By Byron Tau and Deepa Seetharaman
Facebook Inc. confronted an intensifying crisis as political
leaders in the U.S. and Europe called for aggressive inquiries into
whether the technology giant failed to stop improper access and
handling of user data, scrutiny that sent the company's stock to
its biggest decline in four years.
The uproar pushed Facebook's stock down 6.8% to $172.56 Monday,
wiping out about $36 billion in market value as the episode
reignited concerns over how Facebook, Alphabet Inc.'s Google and
other internet firms handle user data that is at the core of
advertising businesses that have made them among the richest
companies on Earth.
The backlash has raised anew the prospect of tighter regulation
of the social-network company and other big internet firms that
already are under scrutiny for how Russia manipulated their
platforms before and after the 2016 presidential election.
The latest controversy centers on whether Cambridge Analytica,
which helped the Trump campaign in 2016, collected and used without
permission data from the accounts of millions of users obtained
through a Facebook app developed by an academic at the University
of Cambridge. Facebook on Friday said it suspended Cambridge
Analytica -- along with an associated firm, the academic and
another individual -- as it investigates reports that the firm kept
user records for years after saying it had destroyed them.
Cambridge Analytica has said it complied with Facebook's rules.
Republican and Democratic lawmakers called for tech-company
leaders, including Facebook Chief Executive Mark Zuckerberg, to
appear before Congress to explain how they protect user data from
being exploited by third-party companies for advertising and other
targeting purposes.
"Facebook, Google, and Twitter have amassed unprecedented
amounts of personal data and use this data when selling
advertising, including political advertisements," said Sens. Amy
Klobuchar (D., Minn.) and John Kennedy (R., La.) in a joint
statement on Monday. "The lack of oversight on how data is stored
and how political advertisements are sold raises concerns about the
integrity of American elections as well as privacy rights."
Sens. Klobuchar and Kennedy are members of the Judiciary
Committee and have asked the panel's chairman, Chuck Grassley (R.,
Iowa), to hold hearings. A spokesman for Mr. Grassley said no
decision had been made to whether to hold such a hearing as the
panel was "currently gathering information and taking steps to
inform any action by the committee."
They join others on Capitol Hill and in Europe calling for
additional scrutiny of tech companies and Cambridge's practices.
Other senior members of Congress are calling for either additional
investigations or renewed steps to curb abuse in digital
advertising.
Ron Wyden (D., Ore.), wrote a letter to Mr. Zuckerberg demanding
answers to a series of questions about media reports on how
Cambridge Analytica used the Facebook data. Mr. Wyden said the
incident calls into question a number of issues, including "the
prudence and desirability of Facebook's business practices and the
dangers of monetizing consumers' private information."
Sen. John Thune (R., S.D.), chairman of the Senate Commerce
Committee, which has jurisdiction over some technology issues, said
he was planning to send a request to Facebook for more information.
Facebook has a "responsibility to make sure that that data is used
in an appropriate way," Mr. Thune said.
Meanwhile, the European Parliament's president, Antonio Tajani,
on Monday said "allegations of misuse of Facebook user data is an
unacceptable violation of our citizens' privacy rights" and vowed
that Parliament will investigate fully.
The EU's justice chief, V ra Jourová, said she expected
"companies to take more responsibility when handling our personal
data." She said she would seek clarifications from Facebook and
would discuss the matter with U.S. government officials on her
scheduled trip to the U.S. this week.
Facebook executives have struggled to find responses that didn't
fuel more recrimination -- repeating a pattern that has played out
over the company's response to a string of crises over the past 18
months. Pivotal Research analyst Brian Wieser said the weekend's
episode was another sign of "systemic problems" within the company.
Mr. Wieser has a "sell" rating on the stock.
Several executives took to Twitter over the weekend to argue
that Cambridge's use of data, if confirmed, would be an abuse but
wouldn't constitute a data breach because the records were gathered
through proper channels.
Chief Security Officer Alex Stamos on Saturday deleted several
tweets arguing against the use of the "data breach" term, later
saying he "should have done a better job weighing in" even though
his remarks were factually correct. Mr. Stamos said he thought it
was important for Facebook executives to talk about these complex
issues publicly, but "I don't know how to do that in this media
environment."
Andrew Bosworth, another senior Facebook executive, wrote in a
Facebook post on Monday that Cambridge's actions amounted to a
breach of trust. "Much of the critique that has emerged over the
weekend is valid and I am following it closely and listening," he
said.
Facebook began in 2007 letting outsiders access its "social
graph" -- the friend connections, interests and "likes" that linked
its user base together. A range of organizations were allowed to
use the information, including political campaigns. President
Barack Obama's 2012 re-election campaign, for example, created a
voter-outreach app that analyzed users' Facebook connections and
encouraged users to reach out to potential Obama supporters among
them.
By 2015, Facebook had largely stopped access to users' friend
connections, though political campaigns could still find would-be
supporters by buying ads and using Facebook's targeting tools.
Facebook has said it had learned in 2015 that Aleksandr Kogan, a
psychology professor at the University of Cambridge, broke its data
policies when he shared user data gleaned from his
personality-prediction app, "thisisyourdigitallife," with parties
that included Cambridge Analytica.
At the time, Facebook's platform rules allowed Mr. Kogan to
glean information about those who downloaded the app -- as well as
many data points about their friends. Facebook has since restricted
access to friend data.
Facebook said when it learned in 2015 that Mr. Kogan's company
shared data with Cambridge Analytica in violation of its terms of
service, it obtained legal agreements to delete the information
from the firm and Mr. Kogan, along with a man named Christopher
Wylie, who worked with Cambridge Analytica. Facebook now is
investigating whether the parties kept the data anyway.
A Cambridge Analytica spokesman said in a statement that its
political division didn't use Facebook data collected by Mr.
Kogan's company. The firm said that it deleted all data it received
after it became clear that Mr. Kogan violated Facebook's policies.
Mr. Kogan didn't respond to a request to comment and Mr. Wylie
couldn't reached to comment.
About 270,000 people downloaded the app, giving Mr. Kogan access
to information such as the cities they lived in, the content they
had liked, or information about their friends, Facebook has said.
According to a report in the New York Times, as many as 50 million
Facebook users were swept up in the data collection.
On Monday, Facebook said it hired a digital forensics firm,
Stroz Friedberg, to do a "comprehensive audit" of Cambridge
Analytica, which agreed to give "complete access" to its servers
and systems.
Facebook also asked Mr. Kogan and Mr. Wylie to agree to an
audit; the company said that Mr. Kogan provided a verbal agreement,
while Mr. Wylie declined. Facebook said the audits were part of a
broader review conducted by the company to determine whether the
parties deleted the user data as they certified some years ago.
"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.
--Natalia Drozdiak in Brussels and Sam Schechner in Paris
contributed to this article.
(END) Dow Jones Newswires
March 19, 2018 20:47 ET (00:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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