Facebook Inc says it does not have contractual relationship with Australian users

It said only Facebook Ireland carried on business in Australia when local users' data were collected as part of the Cambridge Analytica scandal.

Facebook on late Friday afternoon argued at Australian Federal Court that the handling of personal data owned by Australian users is only the responsibility of Facebook Ireland, and that the US-based Facebook Inc has no contractual relationship with these users. 

The lawsuit, raised by the Australian Information and Privacy Commissioner in March, is in relation to allegations that both the US-based Facebook Inc and Facebook Ireland breached Australia's Privacy Act by repeatedly and seriously interfering with the privacy of Australians. 

Facebook allegedly disclosed the personal information of over 311,000 Australians to the This Is Your Digital Life app, despite there only being 53 Australians that installed the app. This information was then allegedly given to Cambridge Analytica and used for political profiling purposes. 

"Most of those users did not install the app themselves, and their personal information was disclosed via their friends' use of the app," Australian Information and Privacy Commissioner Angelene Falk said back in March.

The This is Your Digital Life app was a personality survey that operated independently of the Facebook website. Through the use of the Graph API, the app was able to request information from the Facebook accounts of hundreds of thousands of Facebook users globally, of which, approximately 53 were Australian.

Under Australian privacy laws, entities such as Facebook can only hold any collected personal information of an individual for a particular purpose, but they are not allowed to use or disclose the information for another purpose.

The presiding judge, Justice Thomas Thawley, is currently determining whether the allegations are substantial enough for litigation to proceed, and more specifically, whether either Facebook Ireland or Facebook Inc were carrying on business in Australia when the data was shared to the This is Your Digital Life app.

See also: NZ Privacy commissioner labels Facebook as 'morally bankrupt pathological liars'  

On Friday afternoon, the social networking giant denied that Facebook Inc, the US-based corporation, had any responsibility for its Australian users, with its legal representative arguing that Facebook's user agreements only specify that the website Facebook.com was offered to Australia by Facebook Ireland.

"It's not a question of an inference being available; no inferences are available because nothing has been established yet, which would supply a basis to say that [Facebook Ireland] is conducting its business as an agent of Inc," senior counsel Noel Hutley said in the preliminary hearing on Friday.

"During the relevant period, Facebook Inc does not sell advertising in Australia and does not earn revenue in Australia.

"There is no evidence that Facebook is contracted with any users in Australia on the basis of what we've already submitted." 

Senior counsel Ruth Higgins, the legal representative for the Australian Information and Privacy Commissioner, argued otherwise, saying that Facebook is a global network wherein users from around the world are able to connect with people outside of their own region. 

In these instances, Higgins alleges that Facebook Inc must interact and use the personal data of Australian Facebook users, meaning that it should be party to the litigation. 

"It is, we say, reasonably arguable that Facebook Inc made a record of the personal information of Australian users for the purposes of providing the Facebook service to North American users upon that data being transferred under the data transfer and processing from [Facebook Ireland to Facebook Inc]," she said.

Despite hundreds of thousands of Australian users having their information misused, the country was only the 10th hardest hit by the Cambridge Analytica scandal globally. Overall, information on up to 87 million users, mostly from the US, was admitted by Facebook as being "improperly shared" with Cambridge Analytica.

Falk considers that these were systemic failures to comply with Australian privacy laws by one of the world's largest technology companies. The Federal Court can impose a civil penalty of up to AU$1.7 million for each serious and/or repeated interference with privacy.

Facebook Australia reported after-tax profit of AU$22.7 million for the 2019 financial year, slightly down from the AU$23.3 million in the year prior. For the year ending 31 December 2019, the Australian arm of the social media giant recorded AU$16.8 million as an income tax expense, up from the AU$11.7 million paid last year, off the back of before-tax profit of AU$39.5 million.

The preliminary hearings will continue later this week.

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