FTC proposes block on Facebook’s youth data monetization, pause on new products

The Federal Trade Commission (FTC) is threatening to block Facebook-parent Meta (META) from monetizing user data that it collects on minors and pause its launch of new products and services.

In a proposal issued Wednesday, the commission said Facebook has repeatedly violated prior agreements meant to protect user privacy, as well as the Children’s Online Privacy Protection Act Rule (COPPA).

“The company’s recklessness has put young users at risk, and Facebook needs to answer for its failures,” Samuel Levine, director of the FTC's Bureau of Consumer Protection, said in a press release.

In an administrative court filing, the FTC said its latest concerns follow two prior agreements that the company breached concerning its use of private user information.

In 2012, the FTC reached an agreement with Facebook that ordered the company to pay a $3 million fine, cease misrepresenting its social media platform’s privacy practices, and to obtain consumer consent before sharing certain user information.

That order, which went into effect in 2020, the FTC said, was in place only months before Facebook violated its terms by sharing private user information with political data analyzing firm Cambridge Analytica. Later in 2019, the agency and Facebook entered into a second agreement tied to the breach, which imposed a $5 million fine on the company, along with multiple channels of compliance oversight.

“This is the third time the FTC has taken action against Facebook for allegedly failing to protect users’ privacy,” the press release states.

The FTC on Wednesday, May 3, 2023 proposed sweeping changes to a 2020 privacy order with Facebook — now called Meta — that would prohibit it from profiting from data it collects on users under 18. (AP Photo/Jenny Kane, file) (ASSOCIATED PRESS)

Messenger Kids

According to the FTC, Facebook’s most recent infractions include misleading parents about their ability to control who their children contact in Facebook’s Messenger Kids app, and misrepresenting how much access it gives third party app developers to private user data.

“Despite the company’s promises that children using Messenger Kids would only be able to communicate with contacts approved by their parents, children in certain circumstances were able to communicate with unapproved contacts in group text chats and group video calls,” the FTC said.

According to the commission, an independent assessor concluded that Facebook had broken its promise to cut off third party app developers from accessing private user information for users who had not used an app in the past 90 days.

Under the new rules proposed on Wednesday, the FTC said Facebook and its VR platform Oculus would be “prohibited from profiting” from data collected on users under age 18. Additional rules would limit the companies' use of facial recognition technology, and require more user protections around the technology. Facebook would further be required to obtain approval from an independent assessor before releasing new or modified products, services, and features.

The FTC has asked Facebook to respond to its allegations. If an answer is received, the Commission will consider the issues raised and then determine whether to go ahead with or modify its proposal.

'We will vigorously fight this action'

In an email to Yahoo Finance, a spokesperson for Meta called the FTC's new proposal a political stunt.

"Despite three years of continual engagement with the FTC around our agreement, they provided no opportunity to discuss this new, totally unprecedented theory," the spokesperson said. "Let’s be clear about what the FTC is trying to do: usurp the authority of Congress to set industry-wide standards and instead single out one American company while allowing Chinese companies, like TikTok, to operate without constraint on American soil. FTC Chair Lina Khan’s insistence on using any measure – however baseless – to antagonize American business has reached a new low."

The spokesperson added that the company plans to challenge the proposal. "We have spent vast resources building and implementing an industry-leading privacy program under the terms of our FTC agreement. We will vigorously fight this action and expect to prevail.”

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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