Archive – 2021-22

Maryland Proposes Delaying Digital Ad Tax as Constitutionality Challenges Mount

Report from Forbes

In Brief – The Maryland state legislature has proposed delaying the implementation of its first-in-the-nation state tax on digital advertising revenues until 2022. The Maryland tax, with a sliding rate scale based on the global revenue of the company, targets revenue collected by digital ad giants like Facebook, Google and Amazon, and is modeled after the Digital Services Tax (DST) proposals being enacted in a growing number of countries. The US Chamber of Commerce and a trio of tech industry trade groups challenged the law in federal court almost immediately after it was enacted, arguing that the state tax is preempted by the federal Permanent Internet Tax Freedom Act (PIFTA), which prohibits states from taxing commercial activity on the Internet that is not taxed the same way offline. Network providers Comcast and Verizon, which are each competing in the digital advertising services market, recently filed a similar legal challenge arguing that offline advertising and services are not taxed in Maryland.

Context – The foreign DSTs have faced bipartisan opposition in Congress. The Trump Administration delayed most countries from implementing them by threatening trade retaliation. The Biden Administration has appeared more interested in a global digital tax deal, but they have maintained tariff threats and are using the issue to reach agreement on a global Corporate Minimum Tax. Maryland’s tax is a clear sign that US States are interested in the same revenue grab, and bills are floating in a number including Massachusetts, Connecticut and Texas. Don’t underestimate the barrier of PIFTA, which prohibits exactly the kind of tax imposed by Maryland, although some states are reportedly interested in challenging the constitutionality of the two-decade old federal law on Internet access and discriminatory Internet commerce taxes. Short of that blockbuster reversal, the cleanest state workaround would be to put a tax on all advertising services, something the District of Columbia considered but abandoned last year.

Anxiety Over Chinese Data Access Increasing Scrutiny of Rakuten-Tencent Relationship

Report from The Japan Times

In Brief – The Japanese government is planning to monitor Rakuten, the Japanese ecommerce giant, in its expanded relationship with Chinese tech giant Tencent, which earlier this year became a top Rakuten shareholder by taking a 3.65% stake in the company. Japanese security authorities, like their US counterparts, are increasingly concerned with the intelligence implications of the massive data holdings of non-Chinese digital firms being accessed by Chinese authorities through partnerships with Chinese digital companies. Japanese law limits foreign investments in sensitive areas such as telecommunications and last year the threshold requiring prior government approval was reduced to 1% from 10 percent. However, it is not necessary if the investment is solely financial, which Rakuten says is the case with Tencent. Among check points for the Japanese government is expected to whether Tencent is involved in the Rakuten Board and how the company handles the data of its customers in Japan and overseas.

Context – The increased scrutiny of Rakuten’s relationship with Tencent comes on the heels of messaging app LINE, the most popular in Japan, announcing that it will stop allowing data on its Japanese users from being accessed by Chinese-based tech partners. The company faced public concerns over the possibility that the Chinese Government could use the country’s National Intelligence Law to pressure Chinese tech firms to share Japanese user data. Similar allegations have led a group of US Senate Republicans to propose legislation to block federal employees from using TikTok on government-issued devices. Like in Japan, US security reviews of foreign investment in the digital space were recently expanded with 2018’s bipartisan FIRRMA legislation authorizing the Committee on Foreign Investment in the United States to review and approve foreign investments impacting companies holding data on more than one million Americans with a clear eye on Chinese tech firms.

Republican Social Media Content Moderation Regulation Passed by Florida State Senate

Report from WFLA

In Brief – The Florida State Senate has passed a bill to regulate the content moderation practices of social media companies that many Republicans claim are biased against conservative viewpoints and censor legally protected speech. The measure requires digital platforms to publish user content moderation standards, prohibits “arbitrarily” censoring users, mandates that elected officials, candidates and news organizations can use platforms free from algorithmic manipulation, and gives users the ability to opt out of algorithms. Users could file lawsuits and claim up to $100,000 in civil damages per violation, plus actual damages to their businesses, and punitive damages. Additionally, the bill authorizes the state Attorney General to take platforms to court. April 30 is the scheduled end of the state’s legislative session. Gov. Ron DeSantis, with national ambitions, has made challenging tech platforms a top priority and the House companion bill enjoys strong Republican support.

