Mark Zuckerberg told investors that regulation is the best cure for the tech backlash, just hours after the company was slapped with a $5 billion FTC fine (FB)

facebook mark zuckerberg

The FTC has hit Facebook with a $5 billion fine over privacy issues.
Later the same day, Facebook announced its Q2 earnings, and CEO Mark Zuckerberg took the opportunity to discuss regulation.
He told the analysts on its earnings call that he's worried that if tech doesn't get more regulated, backlash against the industry is going to continue to grow.
Earlier in the day, Zuckerberg told Facebook employees that the company was committed to change.
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Facebook CEO Mark Zuckerberg says he's worried that if the technology industry doesn't get more closely regulated, backlash against Big Tech is going to keep getting bigger.

On Wednesday, the FTC formally announced it had reached a $5 billion settlement with Facebook over charges that it misled its users on privacy issues — a fine that was record-breaking in size but was not accompanied by more fundamental changes in Facebook's business model, prompting some critics to accuse the US regulator of going easy on the company.

Hours later, Facebook disclosed its financial results for the second quarter of 2019, and in a subsequent call with analysts Zuckerberg talked about how the company is viewing the regulatory landscape and next steps for the company.

His comments provide valuable insight into how Facebook is trying to position itself as a champion of moderate regulation, and the areas that it is hoping to invite regulatory and legislative scrutiny.

In his opening remarks, Zuckerberg sought to stress that — contrary to the FTC's detractors — the settlement will purportedly involve significant changes to how Facebook operates.

"We're making some major changes to how we build our services and run this company," Zuckerberg said on the analyst call. "This will require investing a significant amount of our engineering resources in building tools to review our products and the ways we use data. It will also significantly increase our accountability by bringing the process for auditing our privacy controls more in line with how financial controls work at public companies ... . It's critical that we get this right, and we're going to build it into all our systems. It's going to take time to do this properly, and I expect it will take us longer to ship new products, especially while we're getting this up and running."

A full transcript of Zuckerberg's prepared remarks from the earnings call is available on the company's Investor Relations website.

Later on the call, an analyst asked Zuckerberg to talk more about how he viewed the regulatory landscape across the globe. He responded, in part (emphasis added):

"Over the last few years we've focused a lot on a number of social issues. Everything from preventing election interference, to reducing harmful content to protecting privacy, now I'm out talking a lot about data portability, and on each fo these I think there's work that we can do, and certainly have a responsibility to ensure that we perform well on them.

"But at the end of the day, when our systems are mature, there's still going to be trade-offs between important values that we have — on content, between free expression and civil discourse and in removing hate and things like that, and these are hard questions that on some level we're always going to do the best we can.

"But we think that having a more democratic standard for setting some of these norms would be helpful ... we believe there needs to be a regulatory framework in place for each of the major issues I just talked about, and my broader concern is that if that doesn't get put in place, then frustration with the industry will continue to grow.

"So we're trying to do our part to help advocate for a good regulatory framework in each area, and it will come in different forms. So in some places there we be laws passed, in others it might be working with regulators in having structural rules placed on us like this FTC settlement, in other areas it might be self-regulation ... overall we're very focused on it. I do think we're making progress on working through the issues and addressing them. We're, I think, at a much stronger place on elections now, our content systems are much more mature. There's a lot more work to do on each of those but I think we are making progress and as I said, this is a global problem, not just a US one, so working with folks who are across Europe and other continents as well is important."

Facebook's communications team also emphasised this on Wednesday by taking the unusual step of sharing a video of Zuckerberg addressing employees at an internal "Town Hall" meeting, telling them: "This is a new chapter for the company ... and we're gonna change the way that we operate across the whole company, from the leadership down and the ground up."

In short, Facebook is trying to signal to investors (and, it seems, employees) that it has a handle on the issues that have bedeviled it for the past two years, while making clear that it's not yet perfect. And it is hoping to guide the regulatory conversation towards areas where it believes it can make meaningful changes that will satisfy demands for reforms of the industry — without undermining its overall market power.

Some of the staunchest critics of tech, including presidential hopeful Elizabeth Warren and Facebook cofounder Chris Hughes, are calling for antitrust action to be taken against Facebook (and other tech firms) — a regulatory remedy that would have far more serious consequences for the company.

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