Facebook warns investors more federal probes may come


Mark Zuckerberg, founder and chief executive officer of Facebook Inc. (Tony Avelar/BLOOMBERG)

In S-1 papers provided to the Securities and Exchange Commission, Facebook listed several regulatory and legal risks — such a privacy investigations, patent disputes, and any potential security breaches — that could force the company to change its business practices or pay hefty fines.

The social networking giant, with 845 million active global users, also warned that censorship of the site in other nations and European and other rules on privacy could harm its business.

“We have been subject to regulatory investigations and settlements and we expect to continue to be subject to such proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business,” the company said in the filing.

Last November, Facebook settled an investigation with the Federal Trade Commission over claims it deceived consumers by overhauling its privacy policies in 2009 in a way that made user information more public.

The firm, which has beefed up its lobbying and policy operations in Washington, D.C. in the past year, listed several regulatory issues that directly affect its business. Those include user online privacy investigations and legislative proposals. The firm also noted risks associated with the proposals of new anti-piracy laws, and stronger protection of minors online.

And with an estimated 90 percent of the social networking market, it also listed “competition” as a issue investors should note. Analysts have pointed to Facebook, Apple, and Google as new targets of antitrust review because of Facebook’s dominance in social networks, Google’s dominance in search and Apple’s closed iTunes system.

“Violation of existing or future regulatory orders or consent decrees could subject us to substantial monetary fines and other penalties that could negatively affect our financial condition and results of operations,” the firm said.

Related:

Obama and Zuckerberg, an unlikely duo, forging tighter ties

Facebook privacy settlement gives leverage over competitors


View Photo Gallery: In seven years, the social networking site has grown from a project hatched in a college dorm to the largest social networking site in the world, well on its way to hitting its goal of having 1 billion users.
Cecilia Kang is a senior technology correspondent for The Washington Post.

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