Transcripts For CNBC Squawk Alley 20240714

Good wednesday morning, welcome to squawk alley. Im carl quintanilla, obviously a big day for earnings were watching the hill, the ftc and facebook is the big news a News Conference on that 5 billion fine over data privacy issues is going to start in awe if moments. Were going to take you to washington when that begins, but the swirl of agencies circling the company, ftc, who knows what the doj has in mind and well get a clearer picture of what the quarter looks like tonight. I dont know why it feels like something shocking is happening. Weve known this fine is coming for a long time, a big fine, but somehow to see 5 billion written down then more interesting to me, the restrictions and the oversight, the committee within facebook that looks like maybe its been structured in a way where Mark Zuckerberg doesnt have total control over this piece, you know, the ftc making the case that Mark Zuckerberg has to certify this privacy compliance every quarter, and this time if he slips up, there will be consequenc consequences, young man. I dont know if thats true. I think its also interesting to look at some of the dissension within the ftc, could this have been so much bigger . Could there have been litigation against Mark Zuckerberg himself . Could the fine have been billions, perhaps tens of billions more. I dont know that we have any better indication of where this is all going, right, because it doesnt seem like this changes the fundamental Business Model for facebook of course big tech as a whole, what is the doj going to do which goes back to your question. Absolutely. Shares of google, amazon, facebook are going to pivot around that over time. Joining us with some insight on what this all means for facebook and the sector, is the former u. S. Assistant attorney general in charge of antitrust and fobil bear thanks for your time i appreciate it. Good morning, big news day. Its huge im wondering where you think the locust is of regulatory right now, lets just start with facebook. Well, facebook, you know, it has resolved its ftc Consumer Protection privacy issues, but its obviously in the cross hairs as a Successful Technology platform, and which may well have engaged in anticompetitive behavior that remains to be seen. There will be an investigation out of the ftc and some point down in the road well get an indication about whats going on. Bill, what happens if facebook i should say when facebook messes up again just this week in the past couple of days weve had this news about Facebook Messenger for kids and how even though it was supposed to be private and controlled by parents, people were able to get in on group chats in a way that wasnt expected Mark Zuckerberg is certifying every quarter that theyre under compliance with these privacy rules. Theyre supposed to have all of these different committees enforcing privacy rules and product development, privacy, privacy, privacy, when they mess up, what happens the order that facebook agreed to with the ftc today will spell out the consequences. Ive not had a chance to read it all, but if there is another messup, the order sets out a process for the ftc to get additional penalties and additional relief. This is going to be a judicially enforced order, and they can go to the court and demand further penalties, further relief. Bill, i wonder lets get to the hearing, bill, and see what the chair has to say. Record breaking 5 billion penalty includes new strict measures to change the way the Company Addresses consumers privacy and holds facebook and its executives accountable for the decisions they make about privacy in the future. This settlement is the result of an exhaustive investigation, which concluded that facebook betrayed the trust of its users and deceived them about their ability to control their personal information the Commission Staff conducted an extremely thorough investigation for over a year that focused on all of the potential violations of the ftcs 2012 order and section 5 of the ftc act todays compliant alleges that facebook violated the commissions order in three ways first, we allege that facebook told consumers that they could limit the sharing of their information to certain groups, friends, for example, but in fact, facebook shared that information more broadly with thirdparty App Developers second, we allege that facebook did not adequately assess and address privacy risks posed by thirdparty App Developers third, we allege that facebook misrepresented to certain users that they would have to turn on facial Recognition Technology but for millions of users the technology was already on by default. In addition to these alleged order violations, we also allege that facebook violated the ftc act when it told its users that they would collect phone numbers to enable a security feature they did not disclose they also used that information for advertising purposes the settlement with facebook is based on the recommendation of the ftcs career enforcement staff, and it includes three major components first, facebook must pay a 5 billion civil penalty, one of the largest in corporate history. Second, the order subjects the company to new expanded privacy requirements third, the order imposes significant Structural Reforms on how facebook does business including greater corporate accountability, more rigorous compliance monitoring, and increased transparency the magnitude of the 5 billion civil penalty we have imposed is unprecedented in global privacy enforcement. This penalty is more than 200 times greater than the largest privacy penalty previously imposed in the United States and is more than 20 times greater than the largest fine imposed in europe pursuant to the e. U. s general Data Protection regulation 5 billion is approximately 9 of facebooks 2018 revenue and