FTC: Facebook Lied To Customers About Facial Recognition, Phone Number Usage

The Washington Post is reporting that as part of a milestone settlement against Facebook, the Federal Trade Commission (FTC) is going to say that Facebook lied to users about handling phone numbers and that it misled users about turning off a photo recognition tool.

The phone number issue concerns Facebook’s two-factor authentication, which allowed users to ask for a one-time password via text when they log onto the site. However, some advertisers had access to the contact details without permission from users.

The FTC will also claim that Facebook didn’t tell about 30 million people that they could turn off a facial recognition tool that tagged people in photos.

Those two complaints will be part of the settlement, which will reportedly include a $5 billion fine and the creation of a privacy board meant to provide oversight of Facebook. The settlement is rumored to be released on Wednesday (July 24) before the closing of the stock market.

As part of a 2011 FTC consent decree, Facebook allowed continuous privacy checkups by PricewaterhouseCoopers LLP. The new board committee will be added to the existing team.

Analysts pointed out that it’s clear Facebook has struggled with privacy issues since 2011, and so they expect the social media giant to agree with tightened oversight.

“The FTC does not have supervision authority, but there are ways of creating an analog to that,” said David Vladeck, a Georgetown University law professor and former FTC official.

The consequences of the settlement on high-level Facebook executives has not been disclosed. It has been reported that Facebook found emails that tied CEO Mark Zuckerberg to the troublesome privacy issues, which was apparently a large factor in the FTC’s decision to try to reach a settlement.

Analysts predict that the Facebook fine will be an amount the company can handle. The company is expected to earn $5.4 billion in net income from $16.5 billion in revenue in Q2, which means the fine will represent about three months of earnings for the company.