Archive – 15 Sep 2023

Many Intelligent People Call for AI Research Pause or Government-Imposed Moratorium

Report from the New York Times

In Brief –  Well over 1,000 self-selected technology leaders, researchers, and academics, including some very high-profile individuals such as Elon Musk and Apple co-founder Steve Wozniak, have signed an online letter calling on “all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4” and calling on governments to “step in and institute a moratorium” if that does not happen quickly. The letter was organized by the Future of Life Institute, which has long warned of a wide range of Artificial Intelligence-related risks.

Context –  Many of the letter signors may be highly educated but they don’t seem to know much about government. “All AI labs” won’t immediately pause their work, and the chance that any relevant government will quickly “institute a moratorium” is also zero. But there are some actual policy developments to consider. First, one reason “AI” regulation is so slow to develop is because the whole concept is so nebulous. In addition, although a handful of giant companies have invested heavily, smaller firms have made breakthroughs. Look at Clearview AI. Many people fear that technology will go wrong and harm people, and it’s ironic that that Mr. Musk is so concerned about super chatbots with self-driving cars killing people a more tangible fear for many people. More aligned with rogue chatbot harms, Justice Gorsuch obliquely referenced ChatGPT during Gonzalez v Google oral arguments, indicating that online AI outputs are likely not covered by Sec. 230’s third-party liability shield, a view backed by the estimable congressional authors of Sec. 230. In terms of actual government action on AI, the US has taken a hands-off approach with high-level principles and goals. That is not changing federally. The EU, in its deliberative but plodding manner, is moving forward on an AI legislative package that includes an AI Liability Directive and AI updates to the EU Product Liability Directive. Consumer groups have petitioned regulators in both venues to open investigations into ChatGPT, even that would take a year or more. The UK has criticized the EU’s model and proposes a lighter touch.

German FCO Gets Around to Investigating Whether $2 Trillion Microsoft is a Tech Giant

Report from TechCrunch

In Brief –  The Bundeskartellamt, Germany’s competition agency, has announced that it is opening an investigation of Microsoft under its legal authority to proactively address competition threats from the largest digital platforms. Since early 2021, the regulator has had the authority to identify digital companies “of paramount significance on competition across markets” and establish rules to protect competition in the markets they occupy, such as prohibiting preferential treatment of their own services or hindering interoperability. In its announcement, the regulator noted the breadth of the company’s businesses, including software platforms Windows and Office, cloud services Azure and OneDrive, collaboration platform Teams, video games and Xbox, LinkedIn, and Bing search, which now is linked to OpenAI’s ChatGPT. The company has faced complaints that they link products and services in ways that preference their offerings and undermine competitors.

Context –  Microsoft is the fifth digital giant targeted under the German digital regulatory authority, following Amazon, Apple, Google, and Meta. It is surprising that it took so long given that the company, like Apple, is valued at more than two trillion dollars, hundreds of billions more than the other three. The German law was a harbinger in Europe away from the traditional competition enforcement model of investigating dominant businesses for anticompetitive abuses after they caused harm, a process many criticized as too slow for digital markets. The EU’s Digital Market Act (DMA) establishing a new regulatory regime to enforce 18 high-level company “Do’s and Don’ts” for what may be a dozen “digital gatekeepers” is now the most important example. The DMA is expected to be fully enforceable in early 2024. The German regime is more open-ended in some ways, has more than a year head-start, and currently only targets five companies. Some German officials have expressed concerns that the DMA is both too restrictive regarding the company conduct that is covered, and that the European Commission many not have the resources dedicated to regulating a larger number of firms.

Many Intelligent People Call for AI Research Pause or Government-Imposed Moratorium

Report from the New York Times

In Brief –  Well over 1,000 self-selected technology leaders, researchers, and academics, including some very high-profile individuals such as Elon Musk and Apple co-founder Steve Wozniak, have signed an online letter calling on “all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4” and calling on governments to “step in and institute a moratorium” if that does not happen quickly. The letter was organized by the Future of Life Institute, which has long warned of a wide range of Artificial Intelligence-related risks.

Context –  Many of the letter signors may be highly educated but they don’t seem to know much about government. “All AI labs” won’t immediately pause their work, and the chance that any relevant government will quickly “institute a moratorium” is also zero. But there are some actual policy developments to consider. First, one reason “AI” regulation is so slow to develop is because the whole concept is so nebulous. In addition, although a handful of giant companies have invested heavily, smaller firms have made breakthroughs. Look at Clearview AI. Many people fear that technology will go wrong and harm people, and it’s ironic that that Mr. Musk is so concerned about super chatbots with self-driving cars killing people a more tangible fear for many people. More aligned with rogue chatbot harms, Justice Gorsuch obliquely referenced ChatGPT during Gonzalez v Google oral arguments, indicating that online AI outputs are likely not covered by Sec. 230’s third-party liability shield, a view backed by the estimable congressional authors of Sec. 230. In terms of actual government action on AI, the US has taken a hands-off approach with high-level principles and goals. That is not changing federally. The EU, in its deliberative but plodding manner, is moving forward on an AI legislative package that includes an AI Liability Directive and AI updates to the EU Product Liability Directive. Consumer groups have petitioned regulators in both venues to open investigations into ChatGPT, even that would take a year or more. The UK has criticized the EU’s model and proposes a lighter touch.

German FCO Gets Around to Investigating Whether $2 Trillion Microsoft is a Tech Giant

Report from TechCrunch

In Brief –  The Bundeskartellamt, Germany’s competition agency, has announced that it is opening an investigation of Microsoft under its legal authority to proactively address competition threats from the largest digital platforms. Since early 2021, the regulator has had the authority to identify digital companies “of paramount significance on competition across markets” and establish rules to protect competition in the markets they occupy, such as prohibiting preferential treatment of their own services or hindering interoperability. In its announcement, the regulator noted the breadth of the company’s businesses, including software platforms Windows and Office, cloud services Azure and OneDrive, collaboration platform Teams, video games and Xbox, LinkedIn, and Bing search, which now is linked to OpenAI’s ChatGPT. The company has faced complaints that they link products and services in ways that preference their offerings and undermine competitors.

Context –  Microsoft is the fifth digital giant targeted under the German digital regulatory authority, following Amazon, Apple, Google, and Meta. It is surprising that it took so long given that the company, like Apple, is valued at more than two trillion dollars, hundreds of billions more than the other three. The German law was a harbinger in Europe away from the traditional competition enforcement model of investigating dominant businesses for anticompetitive abuses after they caused harm, a process many criticized as too slow for digital markets. The EU’s Digital Market Act (DMA) establishing a new regulatory regime to enforce 18 high-level company “Do’s and Don’ts” for what may be a dozen “digital gatekeepers” is now the most important example. The DMA is expected to be fully enforceable in early 2024. The German regime is more open-ended in some ways, has more than a year head-start, and currently only targets five companies. Some German officials have expressed concerns that the DMA is both too restrictive regarding the company conduct that is covered, and that the European Commission many not have the resources dedicated to regulating a larger number of firms.

Many Intelligent People Call for AI Research Pause or Government-Imposed Moratorium

Report from the New York Times

In Brief –  Well over 1,000 self-selected technology leaders, researchers, and academics, including some very high-profile individuals such as Elon Musk and Apple co-founder Steve Wozniak, have signed an online letter calling on “all AI labs to immediately pause for at least 6 months the training of AI systems more powerful than GPT-4” and calling on governments to “step in and institute a moratorium” if that does not happen quickly. The letter was organized by the Future of Life Institute, which has long warned of a wide range of Artificial Intelligence-related risks.

Context –  Many of the letter signors may be highly educated but they don’t seem to know much about government. “All AI labs” won’t immediately pause their work, and the chance that any relevant government will quickly “institute a moratorium” is also zero. But there are some actual policy developments to consider. First, one reason “AI” regulation is so slow to develop is because the whole concept is so nebulous. In addition, although a handful of giant companies have invested heavily, smaller firms have made breakthroughs. Look at Clearview AI. Many people fear that technology will go wrong and harm people, and it’s ironic that that Mr. Musk is so concerned about super chatbots with self-driving cars killing people a more tangible fear for many people. More aligned with rogue chatbot harms, Justice Gorsuch obliquely referenced ChatGPT during Gonzalez v Google oral arguments, indicating that online AI outputs are likely not covered by Sec. 230’s third-party liability shield, a view backed by the estimable congressional authors of Sec. 230. In terms of actual government action on AI, the US has taken a hands-off approach with high-level principles and goals. That is not changing federally. The EU, in its deliberative but plodding manner, is moving forward on an AI legislative package that includes an AI Liability Directive and AI updates to the EU Product Liability Directive. Consumer groups have petitioned regulators in both venues to open investigations into ChatGPT, even that would take a year or more. The UK has criticized the EU’s model and proposes a lighter touch.