approximately 23 of its 2018 profit this penalty is also one of the largest Civil Penalties for any type of conduct in u. S. History alongside cases involving enormous environmental damage and massive financial fraud. The enormity of this penalty resets the baseline for privacy cases and serves as an important deterrent for future violations. Even though todays 5 billion penalty is historic, it is just one piece of the relief achieved in this settlement. Thats chair simons were going to monitor that with ylan muis help. Bill baer helps us understand what this means for facebook, the former cto of the ftc tweets now if this were a game of chess, facebook just check mated the ftc, flipped the board so it couldnt be played again and covered the whole thing up with a blanket. Why do so many people believe this was a soft penalty . Well, i think it has to do with the size of the company, the its revenue, its pervasiveness. There are two ftc commissioners who thought the ftc should have gone to court and fought this out and demanded greater penalties. What you heard chairman simons say on your last hours segment was that they made a judgment call that what they were able to get, not just in terms of dollar relief, but also in terms of conduct that will limit the opportunity of facebook to engage in privacy violations going forward, but on balance, that was a good outcome. Reasonable minds can disagree on it it looks like at the commission reasonable minds did disagree. Bill, why does this fall on the ftc . Why arent we talking about something potentially more transformative such as congress doing something and passing laws to actually regulate Big Technology should that happen why isnt it well, i think congress is looking at that, and there have been president ial candidates and members of congress who are examining whether or not our privacy laws are adequate and whether our antitrust laws are adequate to dealwith this new phenomenon, the very successful, hightech platforms. So the Law Enforcement agencies are doing their jobs whats it going to take congress is looking at it. Whats it going to take for congress to get there . Well, you know, we havent seen a tremendous amount of agreement between the house and senate on legislation this last year, and with a campaign coming up, who knows, but i do think the public will have a role to play if they think these platforms are too large, too intrusive, they can express that at the ballot box. Bill, trying to be a student of history, whens the last time we were in a place like this, history of antitrust law, the progressive era when there were lots of companies in a single industry being targeted for a potential action any sense that this is perhaps a new era that were entering into leg legally . I think thats what both the ftc and the antitrust tuitidivin are trying to figure out the antitrust laws dont punish success, and they are not. These companies are obviously highly successful, but they seem to be almost immune to successful challenge from new innovators and competition, and sot question being asked is is there something significantly different about these folks that require a tweak to the antitrust laws, a different theory of potential antitrust. Thats whats really going on at both agencies and the hearings being held on the hill. Journal today brings up the notion of a turf war between the ftc and doj. They talk about bill barr back at the confirmation hearing saying that he was curious about how these Companies Got so big under the eyes of regulators, adding i want to find out more about that dynamic so who should companies be afraid of more right now well, if i were a Technology Platform or representing one of the big ones and i am not, i would i would basically be concerned about both agencies and the hill these platforms are going to be under increasing scrutiny in the u. S. Theyre already under scrutiny in europe, and i happen to know that all of them are very much focused on compliance. They dont want to be in the position whether it be Consumer Protection privacy or antitrust that facebook finds itself today. Bill, appreciate that very much what a day well see if this if were going to be talking about this day a year or two from now, bill baer, thank you. Youre welcome. When we return, apple to 230, thats the latest ayitus the music event of summer. Cma fest country musics biggest stars perform their hottest hits. And the first time ever. Lil nas x, Billy Ray Cyrus and keith urban perform the hit old town road. Cma fest sunday august 4th, on abc. And after the show check out a special encore performance of brett youngs song, catch. Available only on xfinity. Just say brett young into your x1 voice remote. Welcome back, faang stocks feeling the bleed all down save for netflix after the doj announced its opening a broad antitrust review of the tech giants shares of apple fell 1 on the news taking a 6. 8 billion bite out of the companys market cap. Wall street is sour on the stock ahead of earnings next week, but our next guest says improving trends could present an upside to estimates joining us now is Wamsi Mohan Bank of America Merrill lynch Senior Equity Research analyst thank you for being with us this morning. Thank you, deirdre glad to be here. I know youve been bullish on apple for a while. You are getting more cautious. Tell us why. I would say that being on both sides of the apple trade, you had a downgrade last year when the stock was at 222. We upgraded when we saw improving trends back in china as we look at the services numbers, we do see that although the optics suggest there is an acceleration in the quarter, there is an underlying dynamic that the trends got a little worse. Were a little cautious about that overall deceleration. A little worse, im looking at these numbers, thirdparty App Store Sales went