Facebook shareholder Fan Yuan launched a class action lawsuit against the company, accusing it of making false statements regarding its business, operations, and privacy policy. The latest Strategic Communication Laboratories (SCL)/Cambridge Analytica scandal, which has lost the company almost $50 billion in market value so far, prompted Yuan to sue the company.
Facebook’s “False Statements”
Yuan primarily claimed that Facebook made "false statements" or failed to disclose that the company violated its own privacy policy when it gave SCL, Cambridge Analytica, and others access to the data of millions of users without their consent.
The shareholder added that Facebook also failed to disclose that discovery of its conduct would make the company subject to heightened regulatory scrutiny.
Losing Investors’ Money
Yuan's lawsuit centers on the argument that Facebook's false statements have led to major scandals and a significant drop in the company’s stock value. Yuan named multiple recent scandals that Facebook is responsible for creating due to its negligence with handling users’ data.
The first scandal Yuan’s lawsuit brought up was the one where France’s Commission on Informatics and Liberty (CNIL) fined Facebook the maximum allowed sum of 150,000 euro for failing to prevent advertisers from accessing users’ data without consent. This also gives credence to other reports that Cambridge Analytica was not the only one to abuse Facebook’s user data in this way.
Yuan’s lawsuit also said that even after CNIL’s fine, Facebook still continued to conceal the extent to which its users’ data was available to third-parties without consent. The lawsuit noted that Facebook is currently under investigation by Belgium, the Netherlands, Spain, and Germany over similar practices.
The lawsuit then mentioned the recent Cambridge Analytica scandal, published by most media companies, again due to Facebook's failure to secure users’ data against third-party companies that wanted to harvest and exploit it for their own gain and without user consent. More than that, the company could now suffer potentially devastating fines by the FTC upwards of $40,000 per violation per day.
Facebook’s misleading statements are also what recently prompted UK MPs to call Facebook’s CEO, Mark Zuckerberg, to testify in front of them.
Yuan said that because of all of these self-inflicted scandals due to Facebook’s “wrongful acts and omissions,” Facebook investors have suffered significant losses and damages.
A Lack Of trust
Although Facebook has already lost $50 billion in market capitalization, the worst may be yet to come. Two other major tech companies, Intel and AMD, recently went through some highly-publicized scandals, too. However, their market caps and their investors barely flinched. This may have happened because the investors largely trust the companies and know that they will fix the issues, so there was relatively little reason to panic.
Facebook, on the other hand, has instilled a lack of trust in its users, investors, media, and even governments, because of years of misleading statements and broken promises in regards to its privacy policies and how its user data was being used. All of that seems to be catching up with the company right now. The investors, especially, know that this is not just a one-time scandal for Facebook, but a more fundamental and long-term problem that the company has, which probably won't be fixed overnight.
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