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OPENING THE (FACE)BOOKS

Facebook is facing two antitrust probes

By Hanna Kozlowska

Facebook confirmed July 24 that it is facing two antitrust probes from the US government during a whirlwind day of news for the company.

Early in the day, the US Federal Trade Commission (FTC) announced Facebook would pay $5 billion in a settlement with the agency, which found in a probe it launched after 2018’s Cambridge Analytica scandal that the company violated user privacy. The Securities and Exchange Commission (SEC) slapped on an extra $100 million fine for failing to disclose to investors the misuse of user data. The big FTC fine was expected, and despite it being the biggest penalty it’s ever imposed on a tech company, later in the day Facebook posted quarterly earnings that beat analyst expectations.

But that wasn’t the only government scrutiny Facebook is facing: it confirmed in its earnings report that it was facing antitrust probes from both the FTC and the Justice Department (DOJ).

Facebook, which also owns Messenger, WhatsApp, and Instagram, boasts that 2.7 billion users worldwide who use at least one of its apps monthly. This kind of dominance, partially achieved by gobbling up its competitors, has led to widespread criticism, including by Democratic presidential candidate Elizabeth Warren, who is proposing to break up the tech giant.

There’d previously been reports that the FTC was looking into an antitrust case on Facebook, and the DOJ announced it would be looking into the practices of the “market leading online platforms” on July 23.

“The Department’s review will consider the widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online,” the DOJ said in a statement. “The goal of the Department’s review is to assess the competitive conditions in the online marketplace in an objective and fair-minded manner and to ensure Americans have access to free markets in which companies compete on the merits to provide services that users want.”

What will be the effect of all these probes?

The FTC’s privacy settlement has left some doubting its efficacy. In addition to the fine, it imposed certain compliance measures on the company, requiring that every new product and service go through a privacy review that is to be regularly monitored by an independent assessor and by Facebook CEO Mark Zuckerberg, who will also have to certify that the company is fulfilling its obligations. The company will also have to establish a privacy committee on Facebook’s board.

The FTC settlement was approved 3:2 along party lines, and Rohit Chopra, one of the Democratic commissioners, explained in a statement on Twitter that he was not satisfied with the conditions:

On the antitrust probe, Wedbush Securities analyst Daniel Ives also expressed doubts about its potential to affect Facebook’s business. He wrote in a note to investors:

Current antitrust law does not provide for a forced breakup solely due to the size of the business; if it did, Walmart would have been broken up decades ago. Instead, the objective standard is whether a company engages in anticompetitive behavior, thereby driving up prices for consumers. We believe this is a difficult case to make for Facebook and Google (which provide free consumer services), and a stretch for Amazon (which has objectively competitive prices).

Zuckerberg, meanwhile, framed the scrutiny into the company as direction coming from lawmakers.

“Now we have a clearer path forward—not just in terms of product and business, but in terms of guidance from regulators, which sets clear expectations and gives us a foundation to build on,” he said during the earnings call.