Facebook's metaverse aspirations tied to privacy, antitrust regulation

As Mark Zuckerberg spun his vision last week for the metaverse and Facebook’s transformation into a company built on immersive experiences through virtual and augmented reality, he devoted significant time to a chat with the company’s global affairs chief, Nick Clegg, about regulatory questions.

Their most basic metaverse principle: “Never surprise people.” “That means being transparent about how things work — what data is collected, and how that data is used over time,” Clegg said.

The reassurances offered by Clegg and Zuckerberg were a nod to the inevitable, because Facebook — now rebranded as Meta — is certain to face intense privacy and antitrust scrutiny on its metaverse plans, given that even the rebranded business is still built on the collection of personal data to target advertising. Transparency, alone, is unlikely to satisfy regulators and Facebook’s — or Meta’s — critics.

Interacting with consumers through its Oculus virtual reality devices could allow Facebook to collect a lot more personal data — data that can provide a much more revealing insight into a person’s emotions, abilities, and desires than an interaction through a smartphone or laptop. A 20-minute VR session through an Oculus headset or similar device produces 2 million data points about a person’s body language; future technology will capture even more data.

More significant than the volume of data is the revelatory quality of the non-verbal data that can be collected through a VR device. Data about the user’s head and hand movements, the tracking of what they look at and a record of their facial expressions are all involuntary indicators that psychologists say are highly revealing of that person’s physical and mental condition and abilities.

“The science fiction notion of determining future behavior — whether about what people buy, if they are ill, whom they want to date, or even if they might commit a crime — becomes a possibility,” Jeremy Bailenson, founding director of Stanford University’s Virtual Human Interaction Lab, wrote in JAMA Pediatrics, published by the American Medical Association in 2018.

Such knowledge would be hugely valuable for advertisers. But it also presents charged privacy and competition questions, particularly if Facebook were to monopolize that data. Tracking of body movements through VR can be used to uniquely identify a person, Bailenson and other researchers have found, while tracking of a person’s facial expressions while performing a challenging task can reveal much about their cognitive abilities.

Facebook is selling a lot of Oculus devices. Its yearly non-advertising revenue mushroomed by 195 percent in the most recent quarter, reaching $734 million, driven in large part by strong sales of the VR devices. But the company’s requirement that Oculus users also have a Facebook account has already drawn antitrust scrutiny in Germany, and US critics say the company’s metaverse aspirations underscore that antitrust legislation passed by Congress must include interoperability rules to prevent Facebook/Meta from monopolizing metaverse data.

Facebook wants to build all the highways in the metaverse, said Rory Mir of the Electronic Frontier Foundation. Antitrust legislation needs to include interoperability rules “to let people build their own roads and control where they can go,” they said.

Extended Reality

“Extended reality,” or XR, is the umbrella term for technology that mixes real and virtual environments, as Facebook is proposing with the metaverse, encompassing both VR and augmented reality, or AR.

Augmented reality — technology in which users see a combination of physical reality and computer-generated data projected though glasses or another kind of lens — is  another component of the metaverse Zuckerberg described.

Google’s attempt at AR glasses — Google Glass — famously blew up over privacy concerns nearly a decade ago, with Google drawing a challenge from US regulators in 2013. It’s unclear how much privacy norms have evolved since then, but Facebook’s partnership with Ray-Ban to produce “smart glasses” that are available in six countries already sparked significant regulatory concern in the UK, Australia and Italy over the devices’ onboard cameras. Those devices are just a stepping stone to where Facebook hopes to go with AR, Zuckerberg acknowledged last week.

Zuckerberg and Clegg said Facebook’s products would protect privacy because an LED light would illuminate when the two onboard 5-megapixel cameras built into the frame are switched on, making them less likely to surprise or deceive someone than when shooting photos or video with a phone. Privacy advocates are skeptical of that claim.

A key regulatory risk for Facebook/Meta is that lawmakers and regulators who are already hypersensitized to the company’s privacy problems, following a landmark $5 billion settlement with the US Federal Trade Commission last year and recent revelations that the company knew Instagram was having a negative effect on young women, will spur lawmakers in the US and other jurisdictions to push back even harder to limit Facebook’s data collection practices.

Congress has yet to decide how it’s going to regulate privacy for even the current generation of technology platforms, let alone the next generation platform. But privacy advocates in the US and elsewhere are already saying that Facebook’s metaverse aspirations underscore the need for the US to create a special-purpose data protection regulator, like the state of California has already done.

“We can’t realistically begin to address privacy issues in the virtual world until we build the systems necessary to create and enforce meaningful data protection rules in the real world,” Alan Butler, president of the Electronic Privacy Information Center, told MLex. “The best thing that lawmakers can do to prepare us for the potential AR/VR future would be to pass comprehensive privacy legislation in the United States and create a Data Protection Agency to address new privacy threats as they emerge.”

The privacy issues are particularly critical involving children. Researchers have found that children who experience virtual reality tend to remember it as something they did in the physical world, not just something they viewed through a device. A child who has a virtual reality session about swimming with dolphins may form the memory that she really swam with dolphins.

The intimate quality of data available through VR tracking could allow an employer or government to pigeonhole a person, researchers have found.

“With just a few minutes of facial tracking data — 'a thin slice’ of nonverbal behavior — it was possible to determine whether a user was a high or low performer. A person's future quality of work overall could be pigeonholed by small amounts of nonverbal data,” Bailenson wrote in the 2018 JAMA article. Sponsors, meanwhile, could replace product placement campaigns with “compelling VR experiences that are the equivalent of a Rorschach test, which elicit telling non-verbal patterns that they will later seek to detect in the physical world.”

Antitrust

Just as Facebook is defending against antitrust allegations from the FTC and state attorneys general that its purchases of Instagram and WhatsApp degraded consumer privacy through the company’s monopoly of social media, the company is likely to face antitrust scrutiny of its plans in the metaverse. Facebook’s general counsel, Jennifer Newstead, said this summer that a significant part of her job already is thinking through the regulatory questions around the metaverse.

“It obviously raises a whole host of questions about regulation,” Newstead said at a technology conference in August, and Facebook is trying to think through what those regulatory questions are, and which policy makers will be thinking about those questions.

Facebook is under investigation in Germany in an antitrust probe with the nation’s competition authority, the Bundeskartellamt, investigating a "tying arrangement" with the social media giant where users need to have a Facebook account. Saying the Facebook ecosystem is "particularly characteristic" of the market power that new German rules are intended to address, the Bundeskartellamt said earlier this year it would expand the Oculus probe.

In the US, the proposed Augmenting Compatibility and Competition by Enabling Service Switching, or ACCESS, Act of 2021 doesn’t specifically address VR or any other specific technology, but the antitrust legislation before Congress would impose broad data portability and interoperability requirements, allowing users to access and switch their data to a competitor in a “structured, commonly used, and machine-readable format.”

Zuckerberg suggested in Thursday’s metaverse video presentation that the regulatory storms his company has weathered over the past five years have made him careful to consider regulatory questions from the start, and that he’s done that with the metaverse.

“Interoperability, open standards, privacy and safety need to be built into the metaverse from Day One. And with all the novel technologies that are being developed, everyone who’s building for the metaverse should be focused on building responsibly from the beginning,” he said. “This is one of the lessons that I’ve internalized from the last five years, you really want to emphasize these principles from the start.”

The answers Zuckerberg and his lieutenants give to regulators and lawmakers may well determine, as much as technology breakthroughs, how far his company travels in the metaverse.

—With reporting by Max Fillion in Washington DC.