from 23 yearoveryear in april, 19 in may, 5 in june. How do you get better from that, and arent we looking at more of a structural shift here . The trade war if its all of a sudden resolved it doesnt mean necessarily that apple is going to be selling as many iphones. There are chinese players who have and will and are stepping in. Good question to put it in the broader context of apple, china was growing at about app store was growing about 15 last year. This year 5 thats about ten point deceleration in app store from china, but thats only a third from app store, china is, and when you look in the context of overall services, thats only a third. The net of it is its only a one point headwind to numbers from a Services Perspective our indicator from today is actually showing we have an indicator on car dat proprietary to the bank. Its actually indicating an uptick in revenue trends from apple. Thats an inflection we saw that inflect negatively last year. Had a good rate of predicting those trends and we think its inflecting higher now. Iphone is still what direct this is company as far as earnings go. Youre expecting iphone units for the june quarter to be down 13 , expecting them to be down 13 again in the september quarter. What does apple have to do with the new phone in the fall in terms of features, in terms of geographic rollout to reach that 230 and maybe stay there yeah, no, its a great question look we think that apple has a shot of really driving trade and program much higher in 2019. They have been very focused on this extensively about the opportunity here you got a billion install base, 750 million primary users. Even at a fouryear replacement cycle, youre at 187ish million which is where consensus is. If people are upgrading their phones every four years, thats good enough to meet consensus numbers. Not a whole lot has to be done in 2019. Theres three new phones coming in we think there might be a concurrent launch of these foen phones in september. Not something that people are going to rush out and buy the phone. When you look into 2020 youve got the element of 5g playing in i think investors have written off the 2019 cycle and starting to look forward to 2020. Whats the bull case you would prefer pricing in a phone and excitement around a phone next year or a sustained reacceleration in services if you could only have one yeah, no, i think sustained reacceleration in services is going to be very material to hold a multiple. We think that as the story pivots more and more to a services story, all we need to see is for iphones to be roughly flat, which is great now, cyclically youll see uptick, the following year or following two years. Thats fine. As long as you are able to drive Services Growth off this install base, and we havent really factored in all the new services that are coming in in the fall, i think theres plenty of run for apple to drive incrementally. Can you do that x m a without a Large Purchase look, i think the install base monetization, if you look at stats across the board, this is 200 million number of people that pay for something on the app store, even though the install base is a billion. You have a lot of runway in terms of capability of people to incrementally pay more for apps, existing apps, as well as increase the number of subscribers that are paying something for apple. That number is very in line if you think about like netflix subs or other subs like spotify. So youd really have an underlying core 150, 200 million number of people who are willing to pay for some of these services. Just briefly, since weve been talking about it all morning, talk to us about the Regulatory Risk for apple, not in the same category as the facebook or alphabet, but how do you factor that in if you do it all, and you know, the app store certainly under more scrutiny. Thats a great question i think when you look at privacy, this is one thing we all have to give tim cook a lot of kudos for hes been on the right side of the privacy debate, right from the start, whether its designing stock, keeping it on the iphone got the secure login, all the things theyve done with safari, this has been really a tremendous difference between apple and other large cap mega caps on the app store specifically, although it looks like there could be a monopoly, and theres some risk around take rates i would argue that the app store provides a lot of value to its community, which is in terms of micro payments, whether its in terms of the security, whether its in keeping the ios updated, so you have a great platter of things that are gaining by staying on this platform. They pay for it, but yes. Absolutely, kashlgs yecarl, a a 30 rate, which drops down to 15 if youre doing subscription. I think thats fair. I think the scrutiny that will come is really going to be more around is there a risk to that 30 going lower, and weve spoken to a lot of like legal experts around this, and the take is not really like there is enough arguments from an apple perspective that this is going to be a multiyear debate if it gets challenged. Certainly in san francisco, i started to notice more privacy noting its interesting there wamsi, thank you so much for being with us. Still to come, what the doj, ftc, and s. E. C. s actions mean ckbe a ffuture of mark zuerrgndace. A lot more squawk alley still ahead. Stand up if you are First Generation College student. crowd cheering stand up if youre a mother. If you are actively deployed, a veteran, or youre in a military family, please stand. The world in which we live equally distributes talent, but it doesnt equally distribute opportunity, and paths are not always the same. Im so proud of you dad. [man] i will tell you this, Southern New Hampshire university can change the whole trajectory of your life. uplifting music thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Boris johnson taking over as u. K. Prime minister this morning. Thanks so much, guys. Essentially weve seen johnson arrive here at the steps of downing street a few minutes ago. He gave a quite rambling long speech with a laundry list of things he promised to try and do as prime minister. Of course the focus of his new administration is going to be brexit hes promised to try and renegotiate the agreement that theresa mays government had struck with the european union, and he promised that he was confident a deal could be found. To our friends in ireland and in brussels and around the e. U. , i am convinced we can do a deal. Without checks of the irish border because we refuse under any circumstances to have such checks and get without that antidemocratic backstop, and it is of course vital at the same time that we prepare for the remote possibility that brussels refuses any further to negotiate. He said that possibility that there would not be a deal was today remote, recently he called it one in a million, so it seems like its slightly more likely than before, and that of course is what has investors and businesses across the u. K. And in parts of europe very concerned and is one of the reasons we see the pound trading at a twoyear low over the last few days and continuing concerns amongst investors, Business Owners across the u. K. And of course members of parliament here. Thats going to be the big challenge for Boris Johnson in the days, weeks, and months leading up to that october 31st deadline for the u. K. To depart the european union, is whether members of his own party will support his vision for brexit. Very interesting, perhaps hedging his bets a little now that hes officially in the position. Lets get over to Courtney Reagan for a news update. Good morning. Heres whats happening at this hour defense secretary mark esper arriving at the pentagon for his first day of work saying he was anxious to get his Leadership Team in place. He thanked President Trump for his support. I really appreciate his confidence in me, and i really appreciate the senates overwhelming support, bipartisan support of my confirmation really overwhelming, and im anxious to get the Leadership Team in place and get to work. Barricades have been set in san juan as ongoing protests are expected to continue to put pressure on the puerto rican governor to resign many wonder how the governor will be able to stay in office amid the massive demonstrations to oust him. And organizers of the 2020 Tokyo Olympics unveiling the competition medals one year before the opening ceremony. Theyre designed to collect and reflect light, symbolizing the energy of the athletes and those who support them thats our cnbc news update for the hour lets get back over to squawk alley. Thank you very much. As we go to break, is snap the antifacebook shares are obviously surging today after reporting its strongest user growth since the ipo. And this ftc settlement with facebook next, stay with us. Dows down 128 Mark Zuckerberg is held personally accountable hes signing the order hes named specifically in the order. The order requires him personally to certify that the company is in compliance with our order quarterly, and if he files false certifications, then hes subjecting himself to civil and criminal penalties and that was ftc chairman Joseph S Joseph simons speaking exclusively to our ylan mui earlier, former ftc commissioner and former adviser to facebook mozel thompson join us now here. Guys, good morning good morning. Mosel, so some people say that this lets facebook off too easy because the percentage even if its 5 billion doesnt represent the gain facebook got from this Business Model what do you say . Look, i think that this level of fine is unprecedented, but almost more importantly the level of controls and other conditions is really also unprecedented. The combination makes it somewhat unusual lets get the scale of this kind of right now equifax was decided earlier last week, okay . And for the number of users who were affected, that was about 4,800 per user. This is 27,000 per user i cant help thinking any company has to stand up and take note to that. Roger, these restrictions, the setup of the independent privacy, even your face looks unimpressed at even this privacy committee. Why . Because facebook is given too much control in the process of deciding what is compliance and what is not. Okay. In many ways it mirrors the 2011 Consent Decree in that facebook has essentially a meaningful role in deciding what qualifies as compliant and what does not, and in my mind with all due respect to my dear friend here, i dont think this does anything to change incentives, and because it doesnt change incentives, it wont change behavior. And the issue in my mind, is more than an antitrust problem you know, the ftc commissioner post add tweet this morning which he made to me the core point, which is the issue were really fighting here is surveillance what are peoples rights to make their own choices, to live in a world where theyre not completely immersed in somebody elses economic sphere and this doesnt go to that. Im with my friend here on the really important point that this is not nothing 5 billion is really money. It is a shot across the bow. I just wish there had been a lot more teeth in the back end in the future behavior. This provides i dont totally understand what it means, but theres a whole thing about immunity for past indiscretions that im looking at and going, wait a minute here i think we really need to understand everything thats going on you know, i think if youre a shareholder of facebook you love this outcome, which is how the market is taking it because, you know, they can afford 5 billion and how many years did it take to get here, right theyre not going to get fined 5 