The Federal Trade Commission said it had opened an investigation into Facebook’s privacy practices following the Cambridge Analytica scandal in which the data of 50m users was misused.
Tom Pahl, the acting director of the FTC’s Bureau of Consumer Protection, warned in a statement that the privacy watchdog was committed to taking action against companies “that fail to honour their privacy promises”.
“The FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices,” said Mr Pahl.
The investigation raises substantial risks for Facebook, which signed a consent order in 2011 with the FTC that required it to be upfront with users about how their data was being shared with third parties.
If the company is found to have broken the order, it could face fines of up to $40,000 per violation per day. Last week, David Vladeck, a former FTC director who oversaw the agreement in 2011, said each user whose data was misused could be counted as an individual violation.
Shares dropped as much as 6.1 per cent on Monday, putting Facebook down 22 per cent from its record high close of $193.09 on February 1.
A Facebook spokesperson issued a statement made last week by Rob Sherman, the company’s deputy privacy officer, who said: “We remain strongly committed to protecting people’s information. We appreciate the opportunity to answer questions the FTC may have”.
The FTC’s investigation is just one of several regulatory probes into Facebook following revelations that Cambridge Analytica, a marketing firm used by the Trump presidential campaign, improperly harvested data on 50m Facebook users.
The information had originally been collected by a Cambridge professor who developed a quiz app that Facebook said was advertised as being for academic research.
Politicians in the US and Europe have called on Mark Zuckerberg to testify about the scandal, while attorneys-general in Massachusetts and New York have opened investigations.
Facebook first discovered the issue in 2015 but did not inform the public until earlier this month as the New York Times and the Observer newspapers were about to break the news.
The company has said it relied on a legal certification that the data had been deleted and is now investigating if that was the case.
On Sunday, Facebook took out adverts in American and British newspapers saying it would investigate every app that had downloaded large amounts of data.
The 2011 FTC order specifically mentions Facebook’s disclosures about third party app developers, stating it could not misrepresent to users the extent to which it verified the data privacy or security protections provided by app makers.
The order followed complaints from the Electronic Privacy Information Center and other consumer groups that Facebook was sharing data with developers even though it told users the information could only be seen by their friends.
Marc Rotenberg, president of the Electronic Privacy Information Center,, welcomed the confirmation of the FTC’s investigation and said the agency “must bring an enforcement action against Facebook for the violation of the 2011 Consent order”.
Some analysts have dismissed Facebook’s FTC problems. “The FTC case we ultimately believe given previous cases will end with a fine in the tens of millions and is more noise than an impact to the company’s operations over the coming years,” said Daniel Ivers of GBH Insights in a note on Sunday.
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