Facebook Inc. 's (FB) stock was under pressure in early morning trading Wednesday after the British Information Commissioner’s Office, the U.K. government agency tasked with protecting the data of consumers, revealed it intends to slap a £500,000 ($662,900) fine on the company for its part in the data scandal involving now-defunct political consulting firm Cambridge Analytica.
In a statement, the watchdog said the social media network operator “contravened the law by failing to safeguard people’s information. It also found that the company failed to be transparent about how people’s data was harvested by others.”
Facebook Faces Several Inquiries Into Scandal
Since March the Information Commissioner’s Office has been investigating the data scandal in which Cambridge Analytica was able to gather data on 87 million users without their consent. The data was used to build profiles of American voters as Cambridge Analytica worked on President Donald Trump’s successful run for the White House. The data breach prompted widespread outcry and led to a slew of investigations both in the U.S. and U.K. In the U.S., the Securities and Exchange Commission, Department of Justice, Federal Trade Commission (FTC) and FBI are looking into the scandal. Mark Zuckerberg, Facebook’s chief executive, appeared before Congress earlier in the year to testify about the data scandal. (See more: Zuckerberg's Net Worth Surpasses Buffett's.)
“We are at a crossroads. Trust and confidence in the integrity of our democratic processes risk being disrupted because the average voter has little idea of what is going on behind the scenes,” said Information Commissioner Elizabeth Denham in the statement. “New technologies that use data analytics to micro-target people give campaign groups the ability to connect with individual voters. But this cannot be at the expense of transparency, fairness and compliance with the law.”
The Information Commissioner's Office said that it is awaiting a response from the social network operator, after which a final decision will be made.
Shares of Facebook were inching lower on Wednesday morning.
A Sign of More to Come?
The fine may be tiny compared to Facebook’s revenue which stood at $11.97 billion in the first quarter alone, but it was the maximum penalty the government agency was able to punish the company with. It could also be the first of what could be more fines against Facebook over the data scandal.
The European Union recently put its new GDPR data protection regulation on the books which could fine companies as much as 4% of their global annual turnover or $23.5 million, whichever is bigger, for breaching the law, CNBC reported. There are also worries that the FTC could slap a record fine on the social media network operator. The agency is investigating whether the company violated a consent decree that the tech firm signed with the agency in 2011. The consent decree required that Facebook notify its users and receive explicit permission before sharing personal data beyond their specified privacy settings.