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Facebook Roundup: Regulatory Concerns & Privacy Issues

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As Facebook (FB - Free Report) continues to announce stellar results quarter after quarter, regulators around the world are taking note of where those numbers are coming from, i.e. how much user data the company is lapping up, with how much disclosure it is operating and with what degree of regard for teens and tweens. There’s also a bit of concern in some countries about whether it is paying taxes commensurate with the income it is generating-

U.S. Regulators

Senators Edward Markey and Richard Blumenthal urged the Federal Trade Commission (FTC) to take action against Facebook on the basis of a complaint by consumer groups alleging fraud on children.

It appears from the complaint that while the company has dedicated resources to process refund requests related to unauthorized purchases by children, it also uses deceptive practices to lure them into making those extensive unauthorized in-game purchases in the first place. What’s more, the larger spenders are referred to as whales internally, a casino term to describe high-spending gamblers. The details were uncovered last month when the Center for Investigative Reporting requested the unsealing of court documents related to a case settled in 2016.

Separately, New York state authorities have decided to investigate Facebook after a report from the WSJ about its harvesting of sensitive personal data through apps built for the platform. The WSJ found on investigation that 11 popular apps with millions of users between them have been sharing sensitive personal data with Facebook through the software development kit it provides them.

Facebook doesn’t solicit such data but uses it when app makers tell it to for targeted advertising, according to the company. Moreover, its terms of service for app makers specify that such data shouldn’t be shared without consent, and on occasion, it causes that data to be deleted from its records. The data collection is required by app makers to track how their apps are being used and learn more about user behavior, especially as regards what gives rise to an “event” such as the purchase of an item.

UK Regulation

A non-binding report by a committee of senior lawmakers in the UK recommends that the government pass laws that are up to speed with the “Internet age.”

The targeted technology companies include not just Facebook, but also other dominant platforms although Facebook was specifically mentioned for “bullying the smaller technology companies and developers who rely on this platform to reach their customers.”

As a result of a year-long study of the situation, the report identified some key considerations before lawmakers, including Facebook’s willingness to override its users’ privacy settings so a number of app developers could access their data, Facebook executives’ deliberate misleading of lawmakers/omission to mention Russian interference in foreign elections during the investigation, and strong evidence suggesting foreign state interference in the 2016 Brexit vote. It suggests that the election regulator in the UK should have more power to fine social media companies based on the revenue they generate.

Facebook’s response was that it is "open to meaningful regulation" and supports "the committee’s recommendation for electoral law reform."

EU Regulation

Representatives from a majority of EU countries backed new copyright regulation that seeks to impose restrictions on the way copyrighted materials are shared online. The EU Council approval was tweeted by the current president, Romania.

The new rules will require companies like Facebook and Alphabet (GOOGL - Free Report) to pay publishers for news snippets, enter into specific agreements with copyright holders like publishers, broadcasters and artists, and build upload filters so users are unable to upload copyrighted material.

The goal is to protect the bloc's cultural heritage, but some dissenting countries (Finland, Italy, Luxembourg, the Netherlands and Poland) and two other abstaining ones feel that the agreement hinder innovation and hurt the bloc's competitiveness: "We regret that the Directive does not strike the right balance between the protection of right holders and the interests of EU citizens and companies.”  

A committee of lawmakers will vote on the issue next week, followed by a parliamentary vote in March or April when it will be signed into law.

Indian Regulators

After summoning Twitter (TWTR - Free Report) officials in the prior week, the parliamentary committee investigating Indian citizens’ rights on social media has summoned Facebook representatives including those from its sister concerns WhatsApp and Instagram. The committee will hear what Facebook representatives have to say on the issue on Mar 6.  

The urgency of handling important issues at this time is presumably tied to the national elections in May where Modi is seeking a second term. This is particularly true because fake news circulation, terrorist recruitment, foreign meddling in elections etc. typically assume greater importance when a country is headed to elections.

Facebook’s handling of election concerns isn’t ideal but there has been some improvement of late.

New Zealand Regulators

Prime Minister Jacinda Ardern of New Zealand has said that there are considerable unfair differences in the way domestic and foreign multinational digital companies are taxed. She is therefore seeking to add a 2-3% tax on the revenue these companies generate in New Zealand, in line with other countries attempting the same thing.

Revenue Minister Stuart Nash said that while it would continue to work with the Organization for Economic Cooperation and Development, or OECD to determine an international solution, the proceedings could take time. The proposed tax will likely go into effect next year.

New Privacy Controls

Facebook is rolling out a new tool that will help Android users turn off location tracking, something Facebook has unabashedly resorted to, even when you weren’t using the app. Apple’s (AAPL - Free Report) iOS already offers tools so users can allow or partially allow or totally disallow tracking. The new tool applies to people who had turned on location history in the first place perhaps as a part of turning on the location tagging feature.  

Meanwhile, location tracking on Instagram has reportedly allowed Facebook to develop artificial intelligence that can predict a user’s next destination.

But not all people are equally concerned about data sharing. So to deal with those more concerned, the founder CEO Mark Zuckerberg said in an interview with Harvard Law Professor Jonathan Zittrain that he was mulling a decentralized, blockchain-based approach to access, store and manage private data. With the elimination of the intermediary that is the cornerstone of blockchain technology, individuals could be “dramatically empowered.” The company recently invested in a blockchain focused startup, which could be an indication that Zuck is true to his word.

The Onavo VPN app for Android that was lapping up data shared by teens to support an internal research program is also on its way out. Facebook has stopped recruiting people for the research program and will reportedly close down the app entirely once users have found replacements.


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