Facebook, WhatsApp at Loggerheads with German Authorities

Facebook Inc. FB has again landed in trouble with German authorities over its Internet-based messaging service, WhatsApp. Last month, The Federation of German Consumer Organizations had issued a warning related to data sharing with its parent company.

The Hamburg Commissioner for Data Protection and Freedom of Information has asked the social media service not only to “stop collecting and storing data” of the 35 million German users but also to wipe out any records that it has obtained from its subsidiary. Per the privacy watchdog, Facebook has “neither obtained an effective approval from the WhatsApp users, nor does a legal basis for the data reception exist.”

The authorities also highlighted that Facebook and WhatsApp had publicly announced that they wouldn’t be sharing data in 2014. Facebook had acquired WhatsApp for $19 billion in the same year.

In its defense, Facebook said that it complies with EU data protection law and is willing to work with German authorities to “address their concerns”. Facebook is likely to appeal against the verdict.

In August this year, Facebook and WhatsApp announced that they will be sharing users’ personal data like number and usage data. Though the service offers users an option to disallow sharing, the option is hidden and not easy for an average user to find.

As Facebook hosts a huge amount of personal data, it has been under constant scrutiny from privacy groups and federal agencies. This huge database is its primary asset for attracting advertisers. As a result, the company has been criticized for allegedly selling this personal data to advertisers in order to boost its top line.

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Although the company has denied any wrongdoing, we believe that increasing scrutiny by regulators of its data handling practices remains a major concern, going forward. Recently, the company ran into trouble with Brazilian law enforcement agencies involving its messaging service WhatsApp and in Germany over antitrust concerns.

Not just Facebook, of late, big U.S tech companies like Alphabet (GOOGL), Amazon (AMZN) and Apple Inc. (AAPL) have found themselves in troubled water after the EU tightened regulations surrounding taxation, data privacy and antitrust concerns.

Earlier this month, the European Commission asked Apple to shell out $14.5 billion in taxes to Ireland. It alleged that Apple had received undue tax benefits so far in Ireland, violating EU state aid rules.  Per media reports, Apple struck a deal with Ireland twenty years back, which allowed the company to compute taxes only on its sales in the country instead of paying taxes on its worldwide sales,

At present, Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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