German FCO Gets Around to Investigating Whether $2 Trillion Microsoft is a Tech Giant

Report from TechCrunch

In Brief –  The Bundeskartellamt, Germany’s competition agency, has announced that it is opening an investigation of Microsoft under its legal authority to proactively address competition threats from the largest digital platforms. Since early 2021, the regulator has had the authority to identify digital companies “of paramount significance on competition across markets” and establish rules to protect competition in the markets they occupy, such as prohibiting preferential treatment of their own services or hindering interoperability. In its announcement, the regulator noted the breadth of the company’s businesses, including software platforms Windows and Office, cloud services Azure and OneDrive, collaboration platform Teams, video games and Xbox, LinkedIn, and Bing search, which now is linked to OpenAI’s ChatGPT. The company has faced complaints that they link products and services in ways that preference their offerings and undermine competitors.

Context –  Microsoft is the fifth digital giant targeted under the German digital regulatory authority, following Amazon, Apple, Google, and Meta. It is surprising that it took so long given that the company, like Apple, is valued at more than two trillion dollars, hundreds of billions more than the other three. The German law was a harbinger in Europe away from the traditional competition enforcement model of investigating dominant businesses for anticompetitive abuses after they caused harm, a process many criticized as too slow for digital markets. The EU’s Digital Market Act (DMA) establishing a new regulatory regime to enforce 18 high-level company “Do’s and Don’ts” for what may be a dozen “digital gatekeepers” is now the most important example. The DMA is expected to be fully enforceable in early 2024. The German regime is more open-ended in some ways, has more than a year head-start, and currently only targets five companies. Some German officials have expressed concerns that the DMA is both too restrictive regarding the company conduct that is covered, and that the European Commission many not have the resources dedicated to regulating a larger number of firms.

French Government Proposing Comprehensive Regulation of Social Media Influencers

Report from the Women’s Wear Daily

In Brief –  The French Government intends to regulate the conduct of social media “influencers”, including mandating that when a person is paid for a post, and the images or videos use digital tools such as filters, that it be specially labeled to inform viewers. There are reported to be upwards of 150,000 paid influencers using social media platforms in France. Finance Minister Bruno Le Maire, who praised the sector as dynamic and job creating, also claimed that influencer posts have “destructive psychological effects” on some internet users, and the goal is to put in place a comprehensive regulatory framework. Le Maire further noted that paid promotions concerning cosmetic surgery will be prohibited. This is not the first French foray into regulating online imagery that they link to negative health outcomes. In 2017, France enacted a law mandating labeling photos used in advertising in which models’ bodies were digitally altered in order to combat eating disorders.

Context –  The global social media “influencer” industry was valued at $16.4 billion in 2022. In the US, the Federal Trade Commission (FTC) has been working to provide truth-in-advertising direction to the burgeoning sector since 2017, including a “Disclosures 101 for Social Media Influencers” guide in 2019, and rulemaking kicked off last year to update its “Endorsement Guides” to further inform online influencers themselves, advertisers that hire them, social media platforms that carry them, and businesses that prepare or present online consumer reviews. The FTC endorsement guidelines have traditionally focused on transparency behind paid or otherwise sponsored testimonies. The agency is also proposing to move beyond simply issuing updated guidelines and is planning to issue new regulations regarding unfair and deceptive practices in digital marketing, including regulating fake reviews, paying for positive reviews for your own product or negative reviews about competitors, suppressing negative reviews, or buying or selling followers, subscribers, views, or other means of online influence.

European Commission Approves Google Purchase of Croatian-Developed Math App

Report from Reuters

In Brief –  Google is on track to win antitrust clearance from the European Commission for its acquisition of Croatian-based educational app developer Photomath. The app, which has been downloaded over 300 million times, allows a student to point a phone camera at an equation and the program will provide the answer as well as an explanation of the steps involved in solving the problem. The price of the acquisition has not been reported, by the app developer has been backed by a collection of top Silicon Valley investors and there is speculation that it could be the highest value for a Croatian tech firm.

Context –  Although opposition to acquisitions by Big Tech has been a cornerstone of the “Techlash” of recent years, especially by progressive champions of broad-based antitrust reform, the theories of harm have been wide ranging, and the enforcement track record has been mixed at best. Only one Big Tech acquisition in recent years has been fully rejected, Meta’s $400 million purchase of GIF platform startup Giphy. It was unwound by the UK CMA. The FTC opposed Meta’s similarly sized deal for VR startup Within Unlimited but lost in federal court. It is going through. Even that small bit of success beats the record for the bigger deals. They keep going through, including Amazon buying MGM and One Medical, and Google’s FitBit deal. Some critics of the anti-merger campaign argue that activist regulators talk more than act and prefer to go to court to stop less significant smaller deals where the risks and costs are lower. Microsoft – Activision, the biggest digital platform acquisition ever, is obviously a huge test of whether regulators will block a truly huge deal. It is also an example of the current model of concurrent reviews by the Big 3 regulators — the US, EU, and UK. In the case of Microsoft, they look increasingly likely to win approval in Brussels, are focusing most attention now on the UK CMA, and then will attempt to win over the US FTC third. On a much smaller scale, Amazon’s acquisition of Roomba vacuum manufacturer iRobot, is also still being reviewed in each jurisdiction.

March of the State Privacy Laws – Iowa Continues Bipartisan Compromise Trend

Report from the National Law Review

In Brief –  Iowa has become the sixth US State to enact comprehensive privacy legislation, following California (2018), Virginia (2021), Colorado (2021), Utah (2022), and Connecticut (2022). The law is most aligned with Utah’s, the other state on the roster with unified Republican control. The bill provides consumers a range of new data rights including the right to confirm and access personal data, portability, deletion, and to opt-out of the sale of personal data to a third party, the use of data for targeted advertising, and collection of certain sensitive data. Like Utah, Iowa’s measure does not give consumers the right to correct inaccuracies in their personal data. Finally, like all these state laws, the bill does not allow for consumer class actions lawsuits as a general enforcement measure, reserving enforcement to the Office of the State Attorney General.

Context –  Many digital policy experts have predicted that state-by-state privacy bills would create widespread business compliance problems and push the Congress to enact a comprehensive federal privacy law. That has not been the case yet. Instead, states appear to be able to reach bipartisan compromise when the key issue of private class action lawsuits is taken off the table. And when they do, they’ve tended to enact laws with relatively similar provisions. That said, class action lawsuits continue to be the major tripwire, for example in Washington State. Last year, the House Energy & Commerce Committee came closest to breaking the federal deadlock with the bipartisan American Data Privacy and Protection Act. It included a compromise on class actions that went farther than Republicans and business groups had been willing to go in the past, both federally and in states. But that bill still fell short under strong opposition from progressives and Democrats from California. It was also strategically linked into the Big Tech antitrust drive as a sort of fallback option for Big Tech reform. With those antitrust measures now off the agenda in the Republican House, it will be interesting to watch if business advocates reevaluate their position on privacy and class action lawsuits.

European Cloud Services Companies Still Unhappy About Microsoft Cloud Practices

Report from Reuters

In Brief –  European cloud services rivals are providing feedback to the European Commission Competition Authority that the offers from Microsoft to end complaints about its general cloud services offerings still fall short. Nextcloud, a German provider, filed a complaint with the Commission in 2021 accusing Microsoft of unfairly bundling their cloud services with Windows software to the detriment of cloud competitors. A further coalition of cloud providers, led by French-based OVHcloud, submitted a further complaint regarding Microsoft licensing terms for its highly popular Office and Windows software packages that preferenced using Microsoft’s cloud. In response to the latter complaint, Microsoft publicly announced last August that it was changing those licensing terms in Europe to eliminate a surcharge that applied when the software is stored and used on a cloud provided by a company other than Microsoft, although cloud services giants Amazon, Google, and Alibaba were exempted.

Context –  Despite its standing as a digital giant in software, cloud services, gaming, and business services, and a market cap that now exceeds $2 trillion (matched only by Apple), Microsoft largely avoided the first years of the “techlash”. However, the acquisition of video game giant Activision Blizzard, which is the most expensive acquisition ever by a digital giant, has sparked scrutiny from US, EU, and UK competition enforcers. Besides engaging in a full-throated defense of the acquisition as good for consumers and developers, Microsoft has been engaged in a global goodwill campaign aimed at progressive regulators. It has included acquiescence to unprecedented tech labor organizing, support for major antitrust reforms and app store regulation, and the software license changes to promote European cloud services competition. Although the latest reports point to Microsoft winning approval in the EU with conditions related to cloud-based gaming, the Commission may be looking to add more behavioral promises for greater competition for MS Teams and Azure in the coming weeks as well.

US FTC Proposes Dramatic Simplification of Subscription Cancelation Processes

CNET

In Brief –  The US Federal Trade Commission is proposing a new rule to require companies offering services under subscription plans to allow consumers to cancel their subscription in a manner as simple as they signed up for the subscription. Under the proposal, companies would be required to let customers cancel a subscription in no more steps than it took to sign up. They would also be required to get permission before showing additional offers when customers try to cancel a subscription and send annual reminders before automatic renewals occur. The new requirements would apply beyond digital companies, for example covering newspapers subscriptions or gym memberships, and cover subscriptions purchased over the phone, in print, as well as on the internet and apps. The new rule is crafted as amendments to the FTC’s long-time Negative Option Rule, and was enacted by a 3-1 vote of the Commission. Republican Commissioner Christine Wilson, who will soon depart the FTC, voted against the proposal, arguing that it regulates practices far beyond the purview of the Negative Option Rule.

