FTC Launches New Investigation into How the Major Social Platforms Utilize User Data

By the looks of it, 2021 could see a range of significant regulatory changes, which could change the way digital platforms operate, and digital marketing as a result.

Hot on the heels of launching legal action against Facebook over alleged antitrust breaches, the FTC has now announced a new investigation into how the major social platforms collect and utilize user data, with a focus, specifically, on how data such practices affect children and teens.

As explained by the FTC:

“The FTC is issuing orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders are being sent to Amazon.com, Inc., ByteDance Ltd., which operates the short video service TikTok, Discord Inc., Facebook, Inc., Reddit, Inc., Snap Inc., Twitter, Inc., WhatsApp Inc., and YouTube LLC. The companies will have 45 days from the date they received the order to respond.”

So the investigation is not for a specific case, as such, but more to get a general understanding of how the platforms are gathering and using people’s personal information, from which the FTC will assess any potential next steps.

Those next steps could involve new restrictions on data collection and usage, especially for younger users, which could have implications for TikTok and Snapchat, in particular, given the younger skew of their respective user bases. Back in August, The New York Times reported that up to a third of TikTok’s US user base is aged under 14, while 48% of Snapchat’s users are under 25.

The announcement marks the latest indication of increasing regulatory concern as to how people’s personal data is being gathered and used online, with various regions already implementing new restrictions and rules to better protect consumers from potential exploitation.

The most significant shift on this front thus far has been the implemention of the GDPR in Europe, which aims to give EU citizens more control over how their personal data is used, and has forced many companies to update their processes. But throughout 2020, more nations have raised concerns about data sovereignty, due to the risks of having so much of their citizens’ personal information stored in data centers which are housed in foreign nations.

The US Government, for example, pushed for a ban on TikTok earlier this year over concerns that data on US citizens could be fed through to the Chinese Government via the app. That’s still a possibility, given China’s cybersecurity laws, but what exactly the CCP might do with such insight is unclear – though military forces in the US, UK and Australia have also banned the use of TikTok for this purpose.

In the latter case, the concern is a little more direct – TikTok data could inadvertently reveal the locations of military operations – but the basis of the US push against TikTok, that foreign operatives could access data on its citizens, is an underlying concern held by various security officials and agencies.

Back in September, a European Union privacy regulator sent Facebook a preliminary order to suspend data transfers to the US about its EU users.

With this new investigation, the FTC is more specifically looking at how such usage could impact younger users. But the basis of its findings could have wide-reaching implications, in a range of cases, which could, as noted, eventually see the implementation of new restrictions on data usage, and potentially add to the push to have each company store user data in the nation which it was collected.

The extended benefit of that is that it would also force each company to establish a local base, and therefore be subject to local taxes. All of the major platforms minimize their tax obligations where they can by using lower-cost nations to house their local data centers and operations – for example, in Australia, Google and Facebook only pay a fraction of a regular business’ tax obligations through clever accounting.

As explained by The Australian Financial Review:

“Google and Facebook report less than a fifth of their Australian-sourced income as local sales; and they pay no GST on most of that. While Google and Facebook had estimated Australian sales of $7.4 billion in the year to December, Google and Facebook reported local sales of only $1.4 billion as taxable, representing a $6 billion tax break.”

Because of the way current tax laws are written, both Google and Facebook are operating within their rights, and are minimizing impact accordingly. But what if the tech giants had to establish a distinct local data center, keeping user data within that nation, while also giving them a home base?

The Australian Government is currently engaged in a protracted, and ultimately pointless battle to force Google and Facebook to pay local news publishers for usage of their content. That proposal is already being watered down, and will likely, eventually, be abandoned. Instituting new regulations on data storage could be a more effective way to approach the same, albeit a more complex approach.

The FTC investigation could further fuel this, and other pushes, by providing more specific insight into how each company gathers and uses people’s information. If the investigation highlights concerning issues or trends, those will apply to all nations, which will lead to increased momentum for restrictions on data usage.

Which could lead to big changes in 2021. It’ll take some time, but this is definitely worth keeping an eye on moving forward. 

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