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FTC Fines Facebook $5 Billion for Privacy Violations

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  • The Federal Trade Commission has fined Facebook $5 billion for violating the privacy of customers and imposed new accountability measures and restrictions for Facebook, WhatsApp, and Instagram.
  • The fine is the largest penalty imposed on a tech company for privacy violations ever, which comes after a yearlong investigation into Facebook’s involvement in the Cambridge Analytica data breach.
  • The FTC found that Facebook “deceived” their customers by allowing their data to be accessed by apps their friends used, despite telling the public they had stopped that practice.
  • The FTC also alleges that Facebook enforced data sharing policies based “on whether Facebook benefited financially from its arrangements with the developer.”

FTC Announcement 

The U.S. Federal Trade Commission (FTC) announced Wednesday that it was fining Facebook a record-breaking $5 billion for privacy violations as well as instituting sweeping privacy restrictions and oversight measures.

The penalty represents the largest fine that the FTC has ever imposed on a tech company by far. It is also the biggest penalty ever brought on a company for privacy violations, according to the FTC announcement.

The announcement comes after a yearlong investigation of Facebook over privacy violations.

That investigation was started right after The New York Times and The Observer of London reported that Facebook allowed British political consulting firm Cambridge Analytica to harvest the data of millions of Facebook users without their knowledge and build voter profiles from those users data without their consent.

Cambridge Analytica got the data from Facebook users who used a third-party gaming application called “This Is Your Digital Life.”

Although it has been estimated that only around 270,000 people used the app, the users who gave the app permission to access and acquire their data also gave the app permission to do the same for all of their Facebook friends.

That resulted in the personal information of nearly 87 million Facebook users being collected by Cambridge Analytica, despite the fact that the vast majority of those people had never given the firm permission to access their information, or even played the game.

Along with investigating Cambridge Analytica, the FTC’s investigation also expanded to look at other privacy concerns, such as the tech giant’s data-sharing policies with other third-party apps and device-makers that Facebook users might not have understood or been aware of.

FTC Findings

All of that culminated in the report and announcement released Wednesday by the FTC.

In addition to the $5 billion fine, the FTC’s announcement also stated that Facebook must “submit to new restrictions and a modified corporate structure that will hold the company accountable for the decisions it makes about its users’ privacy.”

That requirement, the FTC says, is mandated “to settle Federal Trade Commission charges that the company violated a 2012 FTC order by deceiving users about their ability to control the privacy of their personal information.”

The FTC goes on to describe the 2012 order in question, saying that it explicitly “prohibited Facebook from making misrepresentations about the privacy or security of consumers’ personal information, and the extent to which it shares personal information.” 

The 2012 FTC order also required that Facebook “maintain a reasonable privacy program that safeguards the privacy and confidentiality of user information.”

Violations of 2012 Order

The FTC goes on to outline how Facebook specifically violated the 2012 order. The statement describes numerous instances, but the most significant examples center around privacy disclosures to customers.

For example, in 2012, Facebook put a disclosure on their Privacy Settings page telling users the information they shared with their friends could also be shared with the third-party apps their friends used. 

The FTC claims that four months later, Facebook removed the disclosure “even though it was still sharing data from an app user’s Facebook friends with third-party developers.”

Then in 2014, Facebook announced they would stop letting third-party developers collect data about the friends of app users. However, the FTC says that Facebook separately told the developers that they could continue to access that data until April 2015.

Even then, Facebook still waited “until at least June 2018 to stop sharing user information with third-party apps used by their Facebook friends,” the FTC said.

The statement then goes on to say, “Facebook did not screen the developers or their apps before granting them access to vast amounts of user data.” 

Facebook also claimed it had consequences for policy violations by third-parties, but it “did not enforce such policies consistently and often based enforcement of its policies on whether Facebook benefited financially from its arrangements with the developer,” the FTC alleged.

New Restrictions & Overhauls

In addition to spelling out Facebook’s privacy violations, the FTC announcement also included some of the new restrictions and oversight measures that Facebook will have to comply with under the settlement.

