Facebook’s (FB - Free Report) security has again been compromised, risking the personal information of more than 50 million users.
This data breach may reportedly lead to a $1.63 billion fine by the European Union (EU) privacy watchdog, if the company is found to have violated Europe’s strict new privacy law — the General Data Protection Regulation (GDPR).
What’s the Issue?
On Sep 16, Facebook identified a surge in unusual activities, making it suspect a data breach, which could have grown its roots on the platform for a long time. According to Facebook, the three vulnerabilities that were introduced into the site’s “View As” option in July 2017 might have been exploited by the attackers.
Attackers misused the code associated with the feature, enabling them to steal "access tokens" that could be used to hack into people's accounts.
As a proactive preventive measure, the company immediately secured 40 million additional user accounts. It has reportedly fixed the vulnerability on Sep 27, and then began the process of resetting the access tokens of users.
Reports say that it is too early to say who attacked the site or whether specific users were targeted. It is also unclear whether credit card information or inbox messages were accessed, or whether the users’ Facebook-linked Instagram or WhatsApp accounts have also been compromised. FBI investigation is underway and it may take some time before information on the hackers is cracked.
Cost of Breach Still Under Discussion
The Irish Data Protection Commission said that Facebook informed it about the breach on Thursday evening, which seems to fall within the 72-hour time limit set by GDPR. However, investigations into the data breach will mostly center on the company’s steps taken to safeguard its users’ data before the hack.
The GDPR law requires companies to invest heavily in the security of user’s data, failing which, they will be susceptible to facing a maximum fine of either €20 million ($23 million), or 4% of the company’s prior-year annual revenues.
Per the Wall Street Journal, EU regulators often refrain from issuing a maximum fine when a company has been cooperative, fully or partially, in an investigation. Further, since the GDPR is new and a company cannot be fined solely on the grounds of a security breach, courts are yet to decide the exact amount of penalty on Facebook.
Another Major Blow for Facebook
Facebook is already reeling under severe scrutiny for its repeated failures to secure the platform as well as its operations with user data, post the Cambridge Analytica scandal, which affected 87 million users in March. Getting embroiled in a security breach of such massive scale in the wake of such a tense environment does not come as a good sign for the company.
Recently, Facebook’s executives testified before the Congress about the company’s role in the proliferation of fake news and its efforts to stop the spread of misinformation on its platforms ahead of elections in Brazil and the mid-term election in the United States. Following this, Facebook announced it will restrain from physically sending its employees to promote the use of the platform for political campaigns.
The company is also among a number of tech giants like Alphabet’s (GOOGL - Free Report) Google, Twitter (TWTR - Free Report) and Amazon (AMZN - Free Report) that are likely to face antitrust probe by the U.S. government. The White House is reportedly issuing a draft executive order, instructing a thorough investigation on the conduct of social media and internet companies, by federal antitrust and law enforcement officials. If conducted, this probe will spell further trouble for Facebook, if proved guilty.
Facebook currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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