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Facebook Faces Fine for Improper User Data Sharing in Brazil

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Facebook (FB - Free Report) continues to be under fire over privacy concerns. The company is under pressure for violating user data protection in Brazil, per a Reuters report.

Reportedly, Brazil's Ministry of Justice has levied a fine of 6.6 million reais or $1.6 million on Facebook for improperly sharing user information.

Brazil's Ministry of Justice and Public Security announced that it examined “the violation of the personal data of the Facebook platform's contracting consumers, as well as whether someone had obtained improper access to such data, taking into account the user's consent form, where sharing is the default, and automatic data sharing with application developers of this user's friends.”

In issuing the fine, the Department of Consumer Protection stated that the data of 443,000 Facebook users was improperly made available to the developers of a Facebook app named “thisisyourdigitallife.”

Notably, the “thisisyourdigitallife” app was built by Cambridge Analytica in the run-up to the 2016 U.S. presidential election. This was aimed to gather information about Facebook users in order to target them for political advertisements.

Additionally, the agency ruled the data was used for questionable purposes. Moreover, Facebook also failed to provide appropriate information to their users with regard to privacy settings on the social media platform, and how user data, particularly that of friends and friends of friends on Facebook was shared with third-party apps.

Facebook has 10 days to appeal the fine. If it does not appeal, the company has 30 days to pay the fine.

Facebook, Inc. Price and Consensus

Facebook, Inc. Price and Consensus

Facebook, Inc. price-consensus-chart | Facebook, Inc. Quote

Facebook’s Expensive Penalty Payments in 2019

Earlier this month, the Federal Trade Commission (FTC) had issued a unanimous ruling against Cambridge Analytica. Approved by FTC commissioners in a 5-0 vote, the agency officially reported that Cambridge Analytica violated federal law by deceiving Facebook users about what data would be collected and how it would be used.

This is not the first financial penalty for Facebook, following the scandal in which Cambridge Analytica harvested the data of around 50 million Facebook users without their permission.

Notably, Facebook settled with the FTC in July 2019. The company was charged with a fine of $5 billion for privacy violation.

Moreover, Facebook was fined $645,000 by the British government in October for related data security concerns involving Cambridge Analytica. The fine comes as part of a settlement between Facebook and the U.K. government in which the company will not admit any liability over its data practices, per a CNN Report.

Nevertheless, Facebook’s recent privacy friendly initiatives are noteworthy. The company is working on making its products and services end-to-end encrypted and ephemeral so that user information is not available for long.

Initiatives to Help Regain User Trust

Facebook has been undertaking a number of initiatives to improve privacy and security of its platform and services. These are primarily aimed at protecting user information, regaining trust and improving user engagement, which are crucial for the company’s growth in 2020.

In October 2019, Facebook announced that it suspended tens of thousands of apps under its ongoing App Developer Investigation, which is focused on improper data use by third-party developers.

Apps associated with 400 developers were suspended for a variety of reasons including the inability or failure of response to Facebook’s request for information. The company has suspended apps in testing phase and also banned a few completely.

Moreover, the company also rolled out a tool called Off-Facebook Activity, which enables users to better control their privacy. The tool helps users to see apps and websites that share information related to their activities on Facebook.

However, if users decide to clear Off-Facebook Activity from their accounts, it is expected to reduce the potency of the company’s data for advertisers. This may eventually hurt top-line growth as Facebook derives a significant part of revenues from ads.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader Computer & Technology sector are Marchex (MCHX - Free Report) , InterXion Holding and Baidu (BIDU - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here

Long-term earnings growth rate for Marchex, InterXion and Baidu is currently pegged at 15%, 12.5% and 2.3%, respectively.

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