Amazon Must Face Price-Parity Antitrust Lawsuit from Zulily

Report from Bloomberg

In Brief – US District Judge John Chun, who is overseeing a collection of federal antitrust cases targeting Amazon’s marketplace practices, has rejected the company’s bid to have a lawsuit from now-defunct online apparel marketplace Zulily fully dismissed. Chun’s order allows Zulily to proceed with the claim that Amazon’s “anti-discounting” practices that penalized third-party retailers who offered lower prices on other platforms violated federal antitrust law. Chun did dismiss Zulily’s complaints alleging that third-party retailers using the Amazon platform were engaged in a price-fixing conspiracy and that Amazon violated a Washington state consumer protection law. Zulily contends that Amazon used its marketplace algorithms to push third-party sellers to use its high-priced Fulfilment by Amazon (FBA) logistics services, pushing up the sellers’ prices on Amazon to account for the FBA fees, while simultaneously engaging in “anti-discounting” practices that scanned the internet for offerings on competitor platforms and penalized sellers who set lower prices on other platforms. Zulily argues that few sellers were willing to make lower price offers on lower-fee Zulily for fear of losing access to sales on Amazon. Chun said that Amazon's arguments that its price-parity policies were pro-competitive need to be argued at the trial.

Context – Third-party sellers account for 60% of the sales on Amazon. These sales mostly involve products that are housed in and handled by Amazon in their FBA network. The sellers are not “beating” Amazon so much as supplying Amazon the way wholesalers do in traditional retail. The third-party seller fees often exceed 50% of the sales price and the sales are often more profitable for Amazon than their own first-party retail sales. Zulily’s complaint parallels a central component of the FTC’s antitrust lawsuit. Chun is also handling that case and similarly rejected Amazon’s motion to dismiss. A similar lawsuit filed by California’s Attorney General is proceeding in California state court and it is reported that Amazon will face heightened scrutiny for self-preferencing in Europe under the Digital Markets Act in 2025.

US Appeals Court Rejects FCC Authority for Net Neutrality Regulations

Report from the Wall Street Journal

In Brief – A three-judge panel of the Sixth Circuit Federal Court of Appeals has fully set aside the net neutrality (NN) rules put in place last April by the Federal Communications Commission (FCC), ruling that broadband internet services providers are “information services” providers under the Federal Communications Act and that the FCC does not have the statutory authority to regulate them using the “telecommunications service” provision of the law. The judges cited last June’s landmark Supreme Court ruling that struck down the judicial principle known as Chevron deference that directed federal courts to defer to federal agencies in setting regulatory standards. The Sixth Circuit panel cited what they called the “vacillations” of the FCC in the absence of clear statutory authority on net neutrality, noting, “This order—issued during the Biden administration—undoes the order issued during the first Trump administration, which undid the order issued during the Obama administration, which undid orders issued during the Bush and Clinton administrations.” The outgoing Democratic chair of the FCC reacted to the decision calling on Congress to legislate, while the new Republican chair lauded the decision and called the rules an example of Biden Administration “regulatory overreach”.

Context – The fight over net neutrality emerged in the mid-2000’s, quickly settled into a highly partisan divide, and became the internet’s highest profile political football pitting Democrats and consumer groups against Republicans and broadband providers. However, its bite waned as rules came and went while abuses never much materialized. Unless the Supreme Court accepts an appeal, which is very unlikely, the federal issue is now in Congress’s hands, and they are equally unlikely to legislate. The appeals court ruling did not overturn state-level net neutrality laws, such as in California, which may become the focus of progressive policy advocates and conservative critics. Meanwhile, those looking for a similarly partisan tech policy regulatory football during the new Trump Administration can still turn to Gig worker classification regulations.

EU Commission to Review Legality of Musk-X Boosting German AfD

Report from Bloomberg

In Brief – Elon Musk’s increasingly high-profile global activity criticizing progressive governments and political leaders that he objects to, and boosting conservative candidates and parties that he supports, is drawing criticism from government officials, especially in Europe. In Germany, his backing of the populist conservative Alternative for Germany (AfD) party in the upcoming national election, including plans to host a livestream with leader Alice Weidel on X, the social media platform he largely owns, is raising hackles from political leaders in Germany and elsewhere in Europe. The AfD, which has long been accused of neo-Nazi views by opponents on the political left, but also by many traditional, mainstream conservatives, is unabashed in its German nationalism, Euro-skepticism, and criticism of significant, often Muslim, immigration into Germany. A spokesperson for the European Commission, which regulates X under the Digital Services Act (DSA), a law that requires digital platforms to restrict the spread of objectionable and illegal content and meet transparency and content moderation standards, said that the EU executive would be looking into how X might be improperly boosting or recommending election content, including related to the AfD, as part of its ongoing DSA investigation of X.

Context – In October 2023, the Commission began investigating X for violating the DSA. They made an initial ruling last July that the company violated provisions dealing with “dark patterns” and transparency. The regulator also continued to investigate whether X’s content moderation practices, including its Community Notes, properly countered information manipulation and the dissemination of illegal content. Former EU Commissioner Thierry Breton used his role as lead DSA enforcer to challenge Musk over hosting a Donald Trump interview in August, an intervention that backfired. Breton, currently just a “concerned” European citizen, has taken to X to challenge the AfD’s Weidel on potentially benefiting from illegal help from Musk and X. Progressive critics argue that free speech covers Musk's comments but not X algorithms that boost them.

Meta Moving from “Fact Checking” Content to “Community Notes”

Report from the Wall Street Journal

In Brief – Meta CEO Mark Zuckerberg has announced major changes to Meta’s content moderation policies and practices, ending “fact-checking” and reducing restrictions on speech across Facebook and Instagram in what he described as “restoring free expression on our platforms.” This announcement said that fact-checkers would be replaced with “Community Notes similar to X.”  The dramatic change in content moderation practices is the latest in a series of Meta moves aligned with the incoming Trump Administration, including promoting Republican Joel Kaplan, a long-time public policy leader in the company into its top government policy role, bringing Zuckerberg to Mar-a-Lago to meet with the President-elect and contribute $1 million to his inauguration fund, and naming Dana White, CEO of Ultimate Fighting Championship and longtime friend of the incoming President, to the Meta Board of Directors. As part of the changes, Meta will “remove restrictions” on topics like immigration and gender called “out of touch with mainstream discourse,” focus “filters” on “tackling illegal and high-severity violations”, and move the “trust and safety and content moderation teams out of California,” to “help remove the concern that biased employees are overly censoring content.”

Context – The full 239-word thread from Zuckerberg outlines a shift that may prove as big as when Elon Musk took over Twitter. It covers a lot in a few words. Note two things. First, he specifically calls out Musk's X and its Community Notes by name. Second, the final action listed is that Meta will, “Work with President Trump to push back against foreign governments going after American companies to censor more.” The European Commission is currently “investigating” X and its Community Notes-based content moderation system for potentially violating the Digital Services Act. The DSA was also the legal basis cited by former Commissioner Thierry Breton when he formally advised Musk to watch out and not violate the law in interviewing then candidate Trump in August. Pushing back on aggressive tech regulation in Europe and elsewhere, and not just on “censorship”, is something Meta would like help from President Trump.