Microsoft Accuses Google of Kicking Off “Astroturf” Cloud Coalition in EU

Report from CNBC

In Brief – Rima Alaily, the top antitrust lawyer on the Microsoft legal team, has posted a highly unusual public blog accusing Google of running extensive “shadow campaigns” designed to discredit the software giant with regulators in major global markets. She highlighted the upcoming European launch of the Open Cloud Coalition which is described in a document allegedly shared with prospective members as advocating for “a fair, competitive and open cloud services industry across the UK and EU” but which the Microsoft official described as an “astroturf” organization funded by Google to use EU-based cloud services providers as the “public face” of continued efforts to pressure EU antitrust regulators to challenge Microsoft’s practices linking its top software services with its cloud services business. Alaily added that Google has been funding, directly and indirectly, similar lobbying coalitions and many industry commentators and academics to criticize Microsoft on other issues as well, including software licensing, cybersecurity, and business operations in China. She attributed Google’s efforts to its desire to distract attention from its own antitrust challenges in Europe and the United States. A Google spokesperson noted that the company has been very public about its concerns with Microsoft’s cloud licensing.

Context – The Microsoft v Google public policy feud was in high gear by 2010, but the two companies announced a highly unusual public truce on legal and regulatory issues in 2016 which came together as new CEOs running both companies. Seriously, when corporate titans dial back their legal, lobbying, “grassroots” and communications proxies, they tend to do it in the shadows because that’s where the campaigns always operated. Soon, the top tech company feud pitted Apple and Meta, fueled by the antipathy between their CEOs. Back at the ranch, the same CEOs of Microsoft and Google are still in charge but their truce was over by 2023, with Microsoft publicly criticizing Google as it faced competition complaints in many top markets. Both sides are certainly not short of resources to spend on their battles.

School Districts’ Social Media Addiction Lawsuits Can Proceed

Report from Bloomberg

In Brief – Federal Judge Yvonne Gonzalez Rogers is allowing a coalition of over a hundred school districts to proceed with their lawsuits alleging that the major social media platforms operated by Meta, Google, Snap, and TikTok, were knowingly addictive and harmful to teen users and failed to warn of the risks. Her most recent order, which builds on a series of her rulings in similar social media-related cases, including one earlier in October that allowed a coalition of State Attorneys General to continue with lawsuits against Facebook and Instagram, dismisses some parts of the school districts’ complaints due to the protections afforded by Sec. 230 of the Communications Decency Act when a platform feature deals with third-party content, but is allowing claims focused on other platform features and policies to proceed. In the lawsuits brought by school districts, the social media platforms also argued that the alleged injuries to the school systems are too remote to address, an argument that largely prevailed in similar lawsuits in California state court earlier this year, but Judge Rogers disagreed, finding the harms alleged were “distinct and borne exclusively by the school districts”.

Context – The same allegations that are powering the vast collection of social media lawsuits being handled by Judge Gonzalez Rogers, are also powering a growing number of state laws regulating the platforms. The lawsuits are having more luck than the new laws, which are pretty much all being blocked by federal judges, especially for running afoul of the First Amendment. One major question in all the litigation is going to be whether there is solid evidence of a causal link between teen social media use and negative mental health, as opposed to just a correlation. The federal judge who recently blocked Utah’s law to protect teens from social media noted in his ruling that evidence of a causal link is lacking. While Rogers appears very sympathetic to the presumption that social media platforms do harm young users, she added, "Causation issues are going to be critical."

Google Investment in Anthropic Being Investigated by UK CMA

Report from the Wall Street Journal

In Brief – The UK Competition and Markets Authority (CMA) has begun a Phase 1 review of Google’s investment in AI company Anthropic, a competitor of OpenAI and creator of the chatbot “Claude”. In late July, the CMA asked market participants to comment on the competitive implications of Google’s $2 billion investment in the AI start-up and are now proceeding to a formal investigation with a target date of December 19 for an initial decision. The British antitrust regulator pursued a similar course of action in reviewing the competition implications of Amazon’s $4 billion investment in Anthropic, beginning a Phase 1 review on August 8 and deciding on September 27 that the digital giant’s investment did not qualify for further review under the UK Merger Act. The CMA also opened a Phase 1 review of Microsoft’s major investments in chatbot leader OpenAI in late 2023, and but unlike their Amazon-Anthropic review, they have not formally closed that matter. However, the CMA did determine that Microsoft’s move to hire key personnel away from AI startup InflectionAI and establish a business relationship with the company afterwards was appropriately considered a merger, but then cleared the transaction as not threatening competition.

Context – Competition regulators in the US, EU and UK believe that vigorous antitrust scrutiny can help maintain robust competition in emerging AI-related markets. In July, they signed a joint statement committing to “work to ensure effective competition and the fair and honest treatment of consumers and businesses" and set out fair dealing, interoperability, and choice as key principles to support competition and protect consumers. This followed each agency opening an investigation of Microsoft’s relationship with OpenAI as well as looking at other deals between digital giants and AI startups. However, in the UK, Prime Minister Starmer recently made news at a major London investment conference saying that the country “needs to run toward” AI opportunities and that its regulators would champion deregulation and investment.

DoJ Releases Rules Restricting US Data Transfers for Adversarial Countries

Report from Reuters

In Brief – The US Department of Justice (DoJ) has proposed new rules to protect Americans' bulk personal data from being acquired by so-called adversarial countries like China, Iran and Russia. The Notice of Proposed Rulemaking (NPRM) implements an executive order issued by President Biden in February. The rules, an initial draft of which was released in March to elicit public comments, place new limits on certain business transactions involving a range of personal, biometric, and financial data that security experts believe could be used for espionage, blackmail, and cyber-attacks. For example, the proposal prohibits transferring genomic data on over 100 Americans, geolocation data on over 1,000 U.S. devices, or health or financial data on over 10,000 people. China, Russia, Iran, Venezuela, Cuba and North Korea are covered by the new rules, along with entities or individuals associated with those states. The rule would allow the Justice Department to enforce compliance both through criminal and civil penalties.

Context – China, with its massive digital services ecosystem, intense digital surveillance, investment in AI, online censorship regime, and increasingly adversarial geopolitical stance, has been a top focus of concern over risks from data collection. In 2018, the federal Committee on Foreign Investment in the United States (CFIUS) rejected the sale of MoneyGram International to Chinese-owned Ant Financial over concerns related to the financial data of US citizens, and in 2019 CFIUS ordered Beijing Kunlun Tech, which had acquired dating app Grindr, to sell the company due to concerns over Chinese Government accessing the sensitive personal data held by the app. Concerns of user data have also been a focus of the debate over TikTok, both throughout the years-long CFIUS review of the app and as Congress enacted legislation to force ByteDance to divest itself of TikTok’s US operations. The legislation that included the TikTok ban also enacted the Protecting Americans’ Data from Foreign Adversaries Act of 2024 (PADFA) that covers much of the same ground as the Biden executive order and the new rules.