Thursday, March 3, 2016

Facebook is under fire in two of the world's biggest economies

Facebook's (FB) commanding position as the world's leading social network is also making it a juicy target for an array of government regulators.

Just this week, Facebook, which has 1.6 billion members, found itself at odds with regulators in Germany and Brazil. Germany is using tougher antitrust rules to pursue privacy issues at Facebook, while Brazil briefly arrested a Facebook executive after prosecutors complained the company's WhatsApp messaging service wasn't turning over data. And just a few weeks ago, the social network lost a French court ruling over possible censorship charges.

The clashes mark just the latest examples of the company's vast user data collection efforts and occasionally shifting privacy policies drawing attention from regulators around the world. As Facebook has grown, it has built one of the largest caches of data about individuals ever assembled, creating concerns about how the data might be used or shared. Last year, Facebook faced scrutiny of its privacy practices from France, Spain, Netherlands, Germany and Belgium, among others. And Facebook's various messaging platforms now carry communications not just from billions of law-abiding people but also potentially from criminals, hackers and terrorists.

Still, none of the recent cases is likely to threaten Facebook's domination of the social world online or on mobile phones. The company, worth $312 billion in the stock market, finished 2015 with revenue of almost $18 billion, up 44%, and over 1 billion daily active users. More than 3 million companies, mostly small businesses, now advertise on Facebook, Chief Operating Officer Sheryl Sandberg disclosed in an interview with USA Today on Wednesday.

'Abuse of market power'

In Germany, instead of using privacy protection laws, authorities in the cartel office this week said they are seeking to investigate Facebook for possible misuse of its users' data under antitrust laws. 

"For advertising-financed Internet services such as Facebook, user data are hugely important," Federal Cartel Office President Andreas Mundt told Reuters. "For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected."

Facebook said it would cooperate with the inquiry. "We are confident that we comply with the law and we look forward to working with the Federal Cartel Office to answer their questions," the company said in a statement.

The case in Brazil echoes in some ways the current, high-profile battle between the FBI and Apple (AAPL) over the contents of an iPhone used by one of the deceased San Bernardino terrorists. Brazilian authorities investigating a drug trafficking ring demanded that WhatsApp provide decrypted messages, but the Facebook unit said it did not have the ability to decode its users' communications. Criminal Court Judge Marcel Maia Montalv√£o initially imposed fines, then ordered the arrest of Facebook vice president Diego Dzodan for "repeated noncompliance."

Facebook said it was disappointed with the arrest. "Arresting people with no connection to a pending law enforcement investigation is a capricious step and we are concerned about the effects for people of Brazil and innovation in the country," the company said in a statement. "We remain willing to address questions Brazilian authorities may have."

The free messaging service, which recently surpassed 1 billion regular users itself, encrypts all messages inside its apps, so that the communications traveling over the company's network can't be intercepted and read while in transit. But the security design also means WhatsApp itself can't decrypt the messages even if requested by law enforcement authorities.

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