Archive – 2021-22

June 2021

House Judiciary Committee Goes All Night and Narrowly Passes Bills to Overhaul Big Tech

Report from the Wall Street Journal

In Brief – The House Judiciary Committee has passed legislation aiming to impose a revolutionary suite of regulations on the largest four or five US digital platforms. The four most aggressive bills are written with criteria thought to sweep in Google, Amazon, Facebook and Apple, and possibly Microsoft. Those bills would make it harder for the giants to make acquisitionsmandate data portability and interoperability requirementsprevent the companies from preferencing their own services or products on their platforms, and restrict the giants from operating multiple platforms that create a conflict of interest. Two bills not directly linked to the mega-platforms, one raising federal fees on corporate merger reviews and another allowing state attorneys general to bring antitrust cases in courts in their own states, were also passed. All the bills passed with bipartisan support, but the process forward is unclear due to divisions within both the Democratic ranks, in particular from members of the California delegation, and within Republican ranks, with strong opposition from members unwilling to grant broad regulatory powers to federal antitrust agencies, even to rein in platforms many conservatives believe are ideologically biased.

Context – Legislation passing the House Judiciary Committee that would overturn the operations of the largest digital companies is newsworthy, but the math, even in the US House, does not look great for the bills’ advocates right now. Democrats hold a six-member advantage on the 44-seat Judiciary Committee and the most aggressive bills passed with just one, four and six vote margins. On the House floor, with 435 members, there is just a 9-vote Democratic majority. With many California D’s reticent about the most aggressive bills, and House GOP leaders rallying around much more narrow efforts to repeal Sec. 230, ban social media “censorship”, and ease court processes to simply break up the covered companies, the toughest measures are likely to face a pause in the House. And then there is the tougher 60-vote margin in the Senate.

Massachusetts Lining Up as the Next Gig Worker Classification State Battlefield

Report from the Boston Globe

In Brief – The State of Massachusetts appears to be taking the pole position as the next venue for full scale political battle over the issue of appropriate classification for Gig workers and related labor and benefit laws. Two coalitions have formed, one backed by major technology industry companies and associations, and a second backed by labor unions and civil rights groups. They are engaged in lobbying over Gig worker benefits legislation in the Massachusetts state legislature and preparing for a possible state ballot initiative that would be reminiscent of California’s Prop. 22.

Context – While the political energy behind Gig labor worker classification laws has revolved around ride sharing and delivery platforms, the AB 5 experience in California illustrated the wide a range of independent workers, professionals and creative freelancers that feel threated by tighter employee standards. After California enacted AB 5 in 2019, the state’s legislature doubled back and exempted a wide variety of independent workers, including writers, in mid-2020. Then state voters enacted Prop. 22 in November 2020 fully exempting ride sharing and delivery platforms from the law. No states followed California’s example in 2020, nor in the first half of 2021. At the federal level, the issue is turning into a partisan regulatory football at the Department of Labor (DoL), with the Obama DoL issuing guidance in 2015 indicating that most workers using app-based platforms should be treated as employees, the Trump DoL overturning that guidance in 2017, and releasing further regulations aligned with independent contractor business models in January 2021. Then the current DoL withdrew those rules in May. In Europe, the regulatory and legal tide is pushing strongly in the direction of requiring independent work platforms to treat workers as employees, including Spain enacting legislation requiring ride sharing and delivery platforms to do so, and Italy putting Gig worker regulation on the agenda for the G20.

FTC Chairman Khan to Get First Antitrust Crack at Amazon in Review of Bid for MGM

Report from the Wall Street Journal

In Brief – The US Federal Trade Commission (FTC), which shares antitrust authority with the Justice Department, will be the agency to review Amazon’s proposed $9 billion acquisition of Hollywood studio MGM, offering an early chance for new Chairwoman Lina Khan, who rose to prominence criticizing the traditional antitrust legal framework for failing to address abuses by Amazon, to challenge the platform giant’s unique business model. The FTC’s pitch was based on its lead role in recent video industry transactions, including Disney’s acquisition of 21st Century Fox and AT&T’s acquisition of Time Warner, as well as the fact that it has an open, wide-ranging antitrust investigation into Amazon’s business practices based on the 2019 agreement between the FTC and the Justice Department to divide up investigations into the Amazon, Apple, Google and Facebook, with the FTC taking responsibility for Facebook and Amazon.

Context – Rejecting the MGM acquisition based on traditional antitrust analysis will be a longshot. MGM is not considered a major studio and Amazon holds less than a 20% share in the video streaming market. Interestingly, Amazon, which is reported to have paid a 40% premium over competing offers from large platforms like Apple, does not even charge a separate fee for its Prime Video streaming service. Instead, it is given away as one of the many Prime Membership benefits, including its landmark package delivery and a wide range of digital services like Amazon Music. The financial return for Amazon is based on how Prime Members spend much more on Amazon’s ecommerce marketplace than other online shoppers, and they nearly always buy the products that qualify for Prime treatment and Amazon recommends, giving the company leverage to push third-party sellers, who make up a large share of sales on Amazon, to buy its logistics services and not price products lower off Amazon, an alleged abuse that is the subject of an antitrust complaint by the DC Attorney General.

ECJ Gives Google’s YouTube a Liability Win Over Rights Owners as DSA Rewrite Looms

Report from Euractive

In Brief – The European Court of Justice has ruled that digital platforms are not liable for users uploading unauthorized material unless the platforms failed to take quick action to remove or block access to the content. The court’s decision, based on the “safe harbor” liability regime of the 20-year old Ecommerce Directive, involved a pair of cases referred to the high court from Germany. In one, Google’s YouTube prevailed over Frank Peterson, a music producer, who sued the company over several audio recordings uploaded to the site without authorization. The second case involved publisher Elsevier suing file-hosting service Cyando after users uploaded several Elsevier works on its platform Uploaded. The YouTube case was initiated in 2008 and the Cyando case in 2013. While the decision is a win for digital platforms in a long-running battle with Europe’s rights owner industry over counterfeits and other unauthorized online activity, the ruling did not address changes made through the European Copyright Directive enacted in 2019 with strong rightsholder support over concerns of Internet speech advocates.

