Meta Platforms (META:NSD) is facing a legal battle against the U.S. Federal Trade Commission (FTC) as the agency seeks to revise a 2020 privacy settlement and impose additional sanctions on the company. Meta has taken action by urging a federal court to block the FTC’s efforts, arguing that the agency does not have the authority to unilaterally modify the original settlement. In this article, we delve into the details of Meta’s struggle against the sanctions and explore the implications for the company and its investors.
FTC’s Intentions and Meta’s Response:
The FTC intends to add new prohibitions to the existing settlement with Meta, including a ban on the use of facial recognition tools and the monetization of data collected from young users. The agency accuses Meta of repeatedly violating the original settlement and has ordered the company to respond by August 3. Meta contends that only the federal court has the authority to modify the settlement, and the FTC must adhere to its terms. The 2020 settlement involved a $5 billion penalty and internal privacy check changes for Meta.
Meta’s Arguments and Position:
In its efforts to halt the FTC’s proceedings, Meta has filed for an injunction, asserting that the agency is trying to bypass the court by taking further enforcement action and modifying the settlement. The company argues that the consent order approved by the district court explicitly states that only the court can enforce or modify its terms. Meta emphasizes its commitment to compliance with the original order and highlights its substantial investments in establishing a comprehensive privacy program.
Impact on Meta’s Stock:
Despite regulatory and macroeconomic challenges, Meta surprised investors with an unexpected increase in first-quarter revenue, despite ongoing pressure on digital ad spending. Wall Street analysts maintain a Strong Buy consensus rating on Meta stock, with 39 Buy ratings, four Holds, and two Sells. Even amid Meta’s current difficulties, two analysts from UBS and RBC Capital recently reiterated their Buy ratings. The average price target of $284.19 suggests a 7.4% upside, and the stock has shown remarkable growth, rising by 120% year-to-date.
The Takeaway:
Meta Platforms finds itself entangled in a legal dispute with the FTC as the agency seeks to revise a 2020 privacy settlement and impose additional sanctions. Meta’s efforts to block the FTC’s actions by appealing to the federal court underscore its commitment to upholding the terms of the original settlement. Investors should closely monitor the outcome of this legal battle, as it could have implications for Meta’s future operations and the company’s stock performance. Despite the challenges, Meta’s recent revenue growth and positive analyst ratings demonstrate the resilience of the company’s business.
