Good morning. David Meyer here in Berlin, filling in for Alan one more time before I head off on vacation.
The ongoing spat between Facebook and academic researchers, which I mentioned in Wednesday’s newsletter, has resulted in severe embarrassment for the company at a time when it can ill afford it.
To recap: For nearly a year, New York University researchers have been running a project called Ad Observatory that encourages users to install a browser plugin to collect data on the political ads they see on Facebook—a perennially touchy subject for the company. The aim to see whether Facebook is living up to its promises about labeling political ads, and to provide data to the public.
Facebook has since late last year been on the Ad Observatory team’s case, saying their plugin violates its terms of service and threatens user privacy. This week, the firm suspended the Facebook accounts of three of the team’s members, as well as pages associated with the project. It also cut off the team’s access to Facebook’s political-ad repository, which it provides to researchers via a publicly-accessible accountability tool (though the researchers say their browser plugin is still sending them data.)
Crucially, Facebook claimed it “took these actions to stop unauthorized scraping and protect people’s privacy in line with our privacy program under the FTC Order”—a reference to the consent decree issued by the Federal Trade Commission in 2012, telling Facebook to better protect user privacy.
Hold up, the FTC said in a public letter to Facebook yesterday. “As the company has since acknowledged, this is inaccurate,” wrote acting Bureau of Consumer Protection (BCP) chief Samuel Levine. “The FTC is committed to protecting the privacy of people, and efforts to shield targeted advertising practices from scrutiny run counter to that mission.”
Levine took issue with Facebook’s decision to publicly invoke the consent decree without first asking the agency. “Had you honored your commitment to contact us in advance, we would have pointed out that the consent decree does not bar Facebook from creating exceptions for good-faith research in the public interest,” he wrote. “Indeed, the FTC supports efforts to shed light on opaque business practices, especially around surveillance-based advertising.”
Talking nonsense about what the FTC demands would be a slack practice at the best of times, but this comes at a moment when the idea of antitrust reform enjoys bipartisan support and, under the Biden administration and new Chair Lina Khan, the FTC is baring its teeth at Big Tech. Rattling the agency’s cage now seems to be asking for trouble.
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Separately, researchers say the Business Roundtable’s members have failed to live up to their celebrated 2019 declaration that the age of “shareholder primacy” is over. It was something of an ur-text for the stakeholder-capitalism movement, but the researchers from the Harvard Law School’s Program on Corporate Governance say it was “mostly for show.”
As Geoff Colvin explains, the researchers found the companies did not revise the corporate documents (bylaws, proxy statements and so on) that would need changing in order to “make clear that serving shareholders is no longer their paramount duty and that other stakeholders—customers, employees, suppliers, and communities—must be served as well.”
The Business Roundtable disagrees strongly, claiming that the views expressed in the 2019 statement are “consistent with existing corporate law and does not require any change to companies’ bylaws and governance guidelines.” The researchers say leaving these documents unchanged means directors can only “consider stakeholder interests whenever doing so would serve long-term shareholder value,” which is “not operationally different from shareholder primacy.”
It’s an argument that will no doubt continue for a long while, but this does look like a blow to the legitimacy of the stakeholder-capitalism movement. As always, let us know your thoughts. More news below—and do check out the new auction of non-fungible tokens (NFTs) representing Fortune‘s latest magazine cover.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
AMOC amok
Sorry to continue yesterday's doom parade, but scientists are now warning that the Atlantic Meridional Overturning Circulation (AMOC, a crucial part of the Gulf Stream that circulates water between the North Atlantic and the tropics) may be on the brink of switching to a "weak mode," perhaps irreversibly. Climate change is to blame, of course. If the switch does happen, weather systems would be transformed around the world. Al Jazeera
iPhone scanning
Apple intends to start scanning iPhones in the U.S. for images of child abuse. It would do so using machine-learning technology that is able to detect known images without breaking the end-to-end encryption on messages. Child safety campaigners are happy, but security experts are not, warning that the move would open the floodgates for government surveillance of people's personal devices. Fortune
Office returns
Amazon has become the latest Big Tech firm to delay the return to its corporate office, and it's being even more cautious than Apple, Google, Netflix and Facebook, with a tentative date of Jan. 3. It hasn't mandated vaccinations (on which note, read S. Mitra Kalita on why office vaccine mandates are a good idea, and check out this news on California forcing health care and long-term care workers to get the jab.) Fortune
Duolingo in China
The popular language-learning app Duolingo has been removed from some Chinese app stores. It's not clear whether this is related to China's recent reforms in the private education sector, which forces providers to become non-profits and bands the teaching of foreign curriculums—if it is, it would be the first known example of that particular crackdown hitting a non-Chinese company. Bloomberg
AROUND THE WATER COOLER
Moderna's rise
Moderna's share price has risen nearly 2,140% since the biotech went public less than three years ago. At the time, its $7.5 billion valuation was a record-breaker. Now it's worth $167 billion, which is getting into Merck territory. Fortune
Robinhood's drop
Robinhood's 50% gain on Wednesday has been halved, with a 27.6% drop yesterday that resulted from a regulatory filing that showed early investors can sell a large amount of stock. Fortune
French measures
France's highest constitutional court has struck down the government's mandatory 10-day quarantine for people who test positive for the coronavirus, on the basis that it amounts to "deprivation of freedoms." However, it cleared the government's policy of requiring health passes to access bars, restaurants and trains. Politico
Airline optimism
Lufthansa CEO Carsten Spohr doesn't see the Delta variant of the coronavirus as a big threat to his sector: "Evolving variants are part of a pandemic, so I think the world is getting used to that now, and experts have expected nothing else… Overall, I think it’s visible that with double vaccination you are able to travel around the world, even in the U.S. soon, hopefully." Fortune
This edition of CEO Daily was edited by David Meyer.
