Facebook probe should look to data privacy, FTC Democrat urges states

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(Bloomberg) --A Democratic member on the U.S. Federal Trade Commission urged states investigating Facebook Inc. to examine whether the company disregarded earlier promises to protect privacy in order to perpetuate its dominance in violation of antitrust laws.

“Now, the ball really is in your court,” Commissioner Rohit Chopra told state attorneys general meeting in Washington on Monday. The company faces an inquiry by 45 states who are looking into both competition and data-protection issues, as well as an FTC antitrust investigation and a potential Justice Department probe.

Facebook agreed in July to pay $5 billion and add a privacy committee to its board of directors to settle FTC’s claims that it mishandled privacy. Chopra dissented saying the settlement didn’t go far enough. The separate antitrust probe is ongoing.

Chopra, an outspoken critic of settlements at the FTC approved along party lines and concentration of corporate power, said he became convinced during the agency’s investigation that Facebook’s privacy violations were done so it could pursue its dominance of social media.

“I don’t care what letter is next to your name, we have to all be working together shaping remedies that actually work,” Chopra said, referring to the Republican and Democratic attorneys general in the room.

Facebook, which had 2.45 billion monthly active users as of September, didn’t immediately respond to a request for comment. The company says it faces robust competition, and privacy and antitrust issues should remain separate.

Data protection and competition have traditionally been distinct areas of law, but some academics and enforcers have insisted that the two issues may have significant overlap for tech giants, particularly Facebook, which harvests data to power its massive and profitable ad-targeting business.

”We think that it’s worth looking deeper, so we’re very engaged in that deeper investigation,” California Attorney General Xavier Becerra said in an interview.

What Bloomberg Intelligence Says

Many bridges must be crossed before any possible findings that unlawful conduct has occurred. Monopolization is a legal term of art and rigorous standards must be met for liability to be found. Remedies, if needed, would likely be narrowly tailored conduct changes.

One of the Republican commissioners, Christine Wilson, pushed back at Chopra at the same event, saying provisions in the settlement that require Facebook executives to sign off regularly on privacy practices were already changing the company.

“It is having the effect of focusing not only managements’ minds but also those of the employees,” said Wilson, who voted for the settlement.

Facebook’s Chief Executive Officer Mark Zuckerberg is now “on the hook” and in danger of civil and criminal penalties if he deviates from the accord, Wilson said.

Some states, including California and Massachusetts, have issued subpoenas or sued Facebook for documents, suggesting the company “has a lot to hide,” Chopra said. He reiterated that the FTC should have interviewed Zuckerberg during its privacy probe.

“I hate seeing the FTC conclude an investigation and we still have states working their butts off to get the information that I think we should have gotten,” he said.

--With assistance from Daniel Stoller

Bloomberg News