House Panel Grills Zuckerberg: Waters Cites Failures; McHenry Defends Innovation

House Democrats blasted CEO Mark Zuckerberg for failures in privacy, workforce diversity and advertising discrimination, during a hearing Wednesday. Skeptical Republicans drew attention to similar miscues. They also defended Zuckerberg as an innovator and warned Congress against hindering Facebook’s digital currency.

There are “serious concerns” about the company establishing a global, digital currency that would challenge the dollar, said House Financial Services Chair Maxine Waters, D-Calif. Ranking member Patrick McHenry, R-N.C., countered that history shows it’s best to be on the side of American innovation. It would be wrong to try to centralize and control it, he said. Concerns about Libra go beyond the project or Facebook, he said, calling the hearing a “trial on American innovation.”

“I actually don’t know if Libra is going to work,” Zuckerberg testified. He acknowledged some people wish it were any but his company proposing such an endeavor. He said the U.S. can’t wait, with China moving forward with currency plans. Libra will empower people with control and access over finances, he said, arguing that sending money worldwide should be as easy as a text message. He said the main purpose of Libra isn’t to establish a currency but a digital payments system.

McHenry told reporters he met privately with Zuckerberg before the hearing. Republicans “largely” agree legislators should let innovation run its course, “but we’ve got a variety of different views,” he said. All Facebook has essentially is a white paper, undeveloped technology, partners and an idea, he said. If it were another company heading the project, there wouldn’t be multiple hearings, he said: The platform has a long way to go explaining its structure and informing Congress.

Waters and Democrats attacked Zuckerberg for allegedly allowing advertisers to discriminate against minorities, resulting in Department of Housing and Urban Development allegations (see 1903280063). Democrats criticized Facebook for not having a diverse enough workforce, particularly leadership positions, a point Zuckerberg agreed to address. Rep. Al Green, D-Texas, asked whether any executives leading the 21 partners joining Libra are female, minority or LGBTQ. Zuckerberg didn’t know. “I was disappointed he’s not aware of who he’s doing business with,” Green told us. “One would assume you know.”

It seems Facebook’s partners on Libra aren’t sure the project is going to work, either, said Rep. Ann Wagner, R-Mo., citing exits from eBay, MasterCard, PayPal, Stripe and Visa(see 1910110062). “It’s a risky project, and there’s been a lot of scrutiny,” Zuckerberg said, calling the endeavor too big and complex for one company.

Facebook might have bitten off more than it can chew, said Rep. Juan Vargas, D-Calif. The company doesn’t need to create a new currency to establish a payments system, he said. Zuckerberg noted part of the allure of digital currency and payments is to compete with rivals like Alipay and WeChat Pay, which have successfully entered the market.

Zuckerberg repeatedly downplayed Facebook’s control over Project Libra, pointing to its partners with equal voting rights. He repeated his claim that Libra won’t launch without the approval from relevant U.S. regulators. Rep. Bill Huizenga, R-Mich., asked what the company would do if the Libra Association voted to move forward with plans without U.S. regulatory clearance. “I believe we would be forced to leave the association,” Zuckerberg said. He hopes the association would weigh the company’s recommendation. Vargas suggested that without Facebook, there's no Project Libra. Zuckerberg can hide behind partners slightly, but this is Facebook’s show, Huizenga said.

Rep. Nydia Velazquez, D-N.Y., asked Zuckerberg to commit to waiting to launch Libra until the U.S. has a new legal framework. Zuckerberg responded that Congress has oversight over regulators, so that’s the role of legislators. “I’ll take that as a no,” Velazquez said. Zuckerberg told Rep. Carolyn Maloney, D-N.Y., his company will seek approval from all relevant regulators with jurisdiction.

Wagner pressed Zuckerberg on Facebook’s plan to extend end-to-end encryption across all services, including WhatsApp and Instagram. That will make the process more difficult for reporting children at risk of exploitation, she said. Zuckerberg agreed that’s a risk.