FTC and Facebook Reach Settlement

In an era where personal data can spread throughout the world at rapid pace and unauthorized access to it has never been quicker and easier, the settlement between the FTC and Facebook underscores the FTC’s willingness to soothe anxiety felt by Internet users over this issue.

As the popularity of social networks are on the rise, this has never been more evident with not only the issues around Facebook, but last year’s FTC settlement with Google over a privacy complaint, as well as this year’s settlement with another social networking service Buzz.

Mark Zuckerberg, the founder of Facebook, did not admit to any violation of laws, in fact, the proposed settlement indicates the company’s denial of the FTC’s allegations. Facebook, which got its start in its founder’s college dorm room, has grown to become the Internet’s leading social media destinations, giving such giants like Google and Yahoo a run for their money when it comes to advertising dollars. Facebook doesn’t publicize its financial results, but certain market research companies predict more than four billion in revenue in 2011, up from about two billion the previous year.

The agreement with the FTC would settle allegations that in 2009 the company made certain information assessable to the public that users of Facebook thought would remain private.

The controversy prompted a swarm of complaints from privacy watchdogs who argue that random changes to Facebook’s privacy settings duped its users into sharing more information to the public that they believed would be private. The allegations alleged that the company shared sensitive information with third-party app developers and advertisers. Another issue of growing concern raised by the FTC is facial recognition, a feature that Facebook rolled out in 2010. The FTC plans to hold a workshop on facial recognition technology sometime this year.

In a blog post, Zuckerberg acknowledged that his company made a “bunch of mistakes,” but downplayed the issue by stating they had already corrected many of the privacy issues and concerns, touted his company’s overall record and reassured that his company provided “transparency and control over who can see your information.”

FTC Chairman, Jon Leibowitz, noted that the Facebook order by the FTC sends a strong message to Internet companies to take privacy matters seriously and build safeguard parameters into their products. But even though the proposed settlement was met with mostly enthusiasm, privacy advocates expressed concern that it would not go far enough to protect the privacy of its company’s users.

American companies are too “secretive,” said Jeffrey Chester, executive director for a Washington privacy advocacy group. The settlement, he claims, doesn’t require companies to be more forthright about how they gather and use personal information of their users. There is little doubt that a good majority of Facebook’s more than eight hundred million users don’t even understand, much less control, “the vast amounts of data mining used to propel its advertising business,” Chester said.

According to the proposed settlement, Facebook will subject themselves to independent private audits once every two years for the next twenty years. The company has also agreed to get its users’ permission on making future modifications to privacy settings. Facebook was not slapped with any fines, but failure to meet the FTC’s terms of the settlement would result in rather severe civil penalties.

This all comes at a time business forecasts Facebook’s value to be around $100 billion, double the valuation of Hewlett Packard, when they offer a $10 billion dollar IPO in 2012. “Facebook’s innovation does not have to come at the expense of consumer privacy,” Leibowitz said. “Nothing in this order will restrict Facebook’s ability to innovate.”

December 2, 2011