To ensure accountability with Facebook’s board of directors, the order will create “an independent privacy committee of Facebook’s board of directors,” in order to remove “unfettered control by Facebook’s CEO Mark Zuckerberg over decisions affecting user privacy.”

The settlement also requires the company to “designate compliance officers who will be responsible for Facebook’s privacy program,” and gives a third-party assessor more power to evaluate Facebook’s privacy programs.

Regarding restrictions the settlement imposes, Facebook will now have to conduct privacy reviews for any new or modified products and services before they can be implemented.

It will also be required to document any data breach involving 500 or more users. 

The FTC statement continues to include a laundry list of new requirements, like exercising more oversight over third-party apps, encrypting passwords, and more.

Notably, it also requires Facebook to “establish, implement, and maintain a comprehensive data security program.”

Also of huge significance is that these new restrictions and accountability measures will also apply to Facebook-owned companies WhatsApp and Instagram.

Response

The decision was approved by the FTC’s commissioners in a 3-to-2 vote earlier this month, with the three Republican commissioners voting to approve the settlement and the two Democrat commissioners voting to oppose.

In a statement to The New York Times, the three Republican commissioners, including agency chairman, Joseph Simons, said the settlement “will provide significant deterrence not just to Facebook, but to every other company that collects or uses consumer data.”

However, the two Democratic commissioners argued that the settlement did not do enough. They said that the $5 billion fine is just a slap on the wrist for Facebook, which made $55.8 billion in revenues last year alone. 

They also pointed out that the settlement did not actually do anything to change or restrict Facebook’s ability to collect and share their user’s personal information.

“The proposed settlement does little to change the business model or practices that led to the recidivism,” Democratic Commissioner Rohit Chopra wrote in his dissenting statement. “Nor does it include any restrictions on the company’s mass surveillance or advertising tactics.”

The Democratic commissioners also reportedly disliked the settlement because they wanted to take the case to court, and felt that the Facebook executives should have been held personally accountable.

The Republican commissioners, however, have said that they did not have a strong enough case to move it to court. 

See what others are saying: (The Chicago Tribune) (The Washington Post) (The New York Times)

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Uber Forks Over $19 Million in Fine for Misleading Australian Riders

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The penalty is just the latest in a string of lawsuits going back years.


Uber Gets Fined

Uber has agreed to pay a $19 million fine after being sued by the Australian Competition and Consumer Commission for making false or misleading statements in its app.

The first offense stems from a company policy that allows users to cancel their ride at no cost up to five minutes after the driver has accepted the trip. Despite the terms, between at least December 2017 and September 2021, over two million Australians who wanted to cancel their ride were nevertheless warned that they may be charged a small fee for doing so.

Uber said in a statement that almost all of those users decided to cancel their trips despite the warnings.

The cancellation message has since been changed to: “You won’t be charged a cancellation fee.”

The second offense, occurring between June 2018 and August 2020, involved the company showing customers in Sydney inflated estimates of taxi fares on the app.

The commission said that Uber did not ensure the algorithm used to calculate the prices was accurate, leading to actual fares almost always being higher than estimated ones.

The taxi fare feature was removed in August 2020.

A Troubled Legal History

Uber has been sued for misleading its users or unfairly charging customers in the past.

In 2016, the company paid California-based prosecutors up to $25 million for misleading riders about the safety of its service.

An investigation at the time found that at least 25 of Uber’s approved drivers had serious criminal convictions including identity theft, burglary, child sex offenses and even one murder charge, despite background checks.

In 2017, the company also settled a lawsuit by the Federal Trade Commission (FTC) for $20 million after it misled drivers about how much money they could earn.

In November 2021, the Justice Department sued the company for allegedly charging disabled customers a wait-time fee even though they needed more time to get in the car, then refused to refund them.

Later the same month, a class-action lawsuit in New York alleged that Uber charged riders a final price higher than the upfront price listed when they ordered the ride.

