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It’s a lousy time for Facebook to be rattling the FTC’s cage

August 6, 2021, 10:20 AM UTC

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.

* * *

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

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This edition of CEO Daily was edited by David Meyer.

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