Privacy Law

Tech companies under fire: Facebook to pay $5B, antitrust probe opened, AG Barr criticizes encryption

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Technology companies are under fire by the Trump administration. On Wednesday, the Federal Trade Commission announced that Facebook will pay a record $5 billion privacy penalty to settle allegations that the company deceived users about their ability to control disclosure of their personal information. The Washington Post has coverage.

The settlement follows an announcement Tuesday that the Department of Justice has opened an antitrust review of big tech that considers how technology companies accumulated market power and whether they acted to reduce competition. The New York Times and the Wall Street Journal had coverage.

Also on Tuesday, U.S. Attorney General William Barr criticized technology companies for deploying encryption programs and refusing to allow appropriate access to law enforcement. The technology “allows criminals to operate with impunity, hiding their activities under an impenetrable cloak of secrecy,” Barr said in prepared remarks. The Washington Post had coverage.

The $5 billion penalty to be paid by Facebook is the largest ever imposed on any company for violating consumers’ privacy and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide, according to the FTC.

The FTC alleged that Facebook had used deceptive disclosures and settings to undermine users’ privacy preferences in violation of a 2012 FTC order. The tactics allowed Facebook to share users’ personal information with third-party apps that were downloaded by the user’s Facebook friends.

Under the settlement, Facebook will be required to create an independent privacy committee on its board of directors and hire privacy compliance officers. A third-party organization will review the company’s data collection.

Under other provisions of the settlement, Facebook won’t be allowed to use telephone numbers collected for two-factor authentication for advertising, it will have to provide “clear and conspicuous” notice of its use of facial recognition, and it will be required to exercise greater oversight over third-party apps.

Facebook has also reached a $100 million settlement with the Securities and Exchange Commission for misleading disclosures about the risk of user data being misused. The company had presented the risk of misuse as merely hypothetical when it knew that Cambridge Analytica had used Facebook data to create personality scores for 30 million Americans and to bolster its political advertising, according to the SEC.

Also on Wednesday, the FTC revealed a proposed settlement with Cambridge Analytica’s former CEO and an app developer who worked with the company to harvest Facebook user information for voter profiling and targeting. The settlement requires destruction of the information collected.

The DOJ announcement of its antitrust review did not name the companies being scrutinized. But its reference to search, social media and some retail services was “presumably putting Google, Facebook and Amazon on notice,” the New York Times said.

The FTC also has created a task force to monitor competition among technology companies, according to the Wall Street Journal.

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