Facebook's Angry Emoji & SEC Interest: What You Need to Know

Facebook's Rebranding and Ongoing Concerns

Despite a potential name change, the issues surrounding Facebook remain. Recent disclosures continue to highlight the detrimental impact the company has on both society and its investors.

Revelations from Frances Haugen

The disclosures made by former Facebook employee Frances Haugen were impactful, though not unexpected. Haugen, who previously focused on election security, shared a substantial collection of documents with the media, legislators, and regulatory bodies.

These documents revealed that Facebook was consistently aware of the harmful effects of its algorithms, particularly on vulnerable populations. For example, the platform allegedly promoted “thin-spiration” content to teenage girls, potentially contributing to eating disorders.

Prioritizing Engagement and Profit

An internal analysis of Facebook’s systems demonstrated that negative reactions, such as the “angry” emoji, were valued five times more than positive “likes.”

This prioritization of controversial content aimed to maximize user engagement and, consequently, increase profits.

Misleading Investors

Facebook’s actions extend beyond harming consumers; they also involve potential misconduct towards investors. Haugen asserts that the company deliberately misled shareholders regarding crucial business information.

This includes details about safety measures and the actual size of its user base.

SEC Complaints and Allegations

By withholding this critical information, Facebook may have violated securities laws and regulations. Haugen has filed at least eight complaints with the Securities and Exchange Commission (SEC) alleging these violations.

Furthermore, a second anonymous whistleblower submitted an affidavit to the SEC, claiming that Facebook prioritizes growth and profitability over addressing hate speech and misinformation.

The SEC's Role in Regulation

While often viewed as a tech company, Facebook is fundamentally a publicly traded entity, making it subject to SEC regulations and oversight. The potential for SEC involvement in regulating Facebook hasn’t received sufficient attention.

Past SEC Interactions with Facebook

The SEC previously approved Facebook’s initial public offering in 2012, a process that included a unique share structure granting Mark Zuckerberg continued control.

The SEC also reached a settlement with Facebook regarding its failure to disclose the Cambridge Analytica data misuse scandal, which affected approximately 30 million Americans.

The Need for Strong Regulatory Leadership

Requesting increased SEC scrutiny of Facebook, given its recent settlement over securities law breaches, is a reasonable expectation. The Biden administration’s appointments of Gary Gensler and Lina Khan to lead the SEC and Federal Trade Commission (FTC) are positive steps.

However, regulating these large tech companies requires a broader, more comprehensive approach than any single agency can provide.

A Whole-of-Government Strategy

A comprehensive, government-wide strategy is necessary to address the challenges posed by large tech firms. The Biden administration’s Council on Competition is a good starting point, but further action is required.

This includes preventing these companies from dominating new markets, such as fintech and government contracts, recognizing their potential to exploit these opportunities for further growth at the expense of competition and consumers.

Congressional Oversight is Crucial

Congressional engagement is also vital. During a Senate subcommittee hearing featuring Haugen’s testimony, the House Financial Services Committee held a hearing on SEC oversight.

Despite extensive coverage of Haugen’s allegations, the SEC’s role in holding Facebook accountable to its investors was not addressed during the hours-long hearing.

Lack of Coordination and Imagination

This oversight represents a failure of coordination and a lack of foresight. All members of Congress should be actively considering solutions for dealing with these massive corporations, including urging the Biden administration to take stronger action.

A Pattern of Whistleblower Revelations

Haugen is not the first whistleblower to come forward with concerns about Facebook, and she likely won’t be the last. The time for the U.S. federal government to passively observe the dangers outlined by Facebook employees, shareholders, and founders has passed.

Bold and Cohesive Action is Required

As these companies grow in size, power, and potential for harm, the Biden administration must act decisively and cohesively. This should begin with the SEC thoroughly investigating Facebook and rigorously enforcing existing laws.