Context –  Context – Cancelling subscriptions, especially for online and digital services, has been one type of digital practice targeted by critics of so-called “dark patterns”, a term used to describe a wide range of design practices from complicated menus, skewed wording, confusing choices, and repeated nudging, to factors as basic as fonts, colors, sizes, and images. At a high level, the EU’s Digital Services Act will begin regulating dark patterns for platforms in Europe, and Amazon, who’s cancellation process was the subject of widespread consumer group complaints starting in early 2021, made major changes to their Prime account cancellation process for European users last summer. The FTC is investigating Amazon’s US practices as well. Bipartisan legislation in the past two Congresses aims for dark pattern regulation in the US as well. It has not moved stand-alone but could be included in broad privacy legislation. State-level digital privacy measures enacted in recent years in California and Colorado have included provisions nullifying user consent when achieved using deceptive practices.

More Public-School Districts Suing Social Media Companies in Sec. 230 End Run

Report from Washington Post

In Brief –  A growing number of public-school districts are filing lawsuits alleging that the large social media platforms popular with teens are legally responsible for a mental health crisis among youths. The suits were kicked off by the Seattle School District in January, and the most recent contributors have been San Matteo County in California and Bucks County in Pennsylvania. The complaints consistently claim that the companies have intentionally designed their services to promote content that they know is harmful to young users, leading to a range of mental health and behavioral disorders among young people, and that these disorders make it more difficult and expensive to educate students. They call on the courts to award damages to the districts and order the companies to change their services.

Context –  Despite endless commentary that contends social media use harms young people, the charge generally does not hold up under analytical scrutiny and study. Along with many competing theories behind teen mental health shortfalls, there is significant evidence of benefits, especially to marginalized youths. Nevertheless, “protecting kids” is being used to justify all manners of online regulation. An age-based “splinternet” walling off and policing teens online is a real possibility. Utah has enacted landmark legislation requiring age verification on all social media accounts, parental approval for those under 18, separate parental access to teenager accounts, and even mandatory shutdowns from 10:30 pm and 6:00 am unless waived by the parent. Utah also enacted a bill to hold social media companies financially liable for harm to users under age 16. Other states are following, as will court challenges. Conveniently, the Supreme Court recently heard oral arguments for the case of Gonzalez v Google, which tests whether Sec. 230, protecting internet platforms from civil liability for third party content, also applies to their actions recommending, ordering, or otherwise presenting. The Biden DoJ joined Gonzalez arguing it does not. If the Court sides with Google, it will set back these and similar efforts to end-run Sec. 230.

TikTok’s Top Executive Testifies to Highly Antagonistic US House Committee

Special Report from PEI

In Brief –  TikTok’s very articulate top executive testified for hours before a highly antagonistic House Energy and Commerce Committee to make the case that the short video social media phenom can operate outside the influence of the Chinese Government despite being owned by Beijing-based ByteDance. Along with reiterating claims that the company has never shared US user data with the Chinese Government, Shou Chew pledged that TikTok intends to address US security concerns with “Project Texas”, a $1.5 billion plan he called a firewall to shield US user data and the algorithms from Chinese Government interference. In addition, he reaffirmed the platform’s ongoing commitment to ensure a safe environment for young users. In 2020, the Trump Administration attempted to force the already popular platform to be sold by ByteDance to a US business, an effort that was initially derailed by federal judges and then abandoned by the incoming Biden Administration. However, the Biden Administration is reported be rejecting Project Texas and calling for a sale to address Chinese Government influence.

Context –  The TikTok debate involves two parallel lines of discussion. One is the collection of social media and digital policy issues confronting all the top social media platforms. TikTok’s emergence into the top tier globally has seen the company facing the same set of issues, including privacy and content moderation, as Facebook, Instagram, YouTube, Snap, and Twitter. But the US Congress is not likely to legislate on those issues this year. And if so, it won’t be part of legislation dealing with TikTok or Chinese digital platforms. In many ways, those issue are operating as a distraction from the second thread relating to unique national security risks due to the authority, legal and practical, that the Chinese Government has over tech companies based in China, meaning ByteDance in this case. While access to user data, including ByteDance’s surreptitious tracking of journalists with TikTok accounts, is a problem for TikTok, concerns with the potential of direct Chinese Government influence over content algorithms in the future, even subtly, for US public influence purposes, is the bigger risk.

California Legislature Enters the Big Tech Mandatory News Media Payments Debate

Report from Los Angeles Times

In Brief –  California Assemblywoman Buffy Wicks (D-Oakland), who was a lead sponsor of state legislation enacted last year to regulate how digital platforms serve users under age 18, has introduced the California Journalism Competition and Preservation Act, a bill to force large digital platforms such as Facebook and Google to pay news media companies a “journalism usage fee” when news content they publish appears on the platforms next to advertising. Last year, federal legislation sponsored by a bipartisan collection of anti-Big Tech reformers in the US Congress to force the same large platforms to pay news media companies more money, was considered but rejected as part of end-of-the-year legislation.

Context –  Newspapers have been complaining for two decades that the internet ruined their business model as advertisers have shifted more of their ad budgets to digital platforms. Media companies have been lobbying governments around the world to legally mandate that the largest digital ad platforms pay them more money. France and Australia have most aggressively come to the aid of media companies. Google and Facebook both drew lines in the sand in Australia that they say they will apply in other markets. Meta rejects paying for news content posted by users to the platform, including by media companies themselves. Google opposes being required to pay for simple search links. The Canadian Parliament is debating legislation inspired by Australia. Meta has publicly threatened to block users from posting or sharing covered media content. Google has tested a change to its search engine to remove covered links from its basic search function. Google and Meta have both created curated media services and paid hundreds of millions of dollars to media companies to reduce political heat. Google recently announced an expansion of their effort. Meta’s position is more interesting. They claim most social media users increasingly don’t want news stories and prefer TikTok-style entertainment. “News” brings misinformation, angst, and strife. So, turning off news in the face of a payments mandate might be a real possibility.

California AG Antitrust Lawsuit Targeting Amazon Price Parity Policies Can Proceed

Report from Bloomberg

In Brief –  California Superior Court Judge Ethan Schulman is allowing an antitrust complaint filed by the California Attorney General challenging Amazon’s “fair pricing” policies to proceed. The AG’s complaint, which alleges violation of state antitrust law and was brought in California state superior court, argues that Amazon uses its price parity policy to protect the high marketplace and logistics fees it imposes on sellers from the competitive pressure of alternative marketplaces that charge lower fees. Amazon is accused of pressuring sellers not to pass along the value of lower fees on other marketplaces to consumers as lower prices, harming the sellers directly through the artificially high Amazon fees and online shoppers by inflating prices on other websites. Amazon argues that their policies benefit consumers by pressing for the lowest prices to be offered on the Amazon Marketplace.

Context –  Among the plethora of legal and regulatory challenges facing Amazon, its fee-shielding price parity policies might be the most at risk, at least in the US, where Amazon’s marketplace holds a very large market shares for online sales by small and mid-size retailers, and its combined fees on top sellers now reach 50 percent. The California AG’s antitrust complaint is the third to survive Amazon motions to dismiss, following two class action suits moving in federal courts in Washington State. Amazon’s one notable legal success was the dismissal of a similar complaint brought in the District of Columbia’s Superior Court in 2021 by then DC AG Karl Racine. However, the Biden Administration has argued for the DC court to reverse the decision and DC’s new Attorney General has formally asked a DC appeals court to take that action. Key to these fights is the level of dominance of Amazon in online marketplace sales, because plaintiffs in all the cases are arguing that sellers will not forgo their ability to successfully sell on the Amazon Marketplace, which accounts for 70% of sales on US ecommerce marketplaces, and so they raise prices on other venues creating an online price floor that bakes in high Amazon fees.

Snapchat Reveals More About Their Content Moderation Standards and Algorithms

Report from Axios

In Brief –  Snapchat is publishing guidelines that better explain the types of content that gets algorithmically distributed to users in its app, including providing greater transparency into the content moderation standards that influence that algorithmic distribution. Detailed moderation guidelines have traditionally been made available only to Snap’s vetted partners and professional creators on the platform. The company says they are making them public to give parents more assurance about what their teens see on the app. While most Snapchat activity involves direct communications between users who are members of each other’s friends lists, Snapchat does include services such as a Stories tab, which features content from professional media publishers and creators, and a Spotlight tab, which highlights content created by non-professional Snapchat users. Like most social media platforms, Snapchat uses algorithms and content guidelines to personalize those content flows. Parents of users under age 18 will now be able to restrict their teens’ ability to view recommended content in Stories or Spotlight via controls within the Snapchat Family Center.

Context –  Greater transparency in content moderation policies is coming to digital platforms, especially in Europe. The landmark Digital Services Act (DSA) demands much greater content moderation transparency. Very Large Online Platforms (VLOPs) with more than 45 million online monthly users take on the most obligations. Snapchat is a VLOP. And while there will be more transparency from all the largest platforms, it’s not clear how the new regulatory regime will be fleshed out and implemented. In addition, if the recent Twitter experience is any indication, DSA regulators will be directing VLOPs how to enforce their policies too. The issue of algorithmic amplification of user content by social media platforms is also a highlight of the massively important Supreme Court case Gonzalez v Google that tests efforts to end-run Sec. 230 by arguing that platforms should be liable for bad things attributed to content their algorithms recommend. We’ll see how that goes this summer.

