Twitter was also fined $150 million in May for violating the terms of a 2011 settlement with the FTC over the company’s improper use of phone numbers to target ads. Former agency officials who spoke to POLITICO said the commission will be on high alert for anything that violates the agreement.
The commission is also continuing to investigate a whistleblower claim by its former security chief, Peiter ‘Mudge’ Zatko, that the company misled the agency about its privacy and data security practices.
If the FTC finds additional settlement violations, the company and its executives could be in for an even bigger fine. The terms of the agreement require periodic independent audits of Twitter’s privacy and security practices, with the first set for next summer.
Twitter’s use of data is expected to be key to its business — an imperative that could clash with the FTC’s heightened attention to consumer privacy and data use under President Joe Biden.
Musk paid $44 billion for the company, borrowing $13 billion along the way, and in his estimation “significantly overpaying.” If he wants to turn the historically unprofitable company into a moneymaker, business watchers believe it’s a good bet he’ll rely on the advertising business, which accounts for about in 90 minutest from platform revenue.
This business depends on finding new ways to collect and monetize information about Twitter users.
Musk has announced a push for more relevant ads on Twitter, which likely means the social network will need to either improve its profiling capabilities or ad personalization algorithms. Both rely heavily on data collection, and Twitter may be at a disadvantage because of its past behavior.
“They’re sending signals about doing more targeted advertising, which requires more data,” said Jason Kint, chief executive of Digital Content Next. “But at the same time, there are limitations that are put on how the data can be used.”
The FTC declined to comment. Twitter did not respond to requests for comment.
Musk’s hiring also comes as the information technology industry faces intense scrutiny from the FTC under the leadership of Lina Khan. While adtech groups argue that data collection and targeted advertising are necessary for a free and open Internet, the FTC is weighing whether to enforce broad privacy regulations governing commercial surveillance. This is in line with Biden’s mission to hit the tech sector with aggressive privacy and antitrust policies. It has also taken action against data brokers for practices that companies defend as standard procedures.
While Musk is the sole owner of Twitter and can make all sorts of business changes on his own, like revising moderation policies or trying to monetize the verification symbol, the FTC’s attention to the company means he will have to be much more careful with collecting company data and personalizing ads.
“Twitter does adtech today, but if Elon wants to get more aggressive and not let people opt-in to collect more revenue from it, then they could be in trouble,” said Justin Brookman, director of technology policy. at Consumer Reports and a former director of policy in the FTC’s Office of Technology Research and Investigation.
The company’s problems with the FTC now go back 12 years. In May, Twitter entered into an amended settlement with the FTC after it was caught using shared phone numbers for multi-factor authentication purposes to target ads. The government argued that this was misleading, and Twitter agreed to pay a $150 million fine, along with complying with privacy and security requirements imposed by the FTC.
Twitter agreed to the initial consent decree in 2011 after the company suffered cyber attacks in 2009 that allowed hackers to take control of the service through simple security flaws.
Recently, former Twitter security chief Peiter ‘Mudge’ Zatko alleged in a whistleblower complaint that the company deliberately misled the FTC and violated the terms of the 2011 settlement.
The FTC is currently investigating the allegations, according to a person familiar with the investigation, who was not authorized to speak publicly. If the FTC finds additional settlement violations, the company and its executives could be in for an even bigger fine.
A former FTC official said the agency doesn’t have the resources to proactively monitor every move taken by a Musk-owned Twitter, but it will almost certainly read his tweets and other public statements, and if new potential abuses of privacy, or other fraudulent behavior comes to light, will act aggressively to stop it.
That likely includes holding Musk himself accountable. “We want to see bad actors face real consequences, and to do that, we’re holding corporate leadership accountable,” Stephanie Nguyen, the FTC’s chief technologist, said at the agency’s sponsored privacy conference earlier this week.
