Regulators Close in on Facebook After Data Revelations

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Regulators Close in on Facebook After Data Revelations

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By Trevor Clawson

What a difference a weekend makes. On Friday 16th of last week, shares in Facebook were valued at more than $185%. Fast forward to the close of US trading on Monday and the social media giant’s share price ended  6.7% down Meanwhile, MPs in Britain were demanding to speak to Facebook founder Mark Zuckerberg to explain his company’s role in the growing scandal with Cambridge Analytica.

US Investors and British parliamentarians were reacting to renewed allegations that Facebook data, harvested from US voters, had been used to create 50 million psychological profiles that formed the basis of an online campaign to support the Presidential ambitions of Donald Trump in 2016.  And although suggestions of wrongdoing have been denied by Facebook and British data mining company, Cambridge Analytica, both businesses are now at the centre of a controversy that goes to the heart of the relationship between social media platforms  and the billions of people who ‘post’, ‘share’ and ‘like’ on a daily basis. And it’s a controversy that could ultimately result in a perhaps messy regulatory crackdown.

Witness the reaction of the UK Parliament’s Culture, Media and Sports Committee. Speaking on Monday, Committee chairman Damian Collins said that Facebook must explain itself. And that explanation should come from the man at the top.

“We have repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular whether data had been taken from people without their consent. Their answers have consistently understated this risk,” he said. “I will be writing to Mark Zuckerberg asking that either he or another senior executive from the company, appear to give evidence in front of the Committee as part our inquiry.”

Collins’ strongly expressed frustration followed by a move by Facebook to protect its own reputation. On Friday 16, the company announced that it was suspending the accounts of both Cambridge Analytica and its parent company, Strategic Communications Laboratory (SCL) on the grounds that the two companies had broken the platform’s rules

“In 2015, we learned that a psychology professor at the University of Cambridge named Dr. Aleksandr Kogan had lied to us and violated our platform policies by passing data from an app that using a Facebook login to SCL and Cambridge Analytica,” said Paul Grewal, Facebook VP and Senior Counsel.

An Angry Reaction

In Britain, there was an angry reaction. As Damian Collins pointed out, MPs had already quizzed Facebook on reports that data from the platform had been processed by third parties, without the consent of users.

“Facebook knew about this, and the involvement of Cambridge Analytica with it, and deliberately avoided answering straight questions from the Committee about it,” he said.

The growing political row centres on data that was originally extracted from a ‘personality test’ placed on Facebook by Cambridge academic Aleksandra Kogan. Described as a research tool, the app was downloaded by about 270,000 people. All agreed that their data could be used by researchers.

Cambridge Analytica: regulators surround Facebook after Data Revelations

But as Facebook has now acknowledged, data was handed over to Cambridge Analytica, breaking the social media platforms rules on privacy and consent. And it is alleged that Cambridge Analytica used the data to chart correlations between the answers given by participants in the ‘test’ and their activities on Facebook.

This formed the basis of a software tool that could create psychological profiles of social media users, based on what they chose to ‘like’ and ‘comment’ on. This profiling was in turn used to target political advertising in support of Donald Trump. Details of the story, as told by Whistleblower Christopher Wylie, were covered in depth by the Observer and New York Times newspapers at the weekend. 

The Heart of the Matter

So why does all this matter? For its part, Facebook is stressing that when it discovered that its rules had been broken, immediate action was taken.

“When we learned of this violation in 2015, we removed his app from Facebook and demanded certifications from Kogan and all parties he had given data to that the information had been destroyed. Cambridge Analytica, Kogan and Wylie all certified to us that they destroyed the data,” said Grewal.

Meanwhile, Cambridge Analytica rejects suggestions it has done anything wrong. Online political campaigning is certainly not illegal and while Donald Trump is a controversial figure, he was a legitimate Presidential candidate, chosen by his party.

So the real question is whether Cambridge Analytica did – as has been alleged – use third-party data, without the consent of its owners. We may soon find out. Britain’s Information Commissioner has applied for a warrant to search the company ’s computers

“Our investigation into the use of personal data for political campaigns, includes the acquisition and use of Facebook data by SCL, Doctor Kogan and Cambridge Analytica,” said Commissioner Elizabeth Denham.

Cambridge Analytica: regulators surround Facebook after Data Revelations

Facebook Inaction

Meanwhile, Facebook must now answer questions about privacy policies and its ability or willingness to control the flow of data to parties who may use it without consent. Damian Collins believes the social media company has thus far failed to address the problem.

“The reputation of this company is being damaged by stealth, because of their constant failure to respond with clarity and authority to the questions of genuine public interest that are being directed to them. Someone has to take responsibility for this. It’s time for Mark Zuckerberg to stop hiding behind his Facebook page,” he said.

Regulation on the Way?

But will this ultimately lead to more regulation? US politicians have already gone on record as supporting tougher measures. For instance, Virginia Senator Mark Warner tweeted:

“Whether it’s allowing Russians to purchase political ads or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency,”

But is effective regulation even possible? Laurent Bourelly is a Search Engine Optimisation (SEO) and marketing specialist. He argues that regulators will always struggle to regulate internet companies.

“The amount of tracking that’s going on is crazy,” he says. “But whatever the regulators do, people will continue to track you.”

As Bourelly sees it, when a controversy of this kind erupts, there are always two camps.

“Those who want to shut down the internet and regulate everything and those who argue that politicians don’t really understand the new technology.”

As a marketer, he uses tracking and profiling but stresses the importance of acting ethically.

Rather than more regulation, he sees more wisdom in educating internet users about the way their data is being used. Armed with the knowledge they can make informed decisions about how they use websites and social media platforms. “At the moment people know they are being tracked but they don’t the depth of it.”  Equally important, he argues that marketers should act ethically.

Arguably there are already tough regulations relating to the use of data already in place. The European Union’s  General Data Protection Regulation sets out strict rules on the use of personal information, with a strong focus on consent and transparency. There are potentially stiff fines for noncompliance.

“GDPR can help to an extent,” says Bourelly. “But if an internet company wants to be sneaky it can put its servers in Panama or somewhere outside the jurisdiction.”

The challenge for regulators is to identify breaches of data laws when they occur and to take touch action when necessary, without stifling free speech.

By | 2018-05-30T10:09:08+00:00 March 21st, 2018|Business, Politics, Technology|0 Comments

About the Author:

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Trevor is a UK-based business journalist and author, specialising in startups, tech companies and fast growth businesses. His career in journalism began as Business Editor of BBC World television's pan-European text news services. From there he went on to edit e.Business and PLC Director magazines before going freelance. He is the author of three books, including The Unauthorized Guide to Business the Jamie Oliver Way, which has been translated into five languages. Follow Trevor on Twitter @trevorclawson

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