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F.T.C. Investigating Facebook in Use of Personal Data by Firm Tied to Trump New Investigations Into Facebook Add New Pressures
(about 5 hours later)
WASHINGTON — The Federal Trade Commission has opened an investigation into whether Facebook violated an agreement with the agency on data privacy, after reports that information on 50 million users was improperly obtained by the political consulting firm Cambridge Analytica, according to a person with knowledge of the inquiry. WASHINGTON — Federal regulators and state prosecutors are opening investigations into Facebook. Politicians in the United States and Europe are calling for its chief executive, Mark Zuckerberg, to testify before them. Investors have cut the value of the social networking giant by about $50 billion in the past two days.
The investigation, started in recent days, adds to the mounting pressure against Facebook about its handling of the data. Cambridge Analytica used the information to help President Trump’s presidential campaign profile voters during the 2016 election. They are all focused on the same thing: whether Facebook mishandled users’ data.
The scrutiny of the company now extends from state capitals to Europe. Attorneys general in Massachusetts and New York are investigating Facebook’s handling of personal data, and the British Parliament has called for a hearing with Mark Zuckerberg, the company’s chief executive. Several senators have also called for him to appear in Washington. Facebook has built its highly profitable social network off its users, selling advertisements based on their ages, interests and other details. But the scrutiny over the company’s vast trove of personal data — following a report that a political consulting firm had improperly obtained information of 50 million users — is taking direct aim at that lucrative formula.
Adding to concerns about the company is the impending departure of Alex Stamos, Facebook’s chief security officer. That change, reported Monday by The New York Times, reflects heightened leadership tension at the company. “Investors are reacting to fears of regulation and the consequences of regulation,” said Brian Wieser, a senior research analyst at Pivotal Research Group. “The scale of errors can only lead one to conclude these are systemic problems.”
The buildup of news has already hurt Facebook’s stock. The company’s shares were down more than 5 percent in midday trading on Tuesday, after falling sharply on Monday as well. So far, most of the social network’s top executives have been silent. Mr. Zuckerberg, its founder, and Sheryl Sandberg, his top deputy, have not made any public statements in recent days. The pair did not appear at an employee meeting on Tuesday in Menlo Park, Calif., where the company is based.
The F.T.C. investigation is connected to a settlement the agency reached with Facebook in 2011. The agency had accused the company of deceiving customers “by telling them they could keep their information on Facebook private, and then repeatedly allowing it to be shared and made public,” according to a statement at the time. At the meeting, employees asked questions about the continuing internal investigation into the use of Facebook data by the political consulting firm Cambridge Analytica. The firm, which was tied to President Trump’s 2016 campaign, used the data to target messages to voters.
Among several violations, the F.T.C. found that Facebook told users that third-party apps on the social media site, like games, would not be allowed to access data. But the apps, the agency found, were able to obtain almost all personal information about a user. The meeting, which included Facebook’s deputy counsel, Paul Grewal, largely focused on the steps Facebook that was taking to ensure its data could no longer be misused by independent researchers, according to Facebook employees in attendance. Mr. Zuckerberg was expected to address employees on Friday, when the company holds an all-hands meeting.
The data on the 50 million users was harvested in 2014 by an outside researcher, Aleksandr Kogan. Mr. Kogan, a professor at Cambridge University, paid users small sums to take a personality quiz and download an app, which collected private information from their profiles and from those of their friends. Facebook allowed that sort of data collection at the time. The company has faced internal dissent over its broader role in spreading disinformation during the presidential campaign and its response to it. The tensions have prompted the planned departure of Alex Stamos, Facebook’s chief security officer, who plans to leave in August.
Then, as The Times reported over the weekend, Mr. Kogan gave the information to Cambridge Analytica, a firm founded by Stephen K. Bannon, the former White House political adviser, and Robert Mercer, the wealthy Republican donor. Passing the information to a third party violated Facebook’s policies, the company said last week. The pressure on Facebook has been building for years.
