Shares of social media giant Facebook bounced back after falling for much of the day on Monday following news that the U.S. Federal Trade Commission (FTC) had opened an “non-public” investigation into the company’s privacy practices.
Facebook shares listed on the Nasdaq composite in New York tumbled more than five per cent to $151 US on Monday morning. Its shares were already down before the announcement, but the slide was accelerated after the confirmation of an investigation by the FTC.
The price bounced back in the afternoon to close higher by 0.4 per cent to $160 US a share, but shares have fallen almost 10 per cent this year. Facebook has been a market winner in the past year, rising nearly 50 per cent in 2017.
Tom Pahl, acting director of the FTC’s Bureau of Consumer Protection, said in a statement the commission was firmly committed to using all its tools to protect the privacy of consumers.
“Foremost among these tools is enforcement action against companies that fail to honour their privacy promises, including to comply with Privacy Shield, or that engage in unfair acts that cause substantial injury to consumers in violation of the FTC Act,” he said.
“The FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices,” he added.
The move comes as the world’s biggest social network continues to face scrutiny after it was revealed earlier this month that London-based political research firm Cambridge Analytica was able to collect data from 50 million user profiles.
The firm helped create Facebook ads with U.S. President Donald Trump’s campaign during the 2016 elections targeted to the profiles of voters.
“Today’s news that the FTC is further investigating Facebook’s data collection practices, along with various other lawsuits and states/attorneys general getting into the mix, added further [aggravation] to the Cambridge inferno that has created a dark cloud over Facebook’s stock,” said Daniel Ives, head of technology research at research firm GBH Insights in a note.
“This dark chapter has opened up a Pandora’s box of bad news that will clearly weigh on shares in the near-term,” he added.
Facebook CEO Mark Zuckerberg apologized last week for a “major breach of trust,” and admitted the company made mistakes.
Facebook had settled with the FTC in 2011 over privacy issues. The commission said then that Facebook promised to take “several steps” to ensure it received consumers’ “consent before their information is shared” beyond their privacy settings.
On Monday, another advertiser also cut ties with Facebook. U.S. tiremaker Pep Boys suspended all advertising on the social network, following a similar move by internet firm Mozilla last week.
Meanwhile, European regulators are pushing for Facebook and other tech firms to face stricter controls.
Germany’s justice minister Katarina Barley said on Monday that Facebook representatives recently assured her that the use of consumers’ data without their knowledge would not happen again and it pledged to inform users who were affected, according to the Associated Press.
The recent privacy scandal has resulted in a hit to Facebook’s public image.
The findings of an Angus Reid poll released yesterday showed that almost three-quarters of Canadians said Facebook’s recent data mining issues will make them change how they use the network.
One in 10 people said they would take a break from Facebook or delete their account.