Context – Even beyond the 2019 Copyright Directive, the EU’s Digital Services Act (DSA) is intended to rewrite the liability regime governing digital platforms with respect to user actions. While much of the public focus has been on new duties for social media platforms to block ills including hate speech, disinformation, support for terrorism and sex abuse, the legislation will also feature a major lobbying battle over online commerce and liability for unauthorized goods. The French Government, a strong advocate for luxury brand owners, is calling for modifying the one-stop-shop mechanism included in the initial DSA to give more enforcement authority to national regulators and give ecommerce platforms additional obligations. The lead European Parliamentarian on the DSA bill is also calling for addressing illicit goods and online platforms sellers to be a bigger priority in the legislation.

European Competition Authority Opens Probe of Google Ad Services Businesses

Report from the Financial Times

In Brief – The European Competition Authority (ECA) has announced that it is opening a major investigation of Google’s digital advertising businesses and services. It will cover allegedly anticompetitive practices including favoring its own ad-buying tools in the advertising auctions it runs, excluding competitors from brokering ads on YouTube, and plans to block certain user-tracking technologies on the Chrome browser and Android operating system that may undermine competitors but which Google says are being done to meet privacy expectations. The new case is the first time the Commission has opened a formal probe of Google since a series of three cases involving the company’s search practices, AdWords business, and conduct related to Android. Over the past decade the Commission ruled against Google in each case, imposed fines and faced a series of legal appeals, a lengthy process that was unsatisfactory to tech critics and helped fuel the drive for the regulatory Digital Markets Act.

Context – Digital advertising revolutionized the ad industry by delivering more effective targeting capabilities and more quantifiable returns. Google was the first digital advertising giant to draw the attention of competition authorities, and as the overall market grew, Facebook and most recently Amazon have also emerged as giant platforms. In Japan, the Ministry of Economy, Trade & Industry’s digital platform unit is considering a regulatory plan to apply transparency and fairness principles to the digital advertising operations of the country’s five largest platforms. Activist competition regulators in the UK and Australia are both engaged in digital ad market reviews. In the US, the Google antitrust complaint led by the Attorney General of Texas is focused on advertising market dominance and abuses. Finally, Google recently settled an antitrust investigation by the French competition authority into its ad business, agreeing to pay a $270 million fine and make changes to its ad businesses in France that could become a model elsewhere.

German FCO Opens Proceeding to Declare Apple a Platform of Paramount Significance

Report from Reuters

In Brief – In a move that was not unexpected, the German Federal Cartel Office (FCO) has announced that it is opening an investigation of Apple based on the regulator’s new legal authority to proactively address competition threats from the largest platforms. The new law rejects the traditional competition enforcement model of enforcers investigating dominant businesses for anticompetitive abuses after they have caused harms, a process many criticize as too slow for digital markets. The German competition regulator can now 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 to their own services or hindering interoperability. Apple is the fourth and final of the GAFA platform giants targeted by the FCO under the new law. In January, the agency announced that it was expanding its investigation of Facebook’s changes to its Oculus VR business under the new regime, and proceedings aimed at Amazon and Google were opened in May. Once the FCO makes a determination of “paramount significance”, it lasts for five years, and any legal challenges are expedited to Germany’s Federal Court of Justice.

Context – The FCO is stepping into its new platform regulatory role with enthusiasm, highlighting the emerging shift from targeting dominant platforms through competition policy, traditionally enforced ex-post, and ex-ante digital regulation. Competition authorities are being turned to for regulatory models in places like the UKKorea and Japan. The EU’s Digital Markets Act (DMA) “gatekeeper” legislation aims to create a regulatory regime for large digital platforms all across Europe and may prove the most impactful of all. Germany, France and the Netherlands are leading efforts to expand the authority of national regulators in Europe to enforce the many mandates being proposed through the DMA.

EU High Court Punches Hole in GDPR One-Stop-Shop Siding with Belgium Privacy Authority

Report from Euractive

In Brief – The “One-Stop-Shop” policy of the EU’s General Data Protection Regulation (GDPR), which promised greater regulatory simplicity by establishing the privacy regulator in the country of a company’s EU headquarters as the “lead supervisory authority” for privacy compliance, has suffered a major setback in Europe’s high court. The European Court of Justice (ECJ) has ruled against Facebook and the European Commission (EC) by siding with the Belgian Data Protection Authority (BDPA) in agreeing that while the lead data protection authority has general jurisdiction over cross-border data processing under the GDPR, including the right to start judicial proceedings against companies based in its jurisdiction, other data protection authorities also have some power to challenge companies in court. The BDPA has attempted to challenge Facebook’s cookie policies. Facebook and the EC both argued that only the Irish Data Protection Commission (IDPC), as Facebook’s lead privacy regulator, could do so, blocking the BDPA from taking the action on its own. The BDPA argued that the Irish authority had not taken up its request to challenge Facebook’s policy and therefore it could then step in. The court’s decision aligns with the January opinion from the court’s Advocate-General in the case.

Context – While EU leaders are proud of the global uptake of GDPR-style regulations, many privacy advocates and Big Tech critics are extremely frustrated that the GDPR has not resulted in large penalties being imposed on digital giants. They often blame the “One-Stop-Shop” policy and criticize the privacy regulators in Ireland and Luxembourg. A former Commissioner from Luxembourg has even called for a change to reduce small state authority. As the massive Digital Markets Act and Digital Services Act move through the EU’s legislative process, EU member states including France, Germany and the Netherlands are leading efforts to expand the authority of national regulators to enforce the many mandates being proposed.