It started in the European Union, where regulators have taken an aggressive attitude toward Facebook and other American technology giants for their sway over the region’s 500 million people. The company has been the subject of several privacy investigations and charges by European regulators. Europe has approved a new privacy law, which takes effect in May, that will give users of Facebook, Google and other internet services more control over how their data is collected and what Silicon Valley companies know about them.
After the 2016 presidential campaign, lawmakers at home joined the chorus of critics, citing the company’s role in Russia’s disinformation efforts. The social network was one of the top tools used by Russians to spread false news, and the company’s executives have struggled to explain what happened and how they would prevent foreign interference in the future.
The Cambridge Analytica revelations have forced Facebook to scramble to assuage fresh concerns by regulators and lawmakers. The company is sending its representatives to Capitol Hill and arranging conversations with state attorneys general to try to answer questions about how the firm collected the information of Facebook users.
The social networking giant is also facing an investigation by the Federal Trade Commission, which is looking into whether Facebook violated an agreement with the agency, according to a person with knowledge of the inquiry.
The F.T.C. investigation is connected to a settlement the agency reached with Facebook in 2011 after finding that the company had told users that third-party apps on the social media site, like games, would not be allowed to access their data. But the apps, the agency found, were able to obtain almost all personal information about a user.
The current investigation has parallels. The information on the 50 million users was harvested in 2014 by an outside researcher, Aleksandr Kogan. Mr. Kogan, a professor at Cambridge University, paid users small sums to take a personality quiz and download an app, which collected private information from their profiles and from those of their friends. Facebook allowed that sort of data collection at the time.
Then, Mr. Kogan gave the information to Cambridge Analytica, a firm founded by Stephen K. Bannon, the former White House political adviser, and Robert Mercer, the wealthy Republican donor. Passing the information to a third party violated Facebook’s policies, the company said last week.
“There are all sorts obligations under the consent decree that may not have been honored here,” said David Vladeck, a former director of consumer protection at the F.T.C.
The company could face fines of $40,000 a day per violation if the agency finds that Facebook broke the agreement.
“We are aware of the issues that have been raised but cannot comment on whether we are investigating,” an F.T.C. spokeswoman said in a statement on Tuesday. “We take any allegations of violations of our consent decrees very seriously.”“We are aware of the issues that have been raised but cannot comment on whether we are investigating,” an F.T.C. spokeswoman said in a statement on Tuesday. “We take any allegations of violations of our consent decrees very seriously.”
The investigation was reported by Bloomberg earlier on Tuesday. Facebook said it expected to receive questions from the F.T.C. related to potential violations of the 2011 consent decree. “We remain strongly committed to protecting people’s information,” Facebook’s deputy chief privacy officer, Rob Sherman, said in a statement. “We appreciate the opportunity to answer questions the F.T.C. may have.”
Facebook said it expected to receive questions from the F.T.C. related to potential violations of its 2011 consent decree. The F.T.C. inquiry is just one piece of the regulatory backlash. On Tuesday, the New York attorney general, Eric T. Schneiderman, announced that he was joining the Massachusetts attorney general, Maura Healey, in an investigation into whether Facebook had failed to protect the privacy of users in those states. New Jersey’s attorney general announced a similar investigation.
“We remain strongly committed to protecting people’s information. We appreciate the opportunity to answer questions the F.T.C. may have,” Facebook’s deputy chief privacy officer, Rob Sherman, said in a statement. Mr. Schneiderman and Ms. Healey sent a letter to Facebook on Tuesday that demanded records of the communications between the company and Cambridge Analytica.
The agency’s action against Facebook in 2011 was considered a landmark in privacy enforcement. The company could face fines of $40,000 a day per violation if the agency finds it violated their settlement.
“There are all sorts obligations under consent decree that may not have been honored here,” said David Vladeck, a former director of consumer protection at the F.T.C. “This goes to the fundamental question of trust.”
Mr. Vladeck said the F.T.C.’s inquiry may just be the start. On Tuesday, the New York attorney general, Eric T. Schneiderman, announced the state was joining the Massachusetts attorney general, Maura Healey, in an investigation into whether the company failed to protect the privacy of users in those states. The two state attorneys general sent letters to Facebook demanding it hand over information about the company’s interactions with Cambridge Analytica.
