Plus, facebook marching forward with at least one ftc settlement in its rearview mirror. The Company Posted secondquarter results, shares are up more than 50 this year as most of wall street says fundamentals remain strong. Tesla resorts secondquarter results, the ev maker misses on cutting losses and wall street reacts. We will break down what went wrong and right. Our top story, facebook out with secondquarter earnings, proving the company can grow advertising and users while feeling the heat from regulators worldwide. Hours after facebook announced a settlement with the u. S. Federal trade commission to end a probe into the privacy policies, the company confirmed it is being investigated by the ftc on antitrust as well. Facebook was alerted to the investigation in june but is just now sharing the news with investors. This as growth in revenue and daily active users Beat Estimates but with its reputation continually under assault, how . To discuss, we are joined by the marketers. David, first of all, what is your take on this new antitrust investigation official by the ftc . David it doesnt really surprise me. We have multiple parts of the government investigating facebook for many things. One of the most salient things about the settlement and the 5 billion fine is facebook did not admit they did anything wrong. I think we really havent seen them show a lot of introspection about why all this happened and i think that is telling. Unfortunately, the reason it happened is because they have had poor governance and it had bled out into all kinds of areas of their business and it is causing them longterm ongoing harm. Emily we are going to talk to one of the commissioners about the details of the settlement and how it will change facebook Going Forward in a moment. Speaking about the numbers, with all of these controversies, all of these scandals, how does facebook seem to keep beating the odds . Deborah it is a tough company. It really is. Every quarter i say the same thing. They have been able to grow revenue, grow user base, despite mounting challenges. This quarter, more of the same. It is really incredible that facebook has been able to do this quarter after quarter. Emily david, i am going to push back a little. They beat on daily active users, on users, they came light on monthly active users, but do you think this is not going to impact the companys longterm reputation and ability to grow . David its reputation is the companys reputation is seriously impaired already. The ability to grow is a complicated question, because, as deborah pointed out, they just keep raking in the dough. They are a brilliantly welldesigned advertising platform, especially for smaller businesses. There is not really another place to go with similar results. That is great for this company, but longterm, is it going to affect them . It is absolutely going to affect them. There is no question about that. Debra i would love to jump in. I 100 agree with david on that part. I think that teflon part of it is their ability to grow revenue and user base quarter after quarter. I do believe there is plenty of Consumer Sentiment issues with facebook. There are plenty of growing issues with regard to how advertisers feel about facebook, but the thing is, there is still spending there and people are still using facebook, despite those concerns. Emily earlier today, zuckerberg gave a town hall at the company. Here is what he had to say about the settlement. Take a listen. Mark zuckerberg i believe that companies should be held accountable on privacy. This is what accountability looks like. As part of this settlement, we have to pay a major fine and there are now very clear rules about how we need to operate on this. I believe that this is going to help us serve our community better. Emily the ftc could have sued facebook but that didnt happen. They could have sued zuckerberg, that didnt happen. They could have curtailed zuckerbergs professional responsibilities as well. That happened to a very small extent. Do you think the settlement goes far enough to provoke the introspection that you believe is needed as the Company Continues to grow . David i would probably have to say no, because i do not see enough introspection. If it takes a 5 billion fine to make a Company Finally start doing what it should have been doing all along with privacy and governance, that is a very bad sign about the culture of the company. I do see gradual reform and changing behavior, i am not going to deny the company is any other place than it has been in the past. The fundamental reasons why this happened have not been addressed and i think they allowed a culture to emerge which showed very little concern for some basic interests of their users, because they were so thrilled at the amount of money they were making. Emily this is really a family of companies now. Facebook, messenger, whatsapp, instagram, how do you see growth in these different divisions changing in the future . Instagram continues to be a better story. We suspect that facebook proper users are getting older, growth is starting to slow. What do you see . Debra instagram remains a very strong growth engine, no question. No question. That said, according to our forecast, instagram is still well under one third of facebooks total revenue and will continue to be that way in the next few years. It is not like growth at instagram is going to suddenly balloon this company to be bigger than it already is. The main part of revenue, the Main Driving Force of revenue remains that big blue app. There is no revenue going into whatsapp, limited revenue going into messenger. It is really all about the blue app and about instagram, with most of the focus on the blue app. Emily we will continue to follow the headlines. Facebooks Earnings Call is underway. Thank you both as always. In other earnings news, test the shares fell