MAHENDRA LIMAYE ASSOCIATES’S TAKE ON FACEBOOK FTC JUDGEMENT
It is one of the biggest penalties inflicted in History of USA or anywhere in world on Social Media Company. Surprisingly it was neither debated nor discussed in India as if India has nothing to do with it. Most of the digital intellectuals as well as legal luminaries didn’t utter a word either praising or criticizing the FTC judgement, which is a compromise settlement. Neither the more vocal supporters of Digital India made any comments on the same favouring their blue eyed boy Marc. When most of the Indian population is trapped in CATCH 22 situation created by Digital Revolution in India and Whatsapp trying to enter Indian payment market, this FTC judgement needs to be carefully scrutinised and must be understood by one and all, irrespective of whether you are concerned or not !!!!! And specially when meeting of Whatsapp Global Head Will Cathcart meeting Mr Ravi Shankar Prasad making headlines in India.
This silence is the strange and startling and hence more dangerous!!!
Nothing in human history has reached 2.4 billion people, roughly one out of every three living humans, with the regularity and influence of Facebook. The only company close to that influence is Google, which controls YouTube and its nearly 2 billion regular users. Both of these companies have developed advertising platforms that deliver carefully targeted messages more effectively and efficiently than anything else in the world. On this backdrop recent compromise judgement of FTC becomes more relevant.
When USA Federal Trade Commission has found the much beloved Marc Zuckerberg’s Facebook guilty on various counts including “Misrepresenting the Extent to Which Users Could Control the Privacy of Their Data and the Extent to Which Facebook Made User Data Accessible to Third Parties” and “ Failure to Implement and Maintain a Reasonable Privacy Program”, the country having maximum number of users on Mark Zuckerberg’s FB/WA/Insta taken together, none is concerned. Rather it is extending red carpet welcome to Whatsapp global CEO Will Cathcart.
DOES IT INDIVIDUALLY AFFECT ME?
WHY SHOULD I BE CONCERNED AND CARING ABOUT SOCIETY?
This is why we prefer to remain silent on many issues happening in the society and that’s where we are being exploited by these anti-social elements.FTC decision’s likely impact on Indian netizens is far reaching and if we don’t debate it now, future generation will never excuse us!!!!!
“ The parties have reached a settlement of the Complaint’s allegations and the Order requires Facebook to pay a $5 billion civil penalty and imposes significant injunctive relief, primarily in the form of an amended administrative order that will be entered by the FTC” is the order in brief which needs more debate.
This judgement of FTC was by 3-2 margin and if we just go through excerpts of dissenting statement of federal trade commissioner REBECCA KELLY SLAUGHTER, it will be easier for us to understand and we may be compelled to introspect.
1) “During the years of Facebook’s continuous alleged lawlessness, its gross annual revenue increased from $5 billion to over $55 billion. Facebook’s collection and use of personal data have grown in unprecedented, unchecked, and often unseen ways.”
2) My principal objections are: (1) the negotiated civil penalty is insufficient under the applicable statutory factors we are charged with weighing for order violators: injury to the public, ability to pay, eliminating the benefits derived from the violation, and vindicating the authority of the FTC. (2) While the order includes some encouraging injunctive relief, I am sceptical that its terms will have a meaningful disciplining effect on how Facebook treats data and privacy. Specifically, I cannot view the order as adequately deterrent without both meaningful limitations on how Facebook collects uses, and shares data and public transparency regarding Facebook’s data use and order compliance. (3) Finally, my deepest concern with this order is that its release of Facebook and its officers from legal liability is far too broad. Rather than accepting this settlement, I believe we should have initiated litigation against Facebook and its CEO Mark Zuckerberg. The Commission would better serve the public interest and be more likely to effectively change Facebook by fighting for the right outcome in a public court of law. For these reasons, I respectfully dissent.
3) I will not recite the facts before the Commission, other than to note that there was extremely compelling evidence of a series of significant, substantial order violations and law violations. In addition to the evidence the Commission reviewed against Facebook, I believe there was sufficient evidence to name Mr. Zuckerberg in a lawsuit.