See what others are saying: (ABC) (NASDAQ) (Los Angeles Times)

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Report Finds That Instagram Promotes Pro-Eating Disorder Content to 20 Million Users, Including Children

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According to the study, even users hoping to recover were given eating disorder content because they were “still in Instagram’s algorithmically curated bubble.”


Instagram Promotes Eating Disorder Content

Instagram promotes pro-eating disorder content to millions of its users, including children as young as nine-years-old, according to a Thursday report from the child advocacy non-profit group Fairplay.

The report, titled “Designing for Disorder: Instagram’s Pro-eating Disorder Bubble,” studied what it called an eating disorder “bubble,” which consisted of nearly 90,000 accounts that reached 20 million unique users. The average age of the bubble was 19, but researchers found users aged nine- and 10-years-old that followed three or more of these accounts. Roughly one-third of those in the bubble were underage. 

According to Fairplay, Instagram’s parent company Meta derives $2 million in revenue a year from the bubble and another $228 million from those who follow it. 

“In addition to being profitable, this bubble is also undeniably harmful,” the report said. “Algorithms are profiling children and teens to serve them images, memes and videos encouraging restrictive diets and extreme weight loss.”

“Meta’s pro-eating disorder bubble is not an isolated incident nor an awful accident,” it continued. “Rather it is an example of how, without appropriate checks and balances, Meta systematically puts profit ahead of young people’s safety and wellbeing.”

Researchers identified the bubble by first looking at 153 seed accounts with over 1,000 followers that posted content celebrating eating disorders. Some used phrases like “thinspiration” or other slang terms like “ana” and “mia” to refer to specific eating disorders. Others included an underweight body mass index in their bios. 

Those seed accounts alone had roughly 2.3 million collective followers, 1.6 million of which were unique. Of those unique users, researchers looked at how many seed accounts each followed to determine that nearly 90,000 accounts were part of the eating disorder bubble. Those accounts totaled over 28 million followers, 20 million of which were unique.

These pages posted content ranging from memes and photos of extreme thinness to screenshots of progress on calorie counting apps. One user said they were on their third day of eating just 300 calories. 

Others, including children under the age of 13, put their current weights and goal weights in their account bios. Some wrote that they “hate food” or were “starving for perfection.”

Content’s Impact on Children

Fairplay claimed that many of those in the bubble wanted to recover but were essentially trapped in Instagram’s algorithm. 

“Many of the biographies of users in the bubble talk about wanting to or being in recovery, wanting to get ‘better’, to ‘heal’ or being aware of how unwell they were,” the report said. “However, these users are still in Instagram’s algorithmically curated bubble. They will still be feeding content from other accounts in the bubble, including the seed accounts, that normalizes, glamorizes or promotes eating disorders.”

The report also showcased the firsthand account of a 17-year-old eating disorder survivor and activist identified as Kelsey. Kelsey wrote that it was impossible to “imagine a time when the app didn’t have the sort of content that promotes disordered eating behavior.” 

“I felt like my feed was always pushed towards this sort of content from the moment I opened my account,” Kelsey continued.

“That type of content at one point even got so normalized that prominent figures such as the Kardashians and other female and male influencers were openly promoting weight loss supplements and diet suppressors in order to help lose weight.”

Kelsey said Instagram delivered that content without any relevant searches, but posts about body positivity needed to be actively sought out. 

The report concluded by arguing that there needs to be legislation that regulates platforms like Instagram by requiring them to prioritize user safety, particularly for children.

Meta and Instagram have long been accused of disregarding child safety. Last year, a whistleblower unveiled documents that revealed the company knew of the harm it posed to young people, specifically regarding body image. A Meta spokesperson told The Hill that they were unable to address the most recent allegations in Fairplay’s report.

“We’re not able to fully address this report because the authors declined to share it with us, but reports like this often misunderstand that completely removing content related to peoples’ journeys with or recovery from eating disorders can exacerbate difficult moments and cut people off from community,” the spokesperson said.