Indian High Court Says Antitrust Cases Targeting Amazon and Flipkart Can Proceed

Report from Reuters

In Brief – The Competition Commission of India (CCI), the country’s antitrust regulator, has scored a win in its ongoing court battles with Amazon and Flipkart that allows the agency to restart investigations alleging that the ecommerce giants have violated the law by prioritizing select large volume sellers, engaging in exclusive smartphone launches, and providing selective fee discounts. After years of intense retailer pressure the CCI launched its probes in January 2020, but the investigations were quickly paused by court orders that noted the Indian Enforcement Directorate, the country’s regulator of Foreign Direct Investment (FDI) policies, was already investigating similar allegations against both companies. The most recent High Court order allows the CCI to restart its investigations, but Amazon and Flipkart are continuing to pursue judicial interventions by filing a fresh round of appeals.

Context – India, with its large and growing population, deep technology roots, rapidly expanding Internet usage, and relative openness to global Internet businesses at least compared to China, is seen as a key growth market of US-based digital giants. The domestic ecommerce ecosystem has been heavily influenced by the country’s strict FDI limits on multi-brand retail businesses that exist side-by-side with open FDI rules for third-party ecommerce marketplace platforms. Foreign-owned enterprises like Amazon and Flipkart can operate digital marketplaces, but they cannot own retail businesses that could undercut domestic and small shopkeepers. Both giants have faced years of charges that they skirt FDI laws through a web of relationships with a small number of very large sellers and a recent Reuters expose purporting to confirm Amazon’s FDI circumvention tactics reinvigorated CCI efforts. New Indian ecommerce rules, under consideration for almost two years, are expected to require ecommerce platforms to treat sellers equally, including through algorithms, and ensure greater transparency in seller terms and conditions.

The House Antitrust Subcommittee’s Bipartisan Bills Targeting The 5 Biggest Digital Giants

*** Special Report from PEI ***

In Brief – The effort of the bipartisan leaders of the House Judiciary Committee’s Antitrust Subcommittee to rein in the biggest US digital companies entered a new phase with the introduction of five bills targeted to address issues raised by the subcommittee’s extended review of competition in digital markets. Four of the five bills are crafted to hit only five US digital giants – Amazon, Apple, Facebook, Google and Microsoft. The criteria includes having at least $600 billion in annual sales or market capitalization, a figure that narrows the pool down to just nine companies globally, and then online platforms must also have at least 50 million active US users each month, or 100,000 active US business customers, which reduces the coverage to the five US giants.

The four bills targeting the digital giants are: (1) the Platform Monopolies Act, making it illegal for major tech platforms to operate another line of business that creates a conflict of interest; (2) the American Innovation and Choice Online Act, prohibiting the tech giants from giving their own products and services preference over services of rivals; (3) the Platform Competition and Opportunity Act, reducing the ability of the tech giants to engage in acquisitions in order to reduce the chance they acquire a potential future competitor; and (4) the Augmenting Compatibility and Competition by Enabling Service Switching Act, requiring that the services of giants are interoperable and allow users to switch their data to rival services. The fifth bill, the far less controversial Merger Filing Fee Modernization Act, increases federal government merger filing fees to better fund antitrust regulators. A similar measure has already passed the Senate.

Bipartisan anger directed at the largest digital companies has been growing for years. Some concerns are related to business practices, but many are related to content moderation. The business concerns and the content moderation frustrations have been marked by major divisions between progressives and conservatives. Progressives have seen tech abuses as just one huge example of antitrust law gone wrong over decades which has led to economic concentration across many parts of the economy. Conservatives have been reluctant to reject traditional antitrust jurisprudence and largely reject extending tech concerns to the broader economy. Content moderation has seen even greater partisan division. The charge that platforms censor conservative viewpoints has become a top Republicans issue nationally with legislators attempting to prohibit social media companies from restricting legal content. Democrats have not only opposed those efforts, they have criticized the same platforms for allowing far too much hate speech, disinformation and other objectionable content and calling for more interventions, not less.

The House tech bills reflect an alliance between progressive and conservatives who very much do not agree on the specifics of antitrust law or online content moderation. Some conservatives, led in this case by Rep. Ken Buck (CO), the subcommittee’s top Republican, believe that aggressive efforts to break up the largest platforms into many smaller versions is the best way to end the power of those giants to impose speech restrictions across the Internet. In short, extreme economic policy justified to address extreme threats to the political system. Some progressives, led in this case by Rep. David Cicilline (RI), top Democrat on the subcommittee, appear willing to focus major antitrust reform energy on just the very largest digital giants, a key requirement for Republicans like Rep. Buck, in order to dramatically reform the tech sector, while putting off the rest of economy for a later day.

Context – The four bills targeting just the largest tech platforms are a very big deal. To be clear, they are not the biggest thing in digital platform regulation… that remains the Digital Markets Act and Digital Services Act in the EU. The EU’s legislative and regulatory processes, while slow, are far more likely to result in a major end-product in a few years. But these House bills are meaningful because if even a few (besides the merger review funding bill) became law they would reorder a sector of the economy that is hugely important to the lives of most people and businesses. Three big things to look for to get a sense if an earthquake is coming –

(1) Are progressive antitrust critics willing to step back from broad antitrust changes? If the rhetoric on competition policy coming from progressives sounds like “First Tech, Then the Rest,” it is likely to eventually scare away conservative Republicans and even Democratic moderates.

(2) Will Senate Republicans be willing to move such drastic anti-tech legislation? There is no shortage of Republican critics of Big Tech in the Senate, but there has been limited support for reordering broad antitrust policy. Moving such major legislation through the Senate with its 60-vote threshold will require almost unprecedented bipartisan cooperation, at least in the modern Congress.

(3) Will the stock market, and therefore Americans who are increasingly invested in index and retirement funds, get spooked by the prospect that the business models of the largest digital companies will be rewritten by Congress? The five targeted digital giants account for around 25% of the S&P 500 and half the value of the Nasdaq 100. If the markets take the bills seriously and react negatively, it could spook the Hill into pursuing other avenues to address big tech behaviors.

