Archive – 15 Sep 2023

Another Federal Judge Rejects Amazon Motion to Dismiss Suit Targeting “Fair Pricing” Policy

Report from Bloomberg

In Brief – Federal District Court Judge Ricardo S. Martinez rejected Amazon’s motions to dismiss a consumer class action lawsuit accusing Amazon of employing an anticompetitive “fair pricing” policy to protect Amazon’s high marketplace fees from pressure exerted by competing marketplace platforms. The lawsuit is the second targeting Amazon’s pricing practices to survive the company’s motions to dismiss in the US District Court for the Western District of Washington. Amazon’s fair pricing policy is a type of “price parity” or “MFN” clause that prohibits sellers on the Amazon Marketplace from offering the same product at a lower price on other internet platforms. Some argue that MFN policies can drive up consumer prices when employed by a dominant platform charging relatively high fees, because many third-party sellers won’t pass savings from lower fees on competitor platforms along to consumers through lower prices for fear of losing sales on the dominant platform. The plaintiffs allege that despite promising regulators in Europe and the US that it would end the policy between 2013 and 2019, Amazon continued the policies under a new name and with different enforcement tools.

Context – Among the plethora of legal and regulatory challenges facing Amazon, its fee-protecting price parity policies might be at most risk, at least in the United States. Along with the two class action suits moving in Washington State federal courts, California’s attorney general filed a similar antitrust lawsuit in State Superior Court in September. A 2021 suit from District of Columbia AG Karl Racine in DC Superior Court was dismissed in a notable, if increasingly rare, Amazon success on the topic. However, the Biden Administration 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. All these suits argue that Amazon’s 70 percent share of online marketplace sales, high fees, and aggressive policing of lower prices off Amazon, combine to harm consumers and undermine price competition.

Google Ends Campaign Email Spam Filter Program and Moves to Dismiss RNC Lawsuit

Report from the Washington Post

In Brief – Google is ending a pilot program that exempted emails from political campaigns from Gmail’s spam filters and asked a federal district court to dismiss a lawsuit from the Republican National Committee (RNC) accusing the company of using its spam filter to discriminate against Republican emails. Google’s moves come on the heels of reports that the Federal Election Committee had dismissed an RNC complaint about Gmail spam filtering. The issue came to the fore last spring when researchers at North Carolina State University released a paper claiming that during the 2020 election campaign Google’s spam filter appeared to identify Republican fundraising emails as spam to a far greater degree than Democratic emails. The study also showed that Yahoo and Microsoft spam filers appeared to identify Democratic emails as spam more than Republican ones. Republican officials attributed the Google results to ideological opposition to conservative Republican views. In its bipartisan dismissal of the complaint, the FEC said that Google’s spam filter was designed to achieve commercial goals, not influence elections, and cited the authors of the initial research paper who said they had no reason to believe that there were deliberate attempts from these email services to create biases.

Context – Google’s attempts to mollify Republican complaints with its trial program to allow political campaign to opt-in to avoid its spam filters did not alleviate the company’s political problems. Many Democrats and public interest groups called for the FEC to reject the effort, but it was eventually approved. Then the RNC didn’t join the program, while the Democratic National Committee did. Google’s pilot was intended to run through the end-of-January 2023 and the company says it will not be extended. It will not be a surprise if Google prevails in dismissing the RNC suit. It is also a near certainty that the Gmail spam filter discrimination charges will be rehashed in congressional hearings Republicans are promising to investigate ideological bias by the biggest tech platforms.

MercadoLibre Complaint Leads to Apple Antitrust Investigation in Brazil

Report from Reuters

In Brief – Brazil’s antitrust watchdog has opened an investigation of a complaint filed by MercadoLibre that Apple abuses its dominant position in the iPhone ecosystem to block the development of independent marketplaces for digital goods. MercadoLibre, a Latin American ecommerce and fintech giant based in Argentina, says it wants to expand from being a marketplace for physical goods to also become a marketplace for digital goods such as e-books, video streaming, audio streaming, video games, and subscriptions. It argues that Apple policies currently restrict those activities from being undertaken in the same manner as physical goods in the MercadoLibre app. CADE, the Brazilian competition authority, noted that its investigation of Apple joins similar antitrust reviews underway in the European Union, UK, South Korea, Japan, India, and Indonesia.

Context – MercadoLibre joining the global app developer campaign to force changes in the Apple (and often Google) mobile ecosystem is a reminder that the battle pits a number of digital companies each worth tens of billions of dollars against two mega-giants worth more than a trillion (two in Apple’s case). Apple and Google mandating the use of their in-house payment services, which serves as a commission-collecting method that can’t be circumvented, has been a part of all the major actions. The big app developers generally don’t want to build payments businesses. They want a way to threaten to circumvent fees. Driven by regulatory action in South Korea and the Netherlands, both Google and Apple have proposed plans allowing app developers to use payments alternatives but the impact on fees is minimal, just 4%, with both proposing to charge up to 26%. An interesting angle in the MercadoLibre complaint is that Apple has traditionally exempted apps selling physical goods from its percentage-of-sales commission system that applies to all digitally delivered goods and services. So, expanding into digital lines of business would change how Apple would review and police the MercadoLibre app.

German Antitrust Authority Investigating PayPal for Anticompetitive Merchant Terms

Report from the Bloomberg

In Brief – The Bundeskartellamt, Germany’s national competition authority, has announced that it is opening an investigation of PayPal for imposing policies on merchants that are allegedly designed to block them from encouraging consumers to use payment options that carry lower fees. The regulator, which claims that PayPal is the leading online payments service in Germany while also charging relatively high fees, will determine if PayPal exercises market power in Germany and whether online retailers are dependent on offering PayPal as a payment option. Potentially problematic conduct includes the company’s terms of use that block merchants from offering products at lower prices if a customer choses a payment service that carries lower fees, as well as efforts to prohibit online sellers from offering PayPal as an option while also making it more convenient for buyers to use a lower-fee alternative.

Context – While the Bundeskartellamt has been active challenging digital giants Apple, Amazon, Google, and Meta using legal powers granted in 2021 that allow the regulator to determine that a digital giant is “of paramount significance on competition across markets” and then establish proactive regulatory rules, the new investigation of PayPal is not based on that authority. Rather, PayPal is being investigated for conduct that is more like a range of controversial price parity (or “MFN”) practices by digital platforms that have been a regulatory concern for years. Some argue that those policies can drive up consumer prices when the offending businesses are dominant because small sellers won’t pass lower fees from smaller competing platforms along to consumers through lower prices for fear of losing sales on the dominant platform. The Online Travel Agency (OTA) industry, with platforms requiring that hotels 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 competition authority concern, including by the Bundeskartellamt. The price parity issue has also been heating up in relation to Amazon’s logistics business, as well as restaurant delivery apps.

