Wednesday, November 16, 2011

Privacy is now No. 1 issue for Facebook

SAN FRANCISCO -- Facebook Inc.’s expected settlement with the Federal Trade Commission is sending a strong message to Internet companies that regulators are getting serious about protecting the privacy of consumers.

The social networking giant could announce a deal with the FTC as early as today over charges that it violated users’ privacy when it changed default settings to make more of their information public.

The settlement taps into growing public concern over online privacy and signals more aggressive enforcement from regulators.

And it appears the message is coming through loud and clear in the corner offices of Silicon Valley and beyond — especially as Internet companies prepare for potentially lucrative initial public offerings.

“Privacy now has the potential to affect the bottom line, which has gotten the attention of CEOs,” said Lisa Sotto, head of the global privacy and information practice at the law firm of Hunton & Williams.

For years online privacy was a sleepy issue hashed out by anonymous lawyers in back rooms. But the explosion of Web usage — and the speed and volume with which data can be transmitted around the globe — has moved the public debate over online privacy to the forefront.

Lawmakers and regulators have responded with pledges to address how Internet companies collect personal information and what they do with it.

The FTC has called for a “do not track” system to make it easier for Internet surfers to keep companies from snooping on their Web activities. The Obama administration has asked for an online privacy bill of rights, while Congress has introduced more than a dozen privacy bills so far this year.

In the cross hairs is Facebook, the wildly popular social network with more than 800 million users that is preparing for a possible IPO that could value the company at up to $100 billion.

Changes to its privacy policies over the years have led to a flood of complaints from consumers concerned over how Facebook handles their personal information. Facebook is also under scrutiny in the European Union for possible breaches of personal data.

“Facebook has to expand its data collection practices to satisfy its largest advertisers to boost the IPO share price. But it also has to appease privacy regulators in the U.S. and the European Union, whose actions could derail Facebook’s pending financial bonanza,” said Jeffrey Chester, executive director of the Center for Digital Democracy, one of the consumer groups that complained to the FTC. “It appears Facebook is poised to neutralize any threats to its future coming from U.S. regulators.”

The proposed settlement with the FTC would prohibit Facebook from making public information that a user originally shared privately without his or her explicit permission. It does not require Facebook to get consent from its users on new sharing features. As part of the settlement, Facebook would have to agree to 20 years of privacy audits.

The settlement stems from a complaint filed by the Electronic Privacy Information Center in December 2009, which asked the FTC to investigate whether consumers were harmed when Facebook changed its privacy settings to disclose more personal information without first getting their permission.