4) I believe litigation was the best course of action in this matter. Litigation would have provided public transparency and accountability for the company, its leaders, and the Commission. It would send a message to the market and the public that the Commission is willing to go to the mat to ensure compliance with its orders. Under the jurisdiction and mandate of a federal court, the Commission would have been able to seek, and if necessary move to compel, discovery of important documents and testimony to inform a court’s assessment of liability. A finding of liability at the end of litigation would deter the company from further violations of the law even without substantial monetary or injunctive relief. If a hard-fought litigation against Facebook produced a result that fell short of public expectations, the public would have every incentive to demand that Congress take steps to address deficiencies in the law.
5) Five billion dollars represents an astronomical penalty compared to prior Commission settlements or to the financial position of most individuals and firms. In the context of Facebook’s financial position and scope of violations, it is a substantially less significant sum. From the time of the original 2012 Facebook order to 2018, Facebook’s gross annual revenue increased more than 1000% from $5 billion to over $55 billion. Its 2019 revenues indicate continued growth, posting first-quarter earnings of over $15 billion. Put another way, as of this year, Facebook brings in around $5 billion on a monthly basis.
6) In this case, the injury to the public, the defendant’s ability to pay, the desire to eliminate the benefits derived from the violations, and the necessity of vindicating the FTC’s authority—all drive the conclusion that $5 billion is an insufficient civil penalty. Injury to the public can be difficult to quantify in monetary terms in the case of privacy violations. That said, I regard the injury to the public and the institutions of our democracy to be quite substantial. Facebook’s conduct that the Commission alleges violated the order also facilitated Cambridge Analytica’s expropriation of data and manipulation of voters.
7) My colleagues in the majority note that civil penalties have exceeded $5 billion only in instances of serious environmental disaster or widespread financial fraud. I believe that the injury to the public from damaging the integrity of our elections is as serious if not more serious than environmental and financial harms because it threatens the very systems that stand to protect Americans from those harms. Concern over this fact pattern should be bipartisan; the manipulative tactics weaponized in favour of a particular party in one election can just as easily be turned against it in the next.
8) The order the Commission voted to accept does not impose any limitations on whether Facebook can transfer information to third parties or to other Facebook subsidiaries. Instead, the order requires Facebook to demand certain purpose and use certifications from third parties that request information, giving Facebook free rein to maintain control over what constitutes a permissible purpose and use. In other words, if Facebook wants third parties to have certain data, it can permit that under its Platform Terms; if Facebook wants to withhold access to that data, it can do so. But there may be a gulf between what is good for Facebook and what is good for its users. I believe that the order itself should limit third-party data access to information necessary to provide or operate the product or service for which the third party is requesting the information—it should not just rely on Facebook’s malleable developer standards.
9) Finally, the order also fails to impose any substantive restrictions on Facebook’s collection and use of data from or about users (and non-users). This failure, in addition to allowing Facebook to aggregate rich data stores across its platform unfettered, may exacerbate competition as well as privacy concerns. We should strive to ensure that all our enforcement efforts are cognizant of, and not inconsistent with, both our consumer protection and competition missions.
10) In sum, many of the problems identified in our investigation and in the related Cambridge Analytica investigation arose from the use of data beyond consumers’ expectations or permissions to enhance Facebook’s partnerships and therefore its bottom line. I believe that it is important and appropriate for the order to apply stringent limitations to how Facebook collects, uses, and shares data.
If we go through few reactions about this judgement we can be more enlightened.
House Commerce Committee Chairman Frank Pallone (D-NJ): “While $5 billion is a record fine for the FTC, monetary damages are not enough. Facebook has repeatedly demonstrated that it prioritizes profit over people. Tough oversight is needed to prevent the abuse of consumer information by Facebook and other companies. Comprehensive privacy legislation is necessary to strengthen the FTC’s authorities and give it more enforcement tools and resources so that violating consumers’ privacy and breaking public trust isn’t just the cost of doing business.”
Senate Commerce Committee Chairman Roger Wicker (R-MS): “The settlement between the FTC and Facebook further stresses the need for a strong federal data privacy law. The details of Facebook’s conduct that were illuminated by the FTC’s investigation are troubling. This investigation and settlement, including a fine significantly larger than has ever been assessed by a privacy enforcer anywhere in the world, are examples of the great work the FTC can do. However, without a robust, comprehensive federal privacy law covering data collectors and consumers, bad actors will be able to continue to abuse data in the online marketplace.
