Severe, yet un­cer­tain, penalty awaits Face­book

The Charlotte Observer (Sunday) - - Front Page - BY CECILIA KANG New York Times

Face­book’s an­nounce­ment in late April that it had set aside $3 bil­lion to $5 bil­lion to set­tle claims that it mis­han­dled users’ per­sonal data sug­gested a strong con­sen­sus by fed­eral reg­u­la­tors that the so­cial me­dia giant needed to be held ac­count­able.

But the re­al­ity be­hind the scenes at the Fed­eral Trade Com­mis­sion is far more com­pli­cated, re­flect­ing the pol­i­tics and give­and-take of the ne­go­ti­a­tions.

The FTC’s five com­mis­sion­ers agreed months ago that they wanted to pur­sue a his­toric penalty that would show the agency’s teeth. But now, the mem­bers are split on the size and scope of the tech com­pany’s pun­ish­ment, ac­cord­ing to three peo­ple with knowl­edge of the talks who spoke on the con­di­tion of anonymity.

The divi­sion is com­pli­cat­ing the fi­nal days of the talks.

Along with dis­agree­ment about the ap­pro­pri­ate fi­nan­cial penalty, one of the most con­tentious un­der­cur­rents through­out the ne­go­ti­a­tions has been the de­gree to which Mark Zuckerberg, Face­book’s chief ex­ec­u­tive, should be held per­son­ally li­able for any vi­o­la­tion of the agree­ment, ac­cord­ing to two of the peo­ple.

Face­book has put up a fierce fight, say­ing Zuckerberg should not be held legally re­spon­si­ble for the ac­tions of all 35,000 of his em­ploy­ees.

The talks could fall apart, but ne­go­ti­a­tions are still mov­ing for­ward and are ex­pected to con­clude within days. This ac­count of the FTC’s in­ves­ti­ga­tion

of Face­book is based on in­ter­views with a half­dozen peo­ple.

Joseph J. Si­mons, the com­mis­sion’s Repub­li­can chair­man, ap­peared to have the votes of the other two Repub­li­can com­mis­sion­ers, giv­ing him the three needed to ap­prove a deal. But a 3-to-2 de­ci­sion along party lines, which Si­mons has said he wants to avoid, could lead to strong re­bukes on Capi­tol Hill.

The stakes are enor­mous for the agency and Si­mons. The case is be­ing closely watched glob­ally as a lit­mus test on how the U.S. gov­ern­ment will po­lice the coun­try’s tech giants.

The com­mis­sion has a rep­u­ta­tion of pulling some punches, par­tic­u­larly in con­trast with reg­u­la­tors in Europe, who have pur­sued force­ful ac­tion on both privacy and an­titrust is­sues. The largest FTC fine against a tech com­pany was $22.5 mil­lion against Google in 2012, for mis­lead­ing users about how some of its tools were track­ing them.

Any set­tle­ment will also be looked at as a mea­sure of the Trump ad­min­is­tra­tion’s will­ing­ness to pe­nal­ize one of the coun­try’s most valu­able and in­flu­en­tial com­pa­nies. The ad­min­is­tra­tion has whit­tled away reg­u­la­tions in many in­dus­tries, but Pres­i­dent Don­ald Trump has re­peat­edly said tech giants like Face­book and Ama­zon have too much power.

Many Democrats have led ef­forts to rein in Sil­i­con Val­ley’s power.

“This is a hugely im­por­tant de­ci­sion be­cause it will be watched by all these big com­pa­nies to see if there is ac­tu­ally go­ing to be a new day on the en­force­ment front,” said Sen. Ron Wy­den, D-Ore., who has pushed for Zuckerberg to be held per­son­ally li­able in any set­tle­ment.

Ro­hit Cho­pra, one of the two Democrats on the com­mis­sion, has pub­licly urged stronger pun­ish­ment of re­peated of­fend­ers of FTC rules.

But Si­mons has ap­peared un­will­ing to force the is­sue and drag the case to court, which could be a risky move. He has re­cently in­ten­si­fied his ef­forts to get at least one of the two Democrats on his side, ac­cord­ing to one of the peo­ple with knowl­edge of the talks. But the in­ter­nal dis­agree­ments have held up a fi­nal agree­ment.

