Facebook hit by data fallout
Facebook Inc shares sank this week as concerns about its ability to safeguard user data sparked a government lawsuit, criticism in the US Congress and a New York Times report on how it had shared data with other firms.
The stock of the world’s largest social media company fell 7.25% on Wednesday, its biggest intraday drop since July, taking losses for the year to about 24%.
Investors are concerned about snowballing legal and regulatory efforts over data use polices that have upset many customers and could carry significant penalties and costs.
In particular, the Silicon Valley firm has drawn global scrutiny since disclosing earlier this year that a third-party personality quiz distributed on Facebook gathered profile information on 87-million users worldwide and sold the data to British political consulting firm Cambridge Analytica.
Washington DC attorneygeneral Karl Racine said the US capital city was suing Facebook, accusing it of misleading users because it had known about the incident for two years before disclosing it.
It further alleges Facebook misled users by allowing several app makers it called partners “to override Facebook consumers’ privacy settings and access their information without their knowledge or consent”.
Facebook said: “We’re reviewing the complaint and look forward to continuing our discussions with attorneysgeneral in DC and elsewhere.”
The New York Times reported new details on Tuesday about the user data that remained available to such partners years after they had shut down features that required them. Facebook acknowledged the lapse in a blog post but said it had not found evidence of wrongdoing by those partners.
In response, both Democrat and Republican politicians criticised the company and queried whether CEO Mark Zuckerberg had lied to Congress in hearings earlier this year. The incoming chair of the house judiciary committee’s antitrust subcommittee, representative David Cicilline, tweeted: “Zuckerberg told Congress Facebook users had ‘complete control’ over their data. Sure looks like he lied.”
The stock slide was the worst since the owner of Facebook, WhatsApp and Instagram warned in July that profit margins would erode in coming years because of consumer and government pressure to better guard data and suppress objectionable content.
“Facebook could have prevented third parties from misusing its consumers’ data had it implemented and maintained reasonable oversight of thirdparty applications,” according to the lawsuit filed in the Superior Court of Washington on Wednesday.
The court could award unspecified damages and impose a civil penalty of up to $5,000 (R71,000) per violation of the district’s consumer protection law, or potentially close to $1.7bn (R24.1bn) if penalised for each consumer affected.
Facebook offered separate privacy settings to control what friends on the network could see and what data could be accessed by apps, enabling the quiz and other services to collect details about users’ Facebook friends without many of them realising it, according to the lawsuit.