Facebook under pressure as EU, U.S. urge probes of data practices
(Reuters) - Facebook Inc Chief Executive Mark Zuckerberg faced calls on Monday from U.S. and European lawmakers to explain how a consultancy that worked on President Donald Trump's election campaign gained access to data on 50 million Facebook users.
Facebook's shares fell more than 7 percent, wiping around $40 billion off its market value, set for their biggest drop since September 2012, as investors worried that new legislation could damage the company's lucrative advertising business.
"The lid is being opened on the black box of Facebook's data practices, and the picture is not pretty," said Frank Pasquale, a University of Maryland law professor who has written about Silicon Valley's use of data.
Lawmakers in the United States, Britain and Europe have called for investigations into media reports that political analytics firm Cambridge Analytica had harvested the private data on more than 50 million Facebook users to support Trump's 2016 presidential election campaign. (http://reut.rs/2pn8btD)
The scrutiny presents a new threat to Facebook's reputation, which is already under attack over Russians' use of Facebook tools to sway American voters with "fake news" posts before and after the 2016 U.S. elections.
Facebook said on Monday it had hired a digital forensics firm Stroz Friedberg, to carry out a comprehensive audit of Cambridge Analytica, which had agreed to comply and to give the forensics firm complete access to their servers and systems.
Cambridge Analytica said it strongly denies the claims, according to a statement on its website.
Facebook was already facing new calls on Saturday for regulation from U.S. Congress and questions about personal data safeguards after the reports in the New York Times and London's Observer over the weekend.
"It's clear these platforms can't police themselves," Democratic U.S. Senator Amy Klobuchar tweeted.
On Monday, Republican Senator John Kennedy joined Klobuchar in calling on Zuckerberg to testify before Congress, and Democratic Senator Ron Wyden sent a letter to Zuckerberg asking about company policies for sharing user data with third parties.
Wyden, an influential senator on technology issues, asked how many times during the past ten years Facebook was aware of third parties collecting or processing data in violation of the company's platform policies, among several other questions.
Facebook usually sends lawyers to testify to Congress, or allows trade organizations to represent it and other technology companies in front of lawmakers.
Facebook and its rivals, including Twitter and YouTube, have largely withstood political pressure stemming from Russia's manipulation of their services. While they have taken voluntary steps to restrict foreign interference and combat false news, they have not been forced by law or regulation to make changes, and legislation on the issue has stalled.
It was not clear whether Republicans who hold congressional committee gavels would announce hearings related to Facebook and Cambridge Analytica. But the calls reflected mounting bipartisan concern in Washington over whether internet firms are fair trustees of the massive amounts of user data they collect.
On Monday, the Senate was expected to move forward with a bill that would chip away at the internet industry’s legal shield, a decades-old law known as Section 230 of the Communications Decency Act, with a bill intended to address online sex trafficking. The measure has already passed the House of Representatives and was expected to soon become law.
Facebook said on Friday that it had learned in 2015 that a Cambridge University psychology professor had lied to the company and violated its policies by passing data to Cambridge Analytica from a psychology testing app he had built.
Facebook said it suspended the firms and researchers involved. It also said the data had been misused but not stolen, because users gave permission.
Facebook shares fell 7 percent at $172.17, dragging the S&P 500 technology sector down 2.6 percent and weighing on the overall U.S. equity market.
Fears of increased regulation also weighed on shares of Twitter Inc Google parent Alphabet Inc and Snapchat parent Snap Inc.
"(Tech companies) are going to get a lot more scrutiny over what data they are collecting and how they are using it," said Shawn Cruz, senior trading specialist at TD Ameritrade in Chicago.
A spokesman for British Prime Minister Theresa May said the allegations were "clearly very concerning ... It is essential that people can have confidence that their personal data will be protected and used in an appropriate way."
Britain's Information Commissioner's Office said it would consider the potential new evidence as part its separate civil and criminal probe into whether Facebook user data had been abused in British elections.
"It's time for Mark Zuckerberg to stop hiding behind his Facebook page," UK Parliamentary committee chairman and Conservative lawmaker Damian Collins said in a statement.
The head of the European Parliament said EU lawmakers will investigate whether data misuse had taken place, calling the allegations an unacceptable violation of citizens' privacy rights.
(Reporting by Dustin Volz and Munsif Vengattil; Additional reporting by Chuck Mikolajczak and Sruthi Shankar; Writing by Susan Thomas; Editing by Nick Zieminski)
© Copyright Reuters Ltd. All rights reserved. The information contained in this news report may not be published, broadcast or otherwise distributed without the prior written authority of Reuters Ltd.