to fines and penalties if Facebook made further missteps. Facebook lawyers threatened to take the case to court if the FTC did so. Ultimately, the parties agreed that Zuckerberg would be required to certify Facebook’s compliance with new privacy rules and be held accountable for any false statements made in the future. Facebook and the FTC also reached a compromise in which Facebook agreed to accept stronger federal oversight of its management of user data, the New York Times reports. Notably, the settlement did not require Facebook to admit to wrongdoing.
The deal passed narrowly and along party lines: The FTC’s three Republican commissioners endorsed it; the FTC’s two Democratic commissioners did not. Democratic FTC commissioner Rohit Chopra and other critics said the settlement didn’t go far enough to ensure that Facebook wouldn’t repeat its past mistakes.
BATNA in Negotiation—and Beyond
In conflict resolution and negotiation, it’s easy to be intimidated by a counterpart who seems to have unlimited resources. The following negotiating techniques can help:
- Examine your counterpart’s BATNA in negotiation. What is a BATNA? In negotiation, your BATNA, or best alternative to a negotiated agreement, is often your strongest source of power. If you believe you have a weak BATNA, think about what your counterpart will do if you can’t reach a deal. They may be just as motivated as you are to stay at the table. Both Facebook and the FTC, for example, had strong reasons to settle and stay out of court. When you know your counterpart also has a weak BATNA, you may decide you can press harder for a better deal.
- Look for wise tradeoffs. Facebook appeared to carefully calculate its interests and decided it was willing to concede on price in return for concessions from the FTC on other issues. Similarly, the FTC made concessions while pushing to get a high penalty that would show its muscle. In negotiation, identifying your priorities can allow both sides to get more of what they value most.
- Welcome dissent, but strive for consensus. Negotiating teams that debate issues, priorities, and goals are more effective than those that keep disagreements and conflict under wraps. But try to reach consensus on your goals before negotiating so that you can present a united front; otherwise, your counterpart may be able to play a game of “divide and conquer” that leaves dissenters—and their good ideas—out in the cold.
What experiences, positive or negative, have you had with BATNA in negotiation?