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Reportedly, Facebook’s (FB - Analyst Report) “mood” experiment will face probe from data regulators in the United Kingdom. Per Reuters that quoted a Financial Times article, U.K.’s Information Commissioner’s Office (ICO) will investigate whether the social network broke data protection laws to conduct the psychological experiment.

Earlier, in 2012, Facebook and Cornell University conducted the experiment on nearly 689,000 randomly selected users to determine their mood swings over positive or negative feeds. However, it is alleged that Facebook conducted the experiment without any explicit consent from the users.

Facebook recently admitted that its privacy policy did not list “research” among the ways it can use user’s information at the time the experiment was conducted. However, the company argued that it had users' consent to carry out the test, based on broader language in the policy.

Furor over the experiment broke out soon after its results were published in the March issue of the Proceedings of the National Academy of Sciences. The experiment concluded that users who were shown negative content were more likely to produce negative posts. On the other hand, users in the positive group were more likely to create more upbeat posts.

The experiment worked for Facebook as the social network was successful in influencing people’s emotions. Facebook, however, stated that it was an endeavor to improve its service and it never intended to hurt users’ sentiments.

ICO plans to interrogate Facebook officials over the experiment. Since Facebook has its European headquarters in Dublin, Ireland, Irish data protection agency is also expected to join the probe.

Per ICO, it is too early to conjecture about what part of the law Facebook has violated. The regulator will now collect data to determine how much personal information was used for the experiment and whether Facebook took consent of the users. ICO can force Facebook to change its policies and also impose a fine of £500,000, if found guilty.

We believe that the probe will not have any significant impact on Facebook’s share price in the near term. Domestic regulator, The Federal Trade Commission, has not shown any interest in the uproar, much to the relief of the company. Moreover, such probes take a long time to complete. Hence, a negative outcome may not have any significant impact on user activity at the end.

However, the whole issue certainly reflects the lack of strict regulation for social media companies such as Facebook, Twitter (TWTR - Analyst Report), Google (GOOGL - Analyst Report) and Yahoo! (YHOO - Analyst Report) that collect and manage huge user database. Incidents such as these are bound to adversely impact the popularity and credibility of the social media platform.

Currently, Facebook has a Zacks Rank #3 (Hold).

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