Insights

Case study: Facebook subsidiaries fined $20 million for misleading consumers

Corporate
Phone displaying a VPN screen.

On 26 July 2023, the Federal Court ordered two Facebook subsidiaries, Facebook Israel Ltd and Onavo Inc to each pay a pecuniary penalty of $10 million for engaging in misleading conduct in breach of the Australian Consumer Law. The enforcement action demonstrates the importance of considering consumer law in data collection and handling.

Background

In December 2020, the Australian Competition and Consumer Commission (ACCC) commenced proceedings in the Federal Court against Facebook Inc (now Meta Platforms Inc) and two Facebook Inc subsidiaries, Onavo Inc and Facebook Israel Ltd.

Onavo Inc and Facebook Israel Ltd were responsible for developing and marketing the mobile app "Onavo Protect" to Australian consumers. The Onavo Protect app was a free virtual private network (VPN) service available to Australian customers from December 2016 to May 2019.

The ACCC alleged Facebook and Onavo engaged in false, misleading or deceptive conduct when promoting the Onavo Protect app to Australian customers between 1 February 2016 and 31 October 2017. During this time over 270,000 Australian customers downloaded the app.

Onavo Protect was withdrawn from the Apple app store in August 2018 and the Google Play store in February 2019.

Misleading or deceptive conduct

Facebook Ireland and Onavo Inc advertised and promoted the Onavo Protect app as protecting users' personal information and keeping its data safe. The content of the listings for Onavo Protect on the Google Play Store or Apple App Store did not sufficiently disclose to Australian consumers that users' data would be used for purposes other than providing the Onavo Protect service.

However, Facebook Israel Inc and Onavo Inc collected personal mobile activity data such as users' internet and app activity and disclosed anonymised and aggregated data to Facebook Inc for commercial benefit. This included supporting market analytics and identifying future acquisitions.

Disclosures about how the data of Australian consumers would be used for other purposes were set out in the Onavo Protect Terms of Service and Privacy Policy. These disclosures were not sufficiently proximate to the Onavo Protect app store listings.

Facebook Israel Inc and Onavo Inc admitted that contents of the listings that promoted the protection of user data and safety were likely to mislead or deceive, and liable to mislead the public, in the absence of sufficient disclosures to Australian consumers of the fact that users' data would be used for purposes other than providing Onavo Protect.

Facebook Israel Inc and Onavo Inc admitted to contravening the Australian Consumer Law and that their conduct was likely to mislead or deceive (section 18), or liable to mislead the public as to the nature and characteristics of Onavo Protect (section 33).

The case against Meta was dismissed by the Federal Court after settlement negotiations between the ACCC, Facebook Israel Inc and Onavo Inc.

Key takeaways

The ACCC's enforcement action highlights the intersection between privacy and consumer law and data protection as a consumer right. Consumer law must be a key consideration for all organisations when establishing and promoting their data collection and handling practices, regardless of whether the organisation is bound by the Privacy Act.

Organisations can no longer simply rely on their terms of service and privacy policy discretely hyperlinked on a website to set out how personal data will be used and disclosed. The disclosure of such information must be sufficiently prominent to consumers, especially if easily accessible marketing or advertising content does not accurately represent the true picture of how personal data will be used and disclosed by an organisation.

The Federal Court decision Australian Competition & Consumer Commission v Meta Platforms Inc [2023] FCA 842 can be found on the Federal Court of Australia website.

Return to Privacy: Mid-year review 2023

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