“Consumers have a right to know how their information is used — and companies like Facebook have a fundamental responsibility to protect their users’ personal information,” Mr. Schneiderman said. “Today’s demand letter is the first step in our joint investigation to get to the bottom of what happened.”“Consumers have a right to know how their information is used — and companies like Facebook have a fundamental responsibility to protect their users’ personal information,” Mr. Schneiderman said. “Today’s demand letter is the first step in our joint investigation to get to the bottom of what happened.”
Members of Congress are expected to be briefed soon by Facebook staff members, though so far, no committee leaders have scheduled hearings with the company. There have also been growing calls for the top leadership at Facebook to appear before American and British lawmakers to testify about the company and Cambridge Analytica.
“With all the reports out there now, the conduct at issue here is squarely in the bull’s-eye of what the 2011 consent decree was all about,” said James C. Cooper, an associate professor at the Antonin Scalia Law School at George Mason University and a former F.T.C. official. Senators Amy Klobuchar, Democrat of Minnesota, and John Kennedy, Republican of Louisiana, have asked the chairman of the Judiciary Committee, Charles E. Grassley, Republican of Iowa, to hold a hearing. Republican leaders of the Senate Commerce Committee, organized by John Thune of South Dakota, wrote a letter on Monday to Mr. Zuckerberg demanding answers to questions about how the data had been collected and if users were able to control the misuse of data by third parties.
Senators Amy Klobuchar, Democrat of Minnesota, and John Kennedy, Republican of Louisiana, have asked the chairman of the Judiciary Committee, Charles E. Grassley, Republican of Iowa, to hold a hearing on Facebook’s links to Cambridge Analytica. Republican leaders of the Senate Commerce Committee, organized by John Thune of South Dakota, wrote a letter on Monday to Mr. Zuckerberg demanding answers to questions about how the data was collected and if users were able to control the misuse of data by third parties. “It’s time for Mr. Zuckerberg and the other C.E.O.s to testify before Congress,” Senator Mark Warner, Democrat of Virginia, said on Tuesday. “The American people deserve answers about social media manipulation in the 2016 election.”
There have been growing calls for the top leadership at Facebook to appear before American and British lawmakers to testify about the social media giant’s sharing of data with Cambridge Analytica. Facebook staff members were scheduled to brief the office of Mr. Warner, the top Democrat on the Intelligence committee, and the offices of members of other committees, including Commerce, this week.
“It’s time for Mr. Zuckerberg and the other C.E.O.s to testify before Congress. The American people deserve answers about social media manipulation in the 2016 election,” Senator Mark Warner, Democrat of Virginia, said on Tuesday.
Facebook staff members are scheduled to brief his office and others in the Senate Intelligence, Commerce and other committees this week.
“The possibility that Facebook has either not been transparent with consumers or has not been able to verify that third-party app developers are transparent with consumers is troubling,” Mr. Thune said in his letter.“The possibility that Facebook has either not been transparent with consumers or has not been able to verify that third-party app developers are transparent with consumers is troubling,” Mr. Thune said in his letter.
On Tuesday morning, a committee within the British Parliament sent a letter to Mr. Zuckerberg asking him to appear before the panel to answer questions on the company’s connection to Cambridge Analytica. On Tuesday morning, a committee within the British Parliament sent a letter to Mr. Zuckerberg that asked him to appear before the panel to answer questions on the company’s connection to Cambridge Analytica. The president of the European Parliament also requested an appearance by Mr. Zuckerberg.
“The committee has repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular about whether data had been taken without their consent,” wrote Damian Collins, chairman of the British committee. “Your officials’ answers have consistently understated this risk, and have been misleading to the committee.”“The committee has repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular about whether data had been taken without their consent,” wrote Damian Collins, chairman of the British committee. “Your officials’ answers have consistently understated this risk, and have been misleading to the committee.”