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FTC Approves Roughly $5 Billion Facebook Settlement (#GotBitcoin?)

FTC commissioners broke along party lines, 3-2, with the Republican majority lining up to support the pact while Democratic commissioners objected. FTC Approves Roughly $5 Billion Facebook Settlement (#GotBitcoin?)

FTC Approves Roughly $5 Billion Facebook Settlement (#GotBitcoin?)

The Social-Network Company Says Apps May Have Had Improper Access To Photos

 

The Federal Trade Commission has endorsed a roughly $5 billion settlement with Facebook Inc. over a long-running probe into the tech giant’s privacy missteps, according to people familiar with the matter.

FTC commissioners this past week voted 3-2 in favor of the agreement, with the Republican majority backing the pact while Democratic commissioners objected, the people said. The matter has been moved to the Justice Department’s civil division and it is unclear how long it will take to finalize, one of the people said. Justice Department reviews are part of FTC procedure but typically don’t change the outcome of a decision by the commission.

A settlement is expected to tighten government restrictions on how Facebook treats user privacy. The additional terms of the settlement couldn’t immediately be learned.

An FTC spokeswoman declined to comment, as did a Facebook spokesman.

Facebook said in April that to settle the probe it was expecting to pay up to $5 billion. A resolution was bogged down by the party-line split on the FTC, with the Democrats pushing for tougher oversight of the social-media giant.

One point of disagreement was the extent to which Facebook Chief Executive Officer Mark Zuckerberg should be held responsible or be made accountable for future missteps.

The FTC investigation began more than a year ago after reports that personal data of tens of millions of Facebook users improperly wound up in the hands of Cambridge Analytica, a data firm that worked on President Trump’s 2016 campaign. The FTC investigation centered on whether that lapse violated a 2012 consent decree with the agency under which Facebook agreed to better protect user privacy.

Cambridge Analytica shut down in 2018 after the allegations surrounding Facebook data and other questions about its political tactics. The company had won political consulting work in the U.S. by promising to use data to profile and influence voters with political messages. It contracted for several Republican presidential candidates ahead of the 2016 election, including Mr. Trump’s campaign.

The user data at issue in the Facebook case reached beyond those who downloaded the app to include about 30 different data points about those people’s Facebook friends

Since the Cambridge Analytica affair, other privacy missteps have come to light, adding to Facebook’s headaches.

The settlement would easily exceed the previous record penalty for violating an FTC order, a $22.5 million fine levied against Google Inc. in 2012. The commission has limited powers to impose fines for first-time privacy violations but has broad latitude to sanction repeat offenders.

Facebook shares gained 1.8% on Friday, even though the reported settlement amount was $2 billion more than the company has reserved for the settlement. Facebook’s profit for the first quarter before accounting for the penalty was slightly more than $5 billion.

After Facebook set aside the funds, some Democrats criticized the amount as too little, and the party-line decision this past week could expose Republicans to further criticism. The FTC has sometimes been attacked as being toothless on privacy.

Facebook and other large tech companies are under an increasingly harsh spotlight in Washington, D.C., including at a “social media summit” at the White House on Thursday in which President Trump repeatedly bashed Silicon Valley as being unfair to conservatives. Facebook wasn’t invited to attend, nor were other tech companies. They have previously said they police their platforms without regard to political ideology.

Facebook also faces possible scrutiny of its competitive practices. The Wall Street Journal reported last month that the Justice Department is gearing up for an antitrust probe of Alphabet Inc. ’s Google and has authority to look into Apple Inc., while the FTC has taken jurisdiction for possible antitrust probes of Facebook and Amazon.com Inc.

Facebook is also preparing for congressional hearings in the coming week related to its proposed cryptocurrency Libra, which has drawn skepticism from President Trump and many regulators.

The privacy settlement comes as the FTC has faced mounting political pressure to take a tougher line against Facebook and potentially other tech companies. European enforcers have been seen as the global top cop on the tech beat.

With the dollar amount approved this week, the FTC obtained a financial penalty higher than what European Union could have sought under its privacy law.

Facebook’s first FTC settlement, finalized in 2012, resolved commission allegations that the company repeatedly broke its privacy promises to the site’s users, including by sharing their data with advertisers and other third parties.

For example, Facebook-based apps like a television-show quiz could find a user’s relationship status or photos, the FTC said at the time—even though Facebook said it wouldn’t share unnecessary personal details with apps. Facebook settled the case in part by promising not to further deceive users.

In 2017, Facebook said a personality-prediction app had gathered data from tens of millions of users and shared the information with Cambridge Analytica. The FTC reopened the privacy case with Facebook, this time armed with its significant power to punish repeat offenders.

The big-ticket fine is unlikely to satisfy Facebook’s staunchest critics, much as multibillion-dollar penalties against big banks after the 2008 financial crisis did little to reduce anger at Wall Street.

Lawmakers in both parties are working on new privacy rules for large tech firms, while many Democratic presidential candidates want to investigate Facebook’s market power. Sen. Elizabeth Warren (D., Mass.) is calling to break up the company, a position recently backed by Facebook co-founder Chris Hughes.

