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FTC Fines Facebook $5 Billion for Privacy Violations

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11 months ago

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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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Manufacturer Behind Kylie Cosmetics and KKW Beauty Sues to Keep Coty From Stealing Its Trade Secrets

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19 hours ago

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July 2, 2020

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  • Seed Beauty, the company that manufactures Kim Kardashian West and Kylie Jenner’s makeup lines, believes Kylie Cosmetics gave confidential trade secrets to its competitor, Coty Inc, which Jenner sold 51% of her brand to earlier this year.
  • Seed is now suing Kylie Cosmetics and Coty in an effort to stop them from sharing and using those secrets. 
  • The lawsuit comes just days after Seed won a temporary injunction in a similar case against KKW Beauty, which Coty recently acquired 20% of, preventing it from sharing confidential information as well. 
  • KKW Beauty denied claims that it shared information with Coty, and though Coty and Kylie Cosmetics have not responded to the lawsuit yet, they will likely argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.

Kardashian-Jenner’s Strike Deals With Coty Inc.

The company behind Kylie Jenner and Kim Kardashian West’s makeup lines, Seed Beauty, is taking legal action to protect its trade secrets now that both stars have massive deals with Coty Inc. 

Coty Inc. is the beauty conglomerate that owns brands like CoverGirl, Sally Hansen, Rimmel, and others. It has recently made headlines for striking million-dollar deals with the sisters in what some view as an effort to refresh their image and attract a younger audience. For some time now, Coty has been struggling to keep up with its competitors in the industry, so it seems like their new strategy is to link up with more social media-driven brands like Kardashian West and Jenner’s.

Earlier this year, Coty bought 51% of Kylie Cosmetics for $600 million, and just this week, news broke that Kardashian West sold 20% of KKW Beauty to the company for $200 million.

The deals were huge for the sisters, valuing both of their brands at around $1 billion and leaving them each with net worths of $900 million. However, the deals were pretty concerning for Seed Beauty, which partnered with Jenner since her line started in 2016, taking care of logistics, manufacturing, development, storage, and distribution. 

Seed also took on the same responsibilities for KKW Beauty when Kardashian West launched the line in 2017. Now, Seed Beauty is worried that Coty has, and will continue to, get access to the secrets that it believes make Seed a strong force in the beauty industry. 

Seed Beauty Sues After Kylie Cosmetics Allegedly Shares Trade Secrets 

On June 30, Seed Beauty filed a civil lawsuit against Coty and King Kylie, the LLC behind Kylie Cosmetics, to prevent the misappropriation of trade secrets. 

The lawsuit says that because of Coty’s inability to “successfully compete in the new digital cosmetics world through its own innovation,” the company has engaged in a plan “to steal the secret sauce behind Seed,” through its deals with the sisters.

The suit claims, “Coty made a $600 million investment in King Kylie, but it really was a subterfuge to learn Seed’s confidential business methodologies.”

“Any competitor who acquired such information would be given an unfair competitive advantage,” it adds. 

The suit also alleges that Kylie Cosmetics knowingly shared Seed Beauty’s confidential intellectual property and Coty knowingly accepted that information. The complaint is highly redacted, so it doesn’t specify the secrets that Seed wants to keep private, but it could include things like information about product formulations, information about the business’ core operations, and the structure of its partnerships, according to Forbes. 

Seed says it repeatedly asked Kylie Cosmetics not to share certain parts of their partnership agreement over the course of negotiations with Coty, which were rumored to have begun in June of 2019. 

However, according to the suit, Jenner’s team refused to confirm or deny whether or not they had shared information. Seed also says it asked Coty not to ask for, or use, its trade secrets, but Coty similarly refused to assure Seed that it wouldn’t.

Now, Seed Beauty is asking the court to permanently bar Kylie Cosmetics from disclosing it’s trade secrets. It’s also asking that the court force Coty to promise not to use information that it’s already allegedly acquired. On top of that, it wants Coty to be prevented from developing any color cosmetics with Kylie Cosmetics for a period of time that was redacted in the suit.

