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Chinese Retaliation, Tankers Attacked, Drug Prices: CEO Daily for May 13, 2019

May 13, 2019, 10:03 AM UTC

Good morning.

Understand these captains of industry are not usually inclined toward regulation. Indeed, in the same survey, 69% of them say increased regulation is either a “very big” or “somewhat big” challenge for their companies.

But Facebook has crossed a line, in their minds. And Amazon and Google are not too far behind: 40% of the CEOs favor additional regulation of Amazon, and 38% of Alphabet. In comparison, only 7% favor increased regulation for AT&T, 5% for Microsoft and Apple, and 2% for Disney.

This comes on top of the extraordinary essay penned by Facebook co-founder Chris Hughes for the Sunday New York Times (released online Thursday.) Hughes goes a step further than the CEOs, saying that Facebook not only needs to be regulated, it also needs to be broken up. As he points out in the essay, antitrust practice since the 1970s has focused on consumer harm through inflated prices as the justification for breaking up companies—and Facebook isn’t guilty, under that paradigm, since most of its services are free. But Hughes argues that “we pay for Facebook with our data and our attention, and by either measure it doesn’t come cheap.” (You can read Facebook’s response here.)

What makes all this particularly interesting is Zuckerberg’s announcement earlier this year of plans to integrate Instagram, which the company bought in 2012, and WhatsApp, which it bought in 2014, into Facebook. Hughes believes it was a mistake for the FTC to approve both mergers, and argues it’s not too late to undo the mistake. But the clock is ticking. If Facebook succeeds with its integration plans, a breakup will become increasingly difficult.

For what it’s worth, I think Hughes has a point—even though it may stretch existing antitrust law to get there. Zuckerberg had his chance to show he could handle the responsibility that comes with running such a powerful information platform—and he failed. Separating Instagram and WhatsApp would give someone else a chance.

Separately, I’m interviewing another Zuckerberg friend-turned-foe—venture capitalist Roger McNamee, author of the book Zucked—tonight at the Greenwich Library. With Hughes, McNamee, and half the Fortune 500 against him, Zuckerberg must surely feel his back is against the wall. That’s a remarkable turnaround for a company that just a few years ago was celebrated for connecting friends, families, and freedom fighters.

More news below. And more results from the Fortune 500 CEO Poll tomorrow, as well as in the June issue of Fortune magazine.

Alan Murray

Top News

Chinese Retaliation

Markets are seeing red in Asia and Europe, and are likely to do so in the U.S., too. That's all due to fears over the U.S.-China trade war, and the fact that China says it will retaliate against U.S. tariffs (more of which will be outlined today.) What will China do? Analysts say American farm exports may be targeted in order to rile President Trump's base—perhaps also expect increased bureaucracy for American firms operating in China. CNBC

Tankers Attacked

Saudi Arabia says two of its oil tankers were sabotaged yesterday near the Strait of Hormuz, the unavoidable passage for such vessels between the UAE and Iran. It's not clear who did the alleged sabotaging. There were also false reports of explosions at the nearby UAE port of Fujairah. The region is of course very tense right now, with the U.S. having recently warned of "Iran or its proxies" targeting ships. AP

Drug Prices

A total of 44 states have accused Teva Pharmaceuticals and 19 other drug firms of conspiring to increase prices for generic drugs—by over 1,000% in some cases. Teva, the biggest generic medicine producer out there, denies the accusations contained in the states' lawsuit. BBC

Volkswagen Showdown

Three major shareholder advisory groups have told Volkswagen's investors they should refuse to "discharge"—i.e. give approval to—the automaker's management and supervisory board at tomorrow's AGM, over lousy corporate governance associated with the emissions testing scandal. In Germany, the discharge of boards has traditionally been a formality, with pro-management votes usually clearing 90% at least. Bayer recently bucked that trend. Will VW be next? Financial Times

Around the Water Cooler

Equifax Bill

Remember Equifax's ginormous security breach a year and a half ago? The credit bureau does—in Equifax's earnings release Friday, it said the incident had cost it around $1.4 billion. Excluding legal fees. Oh, and there are still outstanding lawsuits. WABE

Facial Recognition

San Francisco, home to many tech companies that are fiddling around with facial recognition, may ban police and city agencies' use of the technology. Similar bans are being proposed elsewhere, including in nearby Oakland and in Somerville, Mass. The proposed SF ban would not affect the use of facial recognition at the city's airport, nor would it affect companies or individuals. Bloomberg

Animal Welfare

Kering, the French owner of luxury brands such as Gucci and Saint Laurent, has set out new animal welfare standards for its supply chain, including requirements for the treatment of cattle and goats, and guidelines for abattoirs. The company says it hopes the whole luxury industry will adopt the standards. Reuters

Energy Image

Oil and gas companies are dropping such terms from their names as they crawl toward a renewable-energy future. Critics say the name-changes are greenwashing. But either way, they can be controversial for other reasons too—just look at Denmark's DONG (Danish Oil and Natural Gas) Energy, which changed its name to Ørsted and then had to defend the move in court, thanks to a lawsuit from a family with that name. Fortune

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.