Home Business Facebook Says F.T.C. Has Opened Formal Antitrust Investigation – The New York Times

Facebook Says F.T.C. Has Opened Formal Antitrust Investigation – The New York Times

16 min read

SAN FRANCISCO — Facebook disclosed on Wednesday that it was the target of an antitrust investigation by the Federal Trade Commission, just hours after the agency unveiled a privacy settlement with the company, underlining the steady stream of actions that regulators are taking to limit the power of America’s tech giants.

The company revealed the investigation in its quarterly earnings announcement, saying that the F.T.C. had informed it last month of the move. While the F.T.C. was known to be looking into Facebook and whether it had used its reach and clout to reduce competition, an antitrust investigation starts a more formal and intensive phase of examination.

Earlier Wednesday, the F.T.C. laid out how it was penalizing Facebook for privacy violations. In that agreement, Facebook was fined a record $5 billion for deceiving users about their ability to control the privacy of their personal data. The company was also ordered to create new layers of oversight and new practices for its collection and handling of users’ data. But the settlement, which did not limit Facebook’s gathering, sharing and use of personal information, was criticized by lawmakers for not going far enough in curtailing its data-mining practices.

The twin developments nonetheless highlighted the new reality for big tech companies: Scrutiny from regulators and lawmakers has become a constant.

Over the past 10 days alone, Facebook, Google, Amazon and Apple have all faced grilling from Congress and questions from regulators. Last week, executives from the companies attended a House hearing on antitrust matters. Google also appeared at a separate hearing on censorship and Facebook testified on Capitol Hill about a new cryptocurrency initiative. This week, the Justice Department said it would start an antitrust review into how internet giants had amassed market power and whether they had acted to reduce competition.

“The online technology industry and our company have received increased regulatory scrutiny in the past quarter,” Facebook said in a statement on Wednesday.

Earlier in the day, Mark Zuckerberg, Facebook’s chief executive, said he supported the privacy settlement with the F.T.C.

“We’re going to change the way that we operate, across the whole company. From the leadership down, to the ground up,” he told employees in a meeting at the company’s headquarters in Silicon Valley. “If we don’t, then we’re going to be held accountable for it.”

A spokeswoman for the F.T.C. confirmed the antitrust investigation and declined to comment further.

Andrew I. Gavil, a law professor at Howard University, said the F.T.C.’s investigation represented a commitment of staff and agency resources. “It also suggests there is reason to believe there is anticompetitive behavior to look at,” he said.

The F.T.C.’s lengthy privacy inquiry into Facebook could well have brought out evidence that helped persuade the agency to pursue an antitrust investigation, said Mr. Gavil, a former senior F.T.C. official.

Investigations can take months or even years. They result in staff presentations, by the agency’s economic bureau and by its competition bureau, made in private to the five commissioners. The politically appointed commissioners then decide whether to bring a case or not, or try to reach a settlement.

Unlike with the privacy case, there is no provision for fines in a civil antitrust case. But what can happen, if a corporate defendant is found to have violated the nation’s antitrust law, is follow-on cases by private plaintiffs such as other companies.

For now, the activity by the authorities has done little to squeeze Facebook’s business. The company said on Wednesday that revenue for its second quarter rose 28 percent from a year ago to $16.9 billion. Profits fell 49 percent to $2.6 billion as Facebook took a one-time $2 billion charge to pay the F.T.C.’s fine and recorded an accounting charge related to tax deductions, but excluding those, the company still performed better than Wall Street had expected.

This is a developing story and will be updated.

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