Restaurant Delivery Apps Fail to Move Federal Class Action Suit Over to Arbitration

Report from Bloomberg

In Brief –  The largest restaurant food delivery app companies have failed to end a federal class action antitrust lawsuit in New York alleging that they exploited their dominance of meal delivery services to push restaurants to raise prices offered to diners eating in the restaurants or directly ordering takeout. The apps each had provisions in their contracts with participating restaurants requiring that they not charge higher prices on the apps despite the fact that the app’s fees often ranged from 30 to 40 percent. US District Judge Lewis Kaplan decided that the arbitration clauses of the delivery app user agreements don’t apply to the claims in the lawsuit because the app businesses are accused of price-fixing that raised prices when the consumer plaintiffs were specifically not using the apps. Although the consumer suit was filed during the pandemic shutdown, it does not allege specific conduct related to this time when many restaurants were required to close their dining rooms.

Context –  The use of contractual “price parity” clauses by digital platforms has been a legal and regulatory concern for years. They prohibit the platform-enabled seller of a good or service from offering a lower price to customers off the platform than they offer on the platform. These become an issue when the platform’s fees are higher than on alternative platforms, and an even bigger concern when a platform is alleged to have market power because sellers won’t risk offering lower prices to consumers on lower fee platforms for fear of losing sales on the dominant platform. The Online Travel Agency (OTA) industry, with platforms requiring hotels to offer the same room rates on their platform as they do on their own hotel website or other OTA platforms, has been a particular target of regulatory concerns, including in Korea, Japan, India, Germany and the EU. In the US, Amazon’s “Fair Pricing” policies are an especially high-profile example, with a growing number of antitrust lawsuits moving forward that allege the ecommerce giant has been pushing sellers to raise prices on other platforms to protect its increasingly high seller fees.

Biden DoJ Fails to Get State AG Social Media Censorship Lawsuit Dismissed

Report from US District Court Judge Terry Doughty has rejected the US Department of Justice’s motion to dismiss a federal lawsuit brought by the Attorneys General of Missouri and Louisiana alleging that the Biden Administration pressured the largest social media platforms to censor disfavored conservative viewpoints. In his ruling, Doughty dispensed with defense claims that the states lacked standing and that none of the defendants had unilateral authority to enforce directives on the platforms.

Context –  Federal social media legislation is stymied by the partisan disconnect on objectionable online content. Democrats want platforms to police misinformation and hate more and better. Republicans want the platforms to allow more diverse and controversial viewpoints. More is happening in states where one party holds all the power. Be aware of two different threads of the Republican social media “censorship” argument. One is that the largest platforms are themselves public venues governed by the 1st Amendment, or some form of “common carrier” prohibited from policing messages. The laws passed in Texas and Florida, and a lawsuit by Ohio’s AG, pursue this line. Expect the Texas and Florida laws to be in front of the Supreme Court next year. The other thread alleges that the federal government, blocked from censoring, circumvents the 1st Amendment by pressuring the platforms, who are allowed to police speech, to do so. The MO-LA lawsuit is making that case, as did Republicans in a recent US House “Twitter Files” hearing. When delegated-censorship charges include federal actions when Donald Trump was the President, such as the Hunter Biden laptop affair, which the original MO-LA lawsuit did, they don’t make much sense. But Biden officials pressuring the social media platforms to police COVID “misinformation” in 2021 is a more credible delegated-censorship case. A House Republican bill to prohibit federal officials from pressuring social media platforms won’t move, but it earned “kudos” from progressive digital policy expert Mike Masnick who said it is “focused on actually reinforcing the 1st Amendment’s protections.”

Three Strikes and Out… UK CMA Ends Google-Meta “Jedi Blue” Investigation

Report from TechCrunch

In Brief –  The UK Competition and Markets Authority (CMA) has quietly dropped the antitrust investigation it opened last March into “Jedi Blue”, a 2018 business agreement between Google and Facebook that came to light through the December 2020 federal antitrust complaint brought against Google by a coalition of 10 States led by Texas AG Ken Paxton (R). That complaint alleged that Google gave Facebook special terms and access to its technology tools allocating advertising space across the internet in return for Facebook abandoning a rival advertising technology called “Header Bidding” that some argued threatened Google’s online ad services business. The companies aggressively disputed the allegations. When the CMA opened its Jedi Blue review last year, it was done in conjunction with the European Commission Competition Authority. The parallel investigations were seen as a sign of heightened cross border regulatory pressure on tech giants. In January, the European Commission (EC) announced that they were dropping their Jedi Blue investigation and focusing on other digital ad-related reviews of both Google and Meta. The CMA cited “administrative priorities” as the reason for their decision, meaning that they were putting their resources into other matters.

Context –  The Jedi Blue hype has truly fizzled out. Initially raised in the US State Attorneys General lawsuit, that charge in their complaint was dismissed last September by the federal judge overseeing that case. While their overall complaint continues forward, the judge said the states failed to show that the Jedi Blue agreement harmed competition. The EC and the UK have now essentially done the same. To be clear, each set of enforcers is moving forward on broader antitrust challenges targeting both companies’ digital ad businesses, and the US Department of Justice joined the fray suing Google in January. Bigger picture, each of the reviews will theoretically need to contend with evidence that both Google’s and Meta’s overall digital ad market shares are falling, appearing to have peaked in 2017, and dipped below 50% combined, in 2022.

Progressives Trying to Keep Trade Talks From Protecting US Digital Companies (Again)

Report from Washington Post

In Brief –  The Indo-Pacific Economic Framework (IPEF) talks have emerged as the latest opportunity for progressive critics of Big Tech to object to US trade policy that attempts to protect US digital businesses from discriminatory policies. Launched last May, the IPEF involves a dozen regional countries, including the US, seven members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and regional heavyweights like South Korea, India, and Indonesia. It is portrayed as very distinctly not being trade negotiations, but instead proto-talks on a wide range of trade, supply chain, sustainability, tax, and corruption topics. Digital trade is one area of discussion, and business groups hope it advances better policies on topics including cross-border data flows, technical standards, and supply chains. Some progressive advocacy groups have argued for months that the Biden Administration was trying to use the IPEF to undermine digital privacy, consumer protection, and labor rights.

Context –  Digital policy fights keep spilling over into US trade debates. When it’s not news, it’s not because the digital conflicts have cooled off, it’s because the US trade agenda is largely stalled. Similar charges emerged last year related to the China competition bill, and in 2019 against the bill implementing the US-Mexico-Canada Agreement. One line of argument is that the trade bills will empower tech companies to enlist the US Government to push back on a wide range of digital regulations as being discriminatory trade barriers. A second, more tortuous argument, is that the trade agreements could hamper the ability of the US Government to engage in its own domestic digital regulations. Sometimes the criticism has been bipartisan. For example, Sen. Ted Cruz (R-TX) joined Speaker Nancy Pelosi (D-CA) in 2019. This time it is progressives. The reality is that progressives see foreign governments instituting a wide range of digital regulations, such as the DMA and DSA in Europe, and decry a lack of similar success in the US.If the Congress won’t follow suit, they at least do not want the US to push back.

TikTok Time Machine – Biden Administration Pushing TikTok Sale or Ban

Report from Wall Street Journal

In Brief –  After years of public debate and private negotiations, reports indicate that the Biden Administration has determined that there is no remediation plan that addresses security concerns related to the ability of the Chinese Government to influence TikTok’s operations if the super-popular app is owned by Chinese-based ByteDance. Therefore it is demanding that the app’s US operations be sold to a non-Chinese business. If not, it is threatening to ban the app from operating in the country. Negotiations to address national security concerns with TikTok have been underway since 2020 through the Committee on Foreign Investment in the United States, a largely non-transparent US Government interagency panel with authority to review foreign purchases of businesses and property in the United States. The panel is reviewing ByteDance’s 2017 acquisition of Musical.ly, a short-video app that became part of TikTok.

Context –  Travel back to mid-2020… Among a few other major happenings, the Trump Administration pushed to force ByteDance to sell TikTok’s growing US operations. Microsoft was a suitor. And Oracle. As leverage, President Trump banned TikTok, as well as Chinese “super app” WeChat. But the US courts are truly independent and federal judges were sympathetic to TikTok (and WeChat user) lawsuits. Arguments included 1st Amendment challenges and the Berman Amendment, a War Era law that exempted some communications materials from US export controls targeting the USSR. Then Trump lost. President Biden called off the bans and court battles. A revived ban is certain to restart the very interesting (and likely lengthy) legal battles. The US-China relationship has not improved. TikTok’s popularity has grown immensely, which must carry political implications. The Chinese Government cracked down on digital giants (look at Jack Ma’s travails) destroying claims that the companies can be independent. And repeated leaks from inside TikTok exposed ByteDance interference that raised questions about whether any company plans or policies could be trusted. There is still a long way to go.