Following High Court Loss, Google to Accept Indian Antitrust Remedies While It Appeals

Report from Reuters

In Brief – Google has announced that it will comply with the remedies ordered by the Competition Commission of India (CCI) following the antitrust authority’s determination that the company illegally leveraged its dominant position in markets such as online search and Android app stores to protect the market position of its apps. The company’s decision followed the Indian Supreme Court’s rejection of Google’s motion to stay the CCI’s order while it appealed the agency’s decision. The regulator has fined the digital giant 13.8 billion Indian rupees ($162 million) and ordered it to change how it operates the Android mobile platform, including dropping policies designed to dissuade smartphone makers from offering alternative apps to Google’s offerings. The matter will now go back to the National Company Law Appellate Tribunal where Google previously failed to secure any relief. The Supreme Court has directed that panel to make its decision on Google’s appeal by March 31.

Context – While Apple employs a strict “walled garden” business model for the iPhone ecosystem, making all the devices, refusing to license the operating system, and strictly controlling all apps, Google has built out the Android ecosystem with a very different hybrid-type system. Android source code can be used in an “open source” manner, but if manufacturers produce devices they plan to brand as official “Android” devices (think green robot logo), they must follow many contractual mandates, including regarding apps. Some of these mandates were challenged by the EU in 2018, but 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. In South Korea, home of Android device giants Samsung and LG, the South Korean Fair Trade Commission has also ruled against Google on policies designed to block device makers from also developing alternative “forks”, as well as taking up the cause of alternative in-app payments and lower fees that animate many app developers.

Meta Oversight Board Calls for More Inclusive Nudity Policies on Company Platforms

Report from the New York Times

In Brief – The quasi-independent Meta Oversight Board, made up of noted outside experts, and serving as a Supreme Court-like panel to adjudicate content moderation decisions, has called on the company to clarify its guidelines on photos showing partial nudity, especially of chests and breasts, which have been accused of being biased against women and LGBTQ people. The panel report was based on a case involving two Instagram posts depicting nonbinary and transgender people with bare chests, which were flagged by users and removed by Instagram for violating platform policies that generally bar nude photos. The Oversight Board criticized those standards, which include exceptions such as “health related situations” and depictions of breastfeeding, as “convoluted and poorly defined”. It called on all Meta’s platforms to clarify them so that people are not discriminated against based on sex or gender.

Context – Hundreds of millions of people post content on digital platforms every day… endless video, audio, images, and text in all combinations. The platforms all have rules, some more, some less, trying to create their version of a successful platform. While debates about rules and content moderation decisions often focus on a few politically salient topics, the number of nuances, “grey areas”, and mind-boggling scale issues, never ends. Super smart tech policy expert Mark Masnick describes the content moderation job as “Impossible to do well”. The Meta Oversight Board is one of the most innovative attempts to improve the process without resorting to government orders. This case raises two interesting points. First, Meta has said that it will always abide by specific Oversight Board case decisions, in this case to restore the photos (which were already restored by Instagram, by the way), but policy recommendations are different. The company promises to review them and give them serious consideration. Second is the noteworthy fact that major platforms have different policies on things like nudity. For example, Twitter and Facebook have long been very different. Is that a problem or a positive?

The US Department of Justice Files Antitrust Suit to Break Up Google AdTech Business

Report from the Wall Street Journal

In Brief – More than two years after the Trump Administration’s Department of Justice (DoJ) and two different coalitions of State Attorneys General filed three major antitrust suits against Google for a range of practices across internet search and advertising markets, the Biden Administration, joined by eight State AGs, filed a long-anticipated antitrust lawsuit focused on Google’s role as the one of the largest brokers, suppliers and online auctioneers of ads placed on websites and mobile applications. Google is accused of an unlawful campaign over than a decade to monopolize the publisher ad server market, the ad exchange market, and advertiser ad network market, including unlawfully tying two major DoubleClick services, Advertising Exchange (AdX) and DoubleClick for Publishers (DFP). The lawsuit asks the court to unwind Google’s “anticompetitive acquisitions” and prevent the company from obtaining similar dominance in the future. It was reported last year that Google offered to split up some of its advertising services into different business units within Alphabet to address regulator concerns, but the DoJ-led suit aims for some Google-owned AdTech operations to be completely sold off.

Context – Digital technology revolutionized the ad industry by delivering better targeting and more quantifiable returns. Google was the first AdTech giant and has drawn antitrust scrutiny in numerous markets, including the State AG suit filed in 2020 and led by Texas, market inquiries in the UK and Australia, and an investigation by the European Commission. Defining the relevant markets, measuring shares, and trying to prove market power, are always key to traditional antitrust analysis, and that will again be the case. Of particular note are recent reports pointing to the combined market share of Google and number two Meta accounting for less than half the online ad services market for the first time since 2014, with Google’s share falling to just 28.6% of the $211 billion total. So the antitrust enforcers are sure to focus on much narrower AdTech markets where they will claim Google’s businesses hold much larger shares and exercise great influence.

Supreme Court Asks Biden Administration to Weigh in on State Regulation of Social Media

Report from the Washington Post

In Brief – The Supreme Court has asked the Biden Administration to weigh in on whether states may bar giant social media companies from restricting legal speech. The request indicates that the high court is seriously considering taking up the issue raised by state laws enacted in Florida and Texas to regulate when and how social media companies moderate user speech. Republican officials in those states, and nationally, argue that large digital platforms often censor conservative viewpoints. Both laws were quickly challenged, and federal appeals courts issued conflicting rulings. The opinion from the 11th Circuit striking down Florida’s law described platforms’ content moderation decisions as the same sort of editorial judgments entitled to First Amendment protections when made by a newspaper. The 5th Circuit opinion upholding Texas’s law argued that the First Amendment “protects every person’s right to ‘the freedom of speech,’” but not “a corporation’s unenumerated right to muzzle speech.” Justices Alito, Thomas, and Gorsuch have said they believe the court should decide the issue. It takes four justices to place a case on the court’s agenda.

Context – For the next year to year-and-a-half, the Supreme Court will be the most interesting and impactful US Government institution on digital policy. In February, the Court hears oral arguments on two major cases impacting Sec. 230. Gonzalez v Google is especially important, testing the argument that some make, including the Biden Administration, that while Sec. 230 protects platforms from being liable for the content of user posts, they can become liable when they rank or promote those user posts. Many internet platforms argue that change would eviscerate Sec. 230’s value and upend the internet because ranking and highlighting among uncounted user-generated content is what most platforms do. Some of the best reading in the space is the amicus briefs on Gonzalez, and Twitter v Taamneh too, which the court also hears in February. And then, later this fall or next spring, the court is likely to be hearing arguments on the Florida and Texas laws. Blockbusters!

Spotify Leads European Platforms Calling on Vestager to Speed Up Apple Actions

Report from Reuters

In Brief – Stockholm-based Spotify continued to illustrate its European leadership role in the global app developer campaign to regulate the mobile ecosystem giants and trim their commission rates with Daniel Eck leading a group of five EU-based digital company CEOs and three European trade groups heads in a letter to European Commissioner Margrethe Vestager calling for “swift and decisive” action against Apple. Spotify lodged a complaint against Apple with the European Commission Competition Authority in 2019 and the regulator announced its preliminary findings in April 2021 that the iPhone giant has a monopoly over the distribution of music streaming apps onto Apple phones and violates European competition law by charging app developers high commission fees and forbids them from telling users about cheaper alternatives elsewhere. Ek has repeatedly expressed frustration with the EC’s competition law enforcement processes which can stretch for years.