In ad­di­tion to the fine, Face­book has agreed, as part of a pro­posed set­tle­ment, to create new po­si­tions that would be fo­cused on privacy poli­cies and com­pli­ance, two of the peo­ple said. The agency, in co­or­di­na­tion with the com­pany, would set up an in­de­pen­dent com­mit­tee to over­see Face­book’s privacy ef­forts. That com­mit­tee and the FTC would ap­point an out­side as­ses­sor to mon­i­tor the com­pany’s han­dling of data.

The com­pany has also agreed to as­sign an ex­ec­u­tive as a privacy com­pli­ance of­fi­cer, mak­ing privacy over­sight a job within the top ranks, the peo­ple said. Zuckerberg could be given the job, ac­cord­ing to one per­son with knowl­edge of the talks, al­though another per­son ex­pressed doubts.

But the set­tle­ment prob­a­bly won’t in­clude lim­its on Face­book’s abil­ity to track users and share data with its part­ners, man­dates that privacy ad­vo­cates have raised as im­por­tant for reg­u­la­tion in the United States and that Face­book has fought. Si­mons has ar­gued that the set­tle­ment pro­posal sets a new bar for en­force­ment of privacy vi­o­la­tions and wants to avoid lit­i­ga­tion that risks los­ing that op­por­tu­nity.

“Five bil­lion dol­lars is a lot of money,” said David Vladeck, a law pro­fes­sor at Ge­orge­town Univer­sity and a former head of con­sumer pro­tec­tion for the FTC. “And at the end of the day, it is not in the com­mis­sion’s in­ter­est to go to trial be­cause there is no guar­an­tee they will get re­lief beyond what’s al­ready on the ta­ble.”

The FTC and Face­book de­clined to com­ment for this ar­ti­cle.

The roots of the in­ves­ti­ga­tion stem from a case that Face­book set­tled with the agency in 2011. The com­pany was ac­cused of de­ceiv­ing con­sumers about how it han­dled their data. As part of the set­tle­ment, it said it would over­haul its privacy prac­tices.

In March 2018, The New York Times and The Ob­server of Lon­don re­ported that Cam­bridge An­a­lyt­ica, a Bri­tish po­lit­i­cal con­sult­ing firm that had worked for Trump’s pres­i­den­tial cam­paign, had used a vast trove of Face­book data to com­pile voter pro­files. The agency then opened an in­ves­ti­ga­tion into whether the com­pany had vi­o­lated the 2011 agree­ment.

Face­book has apologized for re­act­ing slowly to the rev­e­la­tions about Cam­bridge An­a­lyt­ica. But the com­pany has said an aca­demic re­searcher with ac­cess to the data broke its rules by shar­ing the data with the con­sult­ing firm.

At the same time, sen­ti­ment in Wash­ing­ton was turn­ing against Big Tech. It had be­come clear that Russia used on­line ser­vices to in­ter­fere in the 2016 pres­i­den­tial elec­tion. YouTube, Twit­ter and Face­book were be­ing blamed for the spread of harm­ful con­tent and fake news. Politi­cians like Sen. Bernie San­ders of Ver­mont, who is now run­ning for the Demo­cratic pres­i­den­tial nom­i­na­tion, were ac­cus­ing Ama­zon of un­fair la­bor prac­tices.

Weeks af­ter the in­ves­ti­ga­tion started, Si­mons, a long­time Repub­li­can an­titrust lawyer, was sworn in to lead the agency. Two other Republican­s, Noah Phillips and Chris­tine Wil­son, and two Democrats, Re­becca Slaugh­ter and Cho­pra, were con­firmed by the Se­nate as the other com­mis­sion­ers at the same time.

All five first met to dis­cuss the Face­book case in De­cem­ber. The com­mis­sion’s staff said they had found sev­eral vi­o­la­tions of the 2011 agree­ment and a cor­po­rate cul­ture that did not make privacy a pri­or­ity, ac­cord­ing to two peo­ple with knowl­edge of the talks.

There was wide agree­ment among the com­mis­sion­ers that the charges against Face­book ap­peared strong and that they should re­spond vig­or­ously, ac­cord­ing to the two peo­ple.

Talks be­tween Face­book and agency of­fi­cials have con­tin­ued over the past sev­eral days. Si­mons was try­ing to per­suade Slaugh­ter, a Demo­crat who ap­peared to side with Cho­pra, to see his per­spec­tive. The com­mis­sion­ers are ex­pected to vote on the set­tle­ment in the com­ing days.

JES­SICA CHOU NYT

Reg­u­la­tors are said to be divided over how much to hold Face­book CEO Mark Zuckerberg per­son­ally li­able for any vi­o­la­tions.

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