Continue Reading Below
European Union antitrust regulators have launched a probe into Libra, the Facebook-backed cryptocurrency, amid concerns that the payment system could unfairly impact rivals and hurt competition, Bloomberg reported. In a separate dispute, Facebook faced bipartisan criticism after the release of an internal audit of alleged conservative bias on its platform, which did not definitively say whether there was found evidence to support claims that the social media platform suppresses conservative voices.
Neither development had a discernible impact on Facebook stock, as shares were flat for the week through the end of trading on Wednesday and are up nearly 40 percent for the year as earnings remain strong.
“I think we've passed the tipping point of negative publicity on Facebook,” said Arun Sundararajan, a professor at New York University’s Stern School of Business. “Users are likely getting immune to new reports relating to privacy or bias, so it is possible that Facebook is over the most challenging phase on this front. As the antitrust cases against Facebook pick up steam, they are likely to become the primary investor focus.”
Wall Street has remained mostly bullish on Facebook in recent years despite unprecedented scrutiny of its data practices, allegations of political bias and evident government mistrust of Libra. The social media giant agreed to pay out a $5 billion fine to settle a Federal Trade Commission probe of its data privacy efforts last July – the largest such fine in history. The settlement also required CEO Mark Zuckerberg to personally certify compliance with FTC guidelines on a quarterly basis.
The possibility of a full-fledged antitrust investigation in Europe comes as Facebook weathers bipartisan criticism of Libra among U.S. lawmakers, with many calling on the company to halt its project entirely. Both the FTC and Justice Department have opened antitrust investigations into Facebook’s business model.
With the 2020 election cycle approaching, repeated criticism from President Trump and other conservative leaders have placed Facebook’s handling of bias allegations in the spotlight. Liberal pundits ripped Facebook’s audit for lending credence to bias claims, while conservatives ripped the platform for failing to provide an actionable solution.
“Merely asking somebody to listen to conservatives’ concerns isn’t an ‘audit,’ it’s a smokescreen disguised as a solution,” Sen. Josh Hawley (R-Mo.) said in a statement. “Facebook should conduct an actual audit by giving a trusted third party access to its algorithm, its key documents, and its content moderation protocols. Then Facebook should release the results to the public.”
Despite various scandals, Facebook’s core business remains strong. The company topped expectations for both revenue and earnings in its most recent quarterly report, with average revenue per user increasing 18 percent to $7.05.
Growing public criticism and regulatory pushback signals that “the pendulum is swinging back against them,” said Gerber Kawasaki CEO Ross Gerber, adding that his firm has sold off much of its interest in Facebook.
However, the true threat to Facebook’s success may lie in increased competition for consumer attention as Netflix, Apple and various other companies launch their own streaming products, Gerber said. The possibility of more major fines won’t help.
“Maybe this is peak Facebook,” Gerber said. “I wouldn’t bet against the profit side of the business in the short term, but it’s going to end up giving a lot of that profit back in fines, kind of like Microsoft did for a long time and Google’s done. They’ll pay $5 billion and it just goes down on earnings as a dividend to the government.”