Microsoft Adds to their Antitrust Remedy Pitch with 10-Year Boosteroid License Deal

Report from Reuters

In Brief –  Microsoft has signed a 10-year licensing deal with cloud gaming service provider Boosteroid as it continues building a case to win over skeptical antitrust enforcers for its proposed $69 billion acquisition of giant videogame developer Activision-Blizzard. While not the market leader in videogame distribution, Microsoft is already a major competitor in gaming consoles, subscription services, downloadable games, and the nascent cloud-gaming business. Critics have argued that the company could make some or all Activision-Blizzard games, especially highly popular franchises like Call of Duty, exclusive to Microsoft’s distribution platforms to give them an edge in the market. Microsoft has consistently rejected the argument, and has recently made similar deals with cloud gaming providers Nvidia and Ubitus, Nintendo, one of the top three game console makers along with Sony and Microsoft, and Valve Corp, who operates Steam, the largest videogame download platform.

Context –  Microsoft’s Activision deal is the biggest digital acquisition of all time. It’s no surprise that it is facing regulatory scrutiny. One hallmark of the current era of antitrust is a great degree of cross-border regulatory cooperation. Multiple regulators challenge the same deal and appear to partner and venue shop in ways that are causing concerns among some business advocates. In this case, the key enforcement agencies appear to be the European Commission (EC), UK CMA, and the US Federal Trade Commission. The EC is reportedly preparing to approve the deal with a set of behavioral remedies such as the long-term licensing deals Microsoft is reaching. The company is working to reach a similar agreement with the CMA, who, for example, has noted concern about the impact on the emerging cloud gaming market. A deal there is also critical because the UK court system gives great deference to the antitrust regulator meaning a rejection won’t likely be overturned in court. Finally, the company hopes to take conditions arranged in Europe and win approval from the FTC, or if necessary, prevail in an FTC administrative court.

California State Court of Appeals Upholds 2020 Prop. 22 Win for Gig Platforms

Report from New York Times

In Brief –  In a major legal win for Gig-style ridesharing and delivery platforms, a three-judge panel of the California Court of Appeals has overturned a 2021 ruling of State Superior Court Judge Frank Roesch that Prop. 22, the November 2020 ballot initiative to exempt ridesharing and delivery companies from California’s AB 5 legislation, violated the state’s constitution. AB 5, enacted in 2019, reclassified most independent contract workers, especially on digital Gig work platforms, as employees. Prop. 22, a ballot initiative to exempt ridesharing and delivery platforms from AB 5, was passed with 58% of the vote in November 2020. While upholding the exemption from AB 5 for platforms like Uber and DoorDash, the Court of Appeals did strike the ballot initiative provision that severely limited the ability of the state legislature to pass a law allowing Gig workers to join labor unions.

Context –  California leading the way to get rid of Gig-work platforms seems forever ago. “Blue” California voters overturning AB 5 at the same time Joe Biden carried 63% of the state vote was key. Federal bills did not move when Democrats held slim congressional majorities. Republicans now control the US House, taking those chances from slim to none. Even in Blue States, major worker classification bills have also been stalled. A platform-backed Prop. 22-style ballot initiative in Massachusetts, aiming for November 2022, was cancelled by a state court. The Biden Administration Labor Department has proposed a new rule changing the criteria that businesses are advised to use when classifying a worker as an employee or a contractor, shifting the standard toward classifying more workers as employees. But court challenges are expected. And past regulator efforts to change independent contractor models have suffered setbacks. On the compromise front, Washington State has been breaking ground on ridesharing regulation that foregoes reclassification but expands benefits in ways large Gig platforms support. Like on many digital issues, Europe is moving in a direction US progressives support on Gig worker classification.

Meta and Google Threaten Big Changes in Response to Canada’s Online News Act

Report from CBC

In Brief –  Meta and Google are both discussing the dramatic changes they might make to their Canadian operations in response to the Online News Act that would force them to pay Canadian news media companies when their content appears on the platforms. Modeled somewhat after legislation enacted in Australia in 2021, the platforms are directed to reach compensation agreements with large Canadian media companies, and absent deals, face a binding arbitration process led by a Canadian regulator. Both drew lines in the sand in Australia. Meta rejects plans that would force them to pay for news media content posted by users. The company temporarily blocked Australian users from posting or sharing covered media content and says they would likely do the same in Canada. Google opposes being required to pay for simple search links and threatened to drop links to Australian news media content from general search results. The company has tested a similar change in its Canadian search engine with a small number of users.

Context –  Newspapers have been complaining for two decades that the internet ruined their business model. Canada claims that more than 450 news outlets have closed since 2008 and one third of Canadian journalism jobs have disappeared. France and Australia have most aggressively come to the aid of media companies, but the desire to force Google and Meta to pay up is a global phenomenon. An effort in the US Congress to give an antitrust exemption to US media companies to collectively bargain digital ad contracts fell short in the final days of 2022. New Zealand is considering something similar. Google and Meta have both created curated media services and paid hundreds of millions of dollars to media companies aiming to reduce political heat. Google recently announced expansions of that effort in Europe. Meta’s position is more interesting. They claim most social media users increasingly don’t want news and prefer TikTok-style entertainment. Plus, “news” brings misinformation angst and political strife. So, turning off news in the face of a payments mandate might be a real possibility.

Google Fails to Move DoJ’s Advertising Antitrust Suit to New York Federal Court

Report from Washington Post

In Brief –  Google has failed to have the federal antitrust lawsuit filed by the US Department of Justice (DoJ) alleging rampant anticompetitive conduct in its digital advertising business from being transferred from a federal court in Virginia to a federal court in New York where a batch of similar antitrust cases are currently being considered. Google argued that the DoJ’s lawsuit, which was also backed by six state Attorneys General, should be added to cases from across the country that have already been joined in the Southern District of New York to avoid wasting resources and potentially result in conflicting orders. The DoJ wants its case to stand alone in the 4th federal circuit to avoid it not getting its proper consideration alongside the others, as well as potential scheduling delays. DoJ also highlighted that antitrust lawsuits filed by the US Government were specifically exempted from the federal law that otherwise encourages the federal judiciary to consolidate similar cases filed in different jurisdictions.

Context –  Google has been the preeminent digital ad giant since it acquired display ad platform DoubleClick in 2007. It has since drawn antitrust scrutiny in many markets, including the UK, EU, Australia, and in a federal lawsuit filed by States AGs led by Texas. All the digital ad competition cases will increasingly need to address the apparent fact that overall market shares of Google, and number two Meta, are falling, with Google’s below 30%. But this is venue shopping news. Last December, as the high profile Big Tech antitrust reform bills were falling short in the closing days of the 117th Congress, a narrow measure giving State AG-filed federal antitrust lawsuits the same anti-consolidation treatment as the DoJ gets, did pass. That bill got a boost from the fact that the Texas-led Google ad lawsuit was transferred from Texas to New York. State AGs prefer to pick their venues. The same goes on an international scale for antitrust regulators. And the US Chamber of Commerce sees nefarious venue shopping-style multinational regulatory cooperation going on as well.

Meta’s WhatsApp Signals Concern Over UK Online Safety Bill Impact on Encryption

Report from The Guardian

In Brief –  The head of WhatsApp, Meta’s popular messaging app that uses strong end-to-end encryption, is saying that the company might need to stop offering its service in Great Britain if the Online Safety Bill (OSB) is enacted by Parliament in a way that permits UK regulator Ofcom to require that platforms be able to scan user messages for illegal content. Bill backers argue that the landmark legislation does not “ban” strong encryption, but critics argue that Ofcom would have the authority to order messaging services to have the capability to determine if messages contain child sexual abuse material or terrorism content. Noting that there is no way to weaken encryption for WhatsApp in the UK without undermining the encryption system that serves more than 2 billion users, Will Cathcart noted that 98% of those users are based outside the UK and they overwhelmingly support the privacy protections. Relating that strong encryption causes problems with some regimes, he said “We’ve recently been blocked in Iran. But we’ve never seen a liberal democracy do that.” He called for the OSB to be amended by Parliament to include explicit language that would defend end-to-end encryption in messaging services.

Context –  WhatsApp follows Signal as the second major messaging service to explicitly identify the OSB’s vague language authorizing Ofcom to impose requirements on messaging platforms as a reason that it might have to abandon the UK market. Both platforms use end-to-end encryption that blocks the platform itself, as well as all other outside parties to the messages, from detecting the content of messages. So, from each of their perspectives, if Ofcom can require a platform to have the capability to identify message content to determine if it is illegal, it might not be a direct ban on end-to-end encryption, but complying with the requirement would be a de facto ban. Signal’s Company President recently said it is “magical thinking” to believe a communications service can provide privacy “only for the good guys”, adding that “encryption is either protecting everyone or it is broken for everyone.”