“This action is to stop Coty’s theft of Seed’s pioneering and proprietary digital-first business model that has revolutionized the cosmetics industry,” the suit says.

Injunction Against KKW Beauty 

But again, the Seed’s concerns don’t just focus solely on Coty’s relationship with Kylie Cosmetic. In expectation of a Coty-KKW deal, Seed filed a similar lawsuit against KKW Beauty, also seeking protection of its trade secrets. 

Seed filed the lawsuit on June 19, likely after learning from its experience with her sister’s deal. KKW Beauty then filed an opposition to the lawsuit, claiming that Seed’s legal action was an “attempt to stifle the success of the Kardashian-Jenner family.” It also argued that KKW Beauty did not share any trade secrets with Coty and requested that the court compel arbitration.

KKW Beauty lawsuit reads, “The purported harm to Seed is entirely speculative, unfounded, and already complete,”

“By contrast, KKW stands to suffer comparatively more significant harm if the Court were to enter the amorphous injunction proposed by Seed.”

Ultimately, the court granted the temporary order, which lasts until August 21. That order prevents the brand from sharing details about its partnership with Seed, including “the terms of those agreements, information about license use, marketing obligations, product launch and distribution, revenue sharing, intellectual property ownership, specifications, ingredients, formulas, plans and other information about Seed products.”

Still, that court order didn’t stop Kardashian West and Coty from striking a deal, which was formally announced on June 29, and this legal situation is far from over.

It’s likely that Coty and Kylie Cosmetics will both argue that Seed’s allegations are speculative and that the secrets it claims Kylie Cosmetics shared aren’t actually trade secrets.

Still, the legal battles may be worth it in Seed Beauty’s eyes, as it has built itself quite a good reputation in the industry. According to the lawsuit, Seed goes to great lengths to protect its trade secrets by doing things like limiting access to areas of its factory, requiring all employees to sign non-disclosure agreements, and having security monitor the property.

In the Beauty space, Seed is well known for its speed and efficiency thanks to what it calls its “unique business model,” which makes it capable of turning an idea into a product within weeks. The company is not only known for working with the Kardashian-Jenner’s but is also massively successful for its own line, Colourpop Cosmetics, as well as its partnership with YouTuber Tati Westbrook for her new cosmetics line.

So it’s not surprising to see Seed go to great lengths to keep its secrets to success out of its competitor’s hands.

Coty and Kylie Cosmetics have not yet formally responded to the lawsuit or issued a public comment. The first court hearing is scheduled for October, according to Insider.

See what others are saying: (Forbes) (Business Insider) (The Fashion Law) 

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Reddit, YouTube, and Twitch Crack Down on Trump and Far-Right Extremists

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3 days ago

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June 30, 2020

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  • Reddit banned nearly 2,000 subreddits on Monday, including r/The_Donald, arguing it violated its new policies on hate speech, among other rules.
  • The same day, Twitch temporarily suspended President Trump’s account over two videos from rallies where he made racist remarks against the Latinx community– marking the first time one of the president’s personal accounts has been suspended.
  • YouTube also permanently banned several accounts belonging to white supremacists including David Duke, Stefan Molyneux, and Richard Spencer.

Reddit Announces Bans

Reddit, Twitch, and YouTube all took steps to crack down on President Donald Trump and right-wing accounts Monday.

In a post on the platform, Reddit announced that it had rolled out several new content rules, including updates to its policies that more explicitly ban hate speech.

“Communities and users that promote hate based on identity or vulnerability will be banned,” the post said.

As a result of those new rules, Reddit also announced that it was banning about 2,000 subreddits, notably including r/The_Donald, the main forum for Trump supporters on the platform.

The subreddit was created in 2015 when Trump was running for president and quickly became a very significant online base for him, boasting just under 800,000 users. While it does not have an official connection to Trump, he has been known to share memes from it, and in July 2016, when he was running for president, he did an Ask Me Anything.

The page has long been accused of sharing hate speech, conspiracies theories, and promoting violence. Over the years, Reddit has cracked down on the page multiple times for violating its policies.

