Boy, it’s looking like Facebook might be severely fucked.
Shares are down sharply to start the week and as noted early Monday morning, some analysts are already out warning that the data breach fiasco has the potential to spiral out of control.
I’m not seeing anything from the major banks yet, but you can bet some folks are panic-crunching the numbers this morning to try and come up with some kind of back-of-the- envelope calculations for the potential liability here. Raoul Pal’s got some thoughts:
I’m wondering whether we are fast approaching the tipping point for $FB and $GOOGL ‘s fall from monopolistic power, as global regulators begin to take notice as to all the (inadvertent?) inappropriate behavior that has taken place. The short selling case is building fast…
— Raoul Pal (@RaoulGMI) March 18, 2018
One person who thinks this could be really – really – bad is David Vladeck, former director of the FTC’s Bureau of Consumer Protection. He teaches at Georgetown Law now, and he spoke to the Washington Post for a piece out Sunday.
Although Facebook insists it didn’t violate a critical consent decree from 2011 that mandates users be informed and requires their permission before their data can be shared, David thinks they might be wrong. Here are a couple of excerpts from that WaPo piece:
Two former federal officials who crafted the landmark consent decree governing how Facebook handles user privacy say the company may have violated that decree when it shared information from tens of millions of users with a data analysis firm that later worked for President Trump’s 2016 campaign.
Such a violation, if eventually confirmed by the Federal Trade Commission, could lead to many millions of dollars in fines against Facebook, said David Vladeck, who as the director of the FTC’s Bureau of Consumer Protection oversaw the investigation of alleged privacy violations by Facebook and the subsequent consent decree resolving the case in 2011. He left that position in 2012.
On Sunday morning, Vladeck said in an interview with The Washington Post that Facebook’s sharing of data with Cambridge Analytica “raises serious questions about compliance with the FTC consent decree.”
Vladeck, now a professor at Georgetown Law, said violations of the consent decree could carry a penalty of $40,000 per violation, meaning that if news reports that the data of 50 million people were shared proves true, the company’s possible exposure runs into the trillions of dollars.
I’m no Facebook analyst, but I’m going to go out on a limb here and say that if they were fined “trillions of dollars” that might be the beginning of the end for the company.
I mean look, obviously that’s so unlikely to happen that it’s probably not even worth pondering, but then again, given all the recent bad press that Facebook has garnered for its unwitting role in helping bad actors spread propaganda and misinformation, lawmakers are probably at wit’s end with the company at this juncture.
Here’s what Jessica Rich, former deputy director for the Bureau of Consumer Protection who oversaw the FTC’s privacy program and also led the investigation into Facebook before the 2011 consent decree said in an e-mail to WaPo:
Depending on how all the facts shake out, Facebook’s actions could violate any or all of [the consent decree] provisions, to the tune of many millions of dollars in penalties. They could also constitute violations of both US and EU laws. Facebook can look forward to multiple investigations and potentially a whole lot of liability here.
Long story short, this looks like a disaster in the making at the worst possible time and not to put too fine a point on it, but when combined with everything we now know about the extent to which the platform was hijacked for nefarious purposes ahead of the election (see our archive on that here), this casts considerable doubt on Mark Zuckerberg’s competency as someone who is capable of running a company that seems to have escaped the lab and is now running amok in the village.
This morning, Sens. Amy Klobuchar, D-Minn., and John Kennedy, R-La., are out calling for Senate Judiciary Committee hearings during which lawmakers could publicly question technology company CEOs. Here’s the letter:
Dear Chairman Grassley:
We write to express serious concern regarding recent reports that data from millions of Americans was misused in order to influence voters, and to urge you to convene a hearing with the CEOs of major technology companies — including Facebook, Google, and Twitter — regarding the security of Americans’ data in light of this significant breach.
Reports indicate that private information from the Facebook profiles of more than 50 million users — representing nearly a quarter of potential U.S. voters in 2016 — was taken to conduct sophisticated psychological targeting for political ads in order to influence voters. The reports further indicate that Facebook knew about this breach more than two years ago and failed to acknowledge it and take swift and meaningful action.
While Facebook has pledged to enforce its policies to protect people’s information, questions remain as to whether those policies are sufficient and whether Congress should take action to protect people’s private information. The Committee considered similar cybersecurity issues in an October hearing featuring testimony from the former chairman and CEO of Equifax. We believe that the Committee should revisit these issues in light of recent events and upcoming elections.
Important questions also remain unanswered about the role of these technology companies in our democracy. Major social media platforms store an enormous amount of data and have a user base larger than all of the major broadcasting companies combined. The remarkable innovation that these companies have championed has changed how we share and collect information. In the process, Facebook, Google, and Twitter have amassed unprecedented amounts of personal data and use this data when selling advertising, including political advertisements. The lack of oversight on how data is stored and how political advertisements are sold raises concerns about the integrity of American elections as well as privacy rights.
Senators from both parties have called for more transparency and accountability from social media platforms in their efforts to guard against interference by foreign actors. Testimony before this Committee and others from current Administration officials, as well as former officials from the Administrations of President George W. Bush and President Obama, has made clear that the threat of foreign interference continues to exist, and that these foreign powers will make similar attempts to interfere in future elections.
It is our view that Senators on the Judiciary Committee should have the opportunity to question the CEOs of technology companies about these critical matters. While this Committee’s Subcommittee on Crime and Terrorism convened a hearing with witnesses representing Facebook, Twitter, and Google in October of 2017, we have yet to hear from the leaders of these companies directly. A hearing featuring testimony with CEOs would provide the Committee the opportunity to hear an update on the progress of these companies’ voluntary measures to combat attempted foreign interference and what is being done to protect Americans’ data and limit abuse of the platforms, as well as to assess what measures should be taken before the next elections.
It is for these reasons that we request that you announce a hearing of the Judiciary Committee at which Senators can publicly question the CEOs of technology companies. We would be happy to discuss this matter with you further and we appreciate your consideration of this request.