The US Federal Trade Commission is reported to be investigating Facebook after allegations that 50 million users' private information was misused by a political consultancy firm.
Cambridge Analytica (CA), hired by the Trump campaign in the 2016 US election, has been accused of taking the personal data unknown to users.
The move came amid allegations the firm may have broken US electoral law.
CA, which is based in London, denies any wrongdoing.
Meanwhile, Facebook's stock has continued to slide, following a steep decline on Monday.
The British and European parliaments have called on Facebook boss Mark Zuckerberg to give evidence to them., and the social network is due to brief congressional aides on Wednesday.
Mr Zuckerberg did not attend a Facebook staff briefing on the crisis at its Californian headquarters on Tuesday, which was led by deputy general counsel Paul Grewal instead, the Daily Beast news site reports
End of self-regulation era?
By Dave Lee, North America Technology Reporter, BBC News
The criticisms of Facebook, and in particular Mark Zuckerberg, have never been louder or angrier.
Employees at the company were addressed this morning not by their chief executive, but by one of the company's top lawyers. A Facebook spokeswoman said both Mr Zuckerberg and his deputy Sheryl Sandberg were too busy to address staff themselves.
The firm added it was "outraged to be deceived" by Cambridge Analytica. A sign, perhaps, that Facebook is doubling down on the view that it is the victim.
On Wednesday Facebook will send representatives to Washington to answer to Congress - the first step on what is set to be something of a world tour of explaining to investigators how on Earth this activity was able to happen.
The loss to Facebook's value has been more than $60bn (£43bn) since this news broke. The wider impact for Silicon Valley is that it seems the era of tech companies essentially regulating themselves is perhaps coming to a dramatic end.
Why is the FTC getting involved?
The FTC is an independent agency of the US government tasked with protecting American consumers.
It is investigating whether Facebook violated the terms of a 2011 decree regarding the social network's privacy protections, an unnamed source "familiar with the agency's thinking and not authorised to speak on the record" told the Washington Post newspaper.
This was confirmed by a Bloomberg news agency report, quoting an unnamed "person familiar with the matter".
Under the 2011 decree, Facebook must notify users and obtain their permission before data about them is shared beyond the privacy settings they have established, the Washington Post says. Facebook was also subjected to 20 years of privacy checkups to ensure compliance.
Facebook confirmed on Tuesday that it was expecting to receive a letter from the FTC with questions about the data acquired by CA. However, it also said it had had no indication of a formal investigation, Reuters news agency reports.
"We remain strongly committed to protecting people's information," Facebook deputy chief privacy officer Rob Sherman said. "We appreciate the opportunity to answer questions the FTC may have."
In its statement on Tuesday, it said: "The entire company is outraged we were deceived. We are committed to vigorously enforcing our policies to protect people's information and will take whatever steps are required to see that this happens."
What are the accusations against CA?
Christopher Wylie, who worked with the consultancy firm, alleges that it amassed large amounts of data through a personality quiz on Facebook called This is Your Digital Life.
He says that 270,000 people took the quiz but the data of some 50 million users, mainly in the US, was harvested without their explicit consent via their friend networks.
Mr Wylie says that data was sold to CA, which then used it to psychologically profile people and deliver pro-Trump material to them, with a view to influencing the outcome of the 2016 election.
CA insists it followed the correct procedures in obtaining and using data - but it was suspended from Facebook last week.
Did CA break US electoral law?
Channel 4 News, which conducted an undercover investigation into the consultancy firm, reports that it may have broken US electoral law, which prohibits co-ordination between an official election campaign and outside groups, or "Super PACs".
CA executives were filmed discussing a twin-track strategy to campaigning, putting out positive messages through Donald Trump's official presidential campaign, while attack ads were promoted by outside organisations.
Boasting about CA's work for the Trump campaign, Mr Nix told the undercover team: "We did all the research, all the data, all the analytics, all the targeting. We ran all the digital campaign, the television campaign and our data informed all the strategy."
At the same time, CA managing director Mark Turnbull appeared to confirm for the undercover team that CA had created the Defeat Crooked Hillary brand of attack ads, funded by a super-PAC called Make America Number 1.
The firm has denied wrongdoing, saying they operated according to a strict firewall and that they were transparent about their activities.
How can you protect your data on Facebook?
There are a few things to be aware of if you want to restrict who has access to your data:
- Keep an eye on apps, especially those which require you to log in using your Facebook account - they often have a very wide range of permissions and many are specifically designed to pick up your data
- Use an ad blocker to limit advertising
- Look at your Facebook security settings and make sure you are aware of what is enabled. Check the individual app settings to see whether you have given them permission to view your friends as well as yourself.
- You can download a copy of the data Facebook holds on you, although it is not comprehensive. There is a download button at the bottom of the General Account Settings tab. However bear in mind that your data may be less secure sitting on your laptop than it is on Facebook's servers, if your device is hacked.
You can of course, simply leave Facebook, but the campaign group Privacy International warns that privacy concerns extend beyond the social network.
"The current focus is on protecting your data being exploited by third parties, but your data is being exploited all the time," said a spokeswoman.
"Many apps on your phone will have permission to access location data, your entire phone book and so on. It is just the tip of the iceberg."