Facebook faces yet another monstrous privacy headache in Illinois

Just as the Cambridge Analytica scandal re-emerged to heighten Facebook frustrations, the social media giant is contemplating a class-action lawsuit regarding facial-recognition.

It has been a tough couple of weeks for Facebook. With the ink still wet on a $5 billion FTC fine, the UK Government questioning discrepancies in evidence presented to Parliamentary Committees and a Netflix documentary reopening the wounds of the Cambridge Analytica scandal, the last thing needed was another headache. This is exactly what has been handed across to Mountain View from Illinois.

In a 3-0 ruling, the Court of Appeals for the Ninth District has ruled against Facebook, allowing for a class-action lawsuit following the implementation of facial-recognition technologies without consultation or the creation of public policy.

“Plaintiffs’ complaint alleges that Facebook subjected them to facial-recognition technology without complying with an Illinois statute intended to safeguard their privacy,” the court opinion states.

“Because a violation of the Illinois statute injures an individual’s concrete right to privacy, we reject Facebook’s claim that the plaintiffs have failed to allege a concrete injury-in-fact for purposes of Article III standing. Additionally, we conclude that the district court did not abuse its discretion in certifying the class.”

After introducing facial recognition technologies to the platform to offer tag suggestions on uploaded photos and video content in 2010, Facebook was the subject to a lawsuit under the Illinois Biometric Information Privacy Act. This law compels companies to create public policy before implementing facial-recognition technologies and analysing biometric data, a means to protect the privacy rights of consumers.

Facebook appealed against the lawsuit, suggesting the plaintiffs had not demonstrated material damage, therefore the lower courts in California were exceeding granted responsibilities. However, the appeals court has dismissed this opinion. The lawsuit will proceed as planned.

The law in question was enacted in 2008, with the intention of protecting consumer privacy. As biometric data can be seen as unique as a social security number, legislators feared the risk of identity theft, as well as the numerous unknowns as to how this technology could be implemented in the future. This was a protectionary piece of legislation and does look years ahead of its time when you consider the inability of legislators to create relevant rules today.

As part of this legislation, private companies are compelled to establish a “retention

schedule and guidelines for permanently destroying biometric identifiers and biometric information”. The statute also forces companies to obtain permission before applying biometric technologies used to identify individuals or analyse and retain data.

Facebook is not arguing it was compliant with the requirements but suggested as there have been no material damages to individuals or their right to privacy, the lawsuit should have been dismissed by the lower courts in California. The senior judges clearly disagree.

But what could this lawsuit actually mean?

Firstly, you have the reputational damage. Facebook’s credibility is dented at best and shattered at worst, depending on who you talk to of course. The emergence of the Netflix documentary ‘The Great Hack’, detailing the Cambridge Analytica scandal, is dragging the brand through the mud once again, while questions are also being asked whether the management team directly misread the UK Government.

Secondly, you have to look at the financial impact. Facebook is a profit-machine, but few will be happy with another fine. It was only three weeks ago the FTC issued a $5 billion fine for various privacy inadequacies over the last decade, while this is a lawsuit which could become very expensive, very quickly.

Not only will Facebook have to hire another battalion of lawyers to combat the threat posed by the likes of the American Civil Liberties Union, the Electronic Frontier Foundation, the Center for Democracy &Technology and the Illinois PIRG Education Fund, the pay-out could be significant.

Depending on the severity of the violation, users could be entitled to a single sum between $1000-$5000. Should Facebook lose this legal foray, the financial damage could be in the 100s of millions or even billions.

From a reputational and financial perspective, this lawsuit could be very damaging to Facebook.

Russian telcos push for OTT tax on new data storage laws

Russian telcos are lobbying the government to grant new powers which would allow them to tax non-domestic internet companies to ease the burden of new data storage laws.

According to Reuters, the telcos are proposing new legislation to ease the financial burden of the new laws designed to give the state more oversight on communications within the country. As part of the new rules, telcos would be forced to store customer data in the country (calls, texts, internet search history etc.) for six months. The data storage rules come into force in October.

Ahead of the October launch date, the telcos have warned the imposition would result in larger costs. To protect the pockets of shareholders and executives alike, the telcos have suggested these incurred costs for data storage would be passed onto the consumer with tariffs potentially rising as much as 10%. Should the government look favourably on the proposed bill, telcos could seek compensation for the costs from non-domestic internet companies such as Facebook and Google.

Of course it seems perfectly reasonable for telcos to want to spread the burden of the digital economy throughout the ecosystem, it has largely bore the brunt of the financial expense while others profits at the top of the value chain for years, but this is a different matter. Facilitating government ambitions to more surgically monitor citizens and potentially eradicate the concept of privacy might not sit easily with the internet giants.

That said, bowing to government ambitions despite a conflict with apparent principles of the organization is a story which has been hitting the headlines recently. In an effort to penetrate the Great Firewall of China, Google has been creating a censorship-friendly version of its news app which could filter out stories which do not please the government. Google is not alone here as LinkedIn accepted these censorship rules years ago.

Other technology companies might not be as flexible as Google or LinkedIn. Those who maintain principles and refuse to fund the governments ambitions to rid Russia of independent thought will potentially face regulator Roskomnadzor reducing the speed of access to their websites for Russian users.

This is nothing but a proposal for the moment, though should it progress, the internet companies will face another principles versus profits dilemma.