FTC Offers Record Fine as Settlement to Protect Facebook

The Wall Street Journal is reporting that the FTC has reached a settlement with Facebook over the violations of data privacy and breach of its terms of service policy. Set at approximately $5 billion, the fine dwarfs that of prior FTC enforcement actions. The FTC had significantly more leverage in the 2018 Facebook scandals because the Facebook misconduct violated an existing 2011 settlement.

The settlement covers the misuse of data by Cambridge Analytica by the Trump election team that created over 10,000 ads to support “fake news” to weaponize social media as a platform for intentionally falsified campaign information. The work by Cambridge Analytica dwarfed the efforts of Russia to meddle in the U.S. election on behalf of Trump (and more accurately, against Clinton). This foreign company’s ads were viewed billions of times during the election cycle.

Critics of the settlement point to the relatively small percentage of revenue represented by $5 billion. The amount is less than 1% of the company’s market valuation. More importantly, such a settlement avoids criminal actions and true accountability. Although the number is large, the real impact is very modest.

Accountability for prosecutorial discretion and cozy plea deals have been highlighted with Labor Secretary Alex Acosta’s resignation based on the Jeffrey Epstein plea agreement. It is hard to imagine that a record-setting fine falls into the same category, but with billions of customers having their privacy rights violated, global elections being manipulated, and criminal conduct occurring across the globe, the FTC is simply ill-equipped to deal with the level of misconduct by Facebook.

In The Empires Strike Back: Reassertion of Territorial Regulation in Cyberspace, I provided a somewhat more extensive summary of Facebook’s recent transgressions:

Facebook failed to secure its single sign-in feature, which resulted in a massive data breach across multiple user platforms that affected 50 million people.[1] The single sign-in feature vulnerability also meant that Facebook users were potentially vulnerable on any other sites where they had used their Facebook accounts to login, exponentially expanding the potential scale of the breach. In March 2018, Facebook was also forced to admit that it collected data on people’s phone calls and texts, though it denied that it was data mining the contents of these interactions.[2] Facebook also claimed that the tracking was only done with the consent of the user to “provide you with a better experience across Facebook.”[3]

Facebook also faces a lawsuit by Pikinis app developer Six4Three that alleges that “the social network’s chief executive “weaponized” the ability to access data from any user’s network of friends – the feature at the heart of the Cambridge Analytica scandal.”[4] These reports come on the heels of Facebook’s failure to manage the misuse of customer data by Cambridge Analytica.[5] Although the actual data protection failures occurred in 2016, the full extent was not discovered until 2018. The aftermath, therefore, has been a 2018 phenomenon.

The Guardian obtained a 27-page presentation produced by Cambridge Analytica in the aftermath of the Trump victory to show employees its effectiveness.[6] “Intensive survey research, data modelling and performance-optimizing algorithms were used to target 10,000 different ads to different audiences in the months leading up to the election. The ads were viewed billions of times, according to the presentation.”[7] This was the content created on behalf of the Trump campaign, not the information made by the Russians or other third parties.[8]

These and many other society-damaging activities by Facebook earned it the sobriquet “menace to society” from philanthropist George Soros at the World Economic Summit.[9] In response, Facebook hired the right-leaning Definers Public Affairs organization to investigate and smear Soros.[10] The attack by Facebook is part of a broader nationalist agenda to exploit Anti-Semitic and racist tropes, which is precisely the type of misuse about which Soros was raising alarms.[11] Facebook’s leadership lied about the hiring of Definers and finally released an admission during late November 2018 to bury its disclosure.[12]

[1] Mike Isaac & Sheera Frenkel, Facebook Security Breach Exposes Accounts of 50 Million Users, N.Y. Times, Sept. 28, 2018 at A1 (“The company said … flaws were compounded by a bug in Facebook’s video-uploading program …. The flaw allowed the attackers to steal so-called access tokens — digital keys that allow access to an account…. The company forced more than 90 million users to log out.”).

[2] See Andrew Griffin, Facebook Admits Collecting Phone Call and Text From People’s Phones, but Claims it had Consent, Independent, Mar. 26, 2018, https://www.independent.co.uk/life-style/gadgets-and-tech/news/facebook-cambridge-analytica-data-my-download-phone-calls-text-messages-contacts-history-a8274211.html.

[3] Id. (Facebook responded: “You may have seen some recent reports that Facebook has been logging people’s call and SMS (text) history without their permission…. This is not the case.”).

[4] Carole Cadwallader & Emma Graham-Harrison, Zuckerberg set up fraudulent scheme to ‘weaponise’ data, court case alleges, The Guardian, May 24, 2018,https://www.theguardian.com/technology/2018/may/24/mark-zuckerberg-set-up-fraudulent-scheme-weaponise-data-facebook-court-case-alleges. See also Six4Three LLC v. Facebook Inc., No. 17-cv-359, 2017 WL 657004 (N.D. Cal. Feb. 17, 2017) (overcoming Facebook effort to remove case to federal court).

[5] See Paul Lewis and Paul Hilder, Cambridge Analytica’s blueprint for Trump victory, The Guardian, March 23, 2018 08.53 EDT, https://www.theguardian.com/uk-news/2018/mar/23/leaked-cambridge-analyticas-blueprint-for-trump-victory.  

[6] Id.

[7] Id.

[8] Cf, Facebook data gathered by Cambridge Analytica accessed from Russia, says MP, The Guardian, July 18, 2018, https://www.theguardian.com/technology/2018/jul/18/facebook-data-gathered-by-cambridge-analytica-accessed-from-russia-says-mp-damian-collins (implying interaction between Russians and Cambridge Analytica).

[9] Joe Tacopino, George Soros’ organization calls for oversight of Facebook, N.Y. Post, Nov. 22, 2018, https://nypost.com/2018/11/22/george-soros-organization-calls-for-oversight-of-facebook/.

[10] Laura Mandaro, Facebook Admits It Asked Opposition Firm Definers to Investigate George Soros, Forbes,  Nov 21, 2018, 08:50pm, https://www.forbes.com/sites/forbes/2018/11/21/facebook-admits-it-asked-definers-to-look-into-george-soros/#33fb327f37c8; see also Sheera Frenkel et al., Delay, Deny, Deflect: How Facebook Leaders Leaned Out in Crisis, N.Y. Times, Nov. 15, 2018 at A1.

[11] See Kenneth P. Vogel, Scott Shane & Patrick Kingsley, Soros Bashers go from Fringe to Mainstream, N.Y. Times, Nov. 1, 2018 at A1.

[A] loose network of activists and political figures on the right have spent years seeking to cast Mr. Soros … as the personification of all they detest. Employing barely coded anti-Semitism, they have built a warped portrayal of him as the mastermind of a “globalist” movement, a left-wing radical who would undermine the established order and a proponent of diluting the white, Christian nature of their societies through immigration.

[12] Nellie Bowles and Zach Wichter, Facebook Uses Holiday to Drop Bad News, N.Y. Times, Nov. 23 at B3 (Sheryl Sandberg, Facebook COO retracted her statement that she had no idea the company hired Definers and Elliot Schrage, communications and policy chief is stepping down).

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