Facebook May Dodge EU Bullet as New Data Rules Come Too Late

(Bloomberg) -- Markets had already delivered their verdict before the European Union’s data privacy watchdogs could express outrage toward Facebook Inc.

And while the social media giant lost as much as $60 billion in value earlier this week, Facebook is set to dodge tough new EU sanctions even if any violations in the Cambridge Analytica scandal are proven, EU Justice Commissioner Vera Jourova said in an interview with Bloomberg TV from Washington.

The new EU rules in place from May 25 will enable national regulators to “impose much higher sanctions, which cannot be applied in this current case, because there’s no retro-activity possible,” Jourova said.

Fining powers currently vary from state to state, with possible sanctions in the U.K., where the regulator is investigating, capped at 500,000 pounds ($706,000). The new rules can lead to fines as much as 4 percent of global annual sales.

In the meantime, EU authorities will investigate “to better understand what exactly happened and who should be blamed for what” in the wake of allegations, she said on Bloomberg Markets with Vonnie Quinn and Mark Barton.

Vast Swathes

Regulators are examining whether vast swathes of data was illegally held by Cambridge Analytica after it was obtained from a researcher who shared the data without the social network’s permission. According to published news reports, Cambridge University researcher Aleksandr Kogan created a personality-analysis app that was used by 270,000 Facebook users, who in turn gave the app permission to access data on themselves and their friends, ultimately exposing a network of 50 million.

Jourova said she’s trying to meet with Facebook to ask “serious questions, especially on how this could have happened, whether they had neglected the privacy rules, whether they were careful enough.” She also met with the U.S. Federal Trade Commission, which is said to be investigating whether Facebook violated terms of a 2011 consent decree with its handling of the data that was transferred to Cambridge Analytica.

In a tweet after the Wednesday meeting, Jourova said she had met with FTC Commissioner Terrell McSweeny and “was reassured that they take all the allegations on the #Facebook scandal seriously.”

‘Far-Reaching’

EU privacy watchdogs on Wednesday vowed to collaborate in getting to the bottom of the “very serious allegation with far-reaching consequences.” The U.K. regulator, which is leading the probe into British-based Cambridge Analytica is seeking a warrant to search the firm, a process her office said they’re hoping to complete Wednesday.

“I’m not happy at all about this case, because in my view this is not only about data protection breaches, this is about a threat to democracy,” Jourova told Bloomberg TV. “This will serve as a precedent for the future.”

Leaders from the 28-nation bloc will also discuss the matter at a regularly scheduled summit at the end of this week. Jourova said this is happening on the request of French President Emmanuel Macron.

Despite strong words by EU authorities in the last few days, they are currently virtually toothless in the face of technology giants with revenues measured in the billions of dollars. It’s a David versus Goliath scenario, where they often have to rely on local courts to take action in dragged-out procedures that lose most of their effect by the time there’s a decision.

New Rules

This will only change at the end of May, when the new EU privacy rules kick in across all member nations. Serious violations can from then on be punished with massive fines, and even U.S. companies that use or process EU user-data will be covered.

Cambridge Analytica has said that it’s been in touch with U.K. Information Commissioner Elizabeth Denham’s office since last year and remains “committed to helping the ICO and all other concerned organizations in their investigations.”

Facebook said in a blog post on the issue over the weekend that it was “moving aggressively to determine the accuracy of these claims. We remain committed to vigorously enforcing our policies to protect people’s information.”

Facebook Chief Executive Officer Mark Zuckerberg broke his silence on Wednesday as Washington demands answers. In Europe too, he’s been invited to the European and U.K. Parliaments.

Speaking from the U.S., Jourova said the allegations could change how the nation approaches privacy matters.

"People I think in America should be more attentive about what’s happening to their privacy,” she said. “When you look at the list of things which were monitored in case of every individual, the people are totally naked. It’s amazing.”

Jourova said she has worked with Facebook before and has “always had a feeling that they take seriously their social responsibility,” but added that "now of course they will have to renew my trust."

--With assistance from Karin Matussek Ian Wishart David McLaughlin Nate Lanxon Vonnie Quinn and Mark Burton

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net.

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Peter Chapman, Molly Schuetz

©2018 Bloomberg L.P.