Context – “Viewpoint censorship” and the belief that digital companies discriminate against conservative viewpoints is quickly emerging as a top Republican political issue nationally. Pew has found that 90% of Republicans (but also, 59% of Democrats) believe that social media sites censor viewpoints that they find objectionable. Platform censorship bills are moving in many Republican-led states, and while often derided as unconstitutional for 1st Amendment and Sec. 230 federal preemption reasons, USSC Justice Thomas recently made an appeal to get a case before the High Court. On other digital fronts, privacy legislation is coming down to the wire. The Florida House has passed a version with an onerous private right of action aimed at punishing big tech while the Senate passed a version without it, more along the successful Virginia model. On the issue of regulating car-sharing platform services, legislation has cleared the Senate and is pending action in the House, although airport concerns might derail enactment.

Roku Throws Monopoly Accusation at Google Over YouTube and YouTube TV Roku App

Report from Axios

In Brief – Roku’s negotiations with Google’s YouTube over the inclusion of the YouTube TV app on Roku services have hit a major snag and the streaming platform has accused Google of “attempting to use its YouTube monopoly position to force Roku into accepting predatory, anti-competitive and discriminatory terms.” Roku is the top streaming television platform in America with over 50 million households, accounting for an estimated 38% of the streaming TV device market. Google’s YouTube platform for user-generated video is the dominant video platform globally with over 2.3 billion users, but Google brands a number of its digital content services under the YouTube name, including YouTube TV, which is a cable-like channel offering similar to Hulu+, Amazon Prime TV and Sling TV. Roku alleges that Google is asking for concessions unrelated to the YouTube TV app, such as creating a dedicated search results row for YouTube within the Roku smart TV interface, giving YouTube search results more prominent placement, blocking search results from other streaming content providers while users are using the YouTube app, and favoring YouTube music results from voice commands made on the Roku remote while the YouTube app is open.

Context – Carriage disputes, a common occurrence in the world of cable television that are becoming part of the landscape with over-the-top (OTT) video services as well, are not new to Roku, and neither is calling out the platform giants when they are involved. Last summer, when the CEOs of Amazon, Google, Apple and Facebook appeared before the House Antitrust Subcommittee on abusive platform tactics, Jeff Bezos was questioned about stalled talks between ATT’s HBO Max and Amazon regarding its Fire TV service and devices, a Roku competitor. Amazon was accused of unfairly leveraging its ecommerce dominance to impose terms of ATT. (Roku at the time also had not come to agreement with HBO Max.) Deals were struck with Amazon in November and Roku in December.

COVID Burst Thrusts Indian Social Media Regulation Into Forefront with Takedowns

Report from the New York Times

In Brief – Just on the heels of new regulations of digital communications platforms released in February that give the Indian government new authority to require digital platforms to remove “objectionable” online content to promote online safety and national security, the government has ordered Facebook, Instagram and Twitter to take down dozens of social media posts critical of its handling of the pandemic. The orders come as the pandemic has rapidly and unexpectedly hit new heights of severity in India. The targeted posts included critiques from opposition politicians and calls for Narendra Modi, India’s prime minister, to resign. The government said that the digital posts could incite panic, used images out of context, and could hinder the government response to the pandemic. The social media platforms have complied with the requests, including at times blocking the posts from being seen inside India.

Context – Content moderation is a huge and increasingly politicized challenge for platforms. Of course, on one extreme is China. The new Indian regulation shares a number of features of the controversial social media rules enacted last summer in Turkey, including the requirement that social media companies maintain representatives in Turkey to respond to government requests to take down content 48 hours. As we see in India, threatening to arrest in-country executives can be a powerful government lever. In Russia, YouTube is facing a competition regulatory charging discriminatory takedowns of pro-government videos. Governments in Poland, Hungary, Texas and Florida also charge discriminatory practices. The EU, France, UK, Germany, Australia, and Canada are each proposing content moderation regulation as well. Government complaints about online content related to COVID have been rampant since the outset, and Democrat AGs and Members of Congress strongly criticized the same platforms for not blocking vaccine disinformation at a recent congressional hearing.