Charlotte Slaiman, Competition Policy Counsel at Public Knowledge: “Today we see the result of over a year of investigation and negotiation by the FTC. It is frustrating that the FTC was not able to achieve more significant changes to Facebook’s behaviour going forward. Facebook users cannot count on being protected as a result of this settlement. Under this settlement, Facebook does not have to meaningfully change how it collects and uses your data. Facebook retains complete control over when to share your data outside of Facebook, as long as the company complies with the privacy policy that it gets to write. The settlement also protects Facebook from further enforcement on other potential violations that we may not even know exist. The settlement does not impose any pro-competition terms, such as interoperability requirements or limiting data-sharing between Facebook, Instagram, and Whatsapp to the same terms used with third-parties so that competitors can compete fairly. While the settlement does require additional auditing processes and reporting requirements as well as a very large fine, the settlement is weak given the repeated violations and the severity of the harm. We must pass new and more effective privacy laws, as well as broader platform regulation aimed at improving competition in the sector so that consumers can more easily switch to an alternative product if they are not happy.”
Eric Null, senior counsel at New America’s Open Technology Institute: “With the Facebook settlement, the FTC appears to be stepping up its privacy enforcement. But consumers should be sceptical that the settlement will lead to any effective change in online privacy protections or Facebook’s business practices—the company was rewarded on the stock market for the settlement, the settlement imposed no meaningful restrictions on Facebook’s data collection and sharing practices, and structural changes require a tenacious overseer to ensure compliance or they may lead to nothing. Today’s settlement exemplifies the need for strong privacy legislation, which could better protect consumers everywhere by making many practices, including those Facebook engaged in, explicitly unlawful. The FTC only achieved as much as it did because it had a prior consent decree in place. Without comprehensive privacy legislation, consumers will likely end up with more of the same.”
Free Press Policy Counsel Gaurav Laroia: “While the $5-billion fine is one of the largest in the FTC’s history, it still falls far too short. As Commissioners Chopra and Slaughter explained in their dissents, the FTC’s $5-billion fine is unlikely to change the company’s behaviour. It represents just one month’s worth of earnings for Facebook and is a tiny fraction of the company’s growth in revenue since it entered into a consent decree with the agency in 2012 for violating its users’ privacy. Far more serious consequences are needed to curb the tech industry’s behaviour and its amoral pursuit of growth at our expense. This settlement doesn’t change that underlying dynamic. The FTC order places no meaningful limits on Facebook’s collection of users’ personal information. The settlement also fails to address the business model that incentivizes the invasive and manipulative practices the company was fined for. The Cambridge Analytica scandal rightfully motivated the FTC’s to reopen its investigation into Facebook. The company’s lax privacy controls enabled the manipulation of voters in the 2016 election and damaged our democracy. Without corrective action, the business of behavioural advertising is bound to harm our social, political and private lives again and again. It’s now up to Congress to pass legislation to protect our privacy, our democracy and our civil rights.”
Marta Tellado, President and CEO of Consumer Reports: “As expected, the size of the settlement is historic, but these attempts to hold Facebook accountable are not enough to make a real difference. With a weak and under-resourced FTC, and a glaring need for far more comprehensive privacy laws, Congress must raise the standards for consumers and hold Big Tech accountable. Lawmakers have a responsibility to pass laws that offer real protections, giving consumers control of their data and the FTC the power it needs to rein in Big Tech. The details of this settlement make it brutally clear that this isn’t just about Facebook’s privacy policies. Facebook made a concerted effort to control and manipulate consumer choices, by misrepresenting how they do business, and how they treat their users.”
Open Markets Institute: “The Open Markets Institute denounces the Federal Trade Commission’s (FTC) official $5 billion settlement with Facebook. Even as the FTC’s complaint alleges that Facebook committed major privacy violations, the FTC still failed to question Mark Zuckerberg and has not required an admission of guilt by the corporation, protecting Facebook from legal liability.
The Guardian– No collection of scandals, errors, embarrassments, hearings, threats of regulation, fines, or public scolding’s like this one seem to able to stall these two companies in their quest to become the operating systems of our lives. The world has never seen anything like Google. The world has never seen anything like Facebook.