Last year, the company “quarantined” the page⁠— meaning it was placed behind a warning screen⁠— over comments that Reddit said incited violence. Even before that, the platform had also prevented posts on the subreddit from reaching the front page.

Recently, the page’s moderators and much of its audience have moved to other websites that are similar to Reddit but have fewer content rules, and as a result, the forum has been largely inactive for about three months.

In their post, Reddit noted that the “vast majority” of the 2,000 subreddits they banned were already inactive. The post also went on to explain why they banned the r/The_Donald subreddit.

“All communities on Reddit must abide by our content policy in good faith,” it said. “We banned r/The_Donald because it has not done so, despite every opportunity. The community has consistently hosted and upvoted more rule-breaking content than average, […] antagonized us and other communities, […] and its mods have refused to meet our most basic expectations. Until now, we’ve worked in good faith to help them preserve the community as a space for its users—through warnings, mod changes, quarantining, and more.”

Notably, Reddit also said that it had banned the subreddit r/ChapoTrapHouse—which is a spinoff of the popular left-wing podcast—for similar reasons.

“Though smaller, r/ChapoTrapHouse was banned for similar reasons: They consistently host rule-breaking content and their mods have demonstrated no intention of reining in their community,” it said.

Twitch Suspends Trump

Around the same time, as Reddit’s post, Twitch also announced that it was temporarily suspending President Trump’s Twitch account for “hateful conduct.”

In statements to the media, the company noted two recent streams uploaded by Trump that violated their rules. The first was a rebroadcast of his famous 2015 campaign rally where he made racist comments about Mexico sending the U.S. rapists who bring drugs and crime.

The other was a broadcast of Trump’s rally a few weeks ago in Tulsa, where he talked about a “very tough hombre” breaking into a woman’s house in the middle of the night, saying that was something that happened a lot.

“Hateful conduct is not allowed on Twitch,” a spokesperson said in a statement to the media. “In line with our policies, President Trump’s channel has been issued a temporary suspension from Twitch for comments made on stream, and the offending content has been removed.”

While the company did not say how long the suspension would last, the move is still highly significant as it marks the first time ever that one of Trump’s personal social media accounts has been suspended.

YouTube Bans White Supremacists

Later on Monday, YouTube too took steps to address hate speech and announced that it was permanently banning several prominent white supremacist channels, including ones belonging to former KKK Grand Wizard David Duke, podcaster Stefan Molyneux, and white supremacist activist Richard Spencer.

In a statement, the platform said that the channels repeatedly violated its rules by claiming that members of protected groups were inferior, among other violations.

“We have strict policies prohibiting hate speech on YouTube, and terminate any channel that repeatedly or egregiously violates those policies,” a spokesperson said. “After updating our guidelines to better address supremacist content, we saw a 5x spike in video removals and have terminated over 25,000 channels for violating our hate speech policies.”

These bans come almost exactly a year after YouTube announced that it would start cracking down on supremacist channels. The company, however, has already received pushback for the move.

In a tweet Monday, Spencer said that he would appeal the suspension, which he described as “part of a systemic, coordinated effort.”

Molyneux also took to Twitter to voice his displeasure, writing that that YouTube “just suspended the largest philosophy conversation the world has ever known.”

A Broader Shift

The steps taken by Reddit, Twitch, and YouTube are part of this recent shift many social media platforms have begun to make.

Most companies have long-embraced a more hands-off approach and said they want to remain neutral, but now, more and more are changing their tones— especially when it comes to hate speech and President Trump.

Twitter has now placed labels on multiple Trump tweets for sharing misinformation or inciting violence. Recently, Snapchat said it will not promote Trump’s account anymore because his posts can be seen as encouraging violence.

At the same time, Facebook, the biggest social media platform in the world, has consistently refused to address these issues. While the company has claimed over and over again it does not want to police speech, numerous critics have said that they are simply allowing hate speech on the platform.

With so many other social media companies beginning to make changes, Facebook is now seeing unprecedented backlash for its refusal to follow suit.

Over the last week or so, a steadily growing number of major advertisers like Starbucks, Honda, Verizon, Coca-Cola, and more have joined a boycott of Facebook over its policies on hate speech and misinformation on the platform.