Biden Administration Support for Senate China Apps Bill That’s Flexible on TikTok Ban

Report from Reuters

In Brief –  Senior Biden Administration officials are expressing support for bipartisan legislation introduced in the US Senate that will grant the Executive Branch new authority to regulate, and even ban, digital services and other technologies from countries that represent national security threats. The measure adds to the debate over the proper US Government response to the increasingly popular TikTok app that is owned by Chinese digital giant ByteDance. The bill is sponsored by Sen. Mark Warner (D-VA), the Chair of the Senate Intelligence Committee, and Sen. John Thune (R-SD), the second-highest member of the Senate Republican Leadership. It applies to more businesses and services than just TikTok and more countries than just China, including Russia. Rather than ban TikTok, the RESTRICT Act gives the Commerce Department authority to impose restrictions up to and including banning digital technologies that it determines pose national security risks. Top US Government concerns include the ability of the Chinese Government to influence TikTok algorithms or access sensitive data on US users.

Context –  Time to take a temperature check on the prospects of an actual TikTok ban. Keep in mind three things. Partisanship is increasingly infecting the process. Conservative Republicans are rallying around a direct ban while few Democrats are there. That’s one strike against. Then there is the popularity of the service. The Secretary of Commerce, the person who would have the authority to ban the app, recently said how politically unpopular she thought the move would be. “The politician in me thinks you’re gonna literally lose every voter under 35, forever.” Finally, there is the reality that the US judicial system is truly independent and when the Trump Administration attempted to ban TikTok (and WeChat), federal judges were quite sympathetic to First Amendment-based legal challenges. The ACLU recently revived those arguments. Plus, federal courts move slowly. That all said, there is little trust that a Chinese-based business could withstand pressure from the Chinese Government to circumvent any rules or policies a company puts in place.

FTC Probe of Musk-Twitter’s Data Handling Drawing Fierce Republican Reaction

Report from Washington Post

In Brief –  House Republicans are aggressively criticizing the Federal Trade Commission (FTC) for months of regulatory inquiries and challenges of Twitter as Elon Musk announced, completed, and implemented his takeover of the social media platform. The allegations of ideologically-motivated FTC interventions were made at a hearing of House Judiciary’s Select Subcommittee on the Weaponization of Federal Government by Chairman Jim Jordan (R-OH), a lead Republican accusing large digital platforms of discrimination against conservative viewpoints. He argues that the FTC, led by progressive antitrust champion Lina Khan, has pressed Twitter about a wide range of politicized content moderation policies in the year since Elon Musk announced and carried out his purchase of the platform. The FTC has been engaged in oversight of Twitter for many years based on past privacy practices, which Republican allege is now used to justify pressuring the company on unrelated content moderation matters. Democrats responded that the agency was fully justified in its ongoing regulatory oversight.

Context –  The happenings of the Weaponization Subcommittee are relevant because they illustrate how far apart the two parties are becoming on everything related to the digital platforms. It is important to understand what Elon Musk and Lina Khan symbolically represent in policy debates, especially for conservatives. Musk represents the new reality that digital platforms are not innately and forever progressive, reinforcing a traditional reluctance to regulate them. Chair Khan is increasingly seen as the personification of the overbearing regulatory state, a longtime core conservative concern. Many Republicans who expressed sympathy for reining in Big Tech are pulling back in the face of agency overreach. The Wall Street Journal recently criticized populist tech regulatory maven Sen. Josh Hawley (R-MO) for empowering Khan and other regulatory champions. Watch the partisan divide over the FTC increasingly threaten any federal legislation that empowers that agency in any way.

Did Justice Gorsuch Say AI Chatbots Fall Outside Sec. 230 and Have a Liability Problem?

Report from Washington Post

In Brief – During Supreme Court oral arguments in the massively important case of Gonzalez v. Google, one of the two cases the court is deciding related to the foundational internet liability law Section 230 of the Communications Decency Act and its application when terrorism content appears on social media platforms, the debate raised a different Sec. 230 and liability issue, namely whether digital platforms will be liable for AI services that contribute to harms. One big question in Sec. 230 cases is whether the online material in question is created by the platform or by a third-party user. Justice Neil Gorsuch, undoubtedly referring to highly publicized AI-enabled chatbots like ChatGPT, said “Artificial intelligence generates poetry. It generates polemics today that would be content that goes beyond picking, choosing, analyzing or digesting content.” Referring to Sec. 230, he said, “And that is not protected. Let’s assume that’s right.” If US judges end up agreeing with that presumption, and chatbots are considered to be content creators employed by the platform where they appear, then liability challenges related to everything from libel, to faulty investment advice, to encouraging self-harm, could follow on.

Context – When the Supreme Court considers big legal questions, there is a ton of information to read (see the briefs) and an often-interesting debate (for example here and here), but then everything shuts down while the court decides the outcome. That leaves experts and others three or four months to ponder every word and read tea leaves like this one. That said, liability-related issues are a part of the multifaceted world of AI. Setting aside that some very smart analysts argue the “AI” is too nebulous a concept to be useful, many people definitely fear that technology will go wrong and harm people. While the US Government has taken a hands-off approach to AI regulation with only high level principles and goals, the EU is much farther along. Their AI regulatory package already includes two AI liability proposals, the AI Liability Directive and AI updates to the EU Product Liability Directive.

Progressive Telecom Policy Champion Gigi Sohn Withdraws from FCC Consideration

Report from Bloomberg

In Brief – Gigi Sohn, a highly respected advocate for progressive telecommunications policies, has announced that she has withdrawn from consideration as a commissioner of the Federal Communications Commission. She was nominated to the post by President Biden in October 2021 but failed to win approval in the evenly divided 117th Congress. Renominated in January, and with somewhat greater hope due to the Democrats holding a slight majority of 51 Senators, recent negative comments by two Democratic Senators, combined with ongoing united Republican opposition, meant she would not have the votes to prevail. At a recent hearing of the Senate Commerce Committee, Sen. Jacky Rosen (D-NV) set off alarm bells, and then Sen. Joe Manchin (D-WV), often willing to buck the Biden Administration, announced that he would oppose the nomination.

Context – Gigi Sohn is a long-time and unapologetic advocate for progressive policies. Consistently cheered by consumer advocates and decried by the telecom industry. But there is absolutely no question that she is qualified to serve on the FCC. And while she has definitely been outspoken on social media on a wide range of political issues, the same can be said about innumerable Biden Administration nominees to top roles. Indiscreet partisan nastiness on social media, especially Twitter, is unfortunately a feature on both sides of the policy divide. But yet nearly every Biden nominee goes through. Why not here? The fact is, the major telecom companies have invested a tremendous amount in political influence efforts aimed at both sides of the aisle for decades and decades. Big issues that really matter to industry are in front of the FCC, especially Net Neutrality. Sohn is an effective advocate that telecom companies would prefer not be there, and they had the muscle to hold enough Senate Democrats back. Impressive strength. Forget talk of “shadow” campaigns or “dark money”. The companies showed their Senate muscle. So, what’s next? I suspect another progressive nominee is quickly submitted. But if industry can keep the Commission locked up at a 2-2 partisan split for the rest of this year and next, it will be remarkable.

Utah State Legislature Passes Bills Severely Regulating Teen Use of Social Media

Report from Axios

In Brief – The Utah state legislature has passed two bills severely restricting the ability of internet users under age 18 from using social media. Both are expected to be signed by Governor Spencer Cox (R). SB 152, passed on the last day of Utah’s highly truncated state legislative session, would impose age verification on all social media accounts and require individuals under age 18 to have parental approval to set up the account. The age verification procedural requirement will be set by the state’s Division of Consumer Protection. The bill would also require a social media platform to give the approving parent a separate password to access the complete account at any time, as well as require social media companies to cut off access to accounts for users under age 18 each day between 10:30 pm and 6:00 am, unless waived by the parent. If signed into law, the age verification process and related mandates begin to go into effect on March 1, 2024. The second bill, HB 311, would render social media companies financially liable for harm users under age 16 claim to experience on their platforms.

Context – The politics behind proposing to keep “kids” off social media are apparently unimpeachably good. And global. Utah is just the latest and most aggressive example this side of China. (Seriously, they police all content and have similar time limits on gaming.) The push to create a separate, more regulated and policed, version of the internet for teenagers is fully underway, with the UK, France, and California all being prime example. If there is a “splinternet” coming to Western markets, this is it. We don’t have the space to critique too deeply, but super-smart analyst Mark Masnick does here and here. Creating internet-wide age verification causes most privacy advocates to be worried. That is separate from concerns of advocates for at-risk youth who warn of their inability to access online services and support. Finally, actual studies of teen use of social media show it is not generally harmful. Of course, in the US, there will be constitutional challenges to age-based restrictions, such as those filed in California, and the Utah liability bill is likely to face a Sec. 230 legal challenge.

European Commission Telling Musk-Twitter to Hire More Employees to Review Content

Report from Financial Times

In Brief – As the European Commission (EC) proceeds with its plans to implement the Digital Services Act (DSA), its landmark legislation to regulate how digital platforms moderate illegal, dangerous, and other objectionable content, it is reported that EC regulatory staff have informed Twitter representatives that the company is not using enough paid content moderators, including “fact checkers” to root out misinformation, to meet the legislation’s standards. Elon Musk has said repeatedly, both as a general policy view and in the context of the EU’s DSA, that he believes online content speech standards should be set by governments, not social media platforms. In that sense, he has indicated that Twitter would comply with the DSA. However, Musk-Twitter has been widely criticized for reducing company staff, including in a wide range of content moderation roles. The company claims it is based on financial needs, as well as the ability to do the job other ways. Those other ways, including using online volunteers and technology, are being challenged by EU regulators who are proposing to direct Twitter how to comply.

