(Updates with group’s funding sources in 12th paragraph.)
Nov. 11 (Bloomberg) -- Facebook Inc. is in talks with the U.S. Federal Trade Commission to settle claims that it violated users’ privacy when it changed default privacy settings to disclose more information than was previously made public, according to a person familiar with the negotiations.
The proposed 20-year settlement would require Facebook to get express consent from users before sharing material posted under earlier, more restrictive terms, said the person, who declined to be identified because the settlement isn’t final. It would also compel an annual, independent review of Facebook’s privacy practices.
The FTC is stepping up its enforcement of privacy requirements at Internet companies and already has settled complaints with Google Inc. and Twitter Inc. this year.
Cecilia Prewett, a spokeswoman for the FTC, and Andrew Noyes, a Facebook spokesman based in Washington, declined to comment on the talks.
Facebook is under pressure to protect individuals’ information as it seeks revenue from the more than 800 million users who play games, post photos and communicate using the site. The Palo Alto, California-based company, which people familiar with the matter said may hold an initial public offering as early as next year, is also under scrutiny in the European Union for possible privacy-rule breaches over use of personal data.
‘Signal to Investors’
“In order to successfully issue its IPO, Facebook had to send a signal to investors that it’s putting the threat of regulatory intervention aside,” said Jeff Chester, executive director of the Center for Digital Democracy, a group that has urged the FTC to address privacy issues at Facebook and other online marketers.
The potential settlement stems from a Dec. 17, 2009, complaint filed by the Electronic Privacy Information Center, a Washington-based advocacy group.
The center asked the FTC to investigate whether consumers were harmed when Facebook changed its default privacy settings and called on the agency to require Facebook to give users “meaningful control over personal information.” Nine consumer advocacy groups, including the American Library Association, Consumer Federation of America and The Privacy Rights Clearinghouse, signed on to the complaint.
“The FTC’s action is long overdue,” Marc Rotenberg, the executive director of the center, said in a phone interview. “It’s becoming increasingly obvious that the commission has to announce its final decision in this matter. The changes in Facebook privacy settings have continued to be the most frustrating online experience for Internet users.”
Breaches alleged in the group’s complaint include changes in Facebook settings in November and December of 2009 that induced users, in response to recommendations from the company, to reveal their names, profile photos, lists of friends, pages they are fans of, gender, geographic regions and networks to which they belong.
The complaint called on the FTC to compel Facebook to allow users to choose whether to disclose personal information and to choose whether to fully opt-out of revealing information to third-party developers.
Justin Brookman, senior resident fellow of the Center for Democracy and Technology, who has met with Facebook officials on privacy matters, says the company is learning from its missteps. The center gets about 12 percent of its funding from e-commerce companies that include Facebook, Google, Yahoo! Inc., and Wal- Mart Stores Inc., according to its website.
“There was a lot of confusion around the changes they rolled out in 2009,” Brookman said. “They’ve made improvements since then around the user controls.”
In April, Facebook announced additional safety tools, including a redesigned “Family Safety Center” that has videos and articles for teenagers, parents and teachers.
--With assistance from Eric Engleman in Washington. Editors: Fred Strasser, Andrew Dunn
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