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The Facebook Fiasco and Its Future

Posted On April 4, 2018 1:54 pm
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There’s Even More Beneath the Surface

At the time this all started, which was when a Cambridge University data analytics professor created an app called “thisisyourdigitallife” to gather research on users who granted access to their Facebook information, Facebook’s policy allowed for the collection of friends’ data by app creators and academics. Selling data to third parties or using it for advertising wasn’t prohibited.

However, in 2015, Facebook found out the researcher’s company violated its policies when it passed data onto Cambridge Analytica. In March 2015, Facebook said it had been assured that Cambridge Analytica, Kogan (the researcher), and Christopher Wylie had deleted the data.

Facebook never told users their data was hijacked and took “limited steps to recover and secure the private information of more than 50 million individuals,” according to The Observer newspaper in London.

The thisisyourdigitallife app was removed from Facebook in 2015, but Facebook didn’t suspend Cambridge Analytica and SCL Group – the firm that serviced contracts won by Cambridge Analytica until March 16, four days after TheObserver contacted Facebook for comment on the breech it reported.

On top of the political blaze and likely fallout Facebook’s going to face for years to come, it’s potentially facing a more immediate problem.

If Facebook violated its 2011 consent decree with the FTC to not share personal user information, it could be subject to fines of up to $40,000 per incident. That per incident number times 50 million users… well, it’s astronomical.

David Vladeck, formerly director of the FTC’s Bureau of Consumer Protection, who oversaw the investigation of alleged privacy violations by Facebook and the subsequent consent decree resolving the case in 2011, recently said to The Washington Post about Facebook’s sharing of data with Cambridge Analytica that it “raises serious questions about compliance with the FTC consent decree.”

Jessica Rich, former deputy director for the Bureau of Consumer Protection, who oversaw the FTC’s privacy program and also led the investigation into Facebook before the 2011 consent decree, said in an e-mail to The Washington Post, “Depending on how all the facts shake out, Facebook’s actions could violate any or all of [the consent decree] provisions, to the tune of many millions of dollars in penalties. They could also constitute violations of both U.S. and EU laws. Facebook can look forward to multiple investigations and potentially a whole lot of liability here.”

Wednesday morning, Sens. Amy Klobuchar (D-MN) and John Kennedy (R-LA) wrote this letter to the chairman of the Senate Judiciary Committee, Richard Grassley, calling for hearings:

Dear Chairman Grassley:

We write to express serious concern regarding recent reports that data from millions of Americans was misused in order to influence voters, and to urge you to convene a hearing with the CEOs of major technology companies – including Facebook, Google, and Twitter – regarding the security of Americans’ data in light of this significant breach.

Reports indicate that private information from the Facebook profiles of more than 50 million users – representing nearly a quarter of potential U.S. voters in 2016 – was taken to conduct sophisticated psychological targeting for political ads in order to influence voters. The reports further indicate that Facebook knew about this breach more than two years ago and failed to acknowledge it and take swift and meaningful action.

While Facebook has pledged to enforce its policies to protect people’s information, questions remain as to whether those policies are sufficient and whether Congress should take action to protect people’s private information. The Committee considered similar cybersecurity issues in an October hearing featuring testimony from the former chairman and CEO of Equifax. We believe that the Committee should revisit these issues in light of recent events and upcoming elections.

Important questions also remain unanswered about the role of these technology companies in our democracy. Major social media platforms store an enormous amount of data and have a user base larger than all of the major broadcasting companies combined. The remarkable innovation that these companies have championed has changed how we share and collect information. In the process, Facebook, Google, and Twitter have amassed unprecedented amounts of personal data and use this data when selling advertising, including political advertisements. The lack of oversight on how data is stored and how political advertisements are sold raises concerns about the integrity of American elections as well as privacy rights.

Senators from both parties have called for more transparency and accountability from social media platforms in their efforts to guard against interference by foreign actors. Testimony before this Committee and others from current Administration officials, as well as former officials from the Administrations of President George W. Bush and President Obama, has made clear that the threat of foreign interference continues to exist, and that these foreign powers will make similar attempts to interfere in future elections.

It is our view that Senators on the Judiciary Committee should have the opportunity to question the CEOs of technology companies about these critical matters. While this Committee’s Subcommittee on Crime and Terrorism convened a hearing with witnesses representing Facebook, Twitter, and Google in October of 2017, we have yet to hear from the leaders of these companies directly. A hearing featuring testimony with CEOs would provide the Committee the opportunity to hear an update on the progress of these companies’ voluntary measures to combat attempted foreign interference and what is being done to protect Americans’ data and limit abuse of the platforms, as well as to assess what measures should be taken before the next elections.

It is for these reasons that we request that you announce a hearing of the Judiciary Committee at which Senators can publicly question the CEOs of technology companies. We would be happy to discuss this matter with you further and we appreciate your consideration of this request.

Make no mistake about it, Facebook’s in deep trouble. That’s been clear from the beginning of these revelations. When the stock was at about $165, I publicly said it was going to $150, a 10% drop. Which it got to in less than a week.

Facebook bounced last Thursday, but only in sympathy with the market bouncing.

The stock’s going to be under intense pressure, and it wouldn’t surprise me to see it test $120.

*This has been a guest post by Money Morning*

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