The Federal Trade Commission and the Justice Department fined the company $150 million on Wednesday for misleading users about how it treated their personal data.
The agencies said that the information was used to help marketers target ads, but that they did not do enough to say that. The misleading behavior lasted for at least six years.
The settlement must be approved by a federal court.
The proposed settlement will help prevent further misleading tactics that threaten users' privacy, and the $150 million penalty reflects the seriousness of the allegations.
Companies have been scrutinized for their privacy practices. The F.T.C. fined Facebook $5 billion for violations related to Cambridge Analytica. The agency settled with the company once known as Weight Watchers for producing an app that collected data from young people. The F.T.C. is considering writing new rules for how companies collect and use data online.
The F.T.C. has previously clashed with the social network over privacy. In March of 2011, the company settled charges that it had failed to safeguard users' personal information after two 2009 breeches. The company did not have to tell consumers how it protected their privacy for the next 20 years. The company said it would conduct regular security audits.
The F.T.C. and the Justice Department said that the use of personal information for ad targeting violated the terms.
Keeping data secure and respecting privacy is something we take very seriously, and we have cooperated with the F.T.C. every step of the way. Mr. Kieran said that the problem was disclosed in 2019.
The social media company is grappling with a tumultuous takeover from Musk, the world's wealthiest person. Mr. Musk's $44 billion bid to take the company private was accepted last month. Mr. Musk has questioned the deal in recent weeks.
On Wednesday, Mr. Musk disclosed in a filing that he had boosted his personal financial commitment to the deal, and was now planning to contribute $33.5 billion, either from his own funds or in partnership with other Twitter shareholders.
The initial financing plan had Mr. Musk's stock in the electric carmaker secured by a bank loan. The amount of the loan was reduced by half earlier this month as Mr. Musk secured equity commitments from other investors.
The entire loan had been terminated and Mr. Musk would rely more heavily on additional equity. The move by Mr. Musk to increase his stake in the company was seen as a sign that he wasn't going to walk away from the deal.
Mr. Musk said in the filing that he was in discussions with other shareholders about rolling their existing shares into the merged company, rather than getting paid for their stakes. The amount of money that Mr. Musk has personally pledged and the financial risk to him could be reduced if Mr. Dorsey or other shareholders do so.
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