Context – Spotify, one of Europe’s top digital platform companies, was instrumental in kicking off what has grown into a global battle over app store fees. That fight has driven Apple and Google to develop plans allowing app developers to use alternatives to their in-house payments services. But they still propose that app developers collect commissions that reach 26%, which strikes some as high but is in line with many other digital marketplaces. But many large app developers remain unhappy. They want to pay much lower fees. In Europe, digital platform competition policy is now entering a transition phase. The Digital Markets Act (DMA) was enacted last year to regulate the largest digital platform “gatekeepers”, including Apple. Its 18 Do’s and Don’ts mandates go into effect this year but become fully enforceable in 2024. Widespread frustration over the slow pace of competition enforcement and litigation led to adoption of the DMA’s ex ante regulatory model. Although Vestager has repeatedly said that the DMA won’t replace antitrust cases, when the subjects and behaviors fit neatly under the new regime, that seems quite likely.

FEC Dismisses RNC Complaint that Google Spam Filters Were Intentionally Anti-Republican

Report from the Wall Street Journal

In Brief – The Federal Election Commission (FEC) has dismissed a complaint from the Republican National Committee (RNC) that Google violated federal campaign laws by using its Gmail email spam filter to disproportionately block Republican fundraising emails to benefit the Democratic Party. The issue came to the fore last spring when researchers at North Carolina State University released a paper claiming that during the 2020 election campaign Google’s spam filter appeared to identify Republican fundraising emails as spam to a far greater degree than Democratic emails. The study also showed that Yahoo and Microsoft spam filers appeared to identify Democratic emails as spam more than Republican ones. The RNC and other Republican officials attributed the spam filter results to Google having an ideological opposition to Republicans’ conservative views. In its bipartisan dismissal of the complaint, the FEC said that Google’s spam filter was designed to achieve commercial goals, not influence elections, and cited the authors of the initial research paper who concluded that they had “no reason to believe that there were deliberate attempts from these email services to create these biases to influence the voters.”

Context – After Republicans aggressively complained to Google leaders, the company proposed an opt-in program for campaign emails which was approved by the Federal Election Commission last August and went live in early October. Although Democrats had repeatedly criticized Republicans for their spam filter complaints and chastised Google for their response, the Democratic National Committee signed up for the pilot. On the other hand, the RNC followed up their FEC complaint by filing a federal lawsuit two weeks before Election Day asking the court to block Google from blocking Republican emails. Google has until February 23 to respond. Don’t expect that case to go anywhere fast, but as we said back in October, the issue is certain to be one of many featured by House Republicans who plan to hold repeated committee hearings claiming to show that big tech platforms discriminate against conservatives.

TikTok and US Government Discussing Complex Data and Algorithm Oversight

Report from the Wall Street Journal

In Brief – TikTok, the super-popular short-video app owned by Chinese digital giant ByteDance, is reported to negotiating a complex agreement with US Government security officials to ward off a potential order to sell-off TikTok’s US operations or face a ban on operations in the country. The talks are part of a security review by the Committee on Foreign Investment in the United States (CFIUS), a federal government panel with powers to block foreign investments in the US. The CFIUS investigation was initiated in mid-2020 coincident with President Trump issuing executive orders to block both TikTok and WeChat. While those orders were blocked by federal judges and later undone by President Biden, the CFIUS process has continued forward. The top two issues of concern involve the possibility that the Chinese Government could gain access to American user data, or influence TikTok’s recommendation algorithms which drives the videos users see, including on news topics. A complicated arrangement involving US-based Oracle, including servers and engineers, as well as a new US-based TikTok subsidiary and outside board that would report in some manner to the US Government, is being discussed.

Context – Many security officials are increasingly convinced that it’s not possible to limit the influence of the Chinese Government over Chinese technology companies. It is heavily invested in surveillance and online influence, has the legal authority to access foreign user data, and enjoys seemingly limitless political power over the tech companies. Some manner of a deal involving Oracle in an intermediary role seemed close for months but hit roadblocks. Leaks from inside TikTok have added to distrust. Some Biden officials are said to be considering a Trump-style forced sale. At the same time, various types of “bans” are being proposed and implemented across the country, including by state governments and universities, and well as growing bipartisan support on Capitol Hill to block the service nationally. However, as we saw in 2020, the US court system is a truly independent branch that can check government actions.

EU Competition Authority Looks Increasingly Central to Global Microsoft – Activision Review

Report from Reuters

In Brief – The European Commission is preparing a statement of objections to Microsoft’s $69 billion deal to buy video game maker Activision Blizzard. While Microsoft is expected to offer remedies to EU regulators to avert a formal statement of objections and shorten the regulatory process in Europe, the EU competition enforcer is not expected to be open to remedies without first sending out its charge sheet. Microsoft responded to the Commission news saying that it is “continuing to work with the European Commission to address any marketplace concerns,” and its “goal is to bring more games to more people, and this deal will further that goal.”

Context – Microsoft’s Activision deal is the biggest digital acquisition of all time. As expected, it is facing regulatory scrutiny in the US, EU, and UK where competition enforcers have repeatedly expressed their concerns with acquisitions by tech giants. In the US, the FTC filed suit in December to block the deal. The acquisition is also being challenged in US federal court by a consumer lawsuit. The UK Competition and Markets Authority recently pushed back the deadline for their Phase 2 decision from March 1 to April 26, which is a few weeks later than the current European Commission deadline. Besides defending the acquisition as good for consumers and developers, as well as rejecting the argument that it would restrict access to Call of Duty, Microsoft has been engaged in a global goodwill campaign aimed at progressive regulators, including acquiescence to labor organizing, support for tech antitrust reforms, agreeing to software license changes to promote European cloud services competition, and support for app store regulation. The April deadlines facing regulators in the EU and UK are before an expected summer trial date in FTC administrative court. While the FTC reports that Microsoft has not offered it concrete concessions, the company has indicated that any remedies they offer to win approval in the EU and UK would be offered to the FTC to wrap up the deal in the US as well.

UK Online Safety Bill Criminal Penalties Expanded to Tech Execs Who Don’t Protect Teens

Report from the BBC

In Brief – The UK Government will toughen the Online Safety Bill (OSB) by expanding the range of offenses that will impose criminal liability on the executives of digital platforms. The sweeping legislation to regulate how digital platforms combat objectionable online content had imposed criminal liability, including the threat of two-years of jail time, for company executives when platforms failed to provide requested information to Ofcom, the UK government agency that will oversee the new regulatory regime. However, following concerted pressure from nearly 50 Conservative Members of Parliament, backed by child safety advocates and the opposition Liberal Party, criminal liability and the jail threats will be expanded to include senior management at web companies that violate child safety rules and mandates. Tech trade groups and high-profile nonprofit platform Wikimedia Foundation have criticized the move as a threat to smaller tech firms, digital innovation, and platforms like Wikipedia that don’t use centralized content moderation models.