billion a month, which is what it would take to change their behavior. What will it take to get the ftc more clout to perhaps put in some regulations with more teeth . Theres been some suggestions that the ftc is outmatched here, what you read about some of the reporting about what went on behind closed doors, facebook lawyers threatening to bring this thing to court, is the ftc outmatched let me tell you something, every single defendant brings their big guns to the ftc looking for a defense. That doesnt surprise me, and government is always going to be smaller than the industries that they actually regulate, but its important to understand. Its an enforcement agency, not a regulatory agency, and while i have Great Respect for you, roger, i think theres a big difference between when youre talking about a surveillance culture that may actually be a much broader question. Yes. Than not only is online advertising, offline advertising. It has to do with how we use advertising in the United States generally. And its going to require new laws to regulate, beyond the purview of the ftc. That may be possible. Thats a great place for debate in congress and in the public sphere, but i dont think thats what this is and i dont think and thats with all due respect to commissioner chopra, i dont think that thats what the role of this particular proceeding was about. So im completely this agreement with you on that, and i just think its too bad that it wasnt about more because the issues that were dealing with here are relative to public health, relative to democracy, relative to peoples privacy, relative to competition are affecting the entire economy theyre affecting our society and our democracy really profoundly, and at some point we either have to confront these issues or we lose the opportunity. And the ftc to its credit stood up and do something. Mmhmm. I just wish we had more leverage in the situation. You know, i wish the government had more leverage. I wish that we as citizens had more leverage. You were talking about it in the past tense like this is done, and its not, so are your hopes for more out of justice or congress no, no, for certain oh, no, i think theres a lot of good news out there, you know. If, ftc has gone first, three cheers to them for doing something. The antitrust division of the Justice Department is looking mostly at google and some others very important, if youre going to go after the Business Model of surveillance capitalism, google l is the place to start. How do you do that . Surveillance capitalism sounds really bad. It is really bad. Im as paranoid as the next guy. I dont have an echo in the house or any of that the number of things you end up outlawing potentially under surveillance capital i feel goes to the heart of the Business Models of amazon, facebook, google, youtube getting swept up a lot of companies and market cap potentially end up getting swept up. Its more than that its even how we look at advertising in the United States generally. Yeah. Okay. And so if youre going to go back to First Principles and look at that, thats going to be a much, much broader discussion and more than we have time for here well make the time were talking about the regulators and the enforcers, but the other side of this are the shareholders and the consumers who are not showing the same amount of, you know, displeasure or scrutiny, so whats missing here . Why is there this big disconnect can you have one without the other . Int think the big disconnects we dont yet have the full awareness in the population of whats going on. The people city think the issue is they give up a lip bttle bit data they dont understand the societal impact, this isnt just about them their datas being used in ways that cause harm much more broadly, and in my mind john, to the core questions of what were going to reassess, in my opinion, the right answer is advertising was always based on a first Party Relationship i can give my data to you for a service. You can use it to provide that service, and then i think thats where it stops. I disagree with you. Thats fine tell me about. As a person who used to regulate advertising its much more broad and its much more invasive than people think, and so if were going back to First Principles, and you can characterize a surveillance society, but if youre going to go back to that, then what i talked about many months ago here is you have to have a more fundamental discussion with the public about whats the reasonable expectation of the use of privacy. Thats where im with ou. Thats where our regulators, not only that but also our legislators, policymakers here and around the world have kind of fallen off the way because theyre not theyre talking about the edges of the bell curve. Theyre not talking about not only the minuses, but also the pluses, but thats in the middle but i think American Public at the very least need to have a frank discussion about that because right now everybody is flying blind, and im not only saying just the public users, but also the businesses in this area theyre experimenting. I also want to add one other thing that concerns me a little bit about the Consent Decree to the extent that it also includes a lot of conditions including some that are good that i think, for example, any company should look at what the privacy impactof a new product is or a modification but there are also other things in there that leads mow e to woe and be concerned whether any new entrant that has to face those kinds of hurdles will ever be able to compete in this area thats not just against facebook but at all and so you have this kind of ying and yang here, on one hand you want to be protective, but on the other hand how you can create a robust marketplace so other people can enter. Ylan mui is in d. C. Talking with one of the dissenters. Thank you so much, i am here with rohi chopra, he is one of the commissioners at the ftc who dissented from the settlement in addition to his colleague rebecca slaughter. Thank you for joining us you have a statement that is 20 pages long that outline your reasons for dissenting essentially it seems to boil down to something you wrote, this lets facebook off the hook. Theres a lot further investors to celebrate at the end of the day this settlement does nothing to fix the fundamental incentives of their broken behavioral advertising model. It leads to summerveillance, manipulation, and all sorts of problems for our democracy and economy. 