Google Suffers Setback in Australian Court Over Location Data Collection Practices

Report from AP

In Brief – Google has suffered a meaningful setback in Australia in their more than two-year global saga of legal challenges related to their location data collection practices. Australian Federal Court Judge Thomas Thawley largely sided with the Australian Competition and Consumer Commission (ACCC) in ruling that Google broke Australian law by misleading Android mobile device users about personal location data collected between January 2017 and December 2018. It was reported in the media is mid-2018 that a Google Account feature called “Location History”, which offered users the option to turn off storing location data, did not actually turn off all location data collection by Google or other apps on the phone. Instead, another Google account setting titled “Web & App Activity” also enabled Google to collect, store and use personally identifiable location data when it was turned on, and that setting was turned on by default. The judge also found that when users later accessed the “Location History” setting on their Android device during the same time period to turn that setting off, they were also misled because Google did not inform them that by leaving the “Web & App Activity” setting switched on, Google would continue to collect, store and use their data. The ACCC, which is challenging Google on a number of fronts, is seeking court orders and financial penalties against Google to be determined later.

Context – Location tracking is a ubiquitous aspect of smart phones. Besides the ACCC, the Irish Data Protection Commission and the Attorney General of Arizona are also investigating Google for their practices. While Google has failed to have the Arizona case dismissed, the Arizona judge also rejected AG Brnovich’s motion for summary judgement. On the other hand, a federal consumer class action lawsuit filed in the U.S. District Court for the Northern District of California on the same Google practices was dismissed in December 2019 for being too speculative and failing to identify any actual harms.

Growing Online Financial Fraud Leading for Calls for Platforms to Police Fraud in UK Online Safety Bill

Report from Politico

In Brief – Online financial fraud and scams are on the rise in the UK and a growing number of political, finance and regulatory officials are calling on the government to add financial fraud to the range of online conduct that large digital platforms will be responsible for policing through the Online Safety Bill. The legislation, which is expected to be submitted to the Parliament later this year, is intended to address the problems first detailed in the government’s Online Harms White Paper released in 2019. Online platforms will be required to block a wide range of problematic content including child exploitation, terrorist support, revenge porn, hate speech, harassment, promotion of self-harm, disinformation, trolling, and the sale of illegal goods. Ofcom, the communications regulator, will be tasked with creating “codes of practice” detailing how platforms should deal with each, and will be the enforcement agency.

Context – Moderation of user-posted content is a huge challenge for every digital platform. Once one decides that digital platforms should be responsible for the substance that is communicated over the platform, a huge challenge is defining and therefore limiting the scope of the problems that are “important enough” to warrant special care. Child exploitation and terrorism are often the headline ills, such as with the EARN IT Act in the US Senate or the French hate speech legislation. Advocates for the UK Online Safety Bill also call out those evils straightaway, but the actual list is long and, likely, growing. The potentially most impactful effort to create a grand regulatory scheme for platform content moderation is the EU Digital Services Act. Along with the standbys of child exploitation, terrorism and hate, one of the big debates will involve commercial conduct, such as alleged copyright and trademark abuse. Finally, idealogues, advocates and public officials globally charge opponents with misinformation and disinformation daily that they want platforms restricting (or not, depending on their views).

Privacy v Competition – Apple’s Changes to Add Impediments to iPhone Tracking for Ads Goes Into Effect

Report from Bloomberg

In Brief – Apple has rolled out its long-anticipated policy change to require all third-party apps to get user permission to access its “ID for Advertising” (IDFA) that facilitates targeted advertising. Facebook and other digital ad businesses have criticized the move. Facebook argues that small businesses with limited budgets benefit most from highly targeted “smart” advertising and will be hurt by Apple’s change. Apple vigorously defends the change on privacy grounds and CEO Tim Cook has long criticized behavioral advertising business models, taking many not-so-subtle shots at Facebook. Smaller ad businesses have charged Apple with anticompetitive motives arguing that the phone giant has other ways to track users, including a coalition of French advertising companies who filed an antitrust complaint last month and more recently from German firms. The French regulator refused to grant an injunction but announced that they would investigate the charges.

