Twitter Agrees to Settle with Feds, Pay $150M Penalty and Reform Data Collection

The Department of Justice, together with the Federal Trade Commission (FTC), announced a settlement Wednesday that, if approved by a federal court, will require Twitter, Inc. to pay $150 million in civil penalties and implement robust compliance measures to protect users’ data privacy.

The settlement was announced on the same day as Twitter’s annual meeting, held virtually, and with a pending sale of the San Francisco-based public company to billionaire Elon Musk.

The settlement will resolve allegations that Twitter violated the FTC Act and an administrative order issued by the FTC in March 2011 by misrepresenting how it would make use of users’ nonpublic contact information.

The announcement was made by U.S. Attorney Stephanie M. Hinds, Associate Attorney General Vanita Gupta and FTC Chair Lina M. Khan.

The Justice Department said that from May 2013 to September 2019, Twitter told its users that it was collecting their telephone numbers and email addresses for account-security purposes, but failed to disclose that it also would use that information to help companies send targeted advertisements to consumers.

Prosecutors also said Twitter falsely claimed to comply with the European Union-U.S. and Swiss-U.S. Privacy Shield Frameworks, which prohibit companies from processing user information in ways that are not compatible with the purposes authorized by the users.

“Consumers who share their private information have a right to know if that information is being used to help advertisers target customers,” Hinds said in a statement.. “Social media companies that are not honest with consumers about how their personal information is being used will be held accountable.”

Gupta said, “The $150 million penalty reflects the seriousness of the allegations against Twitter, and the substantial new compliance measures to be imposed as a result of today’s proposed settlement will help prevent further misleading tactics that threaten users’ privacy.”

“Twitter obtained data from users on the pretext of harnessing it for security purposes but then ended up also using the data to target users with ads," said Khan. “This practice affected more than 140 million Twitter users, while boosting Twitter’s primary source of revenue.”

The settlement requires Twitter to develop and maintain a comprehensive privacy and information-security program, conduct a privacy review with a written report prior to implementing any new product or service that collects users’ private information, and conduct regular testing of its data privacy safeguards. Twitter also will be required to obtain regular assessments of its data privacy program from an independent assessor, provide annual certifications of compliance from a senior officer, provide reports after any data privacy incidents affecting 250 or more users, and comply with numerous other reporting and record-keeping requirements.

The settlement also will require Twitter to notify all U.S. customers who joined Twitter before Sept. 17, 2019, about the settlement and to provide users with options for protecting their privacy and security.

Also this week, it was reported that a Twitter investor, in a filing in the U.S. District Court for Northern California, has sued the company Musk, accusing the company's would-be acquirer of manipulating the market in order to reduce the transaction's $44 billion cost.

William Heresniak is charging Musk with deliberately making market-moving statements in order to drive the stock price lower - notably Musk's pronouncement a few weeks ago that the deal was "on hold" until he saw more data about the nature of fake/spam accounts on the platform.

Heresniak is seeking declaratory and injunctive relief in the suit, filed in the U.S. District Court for the Northern District of California.

The annual meeting of the San Francisco-based company occurred as Parag Agrawal, Twitter’s chief executive, tries to complete a $44 billion sale to Musk, the world’s richest person. The social media company has agreed to sell itself for $54.20 a share. Today’s closing share price was $39.52, up more than 6%. Meanwhile, Musk recently suggested he wants to renegotiate the deal.

The New York Times reported this week that some employees are rebelling openly against their likely new owner, who had criticized the social media service and its executives. Musk appears likely to force Agrawal from his job, according to the Times, which also reported that Twitter has recently cut spending and frozen nearly all hiring. Twitter has approximately 7,500 employees worldwide.

The Times reported that Agrawal and other executives said at the annual meeting that they could not discuss the terms of the Musk deal, which shareholders will vote on at a later date, until the transaction closes. Executives also fielded shareholder questions on Twitter’s products, misinformation and the importance of diversity and inclusion initiatives.

Also Wednesday, it was co-founder Jack Dorsey’s last day on the board.

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