Context – When the DSA passed the EU Parliament, Commissioner Thierry Breton outlined the regulatory infrastructure plan to implement the legislation. Unlike the Digital Markets Act, which establishes new competition rules for just a dozen or so of the very largest digital “gatekeepers”, the DSA applies its rules to all digital platforms that include user-generated content. But the largest platforms, those with at least 45 million monthly active users in the EU, are designated VLOPs (Very Large Online Platforms) and face heightened standards and enforcement by the EC rather than Member State regulators. Digital platforms were required to inform the EC by February 17 of their estimated monthly user number to determine if they are a VLOP. Twitter, which won’t fall under the DMA, claimed over 100 million active users in the EU. & Enforcement of the DSA for VLOPs could begin as early as mid-June, while for non-VLOPs the Member State-led processes have until mid-2024 to be in place.

US House Committee Approves TikTok Ban but Party-Line Vote Points to Division

Report from Politico

In Brief – The House Foreign Affairs Committee has approved legislation that directs the President to sanction TikTok, including to ban the app, if the company is found to have transferred US user data to “any foreign person” associated with the Chinese government. The measure, which was opposed by committee Democrats who argued that it unnecessarily politicized the issues related to Chinese influence on social media in the United States, also calls for sanctions if the company helps the Chinese government with surveillance, hacking or censorship. Committee Democrats argued that Congress should defer to the now three-year process underway at the Committee on Foreign Investment in the United States (CFIUS) to negotiating how the company handles US user data and potential censorship.

Context – Although bipartisan congressional anxiety about China might lead to legislation this Congress, and Sen. Mark Warner (D-VA), a digital policy leader and Chair of the Senate Intelligence Committee, has predicted as much, the House committee action was not a sign of things coming together. However, a bipartisan Senate bill giving greater authority to the Secretary of Commerce, which might earn Administration support, could face better prospects. Then there is still the non-transparent CFIUS process. Despite reports last year of meaningful progress toward a deal with TikTok setting up Oracle to handle US user data and oversee algorithms to confirm they are not used to censor content, things appear stymied, leading some Administration officials to talk about a forced breakup like that proposed by the Trump Administration. Back in 2020, when the Trump Administration attempted to ban TikTok (and WeChat), federal judges were quite sympathetic to First Amendment-based legal challenges. The ACLU recently revived those arguments. The biggest stumbling block for TikTok is that the Chinese Government has the legal authority, political might, and track record of pressuring seemingly independent corporate leaders, so assurances of corporate independence from Beijing’s surveillance state don’t carry much weight.

Coalition for App Fairness Veterans Form Amazon Seller Advocacy Group

Report from Bloomberg

In Brief – Advocates for aggressive antitrust action against the biggest digital platforms, including a former Democratic staffer on the House Judiciary Committee, have formed a coalition of third-party sellers on Amazon to advocate for action to restrain the ecommerce and logistics giant. Some of the founders worked together in support of the Coalition for App Fairness (CAF), a group created by big app developers including Epic Games and Match Group in 2020 to campaign for regulatory and legislative against Apple and Google, and claim that merchants who sell on the massive Amazon marketplace need a similar advocacy vehicle. The Responsible Online Commerce Coalition, which claims to include both small businesses and big brands as members, but has not yet revealed specifics, says that it will advocate for lower Amazon fees, more success at blocking counterfeit products on its marketplace and in its logistics business, allowing sellers to offer lower prices on venues that feature lower marketplace fees, and ensuring Amazon’s search results are fair and non-discriminatory.

Context – CAF has played a limited part in the global legal, regulatory, and legislative campaign to beat down Apple and Google fees on app developers. But in a massive public policy effort, a “grassroots” or “grass-tops” coalition endeavor will interject themselves in a wide range of specific legal and policy battles and can involve millions of dollars over a few years. Both sides in these big digital policy battles employ the same tactics. In the epic Federal District Court showdown between Epic Games and Apple, Judge Yvonne Gonzalez Rogers called out the relationship between Epic and CAF in her ruling, saying that the group was created as part of Epic’s campaign to engineer a confrontation with Apple rather than it being an organic association of the members. The new Amazon-focused group has plenty of issues to engage on, especially the way Amazon links its dominant logistics business to its dominant ecommerce marketplace, and its long-criticized price parity policies that penalize sellers who offer lower prices off Amazon.

Insiders Predicting Microsoft Will Win European Approval of Activision Acquisition

Report from Reuters

In Brief – Insiders are predicting the Microsoft will win European Commission approval for its $69 billion deal to buy giant video game maker Activision Blizzard based on the set of multi-year game licensing deals that the tech giant is offering to game platform competitors. The Commission has reset their deadline to approve or oppose the acquisition to April 25, just one day before the UK Competition and Markets Committee’s similar deadline to approve or oppose. Regulators are concerned that Microsoft could restrict access to top Activision games, including mega-franchise Call of Duty, to distort competition in game consoles, subscription services, and cloud-based gaming. The Commission hosted a closed-door session on February 21 with Microsoft, lead deal critic Sony who owns the top game console system, and others to find agreement on an acceptable remedy package. Microsoft has repeatedly rejected suggestions to sell off properties like Call of Duty but have instead proposed 10-year licenses to console, subscription, and cloud service providers.

Context – Opposition to acquisitions has been a cornerstone of the anti-Big Tech agenda, especially by progressive champions of broad-based antitrust reform. Competition regulators in the US, the EU and the UK have taken up the cause. But the enforcement track record has been mixed. The one Big Tech acquisition rejected in recent years has been Meta’s $400 million purchase of GIF platform startup Giphy, unwound by the UK CMA. The FTC opposed Meta’s similarly sized deal for VR startup Within, but lost federal in court. Billion-dollar deals keep going through, including Amazon buying MGM and One Medical, and Google’s FitBit deal. Microsoft – Activision, the biggest digital platform acquisition ever, was always going to be a huge test of the criticism that aggressive regulators preferred to go to court over easier to fight small deals. Also, with companies facing simultaneous reviews from different regulators, especially the Big 3, they attempt to negotiate a deal they can accept with one and attempt win approval of the package from the others. In this case, the Microsoft sequence appears to be EU, UK, and then FTC.

Gigi Sohn’s Nomination as FCC Commissioner Might Still Be in Trouble

Report from Axios

In Brief – The nomination of Gigi Sohn, a highly respected advocate for progressive telecommunications policies, to become a commissioner of the Federal Communications Commission, which failed to win approval in the 117th Congress when Democrats and Republicans were evenly divided in the US Senate, again appears troubled in the 118th Congress despite a slightly improved 51 – 49 Democratic majority. If confirmed, Sohn would give Democrats their first majority on the FCC during the Biden Administration. Sohn was nominated to fill the third Democratic commission seat in October 2021, but her nomination was never voted on in the full Senate. United Republican opposition, combined with an aggressive opposition campaign backed by telecommunications industry giants who oppose her progressive policies, kept the Biden Administration from locking down support from all 50 Democratic Senators. Renominated by President Biden in January, Republicans were again uniformly opposed to her in a recent Senate Commerce Committee hearing, However, pushback from Sen. Jacky Rosen (D-NV) again raised the specter that she doesn’t have the level of support among Democrats to push through.

Context – Net neutrality is the biggest political divide animating the Sohn nomination fight, but not the only one. There are a range of telecom policies that she has championed for years in the face of industry opposition. President Biden campaigned in support of Net Neutrality and an FCC reversal back toward Obama-era rules was fully expected when he won in 2020. It was taken for granted that Senate Democrats, even with the barest majority, would approve pro-NN FCC commissioners like Sohn. But it has proven much harder than anticipated. And not only has net neutrality been stalled, but the agency has been blocked from moving forward on any telecom rules that did not enjoy bipartisan support, meaning industry backing. At some point, despite her strong track record, if Senate Democrats won’t united behind her, then the Administration is very likely to find another progressive nominee.

Signal Threatens to Leave UK Over Potential Online Safety Bill Encryption Mandates

Report from BBC

In Brief –  Signal, a popular privacy-focused messaging app that uses strong end-to-end encryption, is saying that it might stop doing business in Great Britain if the Online Safety Bill (OSB) is enacted by Parliament in a way that permits UK regulator Ofcom to order platforms to scan user messages for illegal content. Government officials argue that the landmark legislation does not “ban” end-to-end encryption, but critics argue that Ofcom would have the authority to order messaging services to have the capability to scan encrypted messages for both child sexual abuse material and terrorism content. Signal, which is popular among a wide range of audiences looking for very strong privacy, including journalists, political activists, and people in at-risk groups, is among those who argue that such a mandate would require abandoning the kind of encryption used by Signal. Company President Meredith Whittaker said backers of the OSB engage in “magical thinking” by claiming a communications service can provide privacy “only for the good guys”, adding that “encryption is either protecting everyone or it is broken for everyone.”