Context – “Protecting user privacy” and “competition” are increasingly in conflict when “first-party” user data is preferenced over other user data. Larger online businesses have more users and more first-party data. The platform giants have the most of all. While some privacy advocates call for eliminating tracking for online advertising entirely, many in the digital ad industry argue the bigger problem is that a few giants dominate and restricting third-party data furthers that problem. Google’s proposed changes to third-party cookies in the Chrome browser, which it calls its Privacy Sandbox, is another example and is being investigated by the UK competition authority. Privacy v Competition is also emerging in other app contexts. The recent Senate Antitrust hearing on app stores saw app and device maker Tile charging Apple with using privacy as an excuse to harm Tile’s user experience to benefit its competing service. Facebook is even discussing support for the regulatory gatekeeper model of the EU Digital Markets Act to reign in Apple’s ability to harm app providers in the name of protecting users.

Federal Bills Target Law Enforcement Data Collection from Data Brokers and Clearview AI

Report from the Washington Post

In Brief – Sens. Ron Wyden (D-OR) and Rand Paul (R-KY) have introduced legislation in the US Senate, and Reps. Jerry Nadler (D-NY) and Zoe Lofgren (D-CA) in the US House, to block law enforcement and intelligence agencies from obtaining access from third parties to sensitive personal information on individuals that would otherwise require a court order to gather themselves. The Fourth Amendment Is Not For Sale Act aims to address two perceived abuses allowing law enforcement agencies to undermine legal protections against intrusive government searches. First, sensitive mobile phone data gathered and used in the digital advertising ecosystem, including location data, is being purchased from data brokers and used by law enforcement to track people. The bill also blocks law enforcement from acquiring data that was “illegitimately obtained” via an act of deception, hacking or breach of contract, a restriction targeted at services like Clearview AI, the controversial facial recognition service built on a database of billions of photos scraped from social media platforms such as Facebook and Twitter.

Context – Facial recognition-enabled surveillance is one of the most controversial “AI” technologies. The European Commission’s recently released legislative package on AI proposes to severely limit real-time use of biometric surveillance by law enforcement, although the exemptions have raised concerns with civil libertarians. In the UK, where public video surveillance is commonplace, courts are setting the parameters. In the US, progressive leaders in the Senate and House have proposed banning its use by federal law enforcement, and Sen. Jeff Merkley (D-OR) has proposed a federal moratorium, a policy reiterated by a coalition of 40 racial justice and civil liberties groups. At the state level, Virginia recently enacted legislation prohibiting its use by local law enforcement without approval from the General Assembly, although Gov. Northam (D) demanded exemptions for the Virginia State Police and airport police forces.

Russian Competition Authority Investigating YouTube Over Biased Content Moderation

Report from TechXplore.com

In Brief – The Russian competition authority has opened an investigation of YouTube for biased content moderation practices, rules that are “opaque, biased and unpredictable,” and blocking or deleting accounts without appropriate notice or justification. The Russian Government has been stepping up its efforts to control how the Internet functions inside Russian and has been ramping up pressure on the largest foreign digital platforms. Television in Russia is mainly controlled by the government and political opponents have often turned to YouTube to release videos that garnered millions of views. LinkedIn, Twitter, TikTok and Facebook have each, like YouTube, been used by Kremlin opponents and faced sanctions for “censoring” content produced by Russians (often accounts secretly linked to the government) and for allowing dangerous content like child exploitation and promoting drug use and self-harm.

Context – Ideological aggrievement with platform content moderation practices is global. In the US, conservatives increasingly propose prohibiting action against “legal” speech. See the “viewpoint censorship” bills proposed in states like Florida and Texas. There is a lot of similarity with the concerns of more conservative EU Member State governments in Poland and Hungary. In the US, Democrats come from the other side, criticizing platforms for letting dangerous and hateful content slide and proposing new standards. Online hate-speech regulation in France, as well as the content moderation mandates in the EU’s Digital Service Act, likewise force platforms to do more content moderating. The biggest difference between the EU and the US is the role of the First Amendment. It severely restricts government authority to regulate speech and protects the rights of businesses to do so. In Europe, leaders from all sides want government authorities making the calls on acceptable speech, not companies. They just disagree on what should be allowed. That is largely not possible in the US.

