This week is already shaping up to be another rough one for Facebook. This morning, the Federal Trade Commission (FTC), a bipartisan federal agency designed to protect consumers and promote competition, is investigating the embattled company.
Rumblings of such an investigation began March 20, when The Washington Post reported that the FTC was beginning an investigation into the social media platform in the wake of news of its involvement with Cambridge Analytica, a data mining company.
However, WaPo cited a source not authorized to speak on the record, and an FTC spokesperson simply said the agency was “aware of the issues that have been raised but cannot comment on whether we are investigating.”
Today, Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection, made it official. He released the following statement:
The FTC is firmly and fully committed to using all of its tools to protect the privacy of consumers. Foremost among these tools is enforcement action against companies that fail to honor their privacy promises, including to comply with Privacy Shield, or that engage in unfair acts that cause substantial injury to consumers in violation of the FTC Act.
Companies who have settled previous FTC actions must also comply with FTC order provisions imposing privacy and data security requirements. Accordingly, the FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices.
The FTC Facebook investigation most likely centers on a 2011 consent decree Facebook signed with the agency, numerous news outlets have speculated. That decree required Facebook to get permission from users before it could share their personal data beyond the limits set by their privacy settings. Facebook may have violated that when it allowed Cambridge Analytica to scrape personal information from upwards of 50 million Facebook users without this explicit permission. Cambridge Analytica is now facing its own legal woes for how it used that information to influence U.S. elections.
As for Facebook, the company has so far tried to downplay its involvement with Cambridge Analytica, with CEO Mark Zuckerberg claiming the company "already took the most important steps a few years ago in 2014 to prevent bad actors from accessing people’s information in this way."
However, that's clearly not enough to satisfy the FTC. A single violation of Facebook's 2011 agreement with the agency can carry a fine of up to $40,000. That means Facebook could be facing a $2 trillion penalty from the FTC for these violations — perhaps enough to bankrupt the company. Unsurprisingly, mere minutes after Pahl's statement hit the internet, the company's stock plummeted by 5 percent.
It's difficult to say how long the FTC Facebook investigation could take. But by the time it's over, we should have a clearer picture of Facebook's responsibility for the incident with Cambridge Analytica, and whether it was the only one like it.