in late training after the Company Reported tesla shares fell in late training after the Company Reported secondquarter results. The carmaker posted a worse than expected loss. Tesla said it is going to focus on delivering more cars, expanding capacity and generating cash Going Forward. We will break down teslas earnings later this hour. Coming up, back to facebooks record settlement with the ftc. This is a watershed moment in privacy enforcement and privacy governance. Emily we will hear from ftc commissioner Noah Phillips on how he thinks the facebook fine of 5 billion will change how your data is protected and ask about the newly revealed antitrust investigation. That is next. This is bloomberg. This settlement is the result of an exhausting exhaustive investigation which concluded that facebook betrayed the trust of its users and deceived them about their ability to control their personal information. Emily that was federal trade Commission Chair announcing what we all knew was coming. A 5 billion settlement between the ftc and facebook. Four years of privacy violations by the social network. Some terms of the deal increased responsibility by the board to protect user data, but little impact to facebooks lucrative advertising business. The agreement was approved by the ftc with a vote along party lines. I want to bring in one of the officials who voted in favor. Minutes ago, facebook announced it is being investigated on antitrust by the ftc, one day after the department of justice said it has opened an antitrust probe into big tech. Ftc commissioner Noah Phillips joins us from washington. Thank you so much for joining us. We just learned about the ftc antitrust investigation into facebook. On top of this settlement news that we heard today, how advanced is this antitrust investigation and can you tell anything about what you are exploring . Noah thanks for having me. The details of what we do in terms of investigations and even the existence of those investigations is confidential and we dont reveal it. In this case, because facebook has publicly announced that they are the subject of a probe, i can confirm that there is a probe. Emily so, it is widely known that, for example, facebook used data that it tracked from its own users to decide whether or not to buy instagram, to understand that instagram was becoming popular. Do you think you will use some of the details that you learned as a result of the privacy investigation in the antitrust investigation . Noah unfortunately, because it is an ongoing investigation, other than confirming its existence, there is nothing that i can say. Emily all right, so lets talk about the ftc settlement, which i said earlier, the vote was along party lines. It was not along party lines. However, can you tell us how the ftc came to the decision . Came to the terms of the settlement we heard today . Noah in 2012, facebook committed to us and to the American People that it would take certain steps in regard to privacy. In particular, that it would not misrepresent the kinds of sharing going on with App Developers and the control facebook users had over data they gave to facebook. It also committed to having a reasonable Privacy Program, but facebook broke those promises. It also broke a few other promises. We are here today because we looked at what facebook had done and we wanted to send an Important Message about adherence to ftc orders and commitment to privacy. Noty Mark Zuckerberg will have to personally certify that facebook is complying with its new privacy policies. How would you like to see his management of the Company Change . Noah i think, above all, what we would like to see is a greater focus at facebook on privacy. That includes mr. Zuckerberg and under the terms of the order, he is going to have to focus more on privacy, but it is not just about Mark Zuckerberg. What this order requires beyond the 5 billion fine is attention to privacy at every level of the company. Engineers who are working on projects are going to have to think about the privacy impact of what they do and if they choose not to protect privacy, they will have to explain why. This goes all the way to the board of directors. The board is going to have a new Privacy Committee which will have ultimate authority to oversee privacy. Emily why not find zuckerberg directly or do more to limit his personal authority . Noah as i said, this case is not just about Mark Zuckerberg. This case is about facebook in general. Mark zuckerberg is a very important person at that company, but he is by no means the only one. We want people up and down the line to be focused on privacy. Emily there are a lot of critics who say a 5 billion fine is not enough and that the structural changes required here are also not enough. One of your colleagues who voted against the settlement says it imposes no meaningful changes to the Company Structure or financial incentives which led to these violations. Instead, the order allows facebook to decide how much information it can harvest from users and what it can do with that information. What is your response . Noah to me, there are two really important points here. The first is this. What we do at the ftc is law enforcement. So what we look at is what the facts show, what are the obligations, and did the company break the law and we try to remediate the violation of the law . We dont come in and tell the company what to do about everything. There are a lot of people in america who have real concern about how facebook conducts itself. That is a conversation that goes on all the time in homes across the country and right now in congress, which is thinking about privacy legislation. What facebook was doing in terms ad practices is not what this case was about. This was about the misrepresentation to users about privacy and several of those things we talked about, and critically, that