Plaintiff Anonymity in WeChat User Censorship Suit Raises Tough Legal Questions

Report from the Washington Post

In Brief – The class action lawsuit filed by a group of anonymous users of WeChat, Chinese digital giant Tencent’s “super app”, that charges the business with censoring and surveilling them in league with the Chinese Government, violating their free-speech and privacy rights and causing economic harms, is raising challenging legal issues related to the ability of Tencent and its US legal team to build a defense without knowing who the specific users are. The advocacy group Citizen Power Initiatives for China is a named plaintiff, but the users claim they will be harmed by China if identified. It is widely understood that Tencent, who states that it “operates in a complex regulatory environment, both in China and elsewhere”, works closely with Chinese authorities regarding digital communications impacting China globally.

Context – The differences between the digital and legal ecosystems in the US and China is always interesting, but sometimes an issue pops up that is even more noteworthy. The possibility that Chinese authorities could access data on users outside China from Chinese-based app businesses through China’s broad National Intelligence Law, or simply by privately threatening the Chinese-based business leaders, is a big issue in the context of ByteDance’s TikTok in the US and Europe, or in relation to Chinese contractors of the Line messaging app in Japan. But there is no serious question about data access, surveillance or censorship on WeChat. At the same time, as has been clearly illustrated by the legal challenges to the Trump Administration efforts to ban WeChat and TikTok in federal courts, Chinese-based businesses can fully access independent US courts. In fact, a different group of US WeChat users won an injunction against the WeChat ban arguing a 1st Amendment right to use the service, even if censored and surveilled, because no alternatives were allowed by China. The experience of Alibaba, Ant Financial, Jack Ma and the broader community of Chinese digital firms over the past seven months in China is a striking comparable.

Justice Thomas Again Expresses His Impatience to Address Big Tech Abuses

Report from CNBC

In Brief – A short two-sentence order of the Supreme Court to vacate a federal appeals court ruling that the president could not block users’ access to his Twitter account, an action of President Trump in his official capacity that was mooted by the inauguration of President Biden, provided Justice Clarence Thomas an opportunity to stab at the largest digital platforms in the form of a personal 12-page concurrence. In it, Justice Thomas discussed the possibilities for regulating social media platforms and speculated about various legal theories that might be used to justify curtailing social media websites’ 1st Amendment rights.

Context – The issue of “Platform censorship” and the belief that the largest digital companies discriminate against conservative viewpoints is quickly emerging as a top Republican political issue nationally. And the fact that the tech giants are largely based in progressive coastal bastions adds to the Us-vs-Them framing. Pew has found that 90% of Republicans (but also, 59% of Democrats) believe that social media sites censor viewpoints that they find objectionable, and Justice Thomas does not mind letting people know how he responds to Pew’s phone call. His personal amicus brief on the yet-unfiled case regarding the constitutionality of government regulating social network content moderation practices (maybe the viewpoint censorship bills being considered in Florida or Texas can provide the chance soon… do Supreme Court Justices file amicus briefs?) followed just days after his stinging dissent in the Google-Oracle case regarding Java APIs. He was harshly critical of Google and raised monopolization charges against the search giant, another matter that could end up before the highest court. Back in October he also appended an extraneous 12-page “statement” to the court’s announcement denying cert on an unremarkable Sec. 230-related case to call for a better case to allow the Supreme Court to limit the scope of the law (pp 12-21 here). Transparency in political figures is good. It is probably true with judges too, right?

Consumer Data Privacy Bills in Florida Legislature Likely Hinge on Striking Class Action Suits

Report from FloridaPolitics.com

In Brief – Comprehensive privacy legislation continues to proceed through the Republican-controlled Florida legislature. Governor Ron DeSantis (R) and top Republican State House leaders support the effort to reduce the power of big tech businesses that they claim discriminate against conservatives. Broad business concerns resulted in amendments to the Senate version of the bill, in particular striking the highly controversial ability for consumers to file private lawsuits. The Senate bill limits enforcement to the State Attorney General. In addition, the Senate exempted businesses with less than $100 million in revenues, up from $25 million in the original bill. The House bill allows for private consumer lawsuits against any company that fails to comply with a consumer’s request to delete, correct or stop selling personal information, but there is great skepticism that a bill with a private right of action can move through the full legislature. Time is tight as the legislative session will adjourn for the year on April 30.

