U.S., States Step Up Pressure on Facebook
The attorneys general of 37 states and territories escalate a backlash that has shaken the social-media giant
By Georgia Wells and John D. McKinnon
Updated March 26, 2018 5:04 p.m. ET
Government officials ratcheted up pressure Monday on Facebook Inc. FB 0.42% over its handling of user data, with federal regulators saying they are investigating the social-media giant’s privacy policies and 37 state attorneys general demanding explanations for its practices.
The Federal Trade Commission, in a statement, signaled that its probe of Facebook is broad. Tom Pahl, a top FTC official, said the commission “takes very seriously” recent reports raising “substantial concerns about the privacy practices of Facebook.”
A separate letter from a bipartisan group of state attorneys general, addressed to Chief Executive Mark Zuckerberg, demanded the company provide answers to a series of questions about its policies and practices for handling information about its users. The letter said the attorneys general are “profoundly concerned” over media reports that outsiders were able to obtain Facebook user information without the users’ consent.
The federal and state moves—which came as a third congressional committee asked Mr. Zuckerberg to testify over the user-data issue—added momentum to a push for new regulation of Facebook and other internet giants after the company’s disclosure that an outside firm improperly accessed and retained user information.
Facebook’s shares edged up 0.4% on Monday amid a broader market rally, stabilizing after a rout of the company’s stock that began a week earlier and had knocked nearly $75 billion off its market value through Friday.
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Analysts said the recent controversy could hurt the company’s business by reducing the amount of time users spend on the platform or leading to curbs on how its deploys user data that could impede its advertising-targeting tools.
Facebook has struggled to calm a firestorm of criticism from users, advertisers, politicians and officials in the U.S. and Europe after it said on March 16 that it is investigating reports that Cambridge Analytica, a data-analytics firm that worked with President Donald Trump’s campaign in 2016, improperly accessed and retained Facebook user data. Cambridge Analytica has said it followed Facebook’s policies.
Mr. Zuckerberg apologized last week for what he called a “major breach of trust.” He said Facebook has already curbed access to user information and is investigating how app creators handled data provided to them by Facebook. In an interview with The Wall Street Journal, Mr. Zuckerberg also said the company wouldn’t be able to fully map out how all that user information was deployed.
Rob Sherman, Facebook’s deputy chief privacy officer, said Monday the company remains “strongly committed to protecting people’s information. We appreciate the opportunity to answer questions the FTC may have.”
Will Castleberry, Facebook’s vice president for state and local public policy, said the company plans to respond to the state officials’ letter. “Attorneys general across the country have raised important questions and we appreciate their interest,” he said.
The Key to Understanding Facebook's Current Crisis
Facebook's current data crisis involving Cambridge Analytica has angered users and prompted government investigations.
To understand what's happening now, you have to look back at Facebook's old policies from 2007 to 2014. WSJ's Shelby Holliday explains. Meanwhile, the Senate Judiciary Committee, headed by Sen. Chuck Grassley (R., Iowa), asked Mr. Zuckerberg on Monday to appear at an April 10 hearing on data privacy. Mr. Grassley also invited Sundar Pichai, CEO of Alphabet Inc.’s Google, and Twitter Inc. CEO Jack Dorsey.
“We have received and are reviewing the invite,” a Facebook spokesman said. Twitter declined to comment on whether Mr. Dorsey would appear. Google declined to comment.
Last week, the bipartisan leaders of the House Energy and Commerce Committee and Senate Committee on Commerce, Science and Transportation separately called on Mr. Zuckerberg to testify?about Facebook’s privacy and data-use standards.
“Facebook now faces a pivotal moment in its corporate governance and history,” said Andrea Matwyshyn, professor of law at Northeastern University who studies technology policy.
Ms. Matwyshyn and other experts said the various governmental actions show Facebook will need to adjust its user-data policies further or face the prospect of potentially costly legal and regulatory fights.
The FTC’s statement was unusual in that the agency doesn’t usually comment on nonpublic investigations. The commission said it is examining issues including whether Facebook has lived up to the terms of a trans-Atlantic agreement known as Privacy Shield that is aimed at protecting European consumers’ online data when it is transferred to the U.S.
The FTC is the chief federal privacy enforcer, though its powers are somewhat circumscribed. It can go after companies that engage in deceptive or unfair trade practices, including failing to live up to specific online privacy promises to consumers. It also can seek penalties from companies that violate prior FTC consent decrees, as activists said Facebook did with an agreement it made in 2011; Facebook rejects any suggestion that it violated the consent decree.
Under that decree, approved in 2012, Facebook agreed to obtain user consent for collecting personal data and sharing it with others. The FTC is probing whether Facebook violated the terms of an earlier consent decree with the agency when data of up to 50 million of its users were transferred to Cambridge Analytica.
If the FTC finds that Facebook violated its consent decree or other privacy standards, it could face millions of dollars in fines as well as further harm to its reputation with users.
The investigation also could be important for the two-year-old Privacy Shield agreement and the future of trans-Atlantic electronic commerce. European officials—whose role in privacy protection has been growing with the European Union’s adoption of new data-protection standards—have made it clear they regard the Facebook episode as a key test of U.S. consumer-protection mechanisms, including the Privacy Shield agreement.
The letter from the attorneys general, meanwhile, “sends a strong signal that Facebook is likely to face investigations and possible legal sanction on the state level,” Ms. Matwyshyn said.
The letter said the attorneys general want to better understand Facebook’s policies and procedures and asked how it will allow users to more easily control the privacy of their accounts. The officials asked what safeguards Facebook had in place to ensure that outside developers handled user data correctly. They also asked whether Facebook’s terms of service are “clear and understandable, or buried in boilerplate where few users would even read them?”
“Facebook has made promises about users’ privacy in the past, and we need to know that users can trust Facebook,” the letter says. “With the information we have now, our trust has been broken.”
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