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.

Samsung loses its CEO despite record profits

The CEO of Samsung Electronics – Oh-Hyun Kwon – has thrown in the towel, citing an “unprecedented crisis” at the company as his reason.

The specifics of that crisis were not revealed in ‘an emotional letter’ (according to the Samsung press release) sent to all employees by Kwon, who seems to have more job titles than a medieval monarch. He is also Vice Chairman, CEO of the Device Solutions business (chips and LCDs) and CEO of Samsung Display, and has been at Samsung for 32 years.

“It is something I had been thinking long and hard about for quite some time.” emoted Kwon. “It has not been an easy decision, but I feel I can no longer put it off. As we are confronted with unprecedented crisis inside out, I believe that time has now come for the company start anew, with a new spirit and young leadership to better respond to challenges arising from the rapidly changing IT industry.

“There are no words to describe how proud I am that we built together one of the most valuable companies in the world. We have come a long way to create a company that truly changes how people live, work and communicate with each other.

“But now the company needs a new leader more than ever and it is time for me to move to the next chapter of my life. I would like to share my sense of pride and honor with you, and thank each one of you for your dedication and commitment to the company.”

The obvious elephant in the room is the corruption scandal in Korea that resulted in Samsung Vice Chairman Jae-Yong Lee being sentenced to five years in prison for bribing the government. The former South Korean President – Geun-Hye Park – had been impeached for accepting bribes in exchange for political influence.

Lee is a member of the family dynasty that founded Samsung and was effectively its leader at the time of the scandal due to his father’s ill health. It had previously been thought that he might take one for the team and contain the scandal by doing some time, but Kwon’s resignation implies that strategy has failed.

The big question this poses is: who else at the top of Samsung will also be contaminated by the scandal? Anyone with knowledge of the alleged dodgy payments is presumably vulnerable and it seems plausible to assume that Kwon’s resignation is a further attempt at containment.

Looking at Samsung’s latest numbers, however, you could be forgiven for thinking we could all do with a crisis like this. In its Q3 guidance, Samsung reckons it’s almost going to triple its operating profit year-on-year to 14.07 trillion won (~$12.5 billion), which takes it into Apple territory. While the fact that Samsung was grappling with the exploding Note7 debacle a year ago needs to be considered, these are still impressive numbers, especially if the Note8 keeps its cool.