Facebook is well aware the regulators are coming. It has said repeatedly in recent months that it welcomes more legislative control, not least federal US privacy laws.Facebook CEO Mark Zuckerberg said just yesterday, in fact, that some sort of “societal guardrail framework” will give users confidence that Silicon Valley’s unchained giants aren’t just doing whatever they want.
But every now and then, Facebook is dealt a sharp reminder that some lawmakers are agitating for change that it might not like. And now, after regulatory movement in Britain and Germany, Wall Street is starting to get nervous.
Earlier this month, Germany’s antitrust regulator clobbered Facebook with a landmark ruling , designed to stop the firm collecting and combining data from sources outside its main site, such as WhatsApp and Instagram. Facebook is vigorously appealing the ruling.
And in the UK, whispers about a regulatory framework for Facebook became shouts when a committee of lawmakers which has just completed an 18-month investigation into disinformation that focused heavily on Zuckerberg’s company said there should be “large fines” for firms who fail to act on harmful content.
It has echoes of an existing system in Germany, where social media companies can be fined up to $57 million for not dealing with hate speech effectively . The law is not popular with Facebook, which has actively lobbied against it.
Whether the British government acts on the recommendation remains to be seen, but Jeremy Wright, the minister tasked with handling tech, is in Silicon Valley this week, doing his best to look like he means business . He will get 30-minutes with Zuckerberg on Thursday, according to the BBC , during which regulation will be top of the agenda.
The developments in Britain and Germany have been noted on Wall Street. In a couple of notes this month, analysts have started to ponder what it could all mean for Facebook’s bottom line.
On the ruling in Germany, SunTrust Robinson Humphrey said: “We believe this is a meaningful ruling against Facebook, which would require a fundamental altering of its data collecting practices, and which could have negative effects on its monetization capabilities over time.”
And Bank of America Merrill Lynch deemed the UK parliamentary report “another regulatory setback.” In an otherwise upbeat note on Facebook’s prospects, it warned: “We believe additional regulatory and negative press will likely continue to pressure valuation multiples.”
Facebook and Google spent record amounts on lobbying last year, splashing out $18 million and $21 million respectively on whispering in the ears of lawmakers. Facebook also made a high-profile hire in the shape of Britain’s former deputy prime minister Nick Clegg, who has an intimate understanding of the EU’s corridors of power.
Facebook accepts regulation is coming, but it would like to shape it in a way that does not drastically damage a business model predicated on monetizing people’s data. Not least because investors are watching.
Source: Business Insider