UK CMA Expected to Open an Antitrust Investigation of Amazon Paralleling EU Efforts

Report from the Financial Times

In Brief – The UK Competition and Markets Authority is reported to be planning to open a formal investigation of Amazon after analyzing the digital and ecommerce logistics behemoth for months. The expected investigation appears likely to parallel the two tracks being pursued by the European Competition Authority (ECA), focusing on charges that the ecommerce giant unfairly uses data from its marketplace to compete with third-party sellers, as well as whether Amazon uses their Buy Box and other tools to preference products on their marketplace sold by third-party sellers that purchase logistics services from Amazon’s FBA logistics business. The timing for the investigation remains undecided.

Context – Charges that Amazon unfairly uses marketplace data to compete as a retailer against third-party sellers is a long-time critique of the ecommerce giant. Amazon consistently responds that they are not a large share of overall retail, that other large retailers sell even more “house brands”, and that third-party sellers have been growing their share of sales on Amazon for years. ECA investigators are reported to be having trouble building a case regarding Amazon abuses preferencing its own retail products, which is not a great surprise as first-party retail sales are not nearly as profitable to Amazon as third-party sales that flow through Amazon’s logistics business. UK competition enforcers joining the move toward investigating Amazon’s use of the Buy Box to preference sellers that use Amazon’s FBA logistics business and drive its adoption, with FBA already estimated to be 60% of the ecommerce distribution center market in the US, indicates that regulators are starting to better understand the Amazon ecommerce model. The Italian competition authority was the first to focus on Amazon logistics in 2019, the issue was raised by Rep. Mary Scanlon (D-PA) at the last summer’s Tech CEO antitrust hearing, and the use of Buy Box penalties is central to the DC AG’s antitrust suit targeting Amazon’s price fixing practices.

Success of Colorado Privacy Act Continues Key Trend Leading to Legislative Wins

Report from GovTech

In Brief – Colorado appears poised to become the third state, after California and Virginia, to enact a comprehensive consumer online privacy law. Colorado’s SB 190, which was passed by the state legislature in the closing days of the 2021 legislative session, is expected to be signed into law by Governor Jared Polis (D). The bill grants state residents new rights including to opt out of the sale of their online information and give third-party “authorized agents” the power to manage their online privacy settings, and requires companies to honor browser privacy signals as a global opt out of the sale of data and prohibits the use of dark patterns to obtain consent. On the key issue of enforcement, the bill does not authorize private class actions lawsuits, otherwise known as a private right of action, limiting enforcement to the State Attorney General and District Attorneys, leading to criticism from some privacy and consumer advocates, but also resulting in the bill passing by wide margins.

Context – State legislative debates over online privacy bills continue to reinforce that the issue of enforcement, in particular whether private class action lawsuits are authorized, offers the best thumbnail guide to prospects for success. When privacy legislation includes a “private right of action”, a policy strongly supported by many progressive consumer advocates, it appears to consolidate enough opposition from Republicans, business and tech interests to stifle legislation. In Virginia, a state with unified Democratic control of state government, a bill modeled on California’s CCPA, without private class action lawsuit enforcement, earned business and Republican support and was passed into law earlier this year. In Washington, a state with unified Democratic control and strong progressive leaders, and Florida, with Republican control and conservative leaders looking to punish Big Tech, including class action lawsuits stalled legislation. Watch for similar developments in the federal privacy debate on Capitol Hill.

German FCO to Investigate Google News Showcase for Unfairly Preferencing Media Participants

Report from Reuters

In Brief – The German competition authority has opened an investigation of Google’s News Showcase based on the concern that some German news media businesses might gain preferential treatment from Google by joining News Showcase, disadvantaging news media businesses that do not. The News Showcase is a specialty news platform that the search giant created to in order to develop a mechanism to pay media businesses to license content that is presented on a curated Google media service alongside more traditional news search results. Google, which strongly objects to paying websites for surfacing links in its traditional search results, has been under pressure in many countries to pay media sources for content. Google responded news of the investigation that the selection of News Showcase participants is based on objective and non-discriminatory criteria, and partner content is not given preference in the ranking of search results.

Context – The Internet has overturned the business model of traditional media. Google and Facebook have successfully shaped the new digital ad ecosystem and traditional news businesses and their champions in government are committed to reengineering the business relationships. Competition authorities in Australia and France have taken the lead to press the digital giants to pay media companies and both Facebook and Google have created billion-dollar programs to pay media companies for posting content on specialty services. The Bundeskartellamt is the first to investigate payments as a potential competition problem pitting media enterprises against each other. Germany is also home to a similar competition policy court decision that has temporarily blocked a search cooperation project between Google and the German Ministry of Health, where Google put a “knowledge panel” from the Ministry of Health at the top of Google search results pages when a user searches for information on 160 common illnesses. The Munich Regional court determined that the agreement could unfairly harm competing private health portals.

Nigeria Bans Twitter After Twitter Blocks a Presidential Tweet for Threatening Violence

Report from the Washington Post

In Brief – Nigeria has suspended Twitter (over Twitter), accusing the platform of repeatedly allowing misinformation and fake news to spread through the country with “real world violent consequences”. This ban followed the social media platform deleting a controversial tweet made by the country’s President in which he threatened to punish secessionists in the southeastern part of the country, as well as temporarily freezing his account. Telecom operators in the country implemented the government order, largely blocking direct access to the platform, but many Nigerians reportedly employed VPNs to bypass the domain restrictions. In response to the widespread public disregard of the Twitter ban, the country’s attorney general vowed to prosecute violators, a threat that raised outcries from civil libertarians, technology advocates and social welfare organizations. Diplomats from the United States, the European Union, Canada and other nations also urged Nigeria to lift the Twitter ban.