is what we are aiming to remedy. Emily another colleague who voted against this says the ftc would have done better by suing facebook and zuckerberg himself. Why not do that . Noah i dont think that is an accurate characterization of the state of play. The revenues we have achieved are both financial and injunctive, meaning the changes we are making to facebook, are very unlikely to have been achieved through a court process. In a normal litigation, you are weighing the certainty of less against the chance of more. In this case, what we were facing is a decision between the certainty more and the uncertainty of getting even less. Emily now, privacy advocates have advocated for bigger changes to how facebook attracts tracks its users and fundamental changes to the advertising revenue business. Do you really think that the changes made here are going to be enough to change facebooks perpetuity Going Forward if it is not, aside from , a 5 billion fine, hitting the bottom line . Noah that conversation is a really important one. It is part of the conversation going on nationally and in congress about what ought to be allowed and what isnt allowed. That is not what this case is about. This case is about the commitments that facebook made and its violation of those commitments. That is what we are focused on here. Emily lets talk about Going Forward. Are you in favor of a National Privacy law . Noah that is something i have urged congress to consider. I think they are looking at a a lot of Business Practices at facebook and elsewhere in the economy. I do think congress ought to take a careful look at this case, look at the underlying practices, and if they think that they dont like what facebook did and should have changed every thing about their business, that is a fair thing for congress to think about and that should inform the conversation over National Privacy legislation. Emily lets talk about the conversation happening between the commissioners. The chair of the ftc has said he doesnt want or believe the government should have broad rulemaking authority, rather targeted rulemaking authority. Is a National Privacy law going to be better for users and consumers in the future . Noah i certainly hope, if we adopt any law, that it is better for consumers. In terms of rulemaking authority, my view is that the fundamental decisions in privacy involve real tradeoffs between competition and privacy. Those are the kind of tradeoffs congress is best able to make. Emily what kind of a law, what details, what fine print would you support . Noah i think we have to see what Congress Comes up with. I am very excited to see them come out with a bill and consider it. Emily lets talk bigger picture. I understand that you cannot comment on the specifics of the antitrust investigation into facebook, but in your opinion, do you believe there is a case to be made that facebook, given that it owns whatsapp, instagram, messenger, is too big . Noah the old saw in antitrust law is that big is not necessarily bad. But it is also true that where a company has a dominant market position in an antitrust defined a series ofe are legal obligations that go along with that. I am not going to comment directly about facebook, because, as you noted, the of confirmed the existence of the antitrust probe. Emily more broadly, senator Elizabeth Warren has called for the breakup of big tech. She has gotten support from both sides of the aisle. Does she have a point . Noah i gave a speech about this a while ago and what i said was, in antitrust, as elsewhere in law enforcement, what you want to do is figure out what is the wrong and how does the remedy address the wrong . That is a really important conversation to have. My view is that simply saying the same remedy for a wide variety of companies that have very different practices is neither the right answer, not getting to the right outcome, and is certainly not true to antitrust law. Emily speaking of ongoing investigations, i do have to ask, because it has been reported that the ftc has reached a settlement with youtube over violations of the childrens Online Privacy protection act. Can you tell us the status of your discussions . Noah as i said, as a general matter, we dont even comment on the existence of our investigations, much less the substance. Emily more broadly, can you comment on your level of confidence that big tech companies, whether it is facebook or alphabet or youtube, which is a google company, are they living up to the law . Are they doing what is right by consumers, by children . Noah let me say the following the law details what their obligations are and when they break the law, we are going to be there and that is why we are sitting here today. Emily Noah Phillips, commissioner at the federal trade commission. Thank you so much for joining us on a big day. Thank you. Good to have you. Coming up, the year of big tech ipos continues. Wework could be hitting the Public Market at the end of the year. We will have that story next. This is bloomberg. Emily wework is listed in looking to september in what could be the second largest ipo of the year. They are targeting a sale of about 3. 5 billion. Softbank is their biggest investor. It values the business, which is still unprofitable, at 47 billion. Another setback for the selfdriving car company. Industry. The General Motors unit is backing off plans to deploy robo taxis by the end of the year. The performance will not be able to be examined in time. Coming up, tesla sputters. Shares of the electric carmaker fall in after hours trading after the Company Reports a worse than expected secondquarter loss and backtracks on a profit forecast. Facebooks Earnings Call still underway. Take a listen to Mark Zuckerberg telling investors about the 5 billion fine his company will be paying the ftc. I want to talk about the recent news that we reached