As a result of an investigation by the Federal Trade Commission, Meta's Facebook (NASDAQ: META) was accused of misleading parents about their kids' protection, and the commission proposed tightening existing privacy agreements and preventing profit from minors' personal information.
A “blanket prohibition” has been proposed by the Federal Trade Commission to prevent Meta’s monetization of children’s data. A report by the Federal Trade Commission (FTC) concluded that Facebook's Meta company – previously known as Facebook – failed to comply with a privacy order that had been in place since 2020 by misrepresenting the control that Facebook Messenger gives to users' parents, as well as how their data could be accessed by outside developers.
The FTC makes several claims, including a failure to comply with the order, a misrepresentation regarding the ability of parents to control who their children communicate with through Messenger Kids, and a misrepresentation regarding the access it provides to certain app developers to private user data.
It has been 20 years since the FTC began enforcing privacy measures. The most recent order was issued to Meta (then known as Facebook) after the agency reached a $5 billion settlement regarding the Cambridge Analytica scandal in which Meta (then known as Facebook) was involved. As a result of this investigation, the FTC determined that Meta violated a 2012 order concerning user data privacy. According to the FTC, Meta violated COPPA, along with not complying with the 2020 order.
According to the findings of an independent assessor, Facebook's users were at risk as a result of the security gaps. According to the FTC, the company has been asked to address allegations that their Messenger Kids product misled parents into believing that their children could choose who would communicate with them through it.
Several gaps and weaknesses in Facebook's privacy program have been identified by an independent assessor, who based on the FTC report, has identified several gaps and weaknesses. It is also alleged that Facebook's Messenger Kids' parental controls do not ensure that underage users can communicate with only those contacts approved by their adult guardians or parents. In some circumstances, children could communicate in groups through text chats or video calls with unapproved contacts.
It was specifically said that the FTC found Facebook misled parents about how much control they had over who, and when, their children made contact with in the Messenger Kids application. Furthermore, it was very deceptive about how much access app developers had to users' private information. It breached a privacy agreement signed in 2019.
There are many changes proposed by the FTC, including prohibiting Facebook from making money from the data it collects on children under 18 years old, including with its virtual reality businesses. In addition, the use of facial recognition technology would be subject to expanded restrictions as well.
Despite the large drop in Meta shares on Wednesday, they recovered most of their losses and closed at $238.50, down 0.3% from their previous close.
More than 98% of the revenue generated by Meta, a company that also owns Instagram, comes from digital ads sponsored by its users by being targeted with their personal information.
Although Facebook owns some of the biggest social networks in the world, it is at a disadvantage in the battle to capture young people's attention after the video-sharing app TikTok soared in popularity among American teenagers a few years ago.
After the FTC confronted Facebook about its alleged failure to protect users' privacy, it issued a couple of orders in 2012 and 2020, resulting in the FTC taking action once more against the social network.
In 2012, it was the first time it had happened. On January 30, 2019, Facebook finally settled allegations that it violated a consent order it signed in 2012 by misrepresenting the amount of control users had over their data. This culminated in the company paying a record $5 billion fine for its violation. It was finalized in 2020 when the order was finalized.
As part of a separate lawsuit, the FTC was trying to stop Meta from acquiring Within Unlimited, which produces virtual reality content, but it lost the case. Moreover, the agency has petitioned a federal court for an order to mandate Facebook to sell Instagram, which it purchased for $1 billion in 2012, and WhatsApp, which it acquired for $19 billion in 2014. There is a legal case being fought at the moment.