Context – Africa is home to many countries with large, young and growing populations that are increasingly connected, in particular to the mobile Internet. The sudden turn against Twitter in Nigeria is reminiscent of the Ugandan Government’s efforts in January to shut down all Internet in the country for a week surrounding the country’s national elections and continue blocking most social media services for more than a month. Uganda’s long-serving President has had a tense relationship with social media and the government attempted to reduce their use by instituting an “over-the-top” (OTT) services tax that charged mobile users 200 schillings a day ($.055 US) for using 50 communications apps including Twitter, Facebook, and WhatsApp. Like in Nigeria, high levels of VPN use by Ugandans to circumvent the levy by accessing the services through non-Ugandan servers. This led the government to propose abandoning the OTT tax and replacing it with a general mobile data usage tax.

Biden Replaces Trump’s WeChat & TikTok Shutdown Effort with New App Security Process

Report from the Wall Street Journal

In Brief – President Biden has revoked executive orders issued by President Trump in August of 2020 that attempted to shut down Chinese-owned apps TikTok and WeChat in the US, replacing the company-specific orders with a new directive requiring security reviews of all apps that fall under the jurisdiction of foreign adversaries, including China. The Trump Administration efforts to shut down TikTok, the short-video social media phenom, and WeChat, a communications and commerce “super app” nearly essential for interacting digitally with people inside China, have been stalled by legal challenges in multiple US federal courts. The new app security policy is framed as abandoning the prior ad hoc efforts and instituting a structured security review process. The Commerce Department is now charged with establishing clear criteria to evaluate national security and data security risks posed by software applications that are subject to the jurisdiction of a foreign adversary. It is not clear how long the development of the new standards will take nor how aggressive the new reviews will be in practice. The CFIUS review of TikTok, also initiated in 2020, is not covered by the new order.

Context – The possibility that Chinese authorities could access data on users outside China from Chinese-based app businesses through China’s broad National Intelligence Law, embedding personnel inside Chinese companies or simply by privately threatening the Chinese-based business leaders, remains a big issue in the context of ByteDance’s TikTok in the US and Europe. The same issue has been raised in Japan regarding the Line messaging app using Chinese contractors. But there is no serious question about data access, surveillance or censorship on WeChat. At the same time, the ability of Chinese-based companies to fully access independent US courts has also been made clear. The experiences of Jack MaAlibabaAnt Financial and other Chinese digital firms over the past year are a striking Chinese comparable.

Ohio Attorney General Files Suit Against Google Arguing the Search Giant is a Public Utility

Report from the New York Times

In Brief – Ohio Attorney General David Yost (R) has filed a suit against Google in state court arguing that Google’s Internet search business should be declared a public utility and subject to government regulation to prohibit the digital giant from preferencing its own products, services or websites in search results. The novel lawsuit is based on a century-old state statute historically used to regulate railroads, electricity and the telephone and argues that Google has a duty to offer competitor services equal treatment in advertisements, knowledge boxes, integrated specialized searches, direct answers and other features that commonly appear on the Google search results page. AG Yost and Ohio also joined 37 other State AGs in the federal anti-trust complaint targeting Google for anticompetitive search practices that was filed last December by Colorado’s Attorney General.

Context – Google is more than a decade into facing antitrust complaints, and charges that it discriminates against specialized “vertical” search services in its dominant general Internet search services go back to the beginning. The EU’s initial antitrust complaint against Google regarding “comparison shopping” is a version of the same argument. As noted, discrimination against vertical search competitors is the focus of one of the two major US State AG antitrust complaints. A large coalition of vertical search businesses have called on European Commissioner Margrethe Vestager to open a new investigation of how Google discriminates through its “OneBox”. Google faces other self-preferencing complaints as well, such as Italy’s Enel X Italia complaining that Google’s Android Auto platform discriminates against its EV recharging map app, and Danish app-based bike rental company Donkey Republic has accused Google of preferencing the Lime electric scooter business (partly owned by Google) in its Maps app. Self-preferencing is a major target of the EU’s Digital Markets Act that intends to regulate digital “Gatekeepers” and may prove more impactful than all the antitrust litigation.

G-7 Leaders Announce Initial Tax Deal on Digital Taxes and Corporate Tax Floor

Report from the Wall Street Journal

In Brief – The Group of 7 finance leaders have agreed on a high-level plan to address two major global corporate tax issues – establishing a global minimum corporate tax rate to reduce the use of corporate tax-havens, and changing tax rules for digital companies to allow governments to tax them despite most of their operations happening in other countries. The plan for a global corporate tax minimum, a Biden priority, appears pretty straightforward, calling for countries to set a rate of at least 15 percent. The top European priority has been expanding taxation of (largely American) tech giants, something an increasing number of countries have aimed for through Digital Services Taxes (DST). The Trump and Biden Administrations have pushed for something broader than just taxing Internet companies, and the G-7 calls for new tax rules for the 100 largest global businesses that have a profit margin of at least 10%, proposing that 20% of profits above that threshold would be shared among governments. Negotiations next move to the G-20 that adds countries like China, India, Brazil and South Africa.

Context – A great degree of uncertainty surrounds the global tax deal both because almost no specifics have been released, and because so many countries will need to agree to and implement them, which would take years. On the global minimum tax front, the Biden goal appears to be a domestic political bank-shot, hoping that other countries raising their corporate tax rates will reduce opposition to Administration plans to raise the US top corporate rate. The new and highly uncertain follow-on plan to DSTs could also take years to implement, and G-7 countries that have enacted DSTs have indicated that they will not remove them until the new system is in place. The Biden Administration recently announced trade retaliation against six countries with DSTs but suspended the duties for six months to allow for further tax talks. Finally, applying the new regime to Amazon remains an issue due to the company’s low book “profits” after investments, which could be addressed by applying the profitability threshold to business units like AWS.

