Facebook (FB) has been one of the best-performing FAANG (Facebook, Apple, Amazon, Netflix, and Google) stocks this year. It’s gained more than 50% in 2019, putting it second only to Apple, which has soared 72%. Google (GOOGL), Amazon, and Netflix (NFLX) stocks are up 29%, 17%, and 12% this year, respectively.
FB’s gain this year hasn’t come easily. The company has faced pressure on multiple fronts, and that pressure hasn’t let up. A particular standout among its recent struggles are its regulatory challenges. Here’s what’s been going on lately between Facebook and federal regulators the FTC (Federal Trade Commission) and the DOJ (Department of Justice).
Facebook’s struggle with the FTC sees a new twist
In July, Facebook revealed that it was under an antitrust investigation by the FTC. Neither the company nor the FTC has publicly discussed the scope or focus of the investigation, but there have been reports of the FTC scrutinizing Facebook’s acquisition practices. Specifically, the regulator wants to find out whether the company’s acquisitions have been motivated by a desire to stifle competition.
Between 2012 and 2014, Facebook spent $20 billion on the acquisitions of Instagram and WhatsApp. It also tried several times to acquire Snapchat parent Snap (SNAP) without success. Snap has briefed the FTC about how Facebook has been trying to frustrate its growth since the rebuff.
Even before the FTC concludes its antitrust investigation, it’s considering blocking Facebook from closely integrating its messaging apps, according to a Reuters report on December 12. The company’s stock fell nearly 3.0% on the news. FB’s decline indicates investor fears that the FTC will seek to undo or alter its acquisition of Instagram or WhatsApp.
The FTC fined Facebook a record $5.0 billion in July
In July, the FTC hit Facebook with a $5.0 billion fine after it investigated and concluded that the company’s privacy protection measures had fallen short of regulatory requirements. In addition to the fine, the FTC ordered Facebook to implement a host of changes. But Facebook CFO David Wehner warned the changes the FTC ordered would both be expensive and disruptive of its ad business.
DOJ mulling antitrust probe as it presses FB on platform encryption
The DOJ announced on July 23 that it had launched a broad antitrust review of certain big tech companies. It said its review would look into the antitrust practices of leaders in the Internet search, social media, and online retail tech spaces.
The DOJ named no specific targets of its review. However, it later emerged that the agency was seeking certain documents from Google, the leader in the online search engine market. It isn’t clear whether Facebook, the leader in social media, is also a subject of the DOJ’s review. However, US Attorney General William Barr has pressed for the department to launch an antitrust investigation into Facebook. Barr and the DOJ also want Facebook to stop its plan to implement total encryption across its apps.