Honestly, I keep hoping Apple adds a permission check for the contact list (like they do for GPS location). If the user says no, they should just return a blank contact list (to keep old apps happy that aren't expecting the call to fail).
It's crazy that they haven't added this already. Facebook needs to get my permission to find out where I am, but not to scrape a hundred names, phone numbers, and addresses out of my phone? Bizarre.
I realise you might be using Facebook as an example in a theoretical sense (i.e., that Apple believes protecting your location is more important than protecting your contact database), but in case you weren't, Facebook's "find friends" feature does give you an explanation of what is going to happen, asks you to confirm.
Here's the explanation:
"If you enable this feature, all contacts from your device (name, email address, phone number) will be sent to Facebook and be subject to Facebook's Privacy Policy, and your friends' profile photos and other info from Facebook will be added to your iPhone address book. Please make sure your friends are comfortable with any use you make of their information."
This is one of the few areas where the EU is (still...) ahead of the rest of the world. Facebook should not be able to collect data on your friends even at your request unless your friends explicitly consent to this.
Clearly your friends have no business passing on your data and Facebook has no business collecting it. "Make sure your friends are comfortable" is no excuse for facebook to go ahead and break the law.
Your neighbours to the north also have laws like this that are on par with the DPD. The EU treats PIPEDA as essentially an implementation of the DPD so that DPD compliant orgs can share data with Canadian businesses.
With the recent news, I'm confident they'll do just that in the next iteration. I also submitted a bug report to http://bugreporter.apple.com/, because I really believe it's the way it should be (even though it restricts me as a developer).
I also submitted another bug report (15th time, I believe) about iOS 5's stupid lack of support for audiobook chapters and podcasts...