A number of Democratic lawmakers assailed the pact on Friday. Rep. David Cicilline (D., R.I.), chairman of the House antitrust subcommittee, tweeted that the FTC “just gave Facebook a Christmas present five months early.”

Updated: 1-10-2020

Landmark Facebook Settlement Still Working Its Way Through Court

Judge orders social-media company, government to file written responses to privacy advocacy groups critical of deal.

Almost six months after Facebook Inc. FB +0.51% agreed to a $5 billion settlement of privacy violations, the issue is anything but settled for the social-media giant.

The deal with the Federal Trade Commission announced in July to settle allegations that Facebook broke its promises to protect users’ privacy is still under review by a federal judge, who has been weighing objections from opponents who believe the deal is inadequate.

Judge Timothy Kelly of the U.S. District Court for the District of Columbia has ordered Facebook and the government to file by Jan. 24 written responses to privacy advocacy groups critical of the settlement.

The groups’ chief complaint is a provision releasing Facebook from liability for past missteps, including any unfair or deceptive actions the FTC was aware of as of June 2019. That provision, they say, could nullify long-held complaints about Facebook that aren’t addressed in the proposed settlement, including about its use of facial-recognition technology or its collection of personal health information.

“The proposed release is so vague, and the scope of immunity Facebook would gain is so indeterminately broad, that the Court should reject it as procedurally unfair,” Marc Rotenberg, president of the Electronic Privacy Information Center, said in a filing to the court.

Facebook and the FTC have defended the record penalty and related requirements for the company, saying it will reshape how the company considers users’ privacy. The settlement is based on charges that Facebook violated a 2012 FTC order by deceiving users about their ability to control their personal information.

James Kohm, director of enforcement in the FTC’s consumer protection bureau, said the agency was aware of other privacy complaints about Facebook, and the settlement addresses violations “that we determined were actionable.”

He said in an interview that he expects the court to approve the deal.

Facebook said it has been taking the necessary steps to implement the agreement. “We’ve put dozens of teams in place, made many of the necessary structural and technical changes and expanded privacy protections across our products,” said Michel Protti, chief privacy officer of product.

Still, Facebook isn’t concerned the deal with the FTC will fall apart, people familiar with the matter said.

Inside the social-media company, senior officials have been putting in an increasing amount of money, people and time to comply with requirements of the FTC deal, the people said.

At a Facebook off-site gathering for senior officials in Hawaii last month, compliance with the FTC settlement was one of the focus areas, some of the people said.

The settlement requires Facebook to restructure its privacy practices from the board of directors down. That includes an independent board privacy committee, mandatory privacy reports to senior leaders and personal certification from Chief Executive Mark Zuckerberg that Facebook is complying with regulatory requirements.

The company also must hire an independent assessor that will report to the board’s privacy committee. Some aspects legally can’t be activated until after the court gives final approval, Facebook said.

There are additionally a number of privacy requirements that have taken longer than expected to implement given the number and complexity of Facebook’s databases and servers, the people familiar said.

Company officials in Hawaii also heard updates about other potential headaches, one of the people said, including investigations by state attorneys general. The states are probing, among other things, what Facebook knew about the activities of Cambridge Analytica, a former political consulting firm that used harvested Facebook user data.

Dozens of states in 2018 wrote a joint letter asking Facebook for information about its privacy practices in the wake of reports about Cambridge Analytica. State investigations are continuing, with New York and Pennsylvania among the most aggressive, according to the person.

Facebook said it is cooperating with the probes.

Mr. Zuckerberg, at the time of the settlement announcement, said the new requirements “go beyond anything required under U.S. law today. The reason I support them is that I believe they will reduce the number of mistakes we make and help us deliver stronger privacy protections for everyone.”

Facebook has also resisted some states’ requests. Attorneys general representing California, Massachusetts and the District of Columbia have each taken Facebook to court demanding access to internal company documents. In California’s case, the state is subpoenaing emails from senior executives.

“Now that the court has compelled Facebook to respond I think they will be more diligent in producing information,” California Attorney General Xavier Becerra said in an interview last month.

The FTC’s investigation unearthed email exchanges appearing to connect Facebook’s Mr. Zuckerberg to potentially problematic privacy practices, The Wall Street Journal reported in June. When the FTC announced the settlement in July, it didn’t disclose emails from Mr. Zuckerberg or other executives. Facebook at the time said it fully cooperated with the FTC’s investigation and provided tens of thousands of documents, emails and files. The company then said Mr. Zuckerberg or others didn’t knowingly violate Facebook’s obligations under the FTC consent order nor do any emails exist that indicate they did.

Mr. Kohm of the FTC said evidence his agency gathered suggested “this was a company that wasn’t paying attention to privacy the way they should, and part of that is reflected in the fact that the CEO wasn’t as involved” in privacy decisions.

Others at the FTC have said the agency should have pressed further to investigate the role of senior Facebook executives. FTC Commissioner Rohit Chopra, one of the agency’s commissioners who voted against approving the Facebook settlement, last month told a gathering of state attorneys general, “There was a lot more to do, and I think that now the ball really is in your court.”

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