5 billion doesnt sound like quite enough to fix all of those problems what should be done instead . Is there a fine large enough to fix an assault on democracy . I dont think we should be focused so much on the money theres really no amount of money. We have to look at that Business Model. Facebooks Business Model is built on massive harvesting of personal data, and whats key here is that theyre a repeat offender, and much of the settlement repeats the same settlement that happened in 2012, and we need to fix those fundamental problems we need to put in some real restrictions on the data they can actually collect we need to make sure they cant spawn scams like Cambridge Analytica, which engaged in massive interference in our elections. So we need to look at their Business Practices and not just focus on the headline dollar amount, which, you know, investors can look at as a onetime charge. When i spoke to ftc chairman joe simons earlier, he said that the ceo, Mark Zuckerberg is being held personally accountable for these types of problems within the company, that there are better, stronger rules in place to prevent those types of actions from happening in the future. Why doesnt that go far enough well, its not clear how hes being held accountable when hes not named in this settlement, when he gets a blanket release from all misconduct that may have occurred, and this is unprecedented. Weve not seen these type of settlements that give massive releases of liability to the whole company for known and unknown violations, and i just think thats fundamentally wrong. When you talk about your concerns about facebooks Business Model and how it enables essentially mass surveillance of consumers and of the American Public. That sounds like a problem not just with facebooks Business Model but with many of these social Media Companies more broadly. Thats exactly right. I think were going to have to look hard about this behavioral advertising model, which essentially markets advertisements to a demographic of one it allows companies to manipulate and it allows them to have an unquenchable thirst for data, and thats a problem here with facebook they were told in 2012 they couldnt engage in some of these practices and almost immediately they did, and i think they profited massively from it it allowed them to solidify their dominance with advertisers and other key partners and this settlement will not fix that you know, Mark Zuckerberg having to sign some paperwork to determine whether they are thinking about privacy, i just dont think that goes anywhere near where we have to go. So whats the right remedy . Well, i wanted to investigate further, really uncover what was on the executives and the directo directors minds who was calling the shots . What was their motives if we dont even get those answers how are we going to really know what really happened so much about this settlement we will not learn because it is buried it is essentially saying that here were some problems. Were going to pay some money, and the rest Everything Else is let go. Its now going to turn to state a. G. s and Global Regulators who have going to have to get to the bottom of it. Simons talked about a balance that the commission faces in weighing whats in your power to actually do versus what you could potentially win in any type of court case are you worried that if you took this to the courts, if you investigated further the ftc could lose and facebook could then really be off the hook . Well, lets look at a few years ago with the google settlement where our penalty was more than five times what they earned from it we have no analysis of the evidence of how much they earned from this. Without that key data, we do not really know what happened, and thats why i thought we need to keep going we need to keep finding out what happened so we can make the best case for either a settlement or going to court so many times these big corporate settlements, theres a big penalty paid, and everything moves on and nothing really happens. Its important that enforcers actually know what happened so that they can tell the public and justify these resolutions. This penalty is the biggest ever, so by what standard can you judge whether or not a penalty is the appropriate size . Well, facebook is one of the largest corporations on the planet the ftc has never really gone after one of those before, so we cant judge it based on facebook versus a small firm, and what bothers me is that it feels like theres disparate treatment. Look at Cambridge Analytica. Were suing them were holding individual executives accountable, and we are finding out the truth, and here almost the same exact practices were letting them go. Do you think that the ftc should be investigating these types of practices at other specific companies well, this is going to be a fundamental issue for investors and policymakers the effects of this model that engage in mass data collection, it is just not sustainable it causes massive harm in so many ways, and we need to really ask ourselves is this surveillance model sustainable if we cant solve that then were in trouble elections are coming up. Theres more chances of violence and harm based on