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Facebook's Zuckerberg to Face Congressional Grilling

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10/22/2019 | 11:08am EST

By Jeff Horwitz and Deepa Seetharaman

In the 18 months since Mark Zuckerberg last testified on Capitol Hill, Facebook Inc. has focused heavily on three big initiatives: its cryptocurrency plans, a push to private messaging, and fixing the abuses of its platform.

As he returns to Washington for another congressional grilling this week, he and his social-media giant find themselves embattled on all three fronts.

Mr. Zuckerberg is set to appear before the House Financial Services Committee Wednesday, the sole witness in a hearing focused on Facebook's libra cryptocurrency plans, which have lost key financial industry partners and been criticized by regulators since it was announced in June. Lawmakers also are expected to cover concerns about potential discrimination in how the company handles housing and credit-related advertising.

Mr. Zuckerberg's testimony follows a denunciation by British, Australian and American officials, including U.S. Attorney General William Barr, of Facebook's plans to extend encrypted messaging across its platforms. That encryption push was part of a broader shift unveiled in March toward private messaging after heavy criticism about privacy violations, misinformation and other abuses on its core, public social platform.

Facebook executives, including Mr. Zuckerberg in his April 2018 testimony, have vowed to fix those problems on the platform, but the company remains mired in controversy over issues like how to moderate political speech. And the company faces calls from numerous politicians, including Sen. Elizabeth Warren and other Democratic presidential candidates, to break up Facebook and other big tech companies.

All those controversies are rooted in persistent discomfort among users, regulators and politicians about Facebook's ability and willingness to oversee activity by its billions of members on its vast platforms. This discomfort is made more acute as the country heads into another U.S. presidential election year after widespread abuse on Facebook during the 2016 campaign.

"They serve as a potent target to both parties who want to beat up on them," said Roslyn Layton, a visiting scholar at the conservative American Enterprise Institute who studies the regulation of tech companies. She argued that the company's plans have been uniquely singled out among the tech giants for scrutiny.

Mr. Zuckerberg won generally positive reviews for his last appearance before Congress, looking poised and avoiding any major gaffes but also deferring answers on many of the most difficult questions. He has stepped up his outreach to Washington, with a recent trip to the White House and Capitol Hill.

On Thursday, the 35-year-old billionaire fueled new controversy with a speech asserting Facebook's commitment to free expression in the face of criticism over its decision to exempt ads by political candidates from fact-checking. His sweeping speech at Georgetown University framed social media as the "Fifth Estate," a check on both government and media that could foment discussion and mobilize people in keeping with the legacy of the Rev. Martin Luther King Jr.

"Most progress in our lives comes from regular people having more of a voice," Mr. Zuckerberg said, pledging to hold the line against efforts to expand restrictions on speech. "Democracy depends on the idea that we hold each others' right to express ourselves and be heard above our own desire to always get the outcomes we want. You can't impose tolerance top-down."

The remarks prompted criticism, including from liberal organizations and civil rights advocates including Dr. King's daughter, who took them as an abdication of Facebook's responsibility to police its platform. She will be meeting with Facebook officials later this week.

"Frankly, I think a lot of folks are just flummoxed about what the path forward is and if there's any point to engagement at all," said Vanita Gupta, president and CEO of the Leadership Conference on Civil and Human Rights, of working with Facebook. Before recent disagreements, Ms. Gupta said her organization had been talking with Facebook operating chief Sheryl Sandberg and other officials for much of the past year about the company's efforts to combat online voter suppression.

Sen. Josh Hawley, one of Facebook's most outspoken Republican critics, accused Facebook on Twitter of being willing to censor content when it suits its business interests. Some other conservatives, who have claimed their views are limited by social media companies, applauded Mr. Zuckerberg's stance.

"He was trying to walk down the middle, but using the language and parlance the right would understand," said Ms. Layton, who argues that the company has a better chance of placating Republicans than Democrats about how it moderates speech -- especially when it is publicly sparring with Democratic front-runners Joe Biden and Ms. Warren.

The libra effort has encountered staunch opposition both from Democratic members of congress and the Trump administration, and that has led the project's most prominent financial industry backers to jump ship.

"If you take this on, you can expect a high level of scrutiny from regulators not only on libra-related payment activities, but on all payment activities," warned Democratic Sens. Brian Schatz and Sherrod Brown in a letter to Visa Inc., Mastercard Inc. and Stripe Inc. earlier this month. Treasury Secretary Steven Mnuchin said his department had also written letters to the partners raising questions about libra.

Simon Gleeson, a partner at law firm Clifford Chance who has talked with Facebook about libra but doesn't represent the company, said he expects Mr. Zuckerberg to encounter further antipathy in Wednesday's hearing. The company's scale and reputation means that libra has received far more scrutiny than other asset-backed cryptocurrency efforts.

"The association with the name Facebook suddenly causes people to think about it not as a startup but as a thing that is enormous," he said.

Barring a calamitous performance by Mr. Zuckerberg, the hearing will likely do little more than put Washington's skepticism of Facebook on display, Mr. Gleeson said. He predicted that libra's governing council, which held its first meeting in Switzerland last week, stands a better chance of progress in a less dramatic setting, such as the Group of Seven's working group on stablecoins, which are digital assets backed by baskets of global currencies like the U.S. dollar or other investments.

Regardless of the forum, Mr. Gleeson said, Facebook would best serve libra by emphasizing the cryptocurrency project's independence.

"I strongly suspect he's going to spend a lot of time explaining that libra is not Facebook," he said of Mr. Zuckerberg's testimony.

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

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