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Facebook headed for Big Tobacco-style backlash

Reuters

By Jennifer Saba

(The author is a Breakingviews columnist.)

NEW YORK, Dec 20 ( Breakingviews) - Salesforce Chief Executive Marc Benioff was on to something earlier this year when he said social-media companies such as Facebook should be regulated like the cigarette industry. The District of Columbia's top litigator took the first step on Wednesday in what is shaping up to be a legal onslaught of Big Tobacco-like proportions.

Less than 1,000 people in D.C. were impacted by an application used by the British political-consulting firm to try to influence voters during the U.S. presidential-election campaign in 2016. But the app's web extended far beyond them; it also collected data on their friends, potentially exposing more than 340,000 residents. Facebook could face a penalty of up to $5,000 per violation or roughly $1.7 billion in total. About $30 billion of market value was incinerated from Facebook on Wednesday.

More than 35 other state attorneys general wrote to Facebook in March demanding more information on the fallout from Cambridge Analytica and at least six states are conducting investigations. Washington, D.C. is the first government agency to take the social network to court over the data fracas. The case could spur other states to file their own lawsuits.

A similar scenario played out in the 1990s fight against cigarette makers. More than 40 states sued the tobacco industry, forcing a collective settlement since mounting individual defenses would have been a Sisyphean undertaking. The industry had to pay billions of dollars in fines. It also had to deal with tighter regulation, including on how it markets products.

The corollary for Facebook would be far stricter privacy rules. In addition to the prospect of a huge financial penalty, that'll make for a very unhappy New Year for Facebook boss Mark Zuckerberg.

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CONTEXT NEWS

- Washington, D.C. Attorney General Karl Racine said on Dec. 19 that the district is suing Facebook for misleading users about how the social network uses their data. The complaint alleges Facebook improperly allowed British political-consulting firm Cambridge Analytica to harvest users' information and then failed to disclose the breach for more than two years.

- Facebook said in a statement to : "We're reviewing the complaint and look forward to continuing our discussions with attorneys general in D.C. and elsewhere."

D.C. attorney general statement


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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