The Tsunami of Litigation Races Toward Facebook's Shores: Are the Social Media Giant's Days Numbered?
The last few weeks have not been good ones for billionaire entrepreneur Mark Zuckerberg. In the wake of revelations over its handling of user data, its business practices and how its platform was used to manipulate the 2016 elections, Facebook's stock value has plummeted as investors exit their positions in the company – and so far, there have been four lawsuits filed over its gathering and use of personal information.
Last month, the New York Times reported that recently-founded U.K.-based political consulting firm, Cambridge Analytica, harvested information taken from 50 million Facebook user profiles without authorization. Those actions were taken at the behest of former Trump campaign manager Stephen K. Bannon, after informing him that they had the ability to identify the behaviors of U.S. voters and manipulate their behavior. The work was made possible by a $15 million investment from a wealthy GOP donor, hedge fund manager Robert Mercer.
In response to allegations, Facebook stated that Cambridge Analytica's actions did not constitute a data breach, and that affected users had provided their information willingly. Nonetheless, they suspended the company's account because of the way in which the data was gathered and how it was subsequently shared. Cambridge Analytica worked through a psychology professor from Cambridge University named Aleksandr Kogan, who developed an app called “thisisyourdigitallife.” That app was downloaded by approximately 270,000 individuals, and provided Kogan with users' location, friends, and the type of content they prefer. However, a recent blog post at Facebook now suggests that as many as 87 million users may have had their data mined. According to a statement by Facebook vice-president Paul Grewal, Kogan's method did not violate his company's policies – but “he did not subsequently abide by our rules.” In other words, Kogan was allowed to use the data for his own personal research but had no right to share it with Cambridge Analytica.
Facebook identified those violations in 2015. What happened afterward is not entirely clear, however. At the time, Facebook demanded that all data gathered by Kogan and Cambridge Analytica be destroyed. However, recent reports indicate that not all of the data has been erased.
The first lawsuit on behalf of shareholders was filed in San Francisco on March 20th after Facebook shares lost $50 billion in value over a two-day period. Later that day, a proposed class-action lawsuit was filed in a U.S. District Court in San Jose, alleging negligence and violation of a California unfair competition statute. According to the plaintiff's counsel, John Yachunis, the client “...saw a tremendous uptick in political messaging during the campaign on her Facebook page, which she had never seen...[she] now sees there was an attempt to influence her vote.”
That same week, two additional lawsuits were filed against Facebook; one of them, a securities class action, names company founder and CEO Mark Zuckerberg and CFO David Wehner as defendants, alleging that they misled investors on their social media policies. The other is a derivative shareholder lawsuit targeting Zuckerberg, Chief Operations Officer Sheryl Sandberg and six members of the board. The firm representing the plaintiffs in that case issued a press release in which a partner pointed out, “Facebook’s apology doesn’t do much for the millions of Americans impacted by this conduct. It also doesn’t explain why Facebook executives waited three years to inform their loyal users and shareholders of the massive breach, especially on the heels of the FTC consent decree in 2011.”
Despite Facebook's announcements and actions toward addressing these allegations, it appears that the company's legal troubles are just beginning. This week, Missouri Attorney General Joshua Hawley started an investigation into the ways in which Facebook uses personal data, alleging fraud and deception. He is not the only one; several states, as well as the Federal Trade Commission, are starting their own probes into the company's business practices. Zuckerberg himself has also been ordered to testify before a House Committee in Washington D.C. next week.