Washington/London: The U.S. Federal Trade Commission is investigating Facebook Inc over its use of personal data, Bloomberg News reported on Tuesday, after a whistleblower said a political consultancy hired by Donald Trump improperly accessed information on 50 million Facebook users to sway public opinion.
Facebook shares dropped 4.7 percent, after falling almost 7 percent on Monday, as investors worried that the world's largest social media network could face massive fines and that its dented reputation could scare off users and advertisers. The drop erased more than $20 billion from its market capitalization.
Shares of Snap Inc and Twitter Inc also fell.
U.S. and European lawmakers have demanded an explanation of how the consultancy, Cambridge Analytica, gained access to the data in 2014 and why Facebook failed to inform its users, raising broader industry questions about consumer privacy.
The probe by the FTC, the regulatory agency in charge of consumer protection, would look into whether Facebook allowed Cambridge Analytica to receive some Facebook user data in violation of its policies, said Bloomberg, citing a person familiar with the matter.
"We are aware of the issues that have been raised but cannot comment on whether we are investigating. We take any allegations of violations of our consent decrees very seriously as we did in 2012 in a privacy case involving Google," an FTC spokesman said.
In 2011, Facebook settled complaints that it disregarded its users' privacy, agreeing to set up measures to better protect its 800 million members' data and FTC officials are now looking into whether Facebook violated the 2011 agreement, Bloomberg reported.
If the FTC finds Facebook violated terms of the consent decree, it has the power to fine the company thousands of dollars a day per violation.
Facebook was not immediately available to comment on the reported FTC probe.
In Britain, the Information Commission was seeking a warrant on Tuesday from a judge to search the offices of London-based Cambridge Analytica.
On Tuesday people were seen carrying multiple plastic storage containers into and out of the building that houses Cambridge Analytica's London office, among other companies. It was not clear which firm they were going to.
"We are looking at whether or not Facebook secured and safeguarded personal information on the platform and whether when they found out about the loss of the data they acted robustly and whether or not people were informed," Elizabeth Denham, the head of the Information Commission told BBC Radio.
Created in 2013, Cambridge Analytica markets itself as a source of consumer research, targeted advertising and other data-related services to both political and corporate clients.
According to the New York Times, it was launched with $15 million in backing from billionaire Republican donor Robert Mercer and a name chosen by the-then future Trump White House adviser Steve Bannon.
Facebook says the data were harvested by a British academic, Aleksandr Kogan, who created an app on the platform that was downloaded by 270,000 people, providing access not only to their own personal data but also their friends'.
Facebook said Kogan then violated its policies by passing the data to Cambridge Analytica. Facebook has since suspended both the consulting firm and SCL (Strategic Communication Laboratories), a government and military contractor.
Facebook said it had been told that the data were destroyed.
Kogan says he changed the terms and conditions of his personality-test app on Facebook from academic to commercial part way through the project, according to an email to Cambridge University colleagues obtained and cited by CNN.
Kogan says Facebook made no objection, but Facebook says it was not informed of the change, CNN reported. Kogan was not immediately reachable for comment.
"If this data still exists, it would be a grave violation of Facebook's policies and an unacceptable violation of trust and the commitments these groups made," Facebook said.
Cambridge Analytica has denied all the media claims and said it deleted the data after learning the information did not adhere to data protection rules.
"We are not alone in using data from social media sites to extract user information," Cambridge Analytica said. "No Facebook data was used by our data science team in the 2016 presidential campaign."
© Thomson Reuters 2018
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