Face­book flees with 1.5bn users

By tak­ing sub­scribers out of range of strict EU pri­vacy laws, the so­cial net­work­ing firm is back in the spot­light

Financial Mail - - PATTERN RECOGNITION - @shap­shak

Just when it seemed Face­book couldn’t blun­der into an­other pri­vacy scan­dal, it emerged last week that the firm is mov­ing re­spon­si­bil­ity for 1.5bn of its users from in­ter­na­tional head­quar­ters in Ire­land to Cal­i­for­nia to po­ten­tially avoid new Euro­pean pri­vacy reg­u­la­tions.

That’s about three-quar­ters of Face­book’s 2.2bn monthly ac­tive users that will be out of reach of the EU’S new gen­eral data pro­tec­tion reg­u­la­tion. This is de­spite CEO Mark Zucker­berg telling the US congress this month that Face­book would com­ply with the “spirit” of the reg­u­la­tions.

“We’re still nail­ing down de­tails on this, but it should di­rec­tion­ally be, in spirit, the whole thing,” he said, with­out elab­o­rat­ing. When asked if users could opt out of hav­ing their data used for mar­ket­ing pur­poses, he tact­fully said: “Let me fol­low up with you on that.” Don’t hold your breath.

The EU reg­u­la­tion be­comes ac­tive on May 25, and of­fend­ing com­pa­nies can be fined up to 4% of their global turnover, which in Face­book’s case could be about Us$1.6bn.

What does this tell us about Face­book? At worst, that the com­pany doesn’t want to sub­ject it­self to the much harsher pri­vacy laws Europe is en­act­ing. Or, in the kind­est analysis, that it sim­ply isn’t ready for the tougher reg­u­la­tions. Ei­ther way, Face­book’s busi­ness model won’t sur­vive such strict scru­tiny.

Last year Zucker­berg changed Face­book’s mis­sion from “Mak­ing the world more open and con­nected” to “Bring[ing] the world closer to­gether”. He said this in June — af­ter the fake news rev­e­la­tions around the 2016 US elec­tion, but be­fore those around Cam­bridge An­a­lyt­ica be­came public knowl­edge.

But Face­book knew in 2015 that tens of mil­lions of its users’ per­sonal data had been com­pro­mised, which makes it re­mark­able that au­di­tor PWC gave the so­cial net­work the all clear last year in a re­port for the fed­eral trade com­mis­sion (FTC).

Ac­cord­ing to a 2011 agree­ment with the FTC, “Face­book is ob­li­gated to keep the prom­ises about pri­vacy that it makes to its hun­dreds of mil­lions of users,” FTC chair­man Jon Lei­bowitz said at the time. “Face­book’s in­no­va­tion does not have to come at the ex­pense of con­sumer pri­vacy. The FTC ac­tion will en­sure it will not.”

But PWC found in its au­dit: “In our opin­ion, Face­book’s pri­vacy con­trols were op­er­at­ing with suf­fi­cient ef­fec­tive­ness to pro­vide rea­son­able as­sur­ance to pro­tect the pri­vacy of cov­ered in­for­ma­tion.”

The heav­ily redacted re­port doesn’t ex­plain how PWC came to these con­clu­sions, and US pri­vacy groups have filed free­dom of in­for­ma­tion cases to find out why.

The FTC said last month it is in­ves­ti­gat­ing whether Face­book breached the 2011 agree­ment, which re­port­edly car­ries a fine of $40,000 per vi­o­la­tion per user per day.

The pri­vacy scan­dal doesn’t seem likely to end soon, and with an­gry con­sumers bay­ing for con­se­quences, this is the cost Face­book might face.

The FTC is in­ves­ti­gat­ing whether Face­book breached a 2011 agree­ment on users’ pri­vacy

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