The Federal Trade Commission opened an antitrust investigation into Facebook in June, the company confirmed in its second-quarter earnings report released Wednesday. The agency sought clearance to launch an inquiry into Facebook and other tech giants earlier this year, but Facebook’s disclosure confirms that a formal investigation is underway.
Facebook also acknowledged a separate antitrust review that the Department of Justice announced Tuesday. The company is fielding scrutiny on several fronts; on Wednesday the FTC fined Facebook $5 billion over privacy violations in a settlement that concludes a separate investigation.
Despite the regulatory oversight, Facebook beat expectations in the second quarter, posting revenue of $16.9 billion. Facebook’s daily active users count increased 8 percent to 1.59 billion, suggesting that the scandals bogging the company down have not meaningfully impacted its business. Excluding legal and income tax expenses, including costs associated with the FTC settlement, Facebook said its earnings per share would have been $1.99. Shares were up in after-hours trading.
Update: During Facebook’s Q2 earnings call, CEO Mark Zuckerberg called for a federal regulatory framework to govern issues like privacy and election interference.
“My broader concern is that if that doesn’t get put in place, then frustration with the industry will continue to grow,” he said.
One analyst from Bank of America Merrill Lynch called the FTC settlement “good news” while asking about how the regulatory oversight is impacting Facebook’s business, highlighting the perception that the fine was favorable for the company.
The FTC fine is the largest ever privacy penalty levied against a company, according to the agency. Still, many lawmakers and some members of the FTC itself thought it was insufficient to make Facebook change its behavior.
“When companies can violate the law, pay big penalties, and still turn a profit while keeping their business model intact, enforcement agencies cannot claim victory,” wrote FTC Commissioner Rohit Chopra in a dissenting opinion from the settlement the agency reached. “If we cannot fix these problems, then policymakers must come together here at home and around the world to confront business models that rely on surveillance and profit from manipulation.”
The strong revenue and user growth Facebook showed in the second quarter lends weight to that belief.