Tech giants like Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) have deserved a great deal of the criticism they’ve garnered of late for prying a little too deeply into users’ digital lives. Neither company, however, has experienced the kind of scrutiny that Facebook (NASDAQ:FB) has recently. FB stock is down 40% from July’s high, ultimately because years of its aggressive nosiness have finally come home to roost.
Facebook stock is positioned to continue sinking to new lows, though, in light of this weekend’s development. The U.K.’s Parliamentary Digital, Culture, Media and Sport Committee (DCMS) has seized confidential documents that may further describe the company’s privacy controls and personal data policies. The committee forcibly obtained the documents from a former Facebook partner.
The documents could put even more bearish pressure on the already-beleaguered FB stock.
More of the Same for FB
This development comes in the wake of a major expose about Facebook’s policies towards its partners in March of this year. That’s when political data analytics firm Cambridge Analytica was thrust into the spotlight by The New York Times, which detailed the shocking invasiveness of Cambridge’s efforts to obtain personal information about Facebook’s users.
Such concerns had been voiced before, but this scandal was effectively a “smoking gun.”
The development prompted regulatory inquiries, in the United States and elsewhere. In the U.S., FB CEO Mark Zuckerberg was grilled by a Senate committee charged with determining the nature of Facebook’s so-called “data scraping.” But, because senators were not entirely aware of how Facebook works, the questioning was benign and led to very little change.
In the EU, however, lawmakers adopted a new set of personal data rights known as GDPR (General Data Protection Regulation) in May. The rules themselves were a bit hastily developed. But the governing body has at least set some standards.
How Facebook’s Documents Were Obtained
Facebook’s gaffes and ill-guided decisions are being revealed faster than most regulators can keep up with them. As a result, governments are being forced to gather information in unusual ways.
The files seized by the British parliamentary committee, DCMS, are documents that have been incorporated into a lawsuit filed against FB by a company called Six4Three. The latter company operated a now-defunct Facebook app.
The documents had been sealed by a California judge, but U.S. courts have no jurisdiction in the United Kingdom. When Six4Three’s CEO, Ted Kramer, traveled to the U.K. last week, DCMS Chairman Damian Collins had relevant documents he possessed seized. The files may provide more information on Facebook’s privacy and advertising policies.
Curiously, Collins made a point of noting on Twitter (NYSE: TWTR), “Under UK law & parliamentary privilege we can publish papers if we choose to as part of our inquiry.”
The Bottom Line on FB Stock
The files seized by the DCMS will probably further embarrass Facebook and could negatively impact Facebook stock. And it should be noted that right now, FB stock doesn’t appear to have much strength left to fend off any more criticism.
Indeed, it appears that regulators and consumers are looking for ways to attack the social networking giant, and won’t rest until Facebook’s existing approach and mindset become more palatable.
That process, however, requires owners of FB stock to be patient, and their patience may have run out.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