Context – The long UK effort to regulate how digital platforms block objectionable content is powered most of all by demands to protect internet users under age 18. The original UK Online Harms White Paper focused on illegal content, especially child sexual material and terrorism advocacy. But it was expanded to cover more content, some illegal, some that would be made illegal, and finally a general class of “legal but objectionable” material. That open-ended mandate was roundly criticized as too great a threat to free speech, and last fall the OSB was pared back a bit related to adult users. But promises were made to further protect younger users. So, as the UK Government aims to make the country more attractive than the EU for tech innovation and investment, the OSB’s threats of jail time make the DSA regulatory scheme seem milder. The OSB also pushes full bore towards an age-verification-backed separate internet for teens, which worries some civil libertarians and advocates for marginalized teens.

Activision’s Proletariat Game Studio Rejects Union Request and Calls For Vote

Report from the Washington Post

In Brief – The management of the small Boston-based video game studio Proletariat has not accepted the request of a group of employees to create a new union and instead called for a secret ballot vote overseen by the National Labor Relations Board. The company, which was acquired in 2022 by Activision Blizzard, is reported to have approximately 100 employees total, and union advocates claim that a supermajority from among the 57 eligible employees submitted union cards indicating their support for the creation of the Proletariat Workers Alliance under the auspices of the Communications Workers of America (CWA). The group includes game designers, animators, engineers, producers and quality assurance workers. The labor organizers are calling for policies including flexible PTO, a permanent remote work option, robust healthcare coverage, transparency in compensation and career advancement opportunities, prioritizing DEI (Diversity, Equity, and Inclusion) “in every level of decision making”, and an end to mandatory overtime.

Context – Besides the irony of Proletariat Inc. management opposing a labor union, the organizing standoff at the small video game studio is noteworthy because, if successful, it would represent a marked change in the pattern of labor organizing in the video game industry beyond quality assurance (QA) workers, otherwise known as “game testers”. QA workers tend to be hourly employees who earn around $20 per hour and are not programmers or developers. Two recent union drives at other Activision studios, as well as a major organizing victory among over 360 QA workers at Microsoft-owned studio Zenimax, have not included programmers and developers. Instead, the biggest union victory among highly skilled workers at a digital firm came last year at the New York Times, when 600 employees, including software engineers and designers, voted to organize over the objection of management. Plus, Activision’s labor intransigence helps Microsoft’s softer labor policies appeal to progressive regulators who need to approve their massive Activision bid.

TikTok’s CEO Pledges Good Digital Company Citizenship to EU Leaders

Report from Bloomberg

In Brief – TikTok’s CEO met with four commissioners of the European Union to reinforce the company’s commitment to being a good corporate citizen and complying with the bloc’s growing set of regulatory mandates on digital platforms. High on the agenda were the privacy and data security requirements of the General Data Protection Regulation (GDPR), the Digital Services Act (DSA) that will soon impose standards for digital platforms to deal with illegal and objectionable content, and the prospect that TikTok may be adjudged a digital “gatekeeper” and be required to comply with the requirements of the Digital Markets Act. TikTok, which is the first Chinese-owned digital service to have tens of millions of avid users outside China, including in Europe, has faced a number of run-ins with regulators over its past data and privacy practices, especially towards children, but it’s data policies related to China itself, while under review in Europe, have not caused the same level of friction that have dogged the services in the United States. Finally, unlike the intense media scrutiny surrounding Twitter’s willingness and ability to comply with the online moderation guidelines and requirements of the DSA, TikTok was seen as planning to work cooperatively with EU regulators to address their concerns with objectionable content.

Context – The willingness of TikTok to work with European governments to comply with the continent’s varied and growing digital regulatory regimes is not unexpected. The video giant emerged from a country with a strong government compliance culture. Rather, the big challenge comes from security officials who doubt that any Chinese-owned business can be independent from the influence of a Chinese Government that is heavily invested in digital surveillance, and has both the legal authority and political power to dictate terms to any Chinese tech company. That debate, and the prospect of some form of forced separation from Chinese parent company ByteDance, is much farther along in the United States.

EU Network Businesses Raise Objections to Big Telecom “Fair Share” Payments Idea

Report from Reuters

In Brief – A European trade group representing 69 “internet exchange points”, which are specialized telecommunications businesses that play a behind-the-scenes internet role by allowing large networks to interconnect directly through their exchange, has voiced deep concerns with a European telecommunications industry proposal that calls for the largest digital platforms, such as Google, Netflix, Meta and TikTok, to be forced to make new direct payments to telecommunications companies to fund investments in upgraded network infrastructure. Euro-IX wrote a letter to EU Commissioners Margrethe Vestager and Thierry Breton expressing the view that changing the business fundamentals of internet traffic would likely replace the current market-based model for interconnection with a highly regulated interconnection market in which administrative rules drive interconnection decisions, increasing the costs of concluding interconnection agreements, inhibiting networks’ choice to peer, reducing the quality of service to end-users, and creating new systemic weaknesses in critical infrastructure.

Context – One consistent aspect of the decades-long net neutrality debate is the claim from the largest consumer-facing telecom companies that the largest internet content platforms are “free-riding”. First, the free-riding charge is baseless. Every Internet user, from individual consumers to the largest companies, pays for their bandwidth. But the debate also tends to be framed as giant internet content companies, especially those supplying popular video-based services, battling giant wired and wireless network companies that are ISPs, as if those two types of business make up “the internet”. But in reality, the network architecture of the internet is far more complicated, and internet exchange points are one part. While the lobbying of EU telecom companies for some kind of new tax on Big Tech platforms appears to be resonating with the European Commission, opponents including regulators, consumer advocates, and now technical experts from smaller enterprises within the current network, are raising their voices.

Republicans Introduce Bill to Ban Government from Pressuring Social Media Companies

Report from the Wall Street Journal

In Brief – Senior House Republicans have introduced a bill to ban federal employees from pressuring internet platforms to counter or suppress lawful speech. It does not restrict direct company actions. The measure is part of the Republican campaign to push back on what they call the “weaponization” of the federal government, which will be spearheaded by a new subcommittee of the House Judiciary Committee. The bill sponsors highlighted instances where Biden Administration officials intervened with major platforms, including Meta, YouTube, and Twitter, pressing them to block or demote content beyond what company officials contended their content moderation rules required.

Context – Most Americans, including many Democrats, believe that social media platforms restrict content for ideological reasons. But that view is most widely held by conservatives who see the largest tech companies as stalwart backers of progressive causes. Claims that the social media content moderation is “censorship” violating the First Amendment have been rejected by courts and derided by analysts who argue that the allegations miss the point that the Constitution restricts government censorship, not private decisions about speech. In fact, the same First Amendment protects the ability of companies to restrict speech in most instances. However, government entities in the United States cannot conscript companies to circumvent legal limits. While claims of anti-conservative government coercion seem less than compelling on their face when they occurred while the US Government was led by President Trump (think Hunter Biden laptop stories or the reaction to the Jan 6 Capitol riot), startling company documents and email threads detailing aggressive efforts by senior Biden Administration officials on COVID and vaccines have come to light through a federal lawsuit filed by the Attorneys General of Missouri and Louisiana, as well as from releases by Twitter following its purchase by Elon Musk. Expect that material to be highlighted by the new House subcommittee.

