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FTC Confirms Probe of Facebook Privacy Practices

Fallout from Facebook’s Cambridge Analytica crisis continued Monday, with the U.S. Federal Trade Commission confirming the launch of a “non-public” investigation into the social giant.

“[T]he FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook,” Tom Pahl, acting director of the FTC’s Bureau of Consumer Protection, said in a statement about the agency’s probe. “Today, the FTC is confirming that it has an open non-public investigation into these practices.”

Facebook shares, already down 13.9% since the scandal broke March 16, dropped nearly 6% in morning trading Monday. The stock recovered somewhat but was still down 3.3% at noon ET. [UPDATE: Facebook shares closed up 0.4% Monday, to $160.06 per share.]

Investors are worried that the revelations about the unauthorized possession of data for around 50 million Facebook users by Cambridge Analytica — a U.K.-based analytics and consulting firm that worked for Donald Trump’s 2016 election campaign — will result in new government regulations that could hamper Facebook’s business. The scandal has contributed to Facebook’s market capitalization shedding more than $70 billion in value at this point in a little over a week.

Last week, Facebook had said expected an inquiry by the FTC. “We remain strongly committed to protecting people’s information,” Facebook deputy chief privacy officer Rob Sherman said in a statement issued last week. “We appreciate the opportunity to answer questions the FTC may have.”

The company is facing an FTC probe into whether it violated a 2011 consent decree requiring user consent for sharing data. Facebook faces potential fines of $40,000 per user for violations of the FTC agreement, which could amount to a massive monetary penalty.

In the statement Monday, Pahl said noted that one of the FTC’s chief tools is “enforcement action against companies that fail to honor their privacy promises.” In addition, he said, “Companies who have settled previous FTC actions must also comply with FTC order provisions imposing privacy and data security requirements.”

In addition to the ongoing Cambridge Analytica flap, Facebook acknowledged Sunday that it has collected and stored detailed calling and text-messaging records from some smartphone users for years. The company said the data is aggregated on an opt-in basis for people using Messenger or Facebook Lite on Android and that it does not share that info with third parties.

About 51% of consumers said they “don’t trust” Facebook, with 41% saying they do trust the company, according to a Reuters poll of 2,237 people conducted March 21-23. By comparison, 62% said they trust Google (while 29% do not) and 53% said they trust Apple (and 31% do not).

Facebook CEO Mark Zuckerberg, in a statement last Wednesday about the situation and subsequent media appearances, apologized for the “breach of trust” with users and outlined actions the company has made and plans to make to “fix” that.

Over the weekend, Facebook placed full-page ads signed by Zuckerberg in several newspapers including the New York Times, Wall Street Journal and the Washington Post apologizing for the Cambridge Analytica breakdown.

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