Facebook data breach: new probe, new pressure

Federal regulators and state prosecutors are opening investigations into Facebook. Politicians in the United States and Europe are calling for its chief executive, Mark Zuckerberg, to testify before them. Investors have cut the value of the social networking giant by about $50 billion in the past two days.

They are all focused on the same thing: whether Facebook mishandled users' data.

Facebook has built its highly profitable social network off its users, selling advertisements based on their ages, interests and other details. But the scrutiny over the company's vast trove of personal data - following a report that a political consulting firm had improperly obtained information of 50 million users - is taking direct aim at that lucrative formula.

"Investors are reacting to fears of regulation and the consequences of regulation," said Brian Wieser, a senior research analyst at Pivotal Research Group. "The scale of errors can only lead one to conclude these are systemic problems."

So far, most of the social network's top executives have been silent. Zuckerberg, its founder, and Sheryl Sandberg, his top deputy, have not made any public statements in recent days. The pair did not appear at an employee meeting on Tuesday in Menlo Park, California, where the company is based.

At the meeting, employees asked questions about the continuing internal investigation into the use of Facebook data by the political consulting firm Cambridge Analytica. The firm, which was tied to President Donald Trump's 2016 campaign, used the data to target messages to voters.

The meeting, which included Facebook's deputy counsel, Paul Grewal, largely focused on the steps that Facebook was taking to ensure its data could no longer be misused by independent researchers, according to Facebook employees in attendance.

The company has faced internal dissent over its broader role in spreading disinformation during the presidential campaign and its response to it. The tensions have prompted the planned departure of Alex Stamos, Facebook's chief security officer, who plans to leave in August.

The pressure on Facebook has been building for years. It started in the European Union, where regulators have taken an aggressive attitude toward Facebook and other US technology giants for their sway over the region's 500 million people. The company has been the subject of several privacy investigations and charges by European regulators.

After the 2016 presidential campaign, lawmakers at home joined the chorus of critics, citing the company's role in Russia's disinformation efforts. The social network was one of the top tools used by Russians to spread false news, and the company's executives have struggled to explain what happened and how they would prevent foreign interference in the future.

The Cambridge Analytica revelations have forced Facebook to scramble to assuage fresh concerns by regulators and lawmakers. The company is sending its representatives to Capitol Hill and arranging conversations with state attorneys general to try to answer questions about how the firm collected the information of Facebook users.

The social networking giant is also facing an investigation by the Federal Trade Commission, which is looking into whether Facebook violated an agreement with the agency, according to a person with knowledge of the inquiry.

The FTC investigation is connected to a settlement the agency reached with Facebook in 2011 after finding that the company had told users that third-party apps on the social media site, like games, would not be allowed to access their data. But the apps, the agency found, were able to obtain almost all personal information about a user.

The current investigation has parallels. The information on the 50 million users was harvested in 2014 by an outside researcher, Alexander Kogan. Kogan, a professor at Cambridge University, paid users small sums to take a personality quiz and download an app, which collected private information from their profiles and from those of their friends. Facebook allowed that sort of data collection at the time.

Then, Kogan gave the information to Cambridge Analytica, a firm founded by Stephen Bannon, former White House political adviser, and Robert Mercer, the wealthy Republican donor. Passing the information to a third party violated Facebook's policies, the company said last week.

"There are all sorts of obligations under the consent decree that may not have been honored here," said David Vladeck, a former director of consumer protection at the FTC. The company could face fines of $40,000 a day per violation if the agency finds that Facebook broke the agreement.

Privacy concerns

The FTC inquiry is just one piece of the regulatory backlash. On Tuesday, the New York attorney general, Eric T Schneiderman, announced he was joining the Massachusetts attorney general, Maura Healey, in an investigation into whether Facebook had failed to protect the privacy of users in those states. New Jersey's attorney general announced a similar investigation.

Schneiderman and Healey sent a letter to Facebook on Tuesday that demanded records of the communications between the company and Cambridge Analytica.

"Consumers have a right to know how their information is used - and companies like Facebook have a fundamental responsibility to protect their users' personal information," Schneiderman said. "Today's demand letter is the first step in our joint investigation to get to the bottom of what happened."

There have also been growing calls for the top leadership at Facebook to appear before American and British lawmakers to testify about the company and Cambridge Analytica.

Senators Amy Klobuchar and John Kennedy have asked the chairman of the Judiciary Committee, Charles E Grassley to hold a hearing. Republican leaders of the Senate Commerce Committee, organised by John Thune, wrote a letter on Monday to Zuckerberg demanding answers to questions about how the data had been collected and if users were able to control the misuse of data by third parties.

"It's time for Mr Zuckerberg and the other CEOs to testify before Congress," Senator Mark Warner said. "The American people deserve answers about social media manipulation in the 2016 election."

Facebook staff members were scheduled to brief the office of Warner, the top Democrat on the Intelligence committee, and the offices of members of other committees, including Commerce, this week. "The possibility that Facebook has either not been transparent with consumers or has not been able to verify that third-party app developers are transparent with consumers is troubling," Thune said in his letter.

On Tuesday morning, a committee within the British Parliament sent a letter to Zuckerberg that asked him to appear before the panel to answer questions on the company's connection to Cambridge Analytica. The president of the European Parliament also requested an appearance by Zuckerberg.

"The committee has repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular about whether data had been taken without their consent," wrote Damian Collins, chairman of the British committee. "Your officials' answers have consistently understated this risk, and have been misleading to the committee."