trafficking through these Business Models and we have hard questions to answer. Do you think the ftc has the power it needs to regulate these companies effectively . Well, when it comes to repeat offenders we have big powers, and thats why when it comes to facebook we did have a lot of tools, and i think we could have used them much more aggressively, but im not out there always begging for more authority. I want us to use the tools that we have and use them aggressively because this has to be a top concern for our entire economy. Commissioner chopra, thank you so much for your time. John, i will send it back to you in new york. Ylan mui, big interview, commissioner chopra of the ftc, mozelle, he wants to target the entire Global Online Advertising Market it sounds like. The whole targeted advertising model which facebook and google are at the top of. Can we have that kind of conversation you were just saying consumers need if thats what the opposition aiming for well, unfortunately it sounds like hes already reached the conclusion, and i think there has to be a discussion, a broadbased discussion and when youre an enforcement agency, you have some ability to raise the question you have some ability to raise it in a public forum, but im not necessarily sure that they are the only people or should be the only people who actually are the determining factor in that, okay i think you have congress who are there to make laws, and this is also important to recognize the role of the Consent Order and why this is significant. I understand why the commissioner might be concerned about some of the practices at any company. To the extent this is not a criminal proceeding. Its a civil proceeding, and to the extent that you look at past behavior, youre going to have to really look at a lot in order to find an individual made a public decision, and then Cambridge Analytica you had that evidence, okay what i think is significant here is that lays the predicate in this settlement as to people who are making clear decisions, and theyre either going to be proprivacy or antiprivacy, and youll see that right away thats key, isnt it roger . I mean, can we at least say were not going to undo damage of years past, but its not going to get any worse than it was . I would love to believe that its not going to get any worse, but i find that laughable in a world where google is moving its smart cities projects, Sidewalk Labs forward where facebooks trying to do libra i mean, these things theyre not theyre have a lot of problems doing both of those things. To be clear, theyre not voluntarily shutting these things down. My point to you is that in a world where they were responsive to the feedback from people who are concerned, they would say, you know what . Were going to stop, have this discussion mozelles talking about, get everybody engaged the reason that people like me have to speak so forcefully all the so forcefully all the time is there is no indication that google or facebook are getting the message at all, okay that their behavior is essentially unchanged. And they i mean, the investors are making the right call here. This is from facebook point of view pretty much a best case outcome from where this hand was being played and i look at this and i go, well, great. But we still havent had the conversation theyre talking about. We havent got congress fully up to speed google is testifying in front of congress the other day and was asked, do you do Surveillance Technology and their answer was no im just going, you have got to be kidding me . Thats just not right. But roger, does it on the other hand, i have never seen an enforcement agency, unless its based on fraud in the sale of securities, base a penalty, based on what shareholders are thinking. So this is the perfect time to do that because we know that click fraud, we know advertising fraud in this space is of staggering levels. I was at an event with the advertising agencies last night and they were just talking about the percentages. Huge lets have that conversation that investigation, when its fully through, the problem is google controls all parts of the system so theyve been able to hide the ball very effectively if we did that investigation, and if it turned out there was, in fact, a lot of fraud as the advertisers expect, then that situation would allow us to have a more fulsome conversation of that point as they turn to other Business Models, and, roger, im glad you brought up sidewalk for google and libra for facebook. Are they going to have more trouble pushing those through . Does that open them up to more scrutiny i hope so these things are not in the public interest. How do you know that already . How do you know that when its untested so far, libra youre looking at it. The notion of a private corporation having a reserve currency in competition with it attacks the sovereignty of every country in the world this is the essential notion that a company, which has not been elected, which has no accountability to the people its working with is suddenly allowed to displace currencies without a complying with the law as it applies to all other currency things. If facebook doesnt do it, are you worried someone else will i dont want anybody to do it this is where i take some issue with you in this that there are a lot of people who are could be potentially served by some sort of alternate system to be banked. And you see that around the world. The Banking System now Facebook Facebook is not the right one to do that you may say that, but you are giving a broadbased attack on something that potentially could help people. And im not willing to throw out the baby with the bath water i hear you. But the argument that were going after the unbanked population of the world, when, in fact, the first people are going to use it are criminals and