UK Competition Regulator Pushes Back Deadline for Its Microsoft-Activision Decision 

Report from ComputerWorld

In Brief – The UK Competition and Markets Authority (CMA) has pushed back the deadline for its Phase 2 investigation of Microsoft’s $68.7 billion acquisition of video game developer Activision Blizzard to April 26. The initial CMA deadline to either approve or challenge the acquisition had been March 1. The CMA’s initial review of the acquisition determined that Microsoft could undermine current and future entrants into console gaming by providing them access to top Activision games on much worse terms than it will reserve for its own services. The CMA has also raised concerns with the potential impact on the development of next generation “cloud gaming”, noting Microsoft’s combination of a leading gaming console, a leading cloud platform, and the leading PC operating system, creates a unique threat to future competition in that market.

Context – Microsoft’s Activision deal is the biggest digital acquisition of all time. As expected, it is facing regulatory scrutiny in the US, EU and UK where competition enforcers repeatedly expressed their concerns with Big Tech acquisitions but had not yet challenged a really big digital platform deal. Not anymore. The FTC has filed suit to block the deal as currently structured. The acquisition has also been challenged in US federal court by a consumer suit. Besides defending the acquisition as good for consumers and developers, as well as rejecting the argument that it would restrict access to Call of Duty, Microsoft has been engaged in a progressive regulator goodwill campaign marked by acquiescence to labor organizing, support for antitrust reforms, agreeing to software license changes to promote cloud services competition, and support for app store regulation. The deadlines facing regulators in the EU and UK now fall in April, before an expected summer trial date in FTC administrative court. While the FTC reports that Microsoft has not offered it concrete concessions, the company has indicated that any remedies they offer to win approval in Europe and the UK would be offered to wrap up the deal in the US as well.

State Judge Blocks Legislated Pay Raise for New York City Ride Share Drivers

Report from the New York Times

In Brief – A New York State judge has blocked an increase in the minimum per-minute and per-mile pay for ride-share drivers in New York City imposed in November by the Taxi and Limousine Commission. Uber had sued the commission, a New York City agency, to block the increase that it claimed was too high and could require the company to spend an additional $21 million to $23 million per month to pay its drivers, likely requiring it to raise fares by 10 percent, which could drive business away from the service and harm drivers. Justice Arthur F. Engoron of State Supreme Court in Manhattan agreed with the company’s argument that the commission had used a faulty methodology to calculate the pay increase, including factors such as last summer’s sharp increase in gas prices, which has since abated. The judge had temporarily blocked the raise five days before it was scheduled to take effect on December 19. Representatives of the commission and the New York Taxi Worker Alliance, a labor union representing 27,000 for-hire drivers, criticized the decision and the commission is reviewing a possible appeal.

Context – Federal legislation to regulate gig work platforms gained no traction over the past two years, even with slim Democratic majorities in the US House of Representatives and Senate, and the change to a narrow Republican majority in the House will only reduce the already slim prospect for legislation in the coming two years. The Biden Administration Department of Labor has proposed a new rule changing the criteria that businesses should use when classifying a worker as an employee or an independent contractor, shifting the standard toward classifying more workers as employees. Court challenges are expected, and regulators challenging independent contractor models have suffered setbacks in the past. Like on many digital issues, Europe is moving in a direction US progressives support. On the compromise front, Washington State is breaking ground on Gig ridesharing regulation that foregoes reclassification but expands benefits in ways large Gig platforms support.

In Case You Were Wondering, Tech Reformers Will Continue to Push Their Big Bills

Report from MarketWatch

In Brief – Sen. Mark Warner (D-VA), a long-time leader of efforts to regulate large digital platform businesses, laid out a hopeful agenda for the 118th Congress following the apparent progress, but ultimate failure, of major bills to rein in digital business in the previous Congress. Warner identified two issues — new rules to require digital platforms to protect kids and dealing with technology threats from China — as the topics he believes offer the most hope for bipartisan progress. He expressed hope that success on those issues could be leveraged to restart other efforts, include Big Tech antitrust initiatives such as data portability and interoperability, putting a stop to self-preferencing, and regulating the apps stores of Apple and Google. He also continues to advocate scaling back Sec. 230 to push platforms to better control objectionable content.

Context – It’s a Friday, so let’s look at this kind of soft-news early expectation setting. First, remember that legislators rarely give up and move on. They stop when they retire, and often not even then. And lobbyists want to keep lobbying. They get paid. But all these priorities were pushed hard right into the 2022 Lame Duck session and fell short. So, look for what’s changed in 2023. With that in mind… The two top issues Warner identified are the two with the best shot. But online kids privacy, and privacy overall, still face similar hurdles to last year. There seems to be more movement and better prospects on China. Big Tech antitrust fell short in 2022 and most changes make it a bigger longshot now. The House Republican Leadership is highly skeptical. They distrust Biden’s regulators and will leave it to State AGs and courts. Instead, they will rabidly “investigate” tech platform content moderation for bias, including pressure from government officials. The big new developments on content moderation and Sec. 230 are Elon Musk now owning Twitter and the potential impact of the Supreme Court. Both of those factors reduce chances for bipartisan compromise. But, as President Biden recently wrote, he’s still in favor of all the tech policy changes he supported the past two years.

Seattle Public Schools Sue Social Media Companies for Youth Mental Health Harms

Report from AP

In Brief – The Seattle School District (SSD) has filed a federal lawsuit against the corporate giants behind TikTok, Instagram, Facebook, YouTube and Snapchat, seeking to hold them accountable for an alleged mental health crisis among youth. The complaint claims that the social media companies have intentionally designed their services to recommend and promote content that is harmful to young users, leading to a range of mental health and behavioral disorders among young people, including anxiety, depression, disordered eating and cyberbullying and claims that these disorders make it more difficult and expensive to educate students. The suit asks the court to order the companies to change their services, award damages, and pay for prevention education and treatment for excessive and problematic use of social media. The companies, who also face a similar product liability-based suit in federal court, each claim to take a range of actions to address problematic content and help parents and young people responsibly use their services.

Context – This novel lawsuit is an excellent example of potential implications of the upcoming Supreme Court case, Gonzalez v Google, that will test the scope of Sec. 230 of the CDA. While there is widespread agreement that Sec. 230 protects platforms from direct civil liability for most content posted by users, those aiming to force platforms to block content they find objectionable increasingly argue that the act of ordering and recommending how users see content is different and not covered by Sec. 230. The Biden Administration has backed this argument in the Gonzalez case, which involves how YouTube treated videos sympathetic to terrorist group ISIS. The SSD filed its own amicus brief in the Gonzalez case, which now makes more sense as they are making similar arguments in their federal lawsuit. The courts, especially the Supreme Court, will be at the forefront of any significant social media legal changes in the US in 2023 as chances of bipartisan agreement in Congress look increasingly less likely, even in regards to regulating services to younger users where political anger seems most intense.