Facebook Bans Trump for Two Years and Tweaks Treatment of Speech by Public Officials

Report from the Washington Post

In Brief – Facebook responded to the decision of its independent Oversight Board (OB) by imposing a two-year suspension on former President Donald Trump and establishing new and more transparent rules regarding content policy violations and enforcement actions, especially for public figures. The OB was asked by Facebook to review the company’s decision to indefinitely suspend President Trump’s account following the US Capitol riot. In May, the board agreed that the company’s decision to suspend the account was justified but the “indefinite” length of the suspension violated the platform’s policies. The OB directed the company to address the indefinite nature of the suspension and added a number of policy recommendations to provide greater public transparency regarding content moderation practices, as well to apply content rules to public officials in a manner more in line with all other users.

Context – While the Trump ban generated the headlines, the most important news was Facebook announcing that it was modifying its policies related to posts by public officials in a way that should result in more political leaders facing sanctions. The company is changing its “newsworthiness” test for political leaders when speech could cause harm, treating leaders more like regular users in those cases. However, Facebook is not ending the newsworthiness exception entirely, although in a further nod to the OB, the company will now disclose publicly when a post is allowed on the site based on the exception. The company also plans to be more transparent about its content violations “strikes” system, committing to telling users how many strikes they have, along with the consequences. As with nearly all content moderation matters, both the Trump ban and the fact that Facebook will continue exempting political leaders from most “fact checking” and other tests for misinformation, caused negative reactions from both sides of the political divide based on concerns over either too much or too little control of speech.

Google Settles Adtech Antitrust Case in France That Could Set Global Precedent

Report from the Wall Street Journal

In Brief – Google has settled an antitrust investigation by the French competition authority that alleged the company abused its dominant position in online advertising services. Although Google will neither accept nor deny culpability, it has agreed to pay a fine of nearly $270 million and make changes to its advertising services to address concerns of competitors, publishers and advertisers that interconnecting with the services is unnecessarily difficult and that the various Google adtech businesses unfairly preference each other. Although the settlement will only require the changes to be made in France, Google will explore implementing aspects of the changes more widely to help address similar competition concerns elsewhere.

Context – It is worth remembering how much longer Google has faced major antitrust scrutiny than have the rest of the GAFA companies. The search and advertising giant is a decade into major cases in the EU implicating its search practices, its advertising business, and conduct related to Android. In those years, the European Competition Authority (ECA) ruled against Google, imposed fines and faced a series of legal challenges in each case. And new iterations have emerged. Today, one of the two major US State AG antitrust complaints is focused on how Google’s treats specialized “vertical” search businesses, a charge with a direct line back to the EU’s “Comparison Shopping” case. Specialized search businesses are also calling on the ECA to open a new investigation of how Google uses its “OneBox”. Google’s dominance of digital advertising goes back so far that the key question initially was whether digital advertising was a separate market. Not anymore. Japan is now proposing regulations to increase digital advertising transparency and oversight of Google and four other platforms, the UK’s CMA and Australia’s ACCC, are in the midst of digital advertising market reviews, and the second big US State AG antitrust complaint against Google, led by Texas, is focused on advertising market abuses similar to this French case. Whether Google can build on the agreement made in France to address global challenges is the most important question.

France Leads Effort for Greater Member State Government Role in Digital Regulation

Report from Politico

In Brief – The French Government, one of the most active globally in the drive to regulate large digital platforms, is working to amend the Digital Services Act (DSA) to increase the ability of Member State governments to intervene and regulate content moderation practices. The European Commission’s DSA proposal includes the “country-of-origin principle” that establishes the regulatory authorities of the Member State where a company is legally based as the lead regulatory authority. For most large US-based tech giants that is Luxembourg or Ireland. The EU’s landmark General Data Protection Regulation (GDPR) is built on the country-of-origin framework and privacy advocates and critics of Big Tech have strongly criticized the principle in practice charging that the regulators in those Member States have not aggressively enforced the law. France plans to champion changes to the framework for the DSA in order to allow national governments to more easily intervene if the regulators for company HQs are not aggressive.

Context – The EU’s Digital Services Act, which proposes to increase the content moderation responsibilities and practices of digital platforms, and the Digital Markets Act (DMA), legislation to regulate large digital platform “gatekeepers”, are the most important digital platform regulatory proposals in the world due to the size of the EU market, the pride of EU leaders in being global regulation thought leaders, and the European political consensus to rein in large digital platforms. While EU leaders are proud of the global uptake of GDPR-style regulations, the frustration in the lack of aggressive penalties for tech giants is so widespread even a former Luxembourg Commissioner is calling for change. On the DMA gatekeeper front, France is working with Germany and the Netherlands to propose a mix of greater Member State authority and flexibility. The DSA and DMA are working their way through the EU’s legislative process with Member States and the Parliament currently weighing in on the EC proposals.

India Pressuring Twitter to Stop Labeling Ruling Party Political Communications

Report from the New York Times

In Brief – The Government of India is pressuring Twitter to overturn a decision to apply a “manipulated media” label to Tweets from an official of the ruling BJP party circulating what is alleged to be a “toolkit” of the opposition Congress party criticizing the government’s handling of the coronavirus pandemic. Police in Delhi sent a notice to Twitter demanding an explanation of the label and followed up sending officers to the Twitter office. Twitter’s manipulated media policy applies to content that has been “significantly and deceptively altered or fabricated.” The BJP says Congress created the toolkit to damage Prime Minister Narendra Modi, but the opposition party claims the version of the toolkit the BJP shared was a falsified version of an outdated and unrelated research note. A fact-checking organization claimed that the images did have some falsified information. The Modi Government has been increasingly aggressive in pushing platforms to be more responsive to its social media policy concerns.

Context – India instituted new social media regulations in February requiring platforms to remove “objectionable” online content to promote online safety and national security. In April, the government ordered Facebook, Instagram and Twitter to take down dozens of social media posts critical of its handling of the pandemic that exploded in severity, including posts from opposition politicians and calls for PM Modi to resign. The government said that the content could incite panic and hinder the response to the pandemic. The platforms complied, including blocking the posts from being seen inside India. The Indian social media rules share a number of features of the social media mandates enacted last summer in Turkey, including the requirement that platforms maintain representatives in country to respond to government requests to take down content in 48 hours. Russia is another market where the government is threatening social media platforms for carrying objectionable political speech.

