SEC, FBI, and FTC All Review Facebook’s Handling of Cambridge Analytica

by: The Knowledge Group

July 10, 2018


Recently the Washington Post reported that the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Federal Trade Commission are all currently examining how Facebook transferred the personal information of 71 million U.S. Facebook users to the political consulting firm Cambridge Analytica. Today, the focus is on Facebook’s actions and the extent of its disclosures to users and investors.

Earlier this year, the Justice Department began investigating Facebook’s role in Cambridge Analytica’s harvest of politically revealing information from Facebook accounts. Mark Zuckerberg and other Facebook representatives then testified before Congress about the transfer and use of data—exploitation that the Facebook users couldn’t foresee, and didn’t permit.

Facebook knew by 2015 that Cambridge Analytica, which would later play a role in fashioning messages for a U.S. presidential campaign, had collected information from Facebook profiles to target voters with specific messages. Yet Facebook only acknowledged the activities this year—after a whistleblower’s statements found their way to the international media.

FBI, SEC, and FTC Scrutiny: What Will it Mean for Facebook?

These agencies may find that Facebook communicated in a less-than-transparent manner to investors and the public about the extent of the abuse. Also at issue: whether Facebook’s interactions with Cambridge Analytica breached a 2012 settlement signed by Facebook—the culmination of the FTC’s 2011 investigation into Facebook’s handling of user privacy. Corporations caught violating such agreements incur significant fines.

This March, FTC acting director Tom Pahl warned of possible “enforcement action” against Facebook if it failed to comply with consumer privacy expectations or substantially injured people through violations of the FTC Act.

Multiple U.S. and British agencies have opened investigations into the methods used by the Cambridge Analytica firm to obtain, exploit, and sell Facebook users’ personal information. The fallout has driven Cambridge Analytica into bankruptcy.

This will not be the fate of Facebook, whose market capitalization remains strong even after the turbulence in the scandal’s wake.

Yet the continued scrutiny of Facebook’s operations suggests a strong potential for Facebook to come under the purview of new laws and regulations.

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