Context – The long UK effort to require digital platforms to block objectionable content, including opposition to strong encryption, has been powered by demands to protect young users. The original Online Harms White Paper focused on illegal content, especially child sexual material. It gradually grew to cover much more content, some illegal, some to be made illegal, and finally a general class of “legal but objectionable” material. That open-ended mandate was eventually seen as too great a threat to free speech, and last fall the OSB was pared back a bit. But promises were made to make the bill even stronger protecting younger users, including threatening jail time for executives of companies who don’t comply, pushing for age-verification for users, and the widely expected Ofcom orders on encryption. The prospect of a more heavily policed “splinternet” for young users and teens, which is now underway in the UK, France and California, worries many civil libertarians and advocates for marginalized teens.

Dutch Again Interject in EU Consideration of New “Fair Share” Telecom Payments

Report from  Reuters

In Brief –  The Netherlands, which commissioned a study of the economic justification of a telecom industry proposal often referred to as “fair share” payments by digital platforms, has again raised concerns with the concept, alleging that it would likely raise costs on consumers and threaten the EU’s net neutrality. Fair share payments, also often described as a data “sender pays” model, and the subject of an open European Commission consultation, envisions very large digital platforms like Google and Netflix being required to provide a new type of payments to large consumer-facing telecom companies like Deutsche Telekom and Telecom Italia based on the contention that current telecommunications and digital services business models don’t adequately provide for upgrades to EU networks. The study claims that Europe’s telecoms providers have benefited from efficiencies due to network modernization, the sender pays models would not increase economic efficiency, and new payments models would likely penalize consumers who already pay subscription fees to both telecoms providers and streaming services and would likely see latter fees go up if large platforms face a new internet tax.

Context – Telecom companies have long accused the largest internet platforms of “free riding”. This is despite every internet user, whether consumers or the largest platforms, paying for the bandwidth they use. These arguments have generally been part of net neutrality debates because telecom companies advocating for platform data “senders” paying more propose to only require some platforms pay more, including in this case, and then they receive better service in return. Champions of the current European fair share campaign propose no benefits to the paying platforms, which therefore seems more like a tax on them, but they claim it’s not a tax. The battle lines are well established. Consumer advocates, smaller internet network infrastructure firms, industry regulators, and several Member States, have expressed concerns with the idea, while top EU Commissioners continue to express sympathy to new payments to EU telecom companies.

European Commission Focuses Spotify-Inspired Apple Antitrust Case on Anti-Steering

Report from TechCrunch

In Brief –  The European Commission (EC), nearly four years after Stockholm-based music streaming giant Spotify lodged an antitrust complaint against Apple, has reframed its initial statement of objections released in 2021, dropping its objection to Apple’s requirement that all app developers use Apple’s payments service and focusing the case on the company’s anti-steering practices. Apple uses its mandatory payments processing service to collect the fees it charges developers, which can reach 30%. Many app developers, including Spotify, have argued those fees are unfair and anticompetitive. The EC is instead focusing its new statement of objections on the contractual restrictions that Apple imposes on app developers to prevent them from informing consumers of lower priced alternative service plans that can be purchased off the iPhone app, such as at the service’s website. Apple now can review and respond to the Commission’s new Statement of Objections, and there is no statutory deadline to complete the investigation.

Context – The EC’s decision to set aside the Apple payments mandate and focus on “anti-steering” provisions parallels the 2021 US District Court decision by Judge Yvonne Gonzalez-Rogers in Epic Games v Apple. She largely dismissed Epic Games antitrust complaint, including on Apple’s payments mandate, but ordered Apple to end its anti-steering practices. Both sides appealed that decision and oral arguments were heard in November. Judge Gonzalez-Rogers was very clear throughout that trial that she had a problem with Apple’s aggressive anti-steering rules, and weeks before the decision was released Apple reached a settlement agreement with the Japan Fair Trade Commission to largely end its anti-steering practices for “reader apps” like Spotify (in-game micro payments were exempted). Finally, in the EU, Apple’s payments policies are the subject of antitrust action in the Netherlands, where the company has agreed to allow alternatives, but they only result in 4% lower fees. And all the major App Store policies are likely to be regulated by 2024 under the EU’s new Digital Markets Act anyhow.

Former McConnell Aide Under Consideration for a Republican FTC Seat

Report from Bloomberg

In Brief –  The White House is reportedly considering nominating Andrew Ferguson, a former counsel to Senate Republican Leader Mitch McConnell (KY), and current Solicitor General of the State of Virginia, as a Republican commissioner on the Federal Trade Commission. Although all nominations are made by the President, two of the five FTC commissioners are required to represent the other party, and Presidents traditionally give great weight to that party’s Senate leader in selecting those nominees. The FTC, which has been embroiled in contentious partisan disagreements over the past year, currently has just one Republican commissioner seated. Republican Noah Phillips resigned last October, and Christine Wilson, the remaining Republican, recently announced her forthcoming resignation, harshly criticizing FTC Chair Lina Khan, the other Democratic Commissioners, and Khan’s senior staff, for policy and operational failings.

Context – Although Khan earned significant Republican support when the Senate confirmed her as a commissioner in 2021, her tenure as FTC Chair has been increasingly partisan and divisive, and despite Republican criticism, the Democratic majority she leads does not appear to be pulling back. For example, the was no Republican backing for the FTC’s November policy statement outlining the agency’s new legal thinking on “unfair methods of competition”, or the highly contentious rule proposed in January to largely ban employer non-complete clauses. Planned rulemaking on policy issues like privacy (“commercial surveillance”) and Gig work are expected to be equally contentious absent congressional action. The Biden Administration’s antitrust enforcers have also made it clear that they want to overturn court precedents and are willing to try to block acquisition deals where they know they might lose, a scenario that recently played out with the FTC trying to block Meta’s deal for VR app developer Within Unlimited. The FTC lost in court, and has decided to fully drop their challenge, but some analysts argue that Judge Edward Davila’s ruling included positives for the progressive antitrust campaigners.

Google Announces Plans to Accept Third-Party In-App Payments in India

Report from TechCrunch

In Brief – Google has continued to announce Android policy changes that will be implemented in India to comply with the remedies ordered by the country’s competition regulator, including offering Indian app developers the option as of April 26 to choose an alternative to Google’s payment processing service for in-app payments. In September 2021, the Competition Commission of India (CCI) ruled that Google had illegally leveraged its dominant position in markets such as online search and Android app stores to protect the market position of a range of its other apps. Google had & previously announced that Android users in India will be able to choose their default search engine when setting up an Android device, uninstall Google apps that come with their device, and that & manufacturers will be given greater leeway to build “forked” Android variant devices. Epic Games, a Google antagonist in regulatory and legal forums globally, has filed a complaint alleging that Google is not complying with the CCI’s orders, including by not allowing Epic’s own app store to be downloaded through the Google Play app store.

Context – Despite their very different mobile ecosystem business models, both Apple and Google are under fire for allegedly anticompetitive practices. Apple defends its “walled garden” model, manufacturing all the devices and strictly controlling apps, as offering a distinct and valued user experience. Google’s Android ecosystem is a very different hybrid model, with mobile source code that can be used in an “open source” manner but strict contractual mandates for manufacturers who produce devices they desire to brand as official “Android” devices. Some of Google’s Android mandates were successfully challenged by the EU in 2018, and regulators in South Korea and India, two markets where Android devices hold particularly large market shares, have pushed for further changes to the Google business model. On the key question of fees collected on in-app payments, Google is again proposing a 4% discount to developers using a payments alternative, a fee cut that appears not close to what app developers such as Epic Games want.

TikTok Commits to More Data Centers in Europe as Security Concerns Accelerate

Report from the Wall Street Journal

In Brief – Facing growing security questions and regulatory challenges related to its data handling practices, TikTok has announced that it will be opening two additional data centers in Europe to handle data on European users. Back in August 2020, TikTok announced that it was opening its first data center in Europe, selecting Ireland, which is also its home jurisdiction in the European Union, but that data center has faced repeated delays in opening. The company’s new announcement did not commit to country locations for either of the new data centers.

Context – As TikTok emerged as a global social media giant they were welcomed with “privacy” challenges similar to Meta and Google, especially involving children and teens. But in some countries, including the US, TikTok’s Chinese ownership has added an additional national security-styled layer of concerns over the risk that the Chinese Government, heavily invested in digital surveillance and online message control, could force the company to covertly share user data or influence how politically sensitive content appears on the platform. CFIUS is years into a review that could end up calling for TikTok’s US operations to be sold off, and a growing number of public institutions in the US are banning TikTok from its devices. The company is responding with more aggressive public defenses of proposals to wall off Chinese interference. But the Chinese Government’s ability to pressure recalcitrant tech business leaders does not inspire confidence. Similar concerns appear to be spreading in Europe, with the European Commission recently banning TikTok on employee devices. And TikTok is publicly criticizing that move. Finally, TikTok’s EU data center plans are reminiscent of Meta’s plan to open a massive center in the Netherlands to get itself out from ongoing legal disputes over US-EU data transfers. However, as the reaction to TikTok’s US plan to house data with Oracle shows, it’s not where TikTok data is stored that concerns western security officials, but who can access it.