Context – As state legislatures and the US Congress consider broad consumer data privacy, the issue of private class action lawsuits appears to offer the best thumbnail guide to prospects for success. In short, including enforcement through a “private right of action”, strongly supported by many progressive consumer advocates, appears to consolidate enough opposition from Republicans, business and tech to stifle legislation. In Virginia, a bill modeled on California’s CCPA, but without private class action lawsuit enforcement, earned business and Republican support and passed into law. In Washington, progressive insistence on class action enforcement has again bogged down legislation. In Florida, even with Republican leaders very frustrated with big tech companies, it appears private class action lawsuits will need to be stripped. Prospects for comprehensive federal legislation likely hinge on the same dynamic, with a private right of action needing to be dropped to bring on enough Republican and business support.

European Commission Releases Long-Anticipated Comprehensive AI Regulation Plan

Report from TechCrunch

In Brief – The European Commission (EC) has released its long-anticipated proposal to regulate Artificial Intelligence (AI) technologies and services that are used in Europe regardless of where a business is based. The plan proposes an outright ban on a small number of use-cases including a China-style social credit scoring system or AI-enabled behavior manipulation techniques that can cause physical or psychological harm, as well severely limiting real-time use of biometric surveillance such as facial recognition by law enforcement, although the range of surveillance exemptions raised concerns with civil libertarians. The Commission plan governs other AI applications based on risk. Low-risk applications such as spam filters do not face meaningful mandates. “Limited-risk” applications such as chatbots would face a few mandates such as transparency so users know they are interacting with a digital service. “High-risk” services, such as determining credit worthiness or college admissions, or when AI tools control machinery like autonomous vehicles and medical devices that could harm people, face a set of five obligations including the need to use quality training data to avoid bias, allow for human oversight into each system, create detailed documentation that explains how the software works to both regulators and users, and registration in a EU database of such applications. The Commission’s plan must be reviewed and approved by the European Parliament and the European Council, a legislative process that will likely take more than a year.

Context – European Commission leaders are public about their commitment to drive regulation of technology globally in line with Europe’s vision of fundamental rights. Its GDPR governing privacy regulation and applied to companies globally is seen as a landmark European digital regulatory accomplishment. This AI regulation, the Digital Markets Act’s competition-style “gatekeeper” regulation, and the Digital Service Act proposal to regulate platform content regulation, are seen as efforts to similarly drive comprehensive regulatory standards globally.

Apple Notifies GOP Antitrust Leaders on Eve of Hearing of Parler’s App Store Return

Report from the Washington Post

In Brief – Parler, the Twitter-like social media app that grew in popularity with conservatives angered by perceptions of ideological content moderation by the largest platforms, and was knocked off the Internet by Amazon, Apple and Google following the US Capitol riot, is being reinstated by Apple. The news was made public in a letter to Sen. Mike Lee (R-UT) and Rep. Ken Buck (R-CO), the lead Republicans on the Senate and House Antitrust Subcommittees. Both had strongly criticized the actions of the three platform giants against Parler, and the letter came just days before the Senate Judiciary Committee’s Antitrust Subcommittee hearing on competition in digital app stores. Apple, Google, and a range of critics of the two giants, are scheduled to appear. Apple defended its decision as consistent with its terms of use, not done in conjunction with the other platforms, and claimed it worked to get Parler back in the App Store. Google has indicated it is also willing to work with the service to get them into the Play Store, but Parler indicated it is not interested because users can access the Android app elsewhere.

Context – Apple was the first of the three giants to “de-platform” Parler after the Capitol riot, followed by Google, but it was Amazon’s suspending the service from AWS that essentially kicked Parler off the Internet. Parler sued Amazon for antitrust violations but has not had any success. The ability of the giants to turn off Parler is seen by many conservatives as the most pronounced example of big tech’s power to control speech. Pew reports that a solid majority of Americans believe that digital platform content moderation is influenced by ideology and Republicans at the state level are attempting to restrict the practice (but are likely to hit constitutional roadblocks). Democrats have the opposite view on platform failings, meaning they see too much hate and disinformation getting through. In Congress, aggressive antitrust action targeted that the largest digital companies might be the venue for cooperation.

