Facebook caught in scandal

Following allegations that the Trump-affiliated data analysis firm Cambridge Analytica exploited personal user data from Facebook, the social media giant is reportedly under investigation by the United States Federal Trade Commission. Facebook has previously been accused of enabling influence campaigns by foreign powers such as Russia.

Background

Cambridge Analytica is a private company founded in 2013. It uses data mining (processes that extract patterns and knowledge from big data), and data analysis “to change audience behaviour”. Based out of London, the company has offices in the United States, Brazil, and Malaysia. Cambridge Analytica partnered with Donald Trump’s presidential election campaign. According to reports, Cambridge Analytica and its affiliate SCL, have influenced over 100 campaigns over 5 continents.

Cambridge Anlytica uses personal data acquired from a number of sources, including Facebook, to create micro-targeting advertisements designed to influence opinions. In an exposé by UK’s Channel News 4, it was revealed that revealed that Cambridge Analytica has been involved in a number of political campaigns across the world. CEO Alexander Nix was caught on tape claiming that the company does “a lot more” than just investigation, alluding to entrapment and bribery.

On Friday, the company was accused of a Facebook data breach. Cambridge University professor Aleksandr Kogan reportedly sold the company personal user information collected from 50 million Facebook users. Whistle-blower Christopher Wylie, who worked with Kogan and Cambridge Analytica, said, “We exploited Facebook to harvest millions of people’s profiles. And built models to exploit what we knew about them and target their inner demons. That was the basis the entire company was built on.”

Other names linked to Cambridge Analytica include Robert Mercer, conservative American billionaire, and Steve Bannon, former White House Chief Strategist for President Trump. The company is also part of an investigation by the UK Information Commissioner’s Office into the risks of using data analytics for political purposes.

Facebook and other social media have come under fire a number of times in the past year, for hate and terrorist propaganda, the presence of bots, and the proliferation of “fake news” ahead of elections. In 2017, it was reported that Facebook was a key influencer in the outcome of the 2016 US Presidential election and the Brexit vote. Last September, Facebook admitted to finding approximately $100,000 worth of ads connected to Russia, which allegedly led a fake news campaign against Hilary Clinton.

Analysis

According to media reports, Facebook has known about Aleksandr Kogan’s data breach since 2015. The company asked Kogan and Cambridge Analytica to delete the data, but did not follow up. Facebook also failed to inform its users of the data breach.

Following the Cambridge Analytica scandal, the United States Federal Trade Commission (FTC) has reportedly launched an investigation into Facebook. In 2011, Facebook settled FTC charges that it had deceived customers on its privacy policy. The company updated its privacy guidelines to enforce a consent decree that stated that user permission had to be obtained before sharing data. According to the Washington Post, the organisation will now be examining whether Facebook has breached these terms of privacy.

An FTC spokesperson said that they could not confirm whether the investigation was underway, before adding, "We take any allegations of violations of our consent decrees very seriously as we did in 2012 in a privacy case involving Google."

Facebook has seen intense backlash over the issue. On Monday, Facebook shares fell by 6.8%. By Tuesday night, the company had lost over $60 billion. The “DeleteFacebook” hashtag gained over 60,000 tweets, while a number of people, including WhatsApp founder Brian Acton spoke against the website. In January, a Facebook earning report showed a drop of 5% of users in North America during the last quarter of 2017. At the time, officials claimed that this was the result of a new algorithm.

Analysts have begun to question whether this incident will be the beginning of regulatory action against social media companies. Others such as Emily Parker, writing for CNN, cited the “entrenched monopoly power” of companies such as Facebook and Uber. She suggested the use of Blockchains to enhance individual control over data privacy, and combat the domination that companies such as Google currently have over our personal data.

Facebook founder and CEO Mark Zuckerberg has yet to make an official statement, ignoring calls from US senators and Attorney Generals, and UK MPs alike. “The entire company is outraged we were deceived,” a Facebook spokesperson said. “We are committed to vigorously enforcing our policies to protect people’s information and will take whatever steps are required to see that this happens.”

Cambridge Analytica has denied all allegations made by the Channel 4 exposé. It claims that all the data it uses is legally obtained. The Board of Directors has also announced that CEO Alexander Nix has been suspended. The company has launched an internal investigation and offered to cooperate with the Information Commissioner’s Office.

Assessments

Our assessment is that the Cambridge Analytica event has raised a number of questions linked to data privacy. Analysts have noted the increasing ‘centralisation’ of the internet. This event is demonstrative of the control social media and tech giants have over private data. We believe that these organisations must be held accountable to users. Will this incident open up dialogue on regulatory mechanisms for websites such as Facebook?