Facebook may soon be facing an antitrust lawsuit from the FTC, according to reports. Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Ines Ferre discuss.
ALEXIS CHRISTOFOROUS: Facebook reportedly may soon be facing an antitrust lawsuit from the FTC. "The Wall Street Journal" says the agency is gearing up to take action by the end of the year, though it's unclear if the case will even be filed. Ines Ferre is with us now for more on this. So, Ines, tell us what do we know at this point.
INES FERRE: Well, we know that the FTC has been-- spent more than a year investigating, probing Facebook on antitrust grounds, but there is no decision yet, as you just said, as to whether or not a suit will be filed. In order to file charges, a five member commission at the FTC has to vote to do so to approve a lawsuit to be filed. Now this probe is part of a bigger investigation into internet companies that was started by the FTC and state and federal agencies as well.
And Facebook had confirmed back in August that Mark Zuckerberg, CEO and founder of Facebook, had been interviewed by the FTC as part of this antitrust probe. And back then, Facebook had put out a statement in August saying, we are committed to cooperating with the US Federal Trade Commission's inquiry and answering the questions the agency may have. Now it will be interesting to see if there are any charges filed, what type of claims are in there because the criticism in the past against Facebook has been that it copies its competitors, that it acquires smaller apps, apps that it sees as a threat to Facebook. Alexis.
BRIAN SOZZI: And Ines--
ALEXIS CHRISTOFOROUS: And at the same time--
BRIAN SOZZI: Go ahead.
ALEXIS CHRISTOFOROUS: No, go ahead--
BRIAN SOZZI: No, I was going to say, at the same time, guys, that while this is happening, you have Katy Perry and Kim Kardashian boycotting Instagram. Why is that?
INES FERRE: Yes, it's a protest against hate speech, against misinformation on platforms like Facebook and Instagram. And this is part of the Stop Hate For Profit campaign. It's put forth by a coalition of civil rights groups, the same groups that had put forth that same campaign that led the advertising boycott against Facebook back in July. Now the campaign is calling out Facebook to do more against violence, to do more against disinformation against hate speech.
And Kim Kardashian West tweeted out about this. Remember she has more than 66 million followers. And she said in her tweet, "I can't sit by and stay silent while these platforms continue to allow the spreading of hate propaganda and misinformation." And she went on to say, "misinformation shared on social media has a serious impact on our elections and undermines our democracy. Please join me tomorrow," which is today, "when I will be freezing my Instagram and Facebook account to tell Facebook to stop hate for profit." So she's certainly someone very popular on Facebook who says she's freezing her account for today in order to take part in this protest.
ALEXIS CHRISTOFOROUS: And Ines, I know a lot of big name companies had boycotted Facebook. They weren't advertising there for a while. Have they started to come back to the platform?
INES FERRE: Well, many of them have, some have not. But remember that in that boycott that we saw in July, more than 1,000 companies took part in that boycott. And in the second quarter, advertising was up 10% for Facebook and it was expecting to continue that trend into October. And you can compare that to a rise of 17% in the first quarter year over year. But advertising had been going through a little bit of turmoil, of course, because of COVID-19 prior to that July boycott.
And if you take a look at the sheer sort of scope of advertisers that Facebook has, Facebook doesn't just depend on the big name advertisers, Facebook also has mom and pop shops. Those depend on the Facebook platform in order to promote their businesses.
And in fact, there was a note from JP Morgan, back in July, which said the following. It said, with nine million plus advertisers on the platform, we do not believe the ad boycott will have a major impact. Overall, we expect upside to third quarter numbers as marketers ramp up unallocated ad spend in the second 1/2 of the year. So, certainly, it didn't seem like it made a big impact to its bottom line, perhaps more to Facebook's reputation.
ALEXIS CHRISTOFOROUS: All right, thanks a lot, Ines.