the same people who use all, you know, bitcoin and the other cryptos. Theyre trying to avail surveillance you know, i get your point, but i dont think thats where its going to be in practice you dont want anyone to do it is not practical. If facebook doesnt do it, theres a Chinese Company out there that has just as many users, or as many users almost, that will do it. Im not is it better for the u. S. To have its eye on it and have a u. S. Company doing it rather than i believe what china is china is an authoritarian country using technology to control its population i do not believe the United States should be doing anything with technology that is about controlling its population certainly not letting corporations do it, but it shouldnt be doing it at all interesting that so Many Companies are using well, china is going to do it if we dont as the standard. Tick tock is used here. So is we chat. These are huge apps americans use. And i would not allow that. I believe that is, in fact, not in our National Interest and that is every bit as clear and present a danger as huawei or anything in the hardware business but the point is this is the conversation we need to have, and were having it. Youre like a technological quaker weirdly enough, no. I would like to redirect Silicon Valley towards empowering consumers rather than exploiting them i just believe weve lost our way and were focused on the wrong thing. After 50 years of using tech to empower everyone and to make, you know, the world work better and to make it fairer and to bring up standards of living, now technology treats people as fuel a source of data and im 100 against that. I just want to shift the focus of what were doing to something productive were trying to do maybe where i disagree its not zero or 100. Its not one or the other. We have to have you guys both back that was fun. Good discussion roger, thank you. Well, more on snaps ntuesue tethbrk. Stay with us with lisa coleman from jpmorgan asset management. Lisa y is this earnings season so critical for the fixed income markets . Its particularly important for Corporate Bond Investors Companies have borrowed a lot of debt in recent years so really, we want to listen to understand what theyre doing with their Free Cash Flow. Are they going to be using that Free Cash Flow to the benefit of shareholders for Share Repurchases or are they going to address the amount of debt on the Balance Sheet and use it to repay debt corporate revenue does detract gdp growth what road map does that create we think 2020 growth is going to slow. Slower gdp, slower revenue, means less cash flow available to repay debt. So we know theres a lot of risk out there wheres the best value i think its in areas like financials specifically banks they built up capital. Their Balance Sheets have been stress tested. Feel very safe there contrast that to food and bev where youve seen a lot of debt on the Balance Sheet to Fund Acquisitions thank you so much for more insights from jpmorgan asset management, search for jpmorgan solve it online snap is surging as you know posting of its strongest user growth since its public debut. Julia boorstin has more on that and why the street think its it may be the antifacebook julia . After years of concern that facebook could squash snap by copying it, now snap shares are above the initial price in over a year they are succeeding driving User Engagement and revenue higher than expected. This in sharp contrast to facebooks privacy issues and Ceo Evan Spiegel stressing that for snap, privacy has always been a priority. Weve invested a lot in privacy and we care a lot about the safety of our community and from the beginning, weve always embraced this idea of deletion by default the content you create is deleted after they view it it helps preserve user privacy and as we look forward and empower more creativity on our platform, thats always something well keep in mind and while facebook has struggled with manipulative fake news, snaps focus on premium professional content seems to be working. Time spent watching shows on the platform more than tripled from the year earlier quarter now snaps rise comes as facebook responds to the ftcs record fine and new restrictions which the social giant says mark a sharper turn towards privacy on a different scale than anything in facebooks past. Mark zuckerberg writing hes committed to set a new standard for privacy saying, quote, as we build our privacy focus vision for the future of social networking that i outlined earlier this year, its critical we get this right. The next focus for our company is to build privacy protections as strong as the best services we provide now, Facebook Says the ftcs oversight will shift every part of the company, including building privacy into every product, stricter compliance measures with zuckerberg himself signing reports, and independent oversight with regular assessments in a process much more similar to financial controls now when facebook reports after the bell this afternoon, well see if the regulatory scrutiny of the past year has impacted users or revenue and whether facebook management says anything about this new ftc oversight potentially hindering innovation carl julia, well see what they say tonight along with ford and tesla and paypal and xilynx. Lets get to the judge carl, thanks scott wapner front and center, tech and investors. Can one of the markets best trades continue to work for your money . Its 12 noon this is the halftime report. Taking aim at big tech. Whats at risk and which companies have the most to lose facebook hit with a record fine ahead of earnings after the bell the stock up more than 50 this year will investors continue to like it boeing posting its biggest loss ever and a big miss for caterpillar your next trade straight ahead and one week until the fed