Facebook shares continue to fall amid talk of FTC probe

March 20, 2018

Facebook Inc. is drawing scrutiny from the main U.S. privacy watchdog and members of Congress over how the personal data of 50 million users was obtained by a data analytics firm that helped elect President Donald Trump.

The U.S. Federal Trade Commission is probing whether Facebook violated terms of a 2011 consent decree over its handing of user data that was transferred to Cambridge Analytica without their knowledge, according to a person familiar with the matter. The commission will be sending a letter to the company, according to second person with knowledge of the matter.

Facebook shares declined in morning trading, falling 5.5 percent, to $163.08 each. That follows a drop of 6.8 percent Monday that was the company’s largest since March 2014.

Facebook officials have also tentatively agreed to brief members of the House Judiciary Committee, said a congressional official familiar with the talks. Logistics for the meeting are still being worked out, including who from the company will be involved in the briefing, says the official. The Senate Judiciary Committee also is in the process of scheduling a briefing from Facebook, said George Hartmann, spokesman for Chairman Chuck Grassley.

The FTC is the lead U.S. agency for enforcing companies’ privacy policies and could fine the company into the millions of dollars if it finds Facebook violated a 2011 consent decree.

"The FTC should give this situation a through look to determine if there’s a decree violation," Gene Kimmelman, a former chief counsel of the Department of Justice’s antitrust division, said in a written statement. "The FTC should use all of its power to prevent this from ever happening again."

In an earlier statement Cambridge Analytica said it “strongly” denied “false allegations” in the media and said that the Facebook data at the center of the scandal wasn’t used as part of services provided to the Trump campaign.

Under the terms of the 2011 settlement, Facebook agreed to get user consent for certain changes to privacy settings as part of its resolution of federal charges that it deceived consumers and forced them to share more personal information than they intended. That complaint arose after the company changed some user settings without notifying its customers, according to an FTC statement at the time.

An FTC spokeswoman said in emailed statement that the agency is aware of the issues that have been raised, but can’t comment on whether it is investigating. The agency takes "any allegations of violations of our consent decrees very seriously," the statement said.

If the FTC finds Facebook violated terms of the consent decree, it has the power to fine the company more than $40,000 a day per violation.

Facebook previously said in a statement it rejected "any suggestion of violation of the consent decree."

"We respected the privacy settings that people had in place," Rob Sherman, Facebook’s deputy chief privacy officer, said in an emailed statement. "Privacy and data protections are fundamental to every decision we make."

Despite the requests for briefings about Cambridge Analytica’s use of the data expressed by several Democrats and Republicans, GOP-controlled congressional committees haven’t demanded formal hearings with Facebook executives. The Senate Commerce Committee also announced Monday evening it would like a briefing from the company on "the use and sharing of individual Facebook user data."

Kimmelman, the former DOJ official who is president of the Washington consumer advocacy group Public Knowledge, said in a phone interview that Congress should do more to protect consumers’ digital data.

"Right now, our legal model does not securely signal consumer ownership of our own data," he said. "We need consumer sovereignty."

The Facebook revelations have also prompted transatlantic reaction. The chairman of a UK parliamentary committee announced Tuesday he was requesting that Facebook Chief Executive Officer Mark Zuckerberg, who has remained silent for days, appear before the panel to supplement prior testimony by the company’s executives.

White House spokesman Raj Shah said Tuesday that Trump “believes that Americans’ privacy should be protected” and supports federal investigations into the incident. “If Congress wants to look into the matter or other agencies want to look into the matter, we welcome that," Shah said on Fox News.

Asked if Zuckerberg should testify, Shah demurred. "Without knowing the specifics, it’s difficult to talk about whether an individual should testify,” he said.

A Facebook spokesman confirmed that the company would be holding a townhall Tuesday, where a deputy general counsel would answer questions about the Cambridge Analytica developments.


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