Facebook under pressure as U.S., EU urge probes of data practices


(Reuters) – Facebook Inc Chief Executive Mark Zuckerberg faced calls on Monday from U.S. and European lawmakers to explain how a consultancy that worked on President Donald Trump’s election campaign gained improper access to data on 50 million Facebook users.

Facebook’s shares closed down nearly 7 percent, wiping nearly $40 billion off its market value as investors worried that new legislation could damage the company’s advertising business.

“The lid is being opened on the black box of Facebook’s data practices, and the picture is not pretty,” said Frank Pasquale, a University of Maryland law professor who has written about Silicon Valley’s use of data.

Lawmakers in the United States, Britain and Europe have called for investigations into media reports that political analytics firm Cambridge Analytica harvested the private data on more than 50 million Facebook users to develop techniques to support Trump’s 2016 presidential election campaign.

The scrutiny presents a fresh threat to Facebook’s reputation, which is already under attack over Russia’s alleged use of Facebook tools to sway U.S. voters with divisive and false news posts before and after the 2016 election.

Facebook said on Monday it had hired digital forensics firm Stroz Friedberg to carry out a comprehensive audit of Cambridge Analytica, which had agreed to comply and give the forensics firm complete access to their servers and systems.

Cambridge Analytica said it strongly denies the media claims, and that it deleted all Facebook data it obtained from a third-party app in 2014 after learning the information did not adhere to data protection rules.

But further allegations about the firm’s tactics piled up on Monday, as Channel 4 News, a British broadcaster, published video of Cambridge Analytica executives talking about using bribes, former spies and Ukrainian sex workers to entrap politicians.

Facebook was already facing calls on Saturday for regulation from U.S. Congress and questions about personal data safeguards after reports in the New York Times and London’s Observer over the weekend.

On Monday, Republican Senator John Kennedy called on Zuckerberg to testify before Congress, and Democratic Senator Ron Wyden sent a letter to Zuckerberg asking about company policies for sharing user data with third parties.

Facebook usually sends lawyers to testify to Congress, or allows trade organizations to represent it and other technology companies in front of lawmakers.

Facebook and rivals including Twitter Inc and Alphabet Inc’s YouTube have taken voluntary steps to restrict possible foreign interference and combat false news, but they have not been forced by law or regulation to make changes and legislation on the issue has stalled.

It was not clear whether Republicans who hold congressional committee gavels would announce hearings related to Facebook and Cambridge Analytica. But the lawmaker comments reflected mounting bipartisan concern in Washington over whether internet firms are fair trustees of the massive amounts of user data they collect.

Some technology lobbyists have begun to quietly acknowledge the era of a hands-off approach to Silicon Valley from U.S. policymakers may be fading.

On Monday, the Senate was expected to move forward with a bill that would chip away at the internet industry’s legal shield, a decades-old law known as Section 230 of the Communications Decency Act, with a bill intended to address online sex trafficking. The measure has already passed the House and is expected to soon become law.

Facebook said on Friday it had learned in 2015 that a Cambridge University psychology professor lied to the company and violated its policies by passing data to Cambridge Analytica from a psychology testing app he had built.

Facebook said it suspended the firms and researchers involved. It also said the data had been misused but not stolen, because users gave permission.

Facebook shares fell 6.8 percent to $172.56, dragging the S&P 500 technology sector down 2.1 percent and broadly weighing on U.S. equities.

Fears of increased regulation also weighed on shares of Twitter, Google parent Alphabet and Snapchat parent Snap Inc.

“(Tech companies) are going to get a lot more scrutiny over what data they are collecting and how they are using it,” said Shawn Cruz, senior trading specialist at TD Ameritrade in Chicago.


European officials, who have been more willing to regulate Silicon Valley companies than their U.S. counterparts, were especially strident in criticism of Facebook.

The revelations about Cambridge Analytica were “horrifying, if confirmed,” said EU Justice Commissioner Vera Jourova. “We don’t want this in the EU and will take all possible legal measures” including stricter rules under the bloc’s General Data Protection Regulation that takes effect in May, she said.

A spokesman for British Prime Minister Theresa May said the allegations were “clearly very concerning.”

Britain’s Information Commissioner’s Office said it would consider the potential new evidence as part of its separate civil and criminal probe into whether Facebook user data had been abused in British elections.

The head of the European Parliament said EU lawmakers will investigate possible data misuse, calling the allegations an unacceptable violation of citizens’ privacy rights.

(Reporting by Dustin Volz and Munsif Vengattil; Additional reporting by Chuck Mikolajczak, Sruthi Shankar, David Ingram and Julia Fioretti; Writing by Susan Thomas; Editing by Nick Zieminski and Meredith Mazzilli)


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