Canada Proposing Online Music & Video Services Preference Canadian Content

Report from the Wall Street Journal

In Brief – The Government of Canada is proposing to require social media platform that allow sharing of video and audio content, such as YouTube and TikTok, to more prominently feature content from Canada artists as part of legislation to update the Canadian Broadcasting Act to cover Internet services. The content preferencing proposal has generated criticism from opposition politicians, law professors and net-neutrality advocates, who argue it is an attack on free speech. The ruling Liberal Party, which proposes adding the mandate to legislation requiring online streaming services such as Netflix, Disney+ and Spotify to contribute a share of their revenue to fund domestic production of television shows, movies and music, says the proposal is simply another way to help the struggling broadcasting sector and showcase Canada’s artists. Some legal experts who have reviewed the proposal claim that the regulator could compel platforms to modify algorithms to give Canadian content preference over foreign-made content whenever a user with a Canadian IP address uses the service. The prospect that the Canadian Radio-Television and Telecommunications Commission could regulate individuals’ online posts or viewing habits has caused concerns as the legislation has been reviewed by Parliament.

Context – The Canadian Government is increasingly indicating it plans to follow European and Australian models on digital platform issues. The country’s Heritage Minister has said that the government will propose legislation to regulate online hate speech with monitoring and take-down obligations for platforms and a national digital platform regulator. The Government is planning to implement a digital services tax (DST) modeled on European levies, effective in January of 2022. Finally, the Liberal Party is planning legislation to require digital giants, likely Facebook and Google, to pay Canadian media enterprises when their news content appears on the platforms, following the models of Australia and France.

Amazon Bid to Buy MGM Studio Adds to Conglomerate’s Antitrust Challenges

Report from The Verge

In Brief – Amazon’s plan to acquire movie and television studio MGM for $8.45 billion, the second largest acquisition in the conglomerate’s history, has resulted in bipartisan opposition from elected officials leading the charge rein in “Big Tech” and reform US antitrust laws. Amazon’s offer is reported to have been about 40 percent more than from other potential buyers, including Apple and Comcast, highlighting Amazon’s unique video service business model. Amazon uses Prime Video, which other competitors in the video streaming market sell, primarily as a giveaway to increase the attractiveness of Prime Memberships that entice consumers of spend significantly more on Amazon’s ecommerce services. The Amazon Marketplace accounts for half of US ecommerce and an even larger share of online marketplace services used by smaller retailers. Sen. Amy Klobuchar (D-MN), the chair of the Senate Antitrust Subcommittee, has called for the Justice Department to investigate the acquisition, while Sen. Josh Hawley (R-MO), the most strident GOP tech critic, called for the acquisition to be blocked outright arguing that Amazon should be prohibited from getting bigger through any acquisitions, a call supported by Rep. Ken Buck (R-CO), the top Republican on the House Antitrust Subcommittee.

Context – Rejecting the MGM acquisition based on traditional antitrust analysis of video content market shares and consumer prices will be a longshot, but challenges to the MGM acquisition is the second antitrust dispute confronting the digital giant in quick succession. The DC Attorney General recently filed a landmark antitrust suit in DC Superior Court charging Amazon with driving up prices online broadly by blocking third party sellers on Amazon, who account for over 60 percent of sales on its marketplace, from offering lower prices on any other website, even when those site’s fees are lower. A pair of similar antitrust complaints were soon filed by consumers in Federal District Court in the State of Washington as well.

EU Presses Social Media and Digital Ad Industry to Fight Disinformation More

Report from TechCrunch

In Brief – The European Commission (EC) has announced its plans to push online platforms to take stronger action to combat online disinformation, meaning harmful, malicious and manipulative but not illegal online content. Disputed claims related to the pandemic and vaccinations, as well as political manipulation efforts, are widely cited as examples. Google, Facebook, Microsoft, Twitter and TikTok, along with a handful of industry trade groups, signed onto the EU’s initial voluntary Code of Practice on Disinformation launched in 2018. In announcing the expanded effort, Commissioner Thierry Breton was critical of their efforts, stating that only one has “really” lived up to its commitments (reportedly Twitter). The platforms are being asked to work together to demonetize disinformation by exchanging information on disinformation ads and techniques, providing more accessible tools for users to flag disinformation, and collectively barring actors that repeatedly debunked content. The Commission is also calling for increased use of fact checkers and increased transparency, in particular for political ads. Finally, the EC is looking for smaller digital services and digital adtech companies to sign on.

Context – Agreement on what is disinformation generally exists until it doesn’t. As the EC looks to beef up coordinated action to block false content, Facebook has announced a change in its treatment of content claiming that the COVID virus may have escaped from a lab. That idea was officially misinformation for over a year, but not anymore. Political topics and claims of independent and neutral “fact checking” inevitably lead to charges of censorship. Conservatives in places like PolandHungaryFlorida and Texas see platforms censoring too much and being ideologically biased. France, the UK and Canada are calling for more interventions, just like many US DemocratsRussiaTurkey and India are also calling on platforms to block more, but their ideas on misinformation are often criticized.

Leading European Parliamentarian Wants DMA Focused on Just the Largest Platforms

Report from Reuters

In Brief – The Member of the European Parliament assigned primary responsibility to move the landmark Digital Markets Act (DMA) through the legislative body believes that the scope should be refined to target just the very largest digital platforms, in particular Google, Amazon, Apple, Facebook and Microsoft. The DMA aims to regulate digital “gatekeepers” to prevent conduct that critics of Big Tech believe are harming consumers and small business platforms users, as well as emerging competitors and the digital ecosystem. The initial proposal from the European Commission defines online gatekeepers as companies with more than 6.5 billion euros ($8 billion) in annual European turnover in the last three years or 65 billion euros in market value in the last financial year, and which provide a core platform service in at least three EU countries. Andreas Schwab, MEP from Germany, believes that the scope should be narrowed to companies with EU revenue of 10 billion euros ($12.2 billion), market capitalization of at least 100 billion euros, and be a provider of at least two core platform services. No European companies fit the criteria. He argues that despite the appearance of targeting US digital giants, and noting that Alibaba could also fall under the scope, the covered platforms are the key concern.

