Facebook Under Criminal Probe Over Data-Sharing Deals


Facebook, Inc. (NASDAQ: FB)

U.S. federal investigators are conducting a criminal probe into the data-sharing deals that Facebook struck with some of the biggest tech companies in the world. The news was first reported by The New York Times on Wednesday.

People familiar with the investigation told the NYT that records from at least two well-known makers of smartphones and other devices have been subpoenaed by a grand jury in New York. The people said that Facebook had data partnerships with both companies that offered them access to the personal information of hundreds of millions of its users.

Facebook allowed these companies to see its users’ data such as contact information and friend lists, sometimes without their consent. Facebook stock fell 1.9% to $166.99 in the extended trading session Thursday following the news, after declining 1.85% during the regular trading session.

The social media giant responded to the news saying, “It has already been reported that there are ongoing federal investigations, including by the Department of Justice. As we’ve said before, we are cooperating with investigators and take those probes seriously. We’ve provided public testimony, answered questions, and pledged that we will continue to do so.”

The new inquiry by federal investigators with the United States attorney’s office for the Eastern District of New York, is related to deals that Facebook had with over 150 partners, including big tech firms. Facebook is also facing several other regulatory inquiries and lawsuits over its privacy practices, including ongoing scrutiny by U.S. Securities and Exchange Commission and the Federal Trade Commission. News of the new investigation comes a week after Facebook CEO Mark Zuckerberg outlined his ‘privacy-focussed vision for social networking.’

Facebook, Inc. Profile

Facebook Inc is the world’s largest online social network, with more than 2 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch.

The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktop. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada, and 25% from Europe. With gross margins above 80%, Facebook operates at a 40%-plus margin.