News & Politics

Facebook Stands to Lose Tens of BILLIONS in Dozens of Lawsuits

100 cardboard cutouts of the Facebook founder and CEO stand outside the U.S. Capitol in Washington. (Kevin Wolf/AP images for AVAAZ)

Facebook stocks plunged precipitously on Thursday after the company’s earnings report showed they missed expectations on revenue and that the social media platform’s monthly users are down significantly. All of this comes in the wake of ongoing scandals, including charges of data misuse and anti-conservative bias.

“During a conference call Wednesday, Facebook Chief Financial Officer David Wehner predicted bad news for the second half, and the company’s shares immediately began a drastic retreat in the extended session,” Marketwatch reported on Thursday.

According to Reuters, “Facebook shares dived 18.6 percent, set for its biggest one-day percentage drop ever, after the social media giant said profit margins would plummet for years due to costs to improve privacy safeguards and slowing usage in its big advertising markets.”

But stock prices aren’t the only problems facing the beleaguered social media behemoth. The company is facing massive fines and possible government intervention as lawsuits pile up in the U.S. and around the world. In fact, Facebook is facing more than three dozen class-action lawsuits over Cambridge Analytica privacy breaches alone. The looming legal nightmare is so significant that the company felt the need to include a note about it in their quarterly SEC report:

Beginning on March 20, 2018, multiple putative class actions and derivative actions were filed in state and federal courts in the United States and elsewhere against us and certain of our directors and officers alleging violations of securities laws, breach of fiduciary duties, and other causes of action in connection with the misuse of certain data by a developer that shared such data with third parties […] the events surrounding this misuse of data became the subject of U.S. Federal Trade Commission and other government inquiries in the United States, Europe, and other jurisdictionsAny such inquiries could subject us to substantial fines and costs, divert resources and the attention of management from our business, or adversely affect our business. [Emphasis added]

Here are a few of the dozens of lawsuits Facebook is facing:

1. Facebook accused of using ad tools to discriminate against older job seekers

PJM’s Phil Baker wrote in May that “a potential class-action lawsuit claims that companies are using Facebook’s ad creation tools to create ads for job hunters that discriminate by age, which is against federal law. The lawsuit is not against Facebook, but against a number of companies using their tools to weed out older job hunters.”

The suit was filed by the Communications Workers of America, alleging that “when Facebook’s own algorithm disproportionately directs ads to younger workers at the exclusion of older workers, Facebook and the advertisers who are using Facebook as an agent to send their advertisements are engaging in disparate treatment.”

2. Federal judge gives go-ahead for $30 billion Facebook privacy class-action suit

The lawsuit was filed in federal court in Chicago in 2015 and subsequently moved to federal court in San Francisco. According to Baker, the lawsuit “accuses Facebook of violating Illinois’ Biometric Information Privacy Act. It claims Facebook did not obtain written consent from its users before creating maps of their faces from photos and then not informing them about how their facial information would be used and how long it would be stored.”

“The suit has petitioned the court, asking it to award damages of $5,000 for each reckless violation of the Illinois law and $1,000 for each negligent violation,” Baker said. “The filing has become a class-action suit and could amount to billions of dollars in fines.”

Although Facebook tried to delay the proceedings, a San Francisco federal judge refused their request to halt the $30 billion privacy class-action suit.

3. Facebook slapped with $3.9 billion in lawsuits on the first day of GDPR

“A long-time Austrian privacy advocate and critic of Facebook, Max Schrems, filed four complaints relating to a number of companies that offer a take it or leave it choice rather than an opt-out option,” Baker explained in May. “The complaints were filed against Facebook, Facebook-owned Instagram and WhatsApp, and Google Android. The Facebook complaints are for  $3.9 billion, while the Google Android complaint was for $3.7 billion.”

4. Class-action lawsuit over scraping texts and call logs

A group of plaintiffs based in California is asking for $5 million in damages after it was revealed that Facebook was logging users’ texts and call logs on their smartphone app. The lawsuit claims that “Facebook has collected and stored information in a scope and manner beyond that which users knowingly authorized,” a practice that violates California’s Unfair Competition law, the Consumer Remedies Act, and the Electronic Communication Privacy Act.

According to the lawsuit, “The terms of service and privacy notice materials do not inform (and in the past have not informed) the ordinary and reasonably attentive Facebook user that installing the application on a mobile device will result in the logging of all the user’s phone and text communications — including recipients, dates of communication, length of communication and mode of communication — on Facebook’s servers for Facebook’s own use.”

5. Personality quiz lawsuit

“Data Breach Plaintiffs” filed a notice to appear in Cambridge Analytica’s New York bankruptcy case. “The group is involved in two lawsuits against both Facebook and Cambridge Analytica that seek class-action status on claims that about 87 million Facebook users had their personal information taken without permission,” Bloomberg reported.

California resident Ben Redmon is the lead plaintiff in the case that is seeking more than $1000 per violation for Facebook’s Cambridge Analytica privacy breach. Redmon claims that he never consented to use the personality quiz involved in the breach.

Craig Skotnicki, another Facebook user, is making similar claims that could result in fines in excess of $40,000 per day per violation levied against Facebook.

6. China problems

Facebook is also facing possible sanctions in China. Industry Leaders Magazine reports that the company is under fire for violating user rights. “In the beginning of 2007, Facebook partnered with 60 phone manufacturers to make Facebook-branded app, and among those companies were four Chinese manufacturers, including Huawei, which the U.S. has warned could be a security risk, given its close ties with the Chinese government,” the magazine explained. Huawei’s phones are popular in Europe, and according to ILM, “the devices were able to pull Facebook data on friends and friends of friends, which could lead one device to capturing [sic] data on thousands of people. Given all this, it seems Facebook’s China deals might pose a bigger problem than Cambridge Analytica.”

At publishing time, Facebook’s valuation had dropped from $630 billion to $515 billion. By the end of the day, that loss could grow to $120 billion, which would be the biggest one-day loss of any company in U.S. stock market history. The looming threat of tens of billions in lawsuits is dwarfed by today’s massive valuation loss, nevertheless, as the suits unravel over the coming months and years, they’ll continue to chip away at Facebook’s profits and, more importantly, their reputation among rattled users.

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