Facebook agrees to $9.5 million settlement over misleading privacy claims

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Gatineau (May 26, 2020) – Facebook agreed to pay a $9.5 million penalty over a federal probe into misleading privacy claims. A Competition Bureau investigation found that the social media giant made false or misleading claims about the privacy of Canadians’ personal information on Facebook. The watchdog said that the company did not limit some third-party developers in a manner consistent with the privacy claims. The payment is part of a settlement that was registered with the Competition Tribunal on May 19.

Facebook settled Competition Bureau concerns about misleading privacy claims on May 19, according to a press release. The social media platform agreed to pay a total of $9.5 million as part of the settlement.

False or misleading privacy claims

The Competition Bureau investigated Facebook’s practices between August 2012 and June 2018 in a federal probe. The watchdog found that the company made false or misleading claims about how much control Canadians had over the privacy of their personal information on Facebook and on Messenger.

‘Facebook gave the impression that users could control who could see and access their personal information on the Facebook platform when using privacy features’ and other settings, determined the Bureau. ‘However, Facebook did not limit the sharing of users’ personal information with some third-party developers in a way that was consistent with the company’s privacy claims.’

According to the Competition Bureau, the personal information included content users posted on Facebook, messages users exchanged on the Messenger, and other information about identifiable users. Additionally, Facebook, which has about 24 million monthly active Canadian users, also allowed certain third-party developers to access the personal information of users’ friends after users installed certain third-party applications.

Although Facebook purported that it would no longer allow such access to the personal information of users’ friends after April 30, 2015, the practice continued until 2018 with some third-party developers, found the bureau.

The $9.5 million settlement

Facebook will pay a $9 million penalty as part of the settlement that was registered on May 19 with the Competition Tribunal. The social media giant will also reimburse the costs of the Bureau’s investigation with an additional $500,000.

Besides the financial penalty in the consent agreement, Facebook has also agreed ‘[n]ot to make false or misleading representations about the disclosure of personal information. This includes representations about the extent to which users can control access to their personal information on Facebook and Messenger.’

‘Although we do not agree with the Commissioner’s conclusions, we are resolving this matter by entering into a consent agreement and not contesting the conclusions for the purposes of this agreement,’ Facebook commented on the settlement in a statement.

‘Canadians expect and deserve truth from businesses’

The Competition Bureau explained that the Competition Act forbids companies from making false or misleading claims about a product or service in order to promote their business interests. ‘The Act applies to ‘free’ digital products the same way it applies to regular products or services purchased by consumers.’

Facebook earns revenue primarily by selling advertising services, including targeted advertisements, based in part on the information provided by its users. During the fourth quarter of 2018, Facebook’s average revenue per month per user in Canada and the United States was US$34.86.

The Competition Bureau explained that advances in technology are allowing firms to collect large amounts of data from consumers and pointed out that ‘[w]hether or not their products or services are free, firms must ensure that their claims about the collection and use of data are not false or misleading.’

Read more: Why the privacy commissioner’s investigation into Uber is a positive step forward

‘Canadians expect and deserve truth from businesses in the digital economy, and claims about privacy are no exception,‘ said Matthew Boswell, Commissioner of Competition. ‘The Competition Bureau will not hesitate to crack down on any business that makes false or misleading claims to Canadians about how they use personal data, whether they are multinational corporations like Facebook or smaller companies.’