Context – Regulators and legislators globally are aiming to rein in the influence of digital giants. One of the key questions is how “big” will a platform need to be before restrictions bite? In Europe, the largest home-grown digital platform is, and they have been outspoken critics that the DMA could harm innovation and growth for platforms like it, which while large are nothing like the digital giants. The Schwab changes would clear, for example. In the US, there is a similar debate over Republican support for antitrust legislation, with influential conservative tech critics like Rep. Ken Buck (R-CO) willing to entertain some meaningful reforms if they are highly targeted to impact just the digital super-giants he accuses of ideological censorship.

Biden USTR Proposes and Delays Tariff Retaliation for Digital Taxes as Global Tax Talks Continue

Report from the Wall Street Journal

In Brief – The Biden Administration continued with very deliberate steps toward trade retaliation against six countries – the UK, Austria, India, Italy, Spain and Turkey – that have imposed new taxes on large digital companies. Despite being very clear about their interest in collegially resolving global corporate disagreements, especially on Digital Services Taxes (DST) that will mostly impact US digital firms, the Biden Administration’s United State Trade Representative (USTR) has continued forward with trade retaliation initiated by the Trump Administration to maintain negotiating leverage. In this latest step, the USTR announced that 25% tariffs would apply to about $2.1 billion worth of goods from six countries, but the tariffs were immediately suspended for 180 days to provide a window for multilateral tax talks to yield an agreement. The USTR also dropped efforts to sanction Brazil, the Czech Republic, the EU and Indonesia because they had not implemented their DST plans.

Context – While global tax reform is always a longshot, a pair of linked changes, one increasing taxes paid by large digital firms in countries with large consumer bases, and one raising corporate taxes broadly in the US, remain in play. The Trump Administration and a range of US business interests strongly opposed national DST plans and called for a multilateral regime that did not primarily target US interests or Internet-based businesses. Multinational talks were not fruitful and, for two years, Trump Administration tariff threats largely held national DSTs at bay. The Biden Administration has pursued a different strategy that involves a two-step global corporate tax reform dance. That effort links US acquiescence on DSTs with multilateral agreement on a new global corporate minimum tax rate, a top Biden Administration priority that they believe reinforces their effort to raise corporate taxes domestically. The latest USTR step on retaliatory tariffs proceeded by just days a meeting of the Group of Seven Finance Ministers in London that the US expects will back the call for a global corporate minimum tax.

Republican Social Media “Censorship” Bill Stalls in Texas and Leaders Talk Special Session

Report from The Texan

In Brief – Legislation to regulate the content moderation practices of social media companies that many Republicans accuse of anti-conservative bias failed to pass the Texas State House of Representatives in the final days of the 2021 legislative session. The State Senate had approved a bill in early April to prohibit large social media companies from blocking, banning, demonetizing or discriminating against a user based on their viewpoint, disclose their moderation policies and actions, and create an appeals process for users to challenge take downs. In a nod to business concerns with private right of action enforcement, the legislation limited individuals to suing platforms to have moderation decisions overturned, not receive financial awards. The bill had passed the Senate on a party-line vote and Democrats strongly opposed the legislation in the State House. Like similar efforts in other states, the legislation was criticized for being unconstitutional. Conservative leaders including the Texas Lt. Governor called for a special legislative session to address the social media law and a similarly ideologically divisive bill on transgender student athletics.

Context – Social media “censorship” has quickly become a top Republican issue nationally. Pew reports that 90% of Rs suspect ideological motives, but so do 59% of Ds. Legislation failing in Texas follows enactment of an even more aggressive law in Florida. As repeatedly noted by critics of these state social media laws, two legal barriers stand in the way. One is Section 230 of the CDA, a federal law, so Congress could change it. But the chances are very slim because of the stark partisan divide. Then there is the 1st Amendment that protects platforms in managing their sites. As widely expected, the Florida law has already been challenged in federal court by tech trade groups, a legal fight that many of Florida’s Republican leaders likely look forward to for political reasons regardless of the likelihood of court success, which is slim.

European Privacy Groups File Facial Recognition Complaints Against Clearview AI

Report from AP

In Brief – A coalition of four European privacy advocacy groups have filed legal complaints with data protection authorities in France, Austria, Greece, Italy and the UK alleging that controversial facial recognition firm Clearview AI has violated stringent European Union privacy rules. The small tech firm was little-known prior to an early 2020 expose in the New York Times that revealed how the firm gathered billions of images of individuals off the Internet, often by “scraping” social media websites, and built a service that allowed a user to upload a photo of a person’s face and find matches in the database with links to pages with identifying information. Clearview AI has since claimed to limit their customers to government agencies, in particular law enforcement. The company responded to the European privacy complaints by stating that it “has never had any contracts with any EU customer and is not currently available to EU customers,” which apparently is alluding to not having business relationships with any European consumers. The company has had law enforcement customers in Europe, including the Swedish police authority who was fined earlier this year by the country’s data protection authority for using the service.

Context – Facial recognition is one of the most controversial “AI” technologies. The success of Clearview AI shows that it is not just the purview of giants. In the US, while Amazon, Microsoft and IBM have paused or ended facial recognition services for law enforcement, civil libertarians and racial justice advocates have criticized smaller firms stepping into the void and called for a moratorium on all federal use. A coalition of US business groups have responded and called on the Biden Administration to set rules so work can continue. Finally, the European Commission’s recently released legislative package on AI proposes to severely limit real-time use of biometric surveillance by law enforcement, although it includes exemptions that have raised concerns with civil libertarians.

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