By Yiming Zhao 3/27/2018
Facebook stock took a big hit on Monday after the Federal Trade Commission confirmed reports that it was investigating the company’s privacy policies and practices.
The FTC said in a statement that “[T]he FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices.”
At opening bell Facebook stock plummeted on the news, falling more than 5 percent. By 1:00 p.m. the stock had recovered some but was still down nearly 2 percent, according to CBSNews.
The FTC is planning to determine whether Facebook violated a consent decree it signed in 2011 to protect users’ privacy. The decree required Facebook to notify and receive explicit permission from users before sharing their personal information beyond the limits dictated by their privacy settings. Each violation of the agreement carries a penalty of up to $40,000 a day, according to the New York Times.
Several private organizations have filed lawsuits against Facebook as well. Common Cause filed a complaint alleging that Cambridge Analytica, as a firm headquartered in Britain, broke laws for its involvement in the U.S. elections. The company, which ran data operations for Donald Trump’s 2016 presidential election campaign, was reportedly using personal information from more than 50 million Facebook profiles without permission to build a system that could push personalized political advertisement to U.S. voters. The company was suspended by Facebook earlier this month.