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Facebook : Bolsters Antitrust Defenses

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06/07/2019 | 06:47 am


By Deepa Seetharaman and Jeff Horwitz




Facebook Inc. is revamping the leadership of its defense teams in the face of what is potentially the most serious antitrust threat to the company in its 15-year history.



Over the past year, Facebook has appointed new heads of its legal and communications teams, as well as hiring Nick Clegg, Britain's former deputy prime minister, to lead its lobbying and public-relations efforts overall. Several executives in those departments who had been at Facebook for a decade or longer have recently stepped down. The social-media company also has experienced substantial turnover in its Washington office.



The turnover means those key units' leaders weren't with Facebook at the time of the Cambridge Analytica episode -- involving a user-data leakage of intense interest to regulators -- or when the company snared Instagram and WhatsApp, acquisitions that punctuated its dominant position in social networking. The new personnel come to their roles knowing Facebook as it is today: one of the most powerful companies in the world, but besieged as never before.



Facebook continues to build its defense team, seeking in particular people with experience dealing with the government. The effort includes trying to fill a new job titled "senior public policy manager, competition."



The damage to the corporate brand has made it harder to recruit top talent in the nation's capital and for the company's policy team, a former Facebook executive said. "They're sustaining the greatest scrutiny of any company, and they're woefully unprepared for that," the former executive said.



A Facebook spokesman declined to comment. In recent weeks, Facebook Chief Executive Mark Zuckerberg has dismissed the basis of an antitrust case against the company.



"The argument that we are in some sort of dominant position might be a little stretch," he said on a conference call with reporters last month, arguing the company holds no more than a 10% share of the global advertising market.



The Wall Street Journal reported this week that for antitrust probes the Federal Trade Commission has assumed oversight of Facebook and Amazon.com Inc. while the Justice Department will have authority over Alphabet Inc.'s Google and Apple Inc. The House Judiciary Committee also said it would open an investigation into competition in digital markets.



On Monday, House Speaker Nancy Pelosi said in a tweet that for tech companies "the era of self-regulation is over."



Facebook, like Google and other principals of Silicon Valley, has been working closely with regulators for years. But some experts said the social-media giant isn't as seasoned on antitrust issues as some of its peers.



"Google's been at this for a long time," said Gene Kimmelman, former chief counsel for the Justice Department's antitrust division and president of Public Knowledge, an open-internet advocacy organization that has received money from both Google and Facebook. "For Facebook, maybe this is a newer thing."



Some say the company has been slow to lay the foundation for a level of scrutiny that many believe was inevitable.



"At Apple and Google, those people have been in the job for four, five years," one former FTC official said. "At Facebook, they're figuring it out, and it's way too late."



Facebook's challenges are unique, emerging from a bruising two-year period in which the company has been widely criticized for its business practices involving privacy and the handling of misinformation on its platforms. The company has said it expects to pay a fine of up to $5 billion to settle an FTC investigation into its possible violation of a 2012 agreement to better protect user privacy.



Facebook defenders say it needed fresh blood in its legal and communication teams to navigate more intense public scrutiny and regulatory attention confronting tech companies globally.



The company's media-relations operation, not counting the enlistment of numerous outside public relations firms, has expanded to roughly 400 people around the world. However, its Washington, D.C.-based policy communications team has shrunk from six members to two -- one of whom will soon be heading to company headquarters in Menlo Park, Calif.



Facebook has an antitrust team operating out of its Menlo Park offices, and finding hired help in Washington wouldn't be difficult. Gibson, Dunn & Crutcher LLP, the Los Angeles-based law firm that has been handling the fallout from the Cambridge Analytica scandal, has a robust antitrust practice.



Jennifer Newstead, Facebook's new general counsel, was hired in April after a stint as the State Department's top legal adviser. The company also hired a former antitrust lawyer for the Justice Department, Kate Patchen, who was in the agency's San Francisco office.



Ms. Newstead's first job in government was during the George W. Bush administration. In the aftermath of the September 11 attacks, she helped shape the Patriot Act, accelerating the expansion of national security infrastructure into the digital world.



Most of her legal work has been in private practice at Davis Polk & Wardwell, where she focused on corporate compliance, antitrust and regulatory matters. Federal ethics disclosures show Ms. Newstead worked for companies including Comcast Corp, AstraZeneca PLC and IBM Corp. She also helped HSBC Bancorp reach a deal with U.S. regulators after the bank and some of its top traders were caught in a wide-ranging foreign-exchange fraud.



John Pinette, head of global communications at Facebook, joined the company in April after a career that included representing Microsoft Corp. in its long-running antitrust battle with the Justice Department.



It is hard to predict what course lawmakers and regulators might take to rein in technology companies, and any action is unlikely to happen quickly. But the biggest tech firms are still trying to prepare themselves.



"The Valley in general and Facebook as one of the big ones, I think they are struggling with how to put in place the right people how to lobby for the right policy -- and I don't think they know what's the right policy," said Ben Schachter, senior analyst at Macquarie Group. "Right now, we hear regulate Big Tech. We don't know what that means."



Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com





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