German Competition Authority Believes Google’s Data Practices Violate Competition Law

Report from TechCrunch

In Brief – The German Federal Cartel Office (FCO) has made an initial determination that Google improperly collects and connects user data across its multiple services without giving users sufficient choice over how the data is used, especially related to advertising. The regulator argues that the lack of consumer choice, combined with the company’s wide range of services and the immense scale of the data it collects and processes, undermines competition in digital markets. The FCO’s statement of objections are made under the new German regulatory regime that authorizes the competition authority to designate the largest digital platforms as being of paramount significant across markets, a determination made for Google due to its strongholds in internet search, advertising, video distribution, and its app store. In its announcement, the FCO noted that while it believed that Google would also need to address similar concerns with its data practices under the requirements of the recently enacted EU Digital Markets Act (DMA), the DMA might only apply to Google’s “core services”, while the German authority partially exceeds the DMA by applying to other markets Google operates in. The company responded stating “We’ll continue to engage constructively with the FCO to try and resolve their concerns.”

Context – Efforts to penalize, fine, reorder, or otherwise rein in, large digital platforms are proceeding along a number of major paths in Europe. Two of the more traditional routes are Big Tech antitrust cases as well a number of investigations by data protection authorities under the GDPR. For example, directing Meta to give users a choice to have data used for targeted advertising was at the heart of a recent decision by Ireland’s Data Protection Commission regarding the GDPR, kicking off a legal battle that could extend for years. Simply regulating Big Tech directly, which seems to promise much faster results, is more appealing to many. While the DMA, with its set of 18 Do’s and Don’ts, covers a bigger market, the German Big Tech regulatory regime is already up and running and its advocates argue it is also more flexible.

European Regulators Rule That Meta Requiring Consumers Accept Targeted Ads Violates GDPR

Report from the Wall Street Journal

In Brief – Ireland’s Data Protection Commission (DPC), Meta’s main European privacy regulator, has ruled that the company cannot require users to accept personalized ads as a condition of using its services. The DPC imposed a 390 million euro fine and ordered the company to change its terms of service to comply with the ruling within three months, fully backing the determination of the European Data Protection Board that requiring users to accept targeted advertising as a condition of accessing other services is a violation of the EU’s General Data Protection Regulation (GDPR). For years, Meta has allowed users to opt out of having data collected when they are on other websites and apps from being used for ads on Meta’s platforms, but data generated by a user on its own sites was a different matter and was always used as part of the company’s advertising system. The company says it will appeal the decision, a process that could last years.

Context – If the GDPR requires that consumers have the option to opt out of “first party” targeted advertising, the impact will extend far beyond Meta. As the world (and Meta) has seen first-hand from Apple’s policy requiring app developers to get user consent for ad-based tracking across the Internet, most users say no, at least when there is no apparent downside. Ironically, as the DPC was ordering Meta to allow users to reject ad targeting, the French privacy authority was fining Apple for a similar offense by not applying its targeted ad consent rules to its own iPhone ad service. Facebook has argued for years that it is fundamentally a targeted ad business, and the consumer services parts of the platform cannot be separated out. In addition, despite so much opposition from privacy advocates, consumers have generally preferred ad-based business models rather than paying directly for online services. Finally, smaller businesses benefit most from more efficient, highly targeted ads. One path to compliance, like with GDPR-inspired online cookie notices, could see platforms offering consumers options such as fewer targeted ads, many more less-relevant ads, or a paid subscription.

Biden Renominates Net Neutrality and Consumer Champion Gigi Sohn to the FCC

Report from The Verge

In Brief – President Biden has resubmitted the nomination of Gigi Sohn, a highly respected advocate for progressive telecommunications policy, as a commissioner of the Federal Communications Commission. If confirmed, Sohn would finally give Democrats a majority on the FCC, which is especially important on the contentious issue of net neutrality. Although she was nominated to fill the third Democratic commission seat in October 2021, Sohn’s nomination was never voted on in the full Senate. United Republican opposition that called her an anti-free speech radical, combined with an opposition campaign backed by industry giants, kept the Biden Administration and progressive advocacy groups from locking down the needed support from all 50 Democratic Senators. Although unanimous Republican opposition is again expected in 2023, one Democratic Senator can now vote against the bid and still allow VP Harris to break the tie.

Context – The partisan net neutrality divide, Democrats supporting “strong” rules and Republicans objecting to mandates, is a political football with hardened positions on both sides. The Obama FCC, with Sohn staffing then Chairman Tom Wheeler, enacted landmark rules in 2015. They were overturned by the Trump FCC in 2017. President Biden campaigned in support of Net Neutrality and another FCC reversal was fully expected when he won. 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. Net neutrality opponents pulled out all the stops to block her, and in doing so, stymied the agency from moving forward on any telecom rules that did not enjoy bipartisan support, meaning industry backing. Although divided government due to the new Republican majority in the US House is likely to undermine prospects for many legislative initiatives, the slim Democratic majority in the Senate should slightly ease confirmation fights, both for key executive branch positions as well as federal judgeships.

TikTok & ByteDance Admit to US User Tracking They Denied Two Months Ago

Report from New York Times

In Brief –  More than two months after aggressively denying a report from Forbes that TikTok data was accessed by the Chinese-based corporate security team of ByteDance, TikTok’s parent company, to track the location of US-based users, including journalists, leaders for the Chinese digital giants have admitted that the allegations were true. Forbes claimed that ByteDance’s Internal Audit and Risk Control department monitored the personal location of some Americans who had never worked for the company. TikTok’s carefully worded rebuttal focused on the type of location data the company gathers, claiming that it does not collect “precise GPS location information from US users”, as well as stating that “TikTok has never been used to ‘target’ any members of the U.S. government, activists, public figures or journalists”. However, the company now says that four internal security employees did inappropriately obtain location data of some US-based TikTok users, including two journalists, in an effort to ferret out sources of media leaks. Forbes contends that two other journalists were also targeted.

Context –  Context – TikTok is the only Chinese digital giant with hundreds of millions of rabid users outside China. Security officials in countries that see themselves in strategic competition with China are raising concerns that the Chinese Government, which is heavily invested in digital surveillance, has the legal authority and political power to gain access to foreign user data held by all Chinese tech companies, regardless of size. TikTok and the Committee on Foreign Investment in the United States have been negotiating for years to address security concerns over potential Chinese access to user data, as well as TikTok’s ability to facilitate Chinese Government influence operations through its recommendation algorithms. A deal putting US-based Oracle in a key intermediary role was thought to be close but hit roadblocks, and with increasing bipartisan concerns on Capitol Hill, some Biden officials are reported to be pushing for a Trump Administration-style forced sale of the US TikTok business.

Microsoft Accepts Game Tester Labor Union Win in One of Its Developer Studios

Report from New York Times

In Brief –  Over 300 Quality Assurance (QA) workers employed by major Microsoft-owned game developer ZeniMax Media have voted to unionize in one of the biggest labor organizing victories in the video game industry. ZeniMax, acquired by Microsoft in 2020 for $7.5 billion, produces major titles like The Elder Scrolls, Fallout, Doom, Quake and Wolfenstein. The new union, part of the Communications Workers of America (CWA), follows up on a smaller CWA win last year when 28 QA workers at Raven Software, a small studio that is part of Activision Blizzard, voted to unionize in the face of strident opposition from Raven and Activision leaders. QA workers, otherwise known as “game testers”, are not programmers or developers, and face some of the toughest conditions and lowest wages in the industry. A noteworthy aspect of the ZeniMax organizing success was the hands-off approach of Microsoft, described as an “absolute gift” by one organizer, which included not holding mandatory anti-union worker meetings and allowing workers to vote anonymously on a non-traditional online platform. While the “labor neutrality agreement” that Microsoft reached with the CWA last June formally applied only to organizing efforts inside Activision Blizzard, the company took that stance with an effort inside one of its own studios.

