It’s officially open season on Facebook.
Angry users and money-losing investors. Regulators in the U.S. and Europe. State attorneys general and lawmakers — they all say the social media giant should be held to account for the misuse of personal information of as many as 50 million Facebook users by data analysis firm Cambridge Analytica, which said it helped Donald Trump get elected.
The chances of a sweeping regulatory backlash — the kind Facebook has been able to skirt in the past — have never been higher. Even greater is the risk to Facebook in the court of public opinion.
“If I were Facebook, I would be quite nervous about popular sentiment,” University of Washington law professor Ryan Calo said.
Facebook’s stock took a beating Monday after the Federal Trade Commission said was it was investigating and the attorneys general for 37 U.S. states and territories sought details on how Facebook monitored what app developers did with user data and whether Facebook had sufficient safeguards to keep it from being misused. On Capitol Hill, lawmakers turned up the volume on calls for Facebook CEO Mark Zuckerberg to testify.
The CEOs of some large tech companies who have tried to cast themselves as more responsible when it comes to treatment of customers’ data, piled on, too.
“Smoking, drinking too much, & spending too much time on social media: none of these things are good for you,” Salesforce CEO Marc Benioff wrote on Twitter.
“I think this certain situation is so dire, and has become so large, that probably some well-crafted regulation is necessary,” Apple CEO Tim Cook said over the weekend, according to a report from Reuters.
For years, Facebook has skated with few consequences when it has angered users over how it handles their data. Congress and regulatory agencies have largely resisted calls to crack down on the Silicon Valley company, which now has more than 2 billion users around the globe.
But it faces an unprecedented backlash after reports in the New York Times and The Observer that political ad consultancy Cambridge Analytica improperly received data on tens of millions of Facebook users who downloaded an unrelated psychology app, and data on those users’ friends, without their consent.
Some brands, such as Pep Boys and Sonos, have pulled their ads from Facebook. Tesla and SpaceX CEO Elon Musk said he would delete his firms’ Facebook pages. Shares (FB), which fell 6% after the FTC probe announcement but then recovered by the close, are flirting with bear-market territory.
Last week, on the heels of Zuckerberg’s apology over the data abuse, Facebook’s chief operating officer Sheryl Sandberg said the Silicon Valley company would be “open to regulation” but did not specify what kind or how much.
The FTC’s $40,000-a-day baton
Facebook and regulators have squared off before, and that’s the subject of the FTC probe. The agency said it’s investigating whether Facebook violated a 2011 consent decree to protect users’ privacy. The decree requires Facebook to notify users and get explicit permission before sharing their personal information beyond the limits in their privacy settings. Each violation of the agreement would cost Facebook up to $40,000 a day.
“There’s some fairly strong commitments built into the settlement,” William Kovacic, a professor of law at George Washington University and a former member of the Federal Trade Commission, which he chaired from March 2008 to March 2009. “The critical question is looking in detail at what happened here, did Facebook abide by it.”
The FTC could also consider whether Facebook acted deceptively in the situation, which could lead to outside monitors and regular compliance checks of data security, says Stephen Calkins, a professor of law at Wayne State University who served as the FTC’s general counsel from 1995 to 1997.
Since Facebook executives have already apologized for wrongdoing, “it’s almost certain that they violated something enforced by the FTC and it’s almost certain there will be a remedy imposed,” Calkins said.
Also complicating the issue: The FTC is operating with only two out of five commissioners.
EU bears down
The greater regulatory threat looms from overseas. More stringent privacy rules take effect in May and will hand users more control over what information Internet companies collect on them. But European officials, who have been far more aggressive than their U.S. counterparts in going after U.S. tech companies for privacy incursions, are also pursuing Facebook.
According to political news website Politico, EU Justice Commissioner Věra Jourová on Monday demanded Facebook answer questions, including what impact the data leak has on Europeans and whether the misuse of data could happen again today.
“It is clear that your network has great influence and offers great potential for people, advertisers and other businesses. But with great power comes great responsibility,” Jourová wrote in a letter.
Germany’s justice minister said Monday that she wants more oversight of companies such as Facebook after meeting with its executives. Last week, a U.K. parliamentary media committee summoned Zuckerberg to testify about how Facebook uses data. The U.K. Information Commissioner is probing how Cambridge Analytica got the data.
“Facebook should be nervous about Europe,” said the University of Washington’s Calo. “Europe has both the regulatory hooks they need and also the will.”
Facebook favorability is down following a security breach. Elizabeth Keatinge (@elizkeatinge) has more. Buzz60
Congress may stop short of writing legislation this time, too, but it’s turning up the pressure in other ways, with Republicans joining calls for tech giants to take questions about data handling.
On Monday, Sen. Chuck Grassley (R-Iowa) on Monday requested that Zuckerberg testify at a April 10 Senate Judiciary Committee hearing on consumer data privacy — the third committee, along with the Senate and House commerce committees, to demand the Facebook CEO appear.
Another lawmaker, Sen. Richard Blumenthal (D-Conn.), asked the FTC to explore whether Facebook should pay damages to users. “The sphere of scrutiny must be broader than just the consent decree,” he said in a statement. “There is no excuse for delay.”
By far the greatest danger to Facebook’s social media empire would be losing what really matters: the trust and the time of its users. The Cambridge Analytica crisis appears to be taking a toll on how people feel about Facebook.
Only one in four (41%) of Americans trust Facebook to obey laws that protect their personal information, according to a Reuters Ipsos poll released Sunday. In comparison, Amazon is trusted by 66%, Google (62%), Microsoft 60%) and Yahoo (40%), which reported a pair of massive breaches in 2016.
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