Bloomberg News

FTC Should Investigate Facebook-WhatsApp Deal, Groups Say (1)

March 06, 2014

Facebook Inc. (FB:US)’s purchase of WhatsApp Inc. may be an unfair trade practice because users of the messaging service had an expectation that their data wouldn’t be collected for advertising purposes, two privacy groups said in a complaint filed with the Federal Trade Commission.

The Electronic Privacy Information Center and Center for Digital Democracy are asking the agency to investigate how the $19 billion deal will impact the privacy of WhatsApp users, who exchange private messages via the service.

While Facebook, the world’s biggest social-networking service, hasn’t explained how WhatsApp will tie into its revenue plans, the company’s business model relies on targeting members with advertisements based on their activity. Facebook has gathered data from Instagram, a photo-sharing service it acquired in 2012, according to the complaint.

“Facebook routinely makes use of user information for advertising purposes and has made clear that it intends to incorporate the data of WhatsApp users into the user profiling business model,” the complaint says. “The proposed acquisition will therefore violate WhatsApp users’ understanding of their exposure to online advertising and constitutes an unfair and deceptive trade practice, subject to investigation by the Federal Trade Commission.”

Facebook Chief Executive Officer Mark Zuckerberg said last month that nothing will change for WhatsApp users after the acquisition.

Privacy Issues

“Facebook’s goal is to bring more connectivity and utility to the world by delivering core Internet services efficiently and affordably -- this partnership will help make that happen,” Jodi Seth, a spokeswoman for Menlo Park, California-based Facebook, said in a statement. “As we have said repeatedly, WhatsApp will operate as a separate company and will honor its commitments to privacy and security.”

Facebook has faced privacy complaints in the past. A 2011 lawsuit accused the company of appropriating the names, photographs and identities of users to advertise products without their consent. The feature, called “Sponsored Stories,” was a “misleading advertising scheme” that used material posted by Facebook users on their profile pages, according to the lawsuit.

The company, which settled the class action last year, agreed to provide better explanations of advertising policies and craft new requirements for the use of minors’ data.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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