The move comes after civil rights groups pressured companies to stop paying for advertisements on Facebook, specifically, because the company has allowed posts from Trump that other platforms like Twitter have flagged as inciting violence.

Despite the numerous requests—and the fact that Facebook CEO Mark Zuckerberg reportedly lost $7 billion last week because of the boycott— the company has refused to take any action in removing the content.

On Friday, Facebook responded to the boycott by announcing it will expand its hate speech policies and label posts from politicians who violate rules as “newsworthy.” However, those labels do not explain why the posts are inaccurate or hateful, and many say the company is just going to label hate speech from political figures “newsworthy” without taking any real steps.

Currently, it is unclear if the boycott has had any real, lasting impact, especially because some of the companies are only boycotting for a month. Because Facebook is such a huge incredibly rich company, losing those advertisers is probably just a drop in the bucket.

The issue of political speech is something Zuckerberg has remained really firm on, and while it seems unlikely he will waiver in any meaningful absent some massive event, it will be interesting to see how other companies like YouTube and Twitter continue to change.

See what others are saying: (NPR) (The Verge) (Business Insider)

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Snapchat Apologizes and Removes Juneteenth “Smile” to Break Chains Filter

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2 weeks ago

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June 19, 2020

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  • Snapchat has removed a Juneteenth filter that placed people in front of the Pan-African flag and asked users to “smile” to break the chains that floated up in the background.
  • Before the filter was taken down, many people called it an insensitive way to honor Juneteenth, a holiday that celebrates the end of slavery in America.
  • Snapchat released a statement claiming that this filter was not reviewed before it was posted and went live on the app in error.
  • The company apologized and said it is investigating how the mistake was made.

Filter Leads to Outrage

Snapchat has removed its Juneteenth filter that asked users to “smile” to break chains after it drew criticism online from those who called it tone-deaf and offensive. 

The filter placed Snapchat users in front of the Pan-African flag, alongside a logo that says “Juneteenth Freedom Day.” When a user smiled, a common request for filters on the app, chains would float up in the background, break, then disappear. The filter generated attention when journalist and digital strategist Mark S. Luckie posted a video of him using it. 

Many shared Luckie’s video and condemned Snapchat for releasing the filter. Among other critiques, users called it an insensitive way to honor Juneteenth, a holiday that celebrates the end of slavery in the United States. 

“This is what happens when you don’t have any black people on the product design team,” wrote Ashten Winger, a multimedia designer who used to work for the social media company. “As a Snap alumni, this is extremely embarrassing.”

“Do we need to get into this or do you think snapchat knows why this is fucked up?” one Twitter user asked. 

“I rather Juneteenth go back to being an obscure holiday if this is what is going to happen. This is ridiculous,” another person said. 

Snapchat Removes Filter and Apologizes

As criticism began to pour in, Snapchat removed the filter and issued an apology for ever posting it. The company claimed it went on the app in error. 

“We deeply apologize to the members of the Snapchat community who found this Lens offensive,” a Snapchat spokesperson told CNBC. “A diverse group of Snap team members were involved in developing the concept, but a version of the Lens that went live for Snapchatters this morning had not been approved through our review process.”

“We are investigating why this mistake occurred so that we can avoid it in the future,” it added.

This comes just a week after Business Insider reported that Snapchat CEO Evan Spiegel was withholding the company’s diversity reports and statistics from the public because that data “only reinforces the perception that tech is not a place for underrepresented groups.

According to a transcript from an all-hands meeting at Snapchat obtained by Business Insider, Spiegel is trying to come up with a “new version of a diversity report.” This version would focus more on giving context and “helping people understand our strategy and approach for driving change, and holding ourselves accountable to that. “

Releasing statistics and data on diversity within tech companies is a common practice. Despite Snapchat’s decision to not do this, the company has pledged its support to fight against racial injustice and inequality in the country. In a tweet on June 1, Snapchat wrote: “We condemn racism. We must embrace profound change. It starts with advocating for creating more opportunity, and for living the American values of freedom, equality and justice for all.”

See what others are saying: (CNBC) (Business Insider) (The Verge)

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