FTC Seeks to Ban Meta From Monetizing Children’s Data

  • The Federal Trade Commission (FTC) issued an order to Facebook’s parent company, Meta, seeking to enforce more significant privacy-related measures, especially for data collected from children and teenagers under 18.
  • The FTC’s order comes after the federal body assessed that the company violated the previous two orders.

Consumer regulatory scrutiny is catching up to Meta, considering the FTC has proposed banning the company from monetizing children’s data. In a press release this week, FTC alleges that Meta violated previous government orders, issued in 2012 and 2019, to uphold user privacy and Children’s Online Privacy Protection Act (COPPA).

Consequently, the FTC now preemptively seeks to rein in the social networking giant from committing further privacy-related offenses. “Facebook has repeatedly violated its privacy promises,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “The company’s recklessness has put young users at risk, and Facebook needs to answer for its failures.”

The FTC alleges that Meta (then Facebook) misrepresented its privacy practices within months of being specifically ordered not to in 2012. Trust in Meta hit rock bottom in 2018 when reports of the Cambridge Analytica scandal broke out.

In 2019, FTC’s second orderOpens a new window to Meta constituted a $5 billion penalty and assurance that it would expand its privacy program by:

  • Instituting a privacy review of every new or modified product, service, or practice
  • Exercise greater oversight over third-party apps
  • Establish a data security program
  • Encrypt user passwords and perform regular scans to weed out those stored in plaintext
  • Clearly outline the use of facial recognition tech and obtain user consent
  • Assign independent third-party assessors and compliance officers

Based on the third-party assessor’s report, Meta violated the 2019 order and COPPA. For instance, Meta misrepresented parental control functions. “Despite the company’s promises that children using Messenger Kids would only be able to communicate with contacts approved by their parents, children in certain circumstances could communicate with unapproved contacts in group text chats and group video calls,” FTC said.

Meta also failed to cut off user data access to app developers if the data wasn’t accessed for over 90 days, another requirement mandated by the order.

See More: Why Continuous Compliance Is a Necessity

To top it off, an internal document drafted by Facebook’s Ad and Business Product team, which was leaked last year, revealed that Facebook is clueless about controlling first-party and third-party data and where it is used across the company.

The document revealed that Facebook’s systems are so confusing that even its engineers cannot keep track of the incoming data. Once it goes through any of the thousands of ingestion points, it could be used for a purpose that isn’t what it was collected for, which is a big no-no for privacy regulations such as GDPR.

Subsequently, the FTC’s third and latest order to show cause seeks to restrict Meta’s ability to collect and use data from children and teenagers under 18. If passed, the proposal would impose a blanket ban on Meta being able to monetize said data or use it for commercial activities.

Meta would also be required to submit written confirmation to an independent assessor of its privacy program complying with the order before launching new or updated products, services, or features.

Additionally, FTC’s proposal expands on the consensual use of facial recognition tech and other privacy compliance measures such as privacy review, third-party monitoring, data inventory and access controls, and employee trainingOpens a new window .

The order would apply to any companies Meta may acquire or merge with.

Meta has 30 days to respond to the FTC’s order modification proposal. Meta’s policy communications director took to Twitter to convey the company’s displeasure and said that the Commission is targeting American business while turning a blind eye to China-based TikTok.

Meta’s statement on the FTC’s political stunt. pic.twitter.com/XEPHvriKFYOpens a new window

— Andy Stone (@andymstone) May 3, 2023Opens a new window

FTC Commissioner Alvaro M. Bedoya expressed reservations about the order and promised to hear arguments with an “open mind.”

“There are limits to the Commission’s order modification authority. Here, the relevant question is not what I would support as a matter of policy. Rather, when the Commission determines how to modify an order, it must identify a nexus between the original order, the intervening violations, and the modified order,” Bedoya stated. “Based on the record before me today, I have concerns about whether such a nexus exists for proposed Provision I.”

The Facebook, Instagram, WhatsApp, and Oculus parent company posted positive revenue growth for the first time in the past year. In Q1 2023, Meta’s revenue grew by 3% from $27.9 billion to $28.64 billion year-over-year (YoY). In the same period, the company’s net income declined by 24% YoY, though less than the company posted in the preceding quarters.

Do you think FTC’s order to show cause against Meta is justified? Share your thoughts with us on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!

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