See what others are saying: (The Hill) (CNet)

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Etsy Sellers Strike Amid Increased Transaction Fees and Mandatory Offsite Advertising

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“What began as an experiment in marketplace democracy has come to resemble a dictatorial relationship between a faceless tech empire and millions of exploited, majority-women craftspeople,” an Etsy seller wrote in a petition. 


Thousands of Etsy Sellers Shut Down Shops

Roughly 15,000 Etsy sellers are closing up their online shops starting Monday in protest of several grievances they have with the platform, including a new fee increase.

Starting on Monday, transaction fees are getting boosted from 5% to 6.5% on the platform. CEO Josh Silverman sent a memo claiming that this hike will allow the company to “make significant investments in marketing, seller tools, and creating a world-class customer experience,” but sellers have been frustrated by the change. 

“Etsy’s last fee increase was in July 2018. If this new one goes through, our basic fees to use the platform will have more than doubled in less than four years,” seller Kristi Cassidy wrote in a petition calling for a strike. As of Monday morning, over 50,000 Etsy sellers, customers, and employees had signed the petition.

“These basic fees do not include additional fees for Offsite ads – which started during the first wave of the pandemic,” Cassidy continued. 

Offsite ads allow Etsy to advertise sellers’ products on other websites like Google. Sellers who make over $10,000 a year reportedly have no way of opting out of the program and Etsy takes at least 12% of sales generated through the promotions. 

“Etsy fees are an unpredictable expense that can take more than 20% of each transaction,” Cassidy wrote. “We have no control over how these ads are administered, or how much of our money is spent.”

Etsy became a pandemic success story as online shopping rose amid lockdowns. Many turned to the platform to purchase masks and other goods, prompting its stock, sales, and number of sellers to rise. 

“It’s really obnoxious to tell us sellers, ‘Hey, we made record profits last year and we’re gonna celebrate by raising your fees a whole bunch,’” Bella Stander, a maps and guidebooks publisher who sells on Etsy, told the Wall Street Journal.  

What Etsy Sellers Are Demanding

Currently, there are over five million sellers on Etsy. Cassidy hopes that if enough of them unite, the company will have to respond. 

“As individual crafters, makers and small businesspeople, we may be easy for a giant corporation like Etsy to take advantage of,” she wrote. “But as an organized front of people, determined to use our diverse skills and boundless creativity to win ourselves a fairer deal, Etsy won’t have such an easy time shoving us around.”

In the petition’s list of demands, it asks that Etsy cancel the transaction fee increase, allow sellers to opt out of offsite ads, and provide a transparent plan to crack down on resellers who take up space on the platform.

It also demanded that Etsy end its “Star Seller Program,” which impacts how sellers can interact with their buyers.

“Etsy was founded with a vision of ‘keeping commerce human’ by ‘democratizing access to entrepreneurship.’ As a result, people who have been marginalized in traditional retail economies — women, people of color, LGBTQ people, neurodivergent people, etc. — make up a significant proportion of Etsy’s sellers,” Cassidy wrote.

“But as Etsy has strayed further and further from its founding vision over the years, what began as an experiment in marketplace democracy has come to resemble a dictatorial relationship between a faceless tech empire and millions of exploited, majority-women craftspeople.”

In a statement to Yahoo Finance, an Etsy spokesperson claimed that sellers were the company’s “top priority.”

“We are always receptive to seller feedback and, in fact, the new fee structure will enable us to increase our investments in areas outlined in the petition, including marketing, customer support, and removing listings that don’t meet our policies,” the spokesperson said. “We are committed to providing great value for our 5.3 million sellers so they are able to grow their businesses while keeping Etsy a beloved, trusted, and thriving marketplace.”

The strike was a trending topic on Twitter Monday morning. Many sellers took to the social media site to pledge their support to the movement. 

Many sellers are urging buyers to refrain from using the site for the remainder of the week, which is how long the protest is currently scheduled to last.

See what others are saying: (The Wall Street Journal) (Yahoo Finance) (TechCrunch)

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