Zuckerberg testifies on Capitol Hill as Facebook faces Libra scrutiny

Los Angeles Times Finance 1 month ago

Facebook Inc. Chief Executive Officer Mark Zuckerberg will face the House Financial Services Committee on Wednesday with a legion of lobbyists backing him up.

Despite spending record amounts of money to influence Washington policy, the social media company’s efforts to ingratiate itself so far have done little to assuage policymakers’ privacy and antitrust concerns and in some cases have even made the company’s challenges worse, according to firsthand accounts of its efforts.

Facebook’s struggles to gain traction in Washington aren’t due to a lack of resources.

In the third quarter, Facebook spent a record $4.8 million on lobbying, according to federal disclosures filed Monday, up 70% from the same period a year earlier. Since October 2018, Facebook has hired 12 external lobbying firms to supplement the 11 lobbyists it counts among its own employees, according to the company’s filings. Facebook brought on many of the outside firms to support the launch of a new cryptocurrency called Libra -- which has encountered sharp pushback from lawmakers and regulators.

Libra is just one item on the growing list of issues that has put the social media company founded by Zuckerberg in the spotlight. Others include repeated privacy lapses, allowing its platform to be exploited, and questions about whether it bought rivals to thwart competition.

Just in the last two years, the company has acknowledged the unauthorized use of private user information by a political data firm, shut down several state-backed disinformation campaigns, been targeted with multiple antitrust investigations and been hammered for taking money to publish false political advertising, including trading barbs with 2020 presidential candidate Elizabeth Warren. It failed to get blessings from U.S. regulators before unveiling a plan to launch Libra.

“They have made terrible strategic and tactical decisions over the past year that have ranged from how they are communicating with everyday people to decisions that are being made about what content to allow as it relates to politics and the election,” said Amy Webb, a consultant and professor at the New York University Stern School of Business. “They were in a bad position to begin with, but I don’t think they have managed it well.”

The episode that led Zuckerberg to testify Wednesday actually resulted from a contentious meeting between House Financial Services Committee Chairwoman Rep. Maxine Waters (D-Los Angeles) and Facebook’s Chief Operating Officer Sheryl Sandberg.

As the committee negotiated with Facebook, Waters wanted a senior executive. Facebook said Sandberg would be best suited to appear.

However, in a meeting with Waters in September, Sandberg told Waters she wasn’t equipped to answer her questions on the Libra cryptocurrency, according to a person familiar with the meeting. Sandberg also told Waters she didn’t see why a hearing was needed in the first place, the person said. Sandberg attempted to agree to a hearing only if Libra co-creator David Marcus could testify alongside her, which the committee rejected. The encounter was reported earlier by the Information, a technology news website.

Waters demanded that Facebook commit to Zuckerberg testifying next year, if not sooner, eventually leading to the CEO to take Sandberg’s place at Wednesday’s hearing.

Spokesmen for Facebook and the committee declined to comment on the meeting.

Some congressional staffers said Facebook’s hiring so many lobbyists in Libra’s early days backfired as the lobbyists reached out with overlapping requests to meet with them or the lawmakers they worked for. Facebook’s internal lobbyists regularly blanketed staffers with generic emails one staffer described as “spam” and impersonal, rather than building relationships.

In June, Facebook turned up the heat further with its Libra announcement. Facebook said the project, which originally included 28 partners such as Visa Inc. and Mastercard Inc., could launch as soon as 2020, surprising lawmakers and regulators.

While Facebook was one of the only original Libra partners willing to publicly support the project, staffers said they were sometimes confused when company executives cautioned that they couldn’t make commitments on behalf of the then-28-member Libra Assn. Seven of the original members dropped out this month as the association finalized its charter and governance structure.

The Libra Assn. hired its own lobbyist, Skadden Arps Slate Meagher & Flom LLP, in September, according to a federal disclosure released on Monday. Facebook’s outside lobbyists in the third quarter included Harbinger Strategies, Peck Madigan Jones and Steptoe & Johnson LLP among other firms.

Even as its lobbyists blanketed Capitol Hill, on Libra and other issues, Facebook initially resisted calls for its senior executives to testify before congressional committees, according to some staffers. One of them acknowledged that company officials often resist testifying, but said that asking a Facebook executive to participate was like trying to get the pope to appear before lawmakers.

A Facebook spokesman pointed out that company executives have testified 16 times in front of 10 committees since October 2017.

Now, Zuckerberg is taking some of the lobbying push into his own hands. Wednesday’s hearing will be his third public appearance in Washington in the last month and his first time testifying since he appeared at House and Senate committee hearings in April 2018. In September, he met with several lawmakers in one-on-one meetings and at a private dinner. He even met with President Trump at the White House. Last week, he met with Waters ahead of the hearing and gave a speech at Georgetown University defending the company’s decision to allow false political advertising.

At Wednesday’s hearing, Zuckerberg plans to acknowledge some of the company’s missteps and that the furor of the last two years will make projects such as Libra difficult to pull off.

“I believe this is something that needs to get built, but I understand we’re not the ideal messenger right now,” Zuckerberg said on Libra in his written testimony. “We’ve faced a lot of issues over the past few years, and I’m sure people wish it was anyone but Facebook putting this idea forward.”

--With assistance from Naomi Nix and Kurt Wagner.

Tags: Business

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