FTC Now Investigating Facebook Privacy Practices

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Facebook Inc. (NASDAQ: FB) shares dropped by more than 6% early Monday following an announcement from the U.S. Federal Trade Commission (FTC) that the agency has opened a “non-public investigation” into Facebook’s consumer privacy policies.

The social media giant agreed to a consent decree with the FTC in 2011 that resolved charges against the company that it deceived customers about their ability to keep personal Facebook information private by “repeatedly allowing [the personal data] to be shared and made public.”

According to this morning’s FTC statement:

The FTC is firmly and fully committed to using all of its tools to protect the privacy of consumers. Foremost among these tools is enforcement action against companies that fail to honor their privacy promises, including to comply with Privacy Shield, or that engage in unfair acts that cause substantial injury to consumers in violation of the FTC Act. Companies who have settled previous FTC actions must also comply with FTC order provisions imposing privacy and data security requirements. Accordingly, the FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices.

Facebook’s recent troubles began a week ago with the revelation that personal data on 50 million Facebook users had had their personal information released to Cambridge Analytica and was then used to advance the 2016 presidential campaign of Donald Trump.

Under the 2011 consent decree, Facebook was barred from misrepresenting its practices related to its users’ personal information and was required to obtain users express affirmative consent before overriding their indicated privacy preferences. Among other things, Facebook is also required to provide the FTC with a biennial audit of its privacy practices.

Where the consent decree did not provide for a monetary penalty, under the current investigation Facebook faces a fine of $40,000 per violation. That is a serious penalty, even if the company is held accountable for only the first 270,000 users who downloaded the Cambridge Analytica app from Facebook. Under the terms of Facebook’s contract with a supplier to Cambridge Analytica, the analytics firm was supposed to delete ill-gotten data on around 50 million people whose data was swept up from the data legitimately supplied by the firm’s app.

When Facebook asked Cambridge Analytica to delete the data, the firm failed to do so and Facebook did not press the issue.

In an earlier statement last week, Facebook denied that it has in any way violated its consent decree with the FTC.

Facebook shares traded down about 2% in the noon hour Monday, at $156.14 in a 52-week range of $138.77 to $195.32.

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