WASHINGTON/SAN FRANCISCO, Nov 29 (Reuters) - Facebook has
settled complaints that it disregarded its users' privacy,
agreeing to establish a raft of measures to better protect its
800 million members' data.
The settlement with the Federal Trade Commission on Tuesday
will require Facebook to obtain its users' consent for certain
changes to privacy settings and subject Facebook to 20 years of
The deal comes as Facebook, the world's No.1 Internet
social networking company, is said to be gearing up for a
massive $10 billion initial public offering next year, a source
familiar with the matter told Reuters on Monday.
"I'm the first to admit that we've made a bunch of
mistakes," co-founder Mark Zuckerberg wrote in a lengthy post
on the company's official blog on Tuesday.
He said a few "high-profile" mistakes, such as changes to
overshadowed much of the good work we've done."
To ensure that Facebook did a better job, Zuckerberg said
the company had created two new corporate privacy officer
positions to oversee Facebook products and policy.
In its complaint, the FTC said that Facebook had repeatedly
violated laws against deceptive and unfair practices. For
example, it said Facebook promised users that it would not
share personal information with advertisers, but it did.
Also, the company had failed to warn users that it was
changing its website in December 2009 so that certain
information that users had designated as private, such as their
"Friends List," would be made public, the FTC said.
Chris Conley, policy attorney with the American Civil
Liberties Union of Northern California, said the settlement
"makes it clear that companies can't simply change the rules
without asking users' permission."
But he said that to keep pace with new technology, there
was a need for new laws and tools.
"We shouldn't have to struggle with complicated and
constantly shifting privacy settings just to keep control of
our own personal information," Conley said.
Facebook, which has more than 800 million users, has often
been criticized for its privacy practices since its founding in
a Harvard dorm room in 2004.
Earlier this year, the company came under fire for
practices related to its use of facial recognition technology
to automatically identify people appearing in the photos that
are shared on the service.
ABILITY TO INNOVATE
On a conference call with reporters on Tuesday, FTC
officials said the settlement did not expressly cover the use
of facial recognition technology.
They noted, however, that it was broadly crafted so that it
would prevent Facebook from deceiving consumers going forward.
Senator Al Franken said in a statement that the absence of
provisions covering Facebook's facial recognition technology
was a "gap" in the settlement that he would be "urging the FCC
If Facebook is found to have violated any of the provisions
of the settlement, the company is subject to fines of $16,000
per day for each violation, FTC Chairman Jon Leibowitz said.
"Nothing in this order will restrict Facebook's ability to
innovate," said Leibowitz. But, he added, "Facebook's
innovation does not have to come at the expense of consumer
Under the settlement, which must be approved by an FTC
administrative law judge, Facebook is barred from being
deceptive about how it uses personal information, and is
required to get permission before changing the visibility of
the personal information users have posted.
Facebook noted that it had reversed some of the privacy
settings at issue in the FTC's complaint prior to the
settlement, including restoring users' ability to limit who
sees their Friends List. And it said it fixed a problem more
than a year ago which had "inadvertently" allowed advertisers
to obtain the user ID numbers of some Facebook members.
The settlement does not appear to directly impact
Facebook's current advertising-related business practices, in
which marketers can target ads to specific segments of
Facebook's audience, based on user traits such as location and
gender, said Debra Aho Williamson, an analyst at eMarketer.
"At this point we have no plans to change our forecasts
over Facebook's advertising revenue," she said, citing
eMarketer's estimate that Facebook will generate $3.8 billion
in worldwide ad revenue this year.
Still, the more stringent privacy requirements could
complicate Facebook's ability to roll out new features to its
broad base of users, as it competes with a rival social
networking service from Google.
In a statement, Facebook said that the settlement "strikes
the right balance between innovation and regulation, and gives
us the ability to introduce new sharing, connecting and control
features that will continue to improve Facebook."
The settlement follows a similar agreement in March between
the FTC and Google Inc over the Web search leader's rollout of
its own social network called Buzz.
In 2010, the FTC settled charges with Twitter, after the
agency alleged that the social networking service had failed to
safeguard users' personal information.
Ray Valdes, an analyst at industry research firm Gartner,
said he did not think the timing of the settlement was directly
related to Facebook's IPO plans.
"I don't think it's directly tied to the IPO. The IPO is
still off in the distance," he said, but added: "There's some
connection. I'd make more of a direct link if this was
happening in January."
The investigation by the FTC is In the Matter of Facebook,
Inc., File No. 092 3184.
For the FTC: Laura Berger, Cora Tung Han and Manas
For Facebook: Ashlie Beringer and Sean Royall of Gibson,
Dunn & Crutcher and Theordore Ullyot of Facebook.
(Reporting by Diane Bartz and Alexei Oreskovic)
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