NYT: Criminal probe into Facebook entangles smartphone makers

Dive Brief:

• Facebook is under criminal investigation by federal prosecutors for its data-sharing practices, The New York Times reported. The records of two prominent smartphone and device makers have been subpoenaed by a grand jury in New York as part of the probe, two anonymous sources familiar with the matter told the Times.
• The Times in June first reported on the special data-sharing deals Facebook brokered with more than 150 companies, including high-profile players like Amazon, Apple and Microsoft, that gave them “deep access” to users’ personal information.
• When the investigation in New York began is unclear, as is what it is specifically focused on, the Times said. It is being overseen by federal prosecutors from the United States attorney’s office for the Eastern District of New York. In a statement to the Times, a Facebook spokesperson affirmed that the company is cooperating with investigators.  

Dive Insight:

Two major hardware makers having their records subpoenaed as part of a criminal investigation into Facebook further heats up scrutiny into the embattled social networking giant, though the specifics of the inquiry are unknown. Much of the public outcry toward Facebook has stemmed from the Cambridge Analytica scandal that first broke in March last year, but the special data–sharing deals the company brokered with a wide range of partners behind-the-scenes are dogging it almost as much.

Facebook has wound down most of the deals in recent years, but the amount of information shared through them when they were active was extensive. Some privacy experts believe the deals potentially violated a 2011 consent decree Facebook struck with the FTC. The Washington Post in January reported that the regulatory agency is discussing a potentially record-setting, multibillion-dollar fine for Facebook if it is found the company did overstep the bounds of the agreement.   

Separately, a Cambridge Analytica investigation is ongoing, being led by prosecutors from the Northern District of California. Sources told the Times that a focus of the inquiry surrounds Facebook’s claim that it was misled by the data consulting firm with ties to the Trump campaign. Taken together, these probes signal that some sort of significant legal action might be taken against Facebook in the near future, specifically around how it handles data, which could impact marketers who rely heavily on the platform for targeting their ads and running large campaigns.

Facebook has responded to the slew of data privacy headaches by recently announcing plans to pivot the focus of its business to private, encrypted messaging, marking a significant change-up for a platform that’s previously centered itself around more open features like the newsfeed and video content. CEO Mark Zuckerberg said that the new model will mirror that of the messenger service WhatsApp, which Facebook owns, and incorporate more private features, like calls, video chat, group chat and the disappearing video and photo messages known as stories.