Context –  Two major takeaways. First, Microsoft is not stepping back from their progressive regulator goodwill campaign — acquiescence to labor organizing, antitrust reform, software license changes to promote cloud services competition, and support for app store regulation — aimed at winning approval of their Activision bid. Second, while game testers are decidedly not high-tech workers, the hands-off labor policies might eventually lead to a big labor win with high-skilled workers. In 2022, the biggest labor win with true high-tech workers saw nearly 600 tech workers at the New York Times, including software engineers and designers, unionize in the face of major company opposition. So, watch the CWA effort to organize all 57 workers, including programmers, at Proletariat, a small Boston-based studio owned by Activision.

Amazon Settles EU Antitrust Investigation by Offering to Change the Buy Box

Report from Bloomberg

In Brief –  The European Commission has accepted Amazon’s offer to settle a pair of antitrust investigations by making policy changes regarding how it determines the products that are recommended to online shoppers, as well as agreeing not to use data related to the products of third-party sellers to bolster its own retail business. The most noticeable change to Amazon users in Europe involves how the company will present offers from sellers who offer shipping that is different, and presumably slower and less expensive, than generally included in Amazon’s Prime service. Rather than a single Buy Box offer, Amazon will prominently display a second competing offer if it carries terms for both delivery and price that are significantly different from the one initially featured in the Buy Box. This change is Amazon’s attempt to address charges that it has used the Buy Box algorithm to preference sellers who use its FBA logistics business, pushing sellers to use the logistics services that often offers fast shipping times but also carries high fees for Amazon. Amazon’s new commitments will only apply in Europe.

Context – Unlike true marketplaces, Amazon physically holds the goods supplied by most of their top “sellers” just like a retailer handles wholesaler goods. They are also unlike other logistics providers. For example, Amazon stores the products of different sellers of the same products in “commingled bins” across their massive fulfilment center network, shipping to a customer from the closest facility regardless of whether the official “seller” supplied the product that was shipped. It’s unclear how the unique practices of the integrated Amazon logistics and marketplace businesses will play out. Amazon has said that it hopes this settlement will be a model for its compliance with the newly enacted Digital Markets Act. No doubt, overseeing the development and implementation of the new Buy Box algorithm, which is highly complex and variable over millions of searches a day, will be an early test of the European Commission’s plan to implement and oversee the massive regulatory scheme with just a 40-person team.

Google Addresses German Competition Authority Concerns with News Showcase

Report from Reuters

In Brief –  In a unique twist to the global media payments saga, the German competition authority has closed its investigation of Google’s News Showcase by accepting the company’s offer to remove the News Showcase from the Google search results page and not link media payments related to the new EU “neighboring rights” copyright authority to participating in the curated news offering. Google created the News Showcase in 2020 to help address criticism that its search and digital advertising dominance was unfairly harming the media industry. While Google strongly rejected calls to pay media companies when links to their stories appeared in general online search, the company pledged $1 billion to pay media companies to use content in specialized services, with its News Showcase as the highest profile example. While Google has signed up hundreds of media companies to the paid program, including in Germany, the Bundeskartellamt raised concerns that paying some media companies, but not all, could create a range of anticompetitive incentives, including that media companies might join the Google news program in the hope of getting better treatment in Google search.

Context –  The effort to squeeze payments for media companies out of Google and Facebook goes back years as the internet drastically changed the business model for newspapers and advertising. France and Australia have been the most aggressive in recent years, but the trend is global. Google and Facebook both now operate large programs to pay media companies for licensed content in a bid to forestall legal mandates. Legislation in the US Congress to create a media payments regime like Australia’s failed in the recent Lame Duck session, but there is momentum in Canada and New Zealand. The most intriguing development in 2023 may be that Meta will follow through on their threat to drop news media sharing from Facebook entirely. The company is clearly trying to focus on TikTok-style video entertainment and “news” brings a huge amount of strife and content moderation trouble.

Epic Games Pays Giant Settlements to Resolve FTC Consumer Protection Complaints

Report from Bloomberg

In Brief –  Epic Games, the video game development giant best known for the Fortnite franchise and for leading the massive global campaign to force Apple and Google to change how they operate their mobile operating systems, has reached a pair of agreements with the US Federal Trade Commission (FTC) to pay $520 million to settle investigations regarding child privacy violations and the use of deceptive “dark patterns” to harm consumers. The first part of the settlement involves Epic paying a $275 million penalty to the FTC for allegedly breaking Children’s Online Privacy Protection Act (COPPA) rules. The COPPA fine is the largest in history, exceeding the $170 million paid by Google in 2019 to settle charges related to YouTube data and advertising practices. The game developer also agreed to refund $245 million to parents in a separate settlement regarding a wide range of deceptive practices related to the purchase, billing, and cancelation of in-game purchases that account for the billions in Epic revenues from the otherwise free Fortnite game. The “dark patterns” settlement is the largest refund amount in a gaming case as well as the largest administrative order in FTC history. Epic did not admit or deny the FTC’s allegations as part of the two settlements.

Context –  Context – Epic Games is all in on a legal, regulatory, legislative campaign to change how Apple and Google earn money from their mobile ecosystems. Keeping potentially helpful government agencies onsides is clearly part of the strategy. For example, the Biden Administration filed a brief on Epic’s behalf in the company’s appeal of their 2021 federal court setback against Apple and supported the Open App Markets Act that fell short in the Lame Duck session. Epic settling accounts with an activist FTC is reminiscent of Microsoft’s regulator goodwill campaign on cloud services competition, app store regulation, labor organizing, and payments to media companies as it tries to win approval of the massive Activision Blizzard acquisition.

Google Appeals Indian Antitrust Ruling Forcing Changes in Android

Report from TechCrunch

In Brief –  Google is appealing the October decision of the Competition Commission of India (CCI) that the company illegally leveraged its dominant position in markets such as online search and Android app stores to protect the market position of its apps. The regulator fined the digital giant 13.8 billion Indian rupees ($162 million) and ordered it to change how it operates the Android mobile platform, including policies designed to dissuade smartphone makers from offering alternative apps to Google’s offerings. The CCI’s ruling targets similar Google policies as the EU’s 2018 decision against Google for abuse of market dominance in Android that was recently upheld by the European General Court. Google’s CEO has called on India to pursue digital policies that balance safeguards with frameworks that promote innovation and business certainty. The CCI ruling hews so closely to the EU case that Google’s appeal argues that the CCI improperly copied the EU decision in numerous instances despite very different conditions and policies in the two markets. In the initial appeal hearing, the tribunal refused to stay the CCI ruling while Google’s appeal proceeds.

