Facebook Moves to Defend Itself Against Regulatory Threats

Under pressure from legislators and others, Facebook has taken steps to protect itself. According to sources, the company ceased talks to buy video-focused social network Houseparty to forestall increased antitrust concerns. In response to calls to break up Facebook, the company took internal measures to make that more difficult to do by reorganizing its departments and rebranding Instagram and WhatsApp. Elsewhere, the European Union is expected to issue decisions by the end of the year related to privacy issues involving Facebook.

The New York Times reports, “Mark Zuckerberg, Facebook’s founder and chief executive, has repeatedly said his company faces competition on all sides and is loath to accept a fragmented version of the social giant,” especially since Instagram and WhatsApp “are enormous and have the ability to continue fueling Facebook’s $56 billion business.”

Public Knowledge senior advisor Gene Kimmelman, a former antitrust official in the Obama administration, said that “for a social network with enormous growth in photos and messaging, there’s probably significant business justification for combining the units.”

But representative David Cicilline (D-Rhode Island), chair of the House antitrust committee, noted that “the combination of Facebook, Instagram and WhatsApp into the single largest communications platform in history is a clear attempt to evade effective antitrust enforcement by making it harder for the company to be broken up.”

At Facebook, vice president of messaging Stan Chudnovsky said that “building more ways for people to communicate through our messaging apps has always been about creating benefits for people — plain and simple.”

The FTC began investigating Facebook last year, and “uncovered internal Facebook documents that prompted concerns around how the company was acquiring rivals.” That led to Facebook killing the deal with Houseparty, which is “especially popular with audiences under the age of 24.” Epic Games acquired the company soon after.

Zuckerberg began his quest to combine “the underlying infrastructure of WhatsApp, Instagram and Facebook Messenger” over a year ago … “to create less of a hodgepodge of companies and more of a unified network.”

The Wall Street Journal reports that Ireland’s Data Protection Commission, “which leads EU privacy enforcement for Facebook because the firm’s regional headquarters are in Dublin” stated it is nearly over with its investigation of “some of the 11 cases” current under the EU’s General Data Protection Regulation (GDPR). Decisions will be drafted in “coming weeks,” according to spokesman Graham Doyle, “along with any proposed fines and sanctions, to the EU’s 27 other national privacy regulators by the end of September.”

The draft decisions will “kick off an EU approval process that could stretch to the end of the year or into the beginning of 2020.” A Facebook spokeswoman said that it is “in close contact with the Irish Data Protection Commission,” and that the company has “spent over 18 months working to ensure we comply with the GDPR.”

WSJ also notes that “under the new EU rules, privacy regulators have more expansive powers than the FTC to order changes in behavior,” with fines up to 4 percent of a company’s prior-year worldwide revenue. That would equal $2.23 billion for Facebook, compared to the FTC’s record-breaking $5 billion fine.

Related:
FTC Chief Says He’s Willing to Break Up Big Tech Companies, Bloomberg, 8/13/19