By going through the tone of dissenting judgement it becomes clear that many in this world holds view that Marc Zuckerberg should have been personally held liable for the data breach in its criminal capacity because it is this person who is cheating the entire world with his false promises and assurances. The 2012 assurances from the Facebook to FTC and thereafter breaches of the same by FB are now in public domain and how this serial offender can be believed for his future assurances and promises?
As of 2018, Facebook had more than 2.2 billion monthly active users worldwide. Personal information, such as user’s real name, date of birth, hometown, current city, employer, relationship status, and spouse’s name, as well as sensitive personal information, such as political views, sexual orientation, photos of minor children, and membership in health-related and other support groups is used by FB for its marketing purpose. Users can also provide information about themselves by indicating that they “like” public Facebook pages. Research suggests that a user’s “likes” of public Facebook pages can be used to accurately predict that user’s personality traits, sometimes better than the user’s own friends and family. In addition, Facebook users may install and use applications (“apps”) developed by third-parties (“third-party developers”) that allow the users to share information with their Facebook Friends.
In 2012, after an FTC investigation, Facebook settled allegations that its practice of sharing Affected Friends’ data with third-party developers of apps was deceptive. The resulting Commission Order, among other things, prohibited Facebook from misrepresenting the extent to which consumers can control the privacy of their information, the steps that consumers must take to implement such controls, and the extent to which Facebook makes user information accessible to third parties. But even in 2018 it was found by FTC, after revelations in Cambridge Analytica’s case, that FB is sharing its user’s data to its app developers who in turn are misusing/commercially exploiting the same. So can such company be called trustworthy? If the company can cheat the nation in which it is born, can such company will remain faithful to other nation? Can such company be blindly relied upon is the core issue.
Between November 2015 and March 2018, Facebook asked its users to provide personal information to take advantage of security measures on the Facebook website or mobile application, including a two-factor authentication measure that encouraged provision of users’ phone numbers. But Facebook did not effectively disclose that such information would also be used for advertising. This shows the mens rea of the policy makers of the company and specially its CEO Marc Zuckerberg’s intentions to defraud and cheat the people by mere lip services. We are overwhelmed by the red carpet welcome My Dear Marc received in Modi 1.0 tenure and assurances he made to make global citizens lives simpler and easier with the POWER TO CONNECT. But the real face behind this POWER TO CONNECT was to sell their sensitive personal data and information to mint money!!!!!
One of the significant disclosures by FB in FTC investigations is, “The full scale of unauthorized collection, use, and disclosure of consumer information resulting from Facebook’s conduct is unknown due, at least in part, to the company’s lack of recordkeeping.”
Can anyone believe that FB not having proper record keeping regarding who accessed which information and how many times any information was accessed? To my mind this evasive reply is just to make the penalty quantum very less as it will create confusion in minds of commissioners regarding the real valuation of the sensitive personal data compromised. This quantum of undervalued compromise decree to the tune of 5 Billion Dollars can be guessed from the reaction of the US stock markets in which FB stock gained after this compromise decree was announced. It means markets were expecting much higher penalties on FB than the inflicted one.
To my mind India should be more concerned and watchful about the FTC findings and the manner in which India is welcoming FB group in India. A company with highest following in terms of user base is working on the diametrically opposite principles followed in India which is TRUTH. The company’s decision of accepting US FTC’s offer of compromise settlement rather than challenging the same in Court of Law itself establishes than company has more to lose in civil suit than 5 Billion dollars. So it was easy escape route offered to one of the biggest Social Media giants in the world.
Have you ever seen any example of such meagre surrender by the respondents in any law suits especially when 5 Billion is at the stake?
As a country we must be ready to read between the lines of this FTC Judgement and be more careful while dealing with such companies in future.
If FTC can act then why not any Indian Statutory Bodies like Competition Commission of India or Indian Courts by way of Suo Motu PIL act when FB is openly compromising privacy of the Indian Citizen, is the million dollar question.
AND MAHENDRA LIMAYE ASSOCIATES WANTS TO KNOW THE ANSWER.
This article is just to provide the spark needed for much bigger debate amongst intellectuals in India, especially those who are concerned about sovereignty and security of the nation!!!!
JAI HIND.
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