Context –  Apple, with a strict “walled garden” business model, has been more in the spotlight of the global campaign to regulate the two mobile ecosystem giants. Google’s Android is a very different hybrid-type system than Apple’s. Android source code can be used in an “open source” manner, but if manufacturers produce devices they plan to brand as official “Android” devices (think green robot logo), they must follow many contractual mandates, including regarding apps. While the EU challenged some of Google’s Android policies in one of its three Google antitrust cases, Google has been the focus of regulators in India and South Korea where Android has the dominant market share. Android has 97% of the Indian mobile OS market! The South Korean Fair Trade Commission has also ruled against Google on its policies prohibiting Android device makers from also developing alternative “forks”, and its legislature has mandated app payments alternatives.

Ninth Circuit Says Google-FTC COPPA Settlement Does Not Preempt State Law-Based Suits

Report from Bloomberg

In Brief –  A panel of the 9th Circuit Court of Appeals in Seattle has reversed a 2021 federal district court ruling that dismissed a consumer class action lawsuit accusing Google and several advertisers on YouTube of violating a range of state privacy laws by tracking the YouTube activity of children under age 13 to send them targeted advertising. The lawsuit was initially dismissed based on the argument that the federal Children’s Online Privacy Protection Act (COPPA), which does not permit private class action lawsuits and is instead enforced by the US Federal Trade Commission (FTC) and state attorneys general, regulated the same conduct, and preempted the state laws that allowed for private class action suits. However, the Court of Appeals ruled that the federal law’s preemption clause was intended to apply to state privacy standards that were inconsistent with the COPPA privacy standards but did not intend to create an exclusive remedial scheme for the enforcement of state privacy standards that were consistent with COPPA’s rules. Therefore, COPPA does not bar state-law causes of action that are parallel to, or proscribe the same conduct forbidden by, COPPA. The case was remanded back to the federal district court to consider alternative arguments for dismissal.

Context – In 2019, Google agreed to pay a $170 million fine to the FTC and the State of New York and change a range of practices on YouTube for users under age 13 and content intended for young users, settling charges that the platform violated COPPA through the same conduct targeted by the class action in this case. That settlement, while a record fine for COPPA violations, was controversial, passed by a 3-2 vote of the FTC commissioners with both Democrats objecting, and drew harsh criticism from consumer and child advocates. The issues of state law preemption and private class action enforcement continue to be the top two stumbling blocks in the years-long congressional debate over a possible federal privacy law, a challenge that this decision will likely exacerbate in the 118th Congress.

Federal Court Hearing Pitting FTC Against Meta Over VR App Deal Wraps Up

Report from New York Times

In Brief –  Seven days of federal court hearings to determine if the Federal Trade Commission (FTC) challenge of Meta’s acquisition of VR startup Within Unlimited will be delayed pending a full trial in the FTC’s administrative court wrapped up after testimony from CEO Mark Zuckerberg. He defended the acquisition arguing that his company was helping to build a nascent VR industry for a wide range of developers and companies, and that while fitness apps could prove popular to some users, Meta was focused on a wide range of other applications, including social communications, productivity, and gaming. In July, the FTC filed a suit to block Meta from acquiring Within, alleging that Meta would undermine VR competition broadly if it added its popular Supernatural fitness app to its business. The FTC is asking Judge Edward Davila to issue a temporary restraining order so that the agency can challenge it in administration court. Meta has argued that the FTC suit is “based on ideology and speculation, not evidence” and would send “a chilling message to anyone who wishes to innovate in VR.” Zuckerberg and other Meta executives pushed back on the contention that Meta could build its own fitness app, noting that money was not a direct replacement for talent, and that Meta faces robust competition, new challenges in the online advertising ecosystem, and tightening finances.

Context – Competition regulators in the US, EU and UK have all expressed deep concerns with Big Tech acquisitions for years but direct challenges have been rare. That is changing. Along with its effort to block the Within deal, the FTC is also challenging Microsoft’s megadeal for game developer Activision Blizzard, which can go directly to the special FTC court because the deal is also tied up in Europe and the UK. No need for a federal judge to grant an injunction. The Biden team of progressive antitrust enforcers admit that their efforts to change years of legal precedents on acquisitions may result in court losses, but they are willing to fight the cases regardless.

Big Tech Bills Fail in Lame Duck but Narrow Antitrust Bills Get Across Finish Line

Report from The Hill

In Brief – All the major anti-Big Tech bill failed to be enacted in the Lame Duck session that brought the 117th Congress to a close. However, three narrow measures, one allowing state attorneys general to keep their federal antitrust lawsuits in the federal circuit court they choose, the second increasing corporate merger filing fees for large transactions, and the third requiring merging parties to disclose any economic support they receive from foreign “entities of concern”,
were included in the final “Omnibus” government funding bill. (See H.R. 3843 for text.) The Big Tech measures that failed to make the cut included headliners such as the American Innovation and Choice Online Act, prohibiting the giant platforms from preferencing their own products and services, the Open App Markets Act, regulating the Apple and Google app stores, the Kids Online Safety Act and Children and Teens’ Online Privacy Protection Act, regulating how digital platforms serve internet users between age 13 and 17, and a bill to force Google and Meta to pay media companies when their news content appears on the two platforms.

Context – Once the EU wrapped up the DMA and DSA, the biggest policy question left in 2022 was whether the Congress would rewrite the rules governing the tech giants in the US. As we expected, the answer ended up being No. While some progressives argued that the narrow bills were a major accomplishment, they were more a parting gift. Looking forward, a few claim the big bills will be back on track in the 118th Congress, but most see the divided Congress as a major barrier due to the massive partisan divide over platform content moderation. The venue bill will likely prove the more impactful of the enacted measures. Under current law, antitrust enforcement actions filed by the US Government cannot be transferred between circuits by the US Judicial Panel on Multidistrict Litigation, which consolidates complex cases to promote judicial efficiency, but State AGs have not enjoyed that benefit. Going forward, AGs can forum shop, meaning their digital platform antitrust suits will be playing out less often in the Northern District of California and the Southern District of New York.

EU Quiety Drops Investigation of Google-Meta “Jedi Blue” Adtech Deal

Report from EU Law Live

In Brief – The European Commission has dropped the antitrust investigation 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 US State Attorneys General led by Texas AG Ken Paxton (R). It was alleged that Google gave Facebook special terms and access to its 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. The companies aggressively disputed the allegations. A note in the European Commission’s December 12 Daily News stated that “following a careful assessment of all relevant evidence,” it had “concluded that the evidence did not confirm its initial concerns and has therefore decided to close its investigation.” The Commission’s decision follows a similar ruling from a US Federal District Court judge that allowed the multi-state antitrust lawsuit against Google spearheaded by Texas to proceed, but dismissed the claims related to Jedi Blue because the states failed to show that the agreement harmed competition. The probe by the UK’s Competition and Markets Authority remains open.

Context – Digital technology revolutionized the ad industry by delivering more effective targeting and more quantifiable returns. Google was the first digital adtech giant and remains the leading services provider, while Meta (then Facebook) emerged as the second digital ad giant, leading in display advertising. Both have been subject to digital ad industry competition investigations in the US, UK, EU, Australia, and Japan. As those investigations have proceeded, a key development is the shrinking share that Google and Meta hold in the digital advertising market, as Amazon, TikTok, Microsoft and Apple have grown, with the combined share of Google and Meta appearing to have peaked in 2017 and falling to 48.4% in the US market and 49.5% internationally in 2022.