Hill Republicans Call Out Threat of Chinese Apps Holding User Data with TikTok Ban

Report from The Hill

In Brief – Four Republicans led by Josh Hawley (R-MO) have introduced legislation in the US Senate to ban all federal employees from using TikTok on government-issued mobile devices and computers. Rep. Ken Buck (R-CO), the lead Republican on the House Antitrust Subcommittee, has introduced companion legislation in the US House. Last year, the Defense Department and each branch of the US Military banned the app from the official devices of service members and employees. In addition, the Senate unanimously passed a similar bill from Sen. Hawley, and in the House, an amendment sponsored by Rep. Buck was added to the to the FY 2021 Defense Bill. However, the House did not take up the stand-alone bill from the Senate, and the final version of the Defense Bill did not include the Buck Amendment.

Context – TikTok has rapidly emerged as the one Chinese-owned platform with user numbers and engagement challenging the largest US-owned platforms. Along with quickly facing many of the same kind of privacy, child safety and content moderation challenges of the other social media giants, the Hawley-Buck bills highlight the unique charge that Chinese-owned digital platforms represent a national security-type threat based on the charge that the Chinese Government has the legal authority to access any data held by a Chinese digital firm. Last year, the Indian Government banned dozens of Chinese apps from operating in the country, including TikTok and WeChat, and the Trump Administration endeavored similar prohibitions that have been stalled by US courts. In Japan, messaging giant Line recently ended data access for Chinese firms due to public concerns with open-ended Chinese Government authority to access data under its National Intelligence Law. And while the University of Toronto’s Citizen Lab has released a report concluding that TikTok’s computer code does not send data to China, the authors added that the Chinese Government could theoretically obtain user data by imposing the National Intelligence Law on Beijing-based ByteDance.

Uganda Replacing Unpopular Daily Social Media Tax with 12% Tax on Internet Access

Report from Quartz

In Brief – Uganda is expected to eliminate its controversial “over-the-top” (OTT) services tax that charged users 200 schillings a day ($.055 US) for using 50 OTT mobile communications apps, including highly popular Facebook, Twitter and WhatsApp. The government of long-serving President Yoweri Museveni, who has had a tense relationship with social media, shut down all Internet in the country for a week surrounding January’s election, and continued to block most social media services for more than a month over claims they threatened national security, plans to replace the OTT tax with a 12% tariff on Internet data plans. The OTT tax was overwhelmingly unpopular right from its inception in 2018 and efforts to circumvent it led to an explosion of VPN use in the country, which drove the government to order telecommunications providers to block their use, a mandate that proved very hard to implement. As a result, the OTT tax raised far less revenue than expected. The direct bandwidth tax will be far more difficult for consumers to avoid but will undermine efforts to bring more people and commerce online.

Context – While the EU has been a hotbed of efforts to expand the taxes paid by digital platform companies, the desire to base corporate taxes on where Internet users reside rather than where digital enterprises operate is not exclusive to Europe. India and Turkey are two of the seven countries currently targeted by the United States for trade retaliation for digital taxes. Africa is home to many countries with large, young and growing populations that are increasingly connected, in particular to the mobile Internet. A number of African countries, led by Nigeria and Kenya, have explored digital services taxes but have been dissuaded by threats of retaliation from the US as well as the prospect that the large digital platforms would not hesitate to simply pass costs along to local users. Finally, African countries are pressing for the OECD-led digital tax talks to ensure thresholds are low enough to benefit African governments.

Facebook Leaders Sued for Failing to Effectively Block Anti-Muslim Hate Speech

Report from CNet

In Brief – Facebook and four senior leaders, including Mark Zuckerberg and Sheryl Sandberg, have been sued in the Superior Court for the District of Columbia by a Muslim advocacy organization for allegedly violating the District’s consumer protection laws by making false and deceptive statements about Facebook’s efforts to remove hate speech and harmful content. The group, which for years has been identifying alleged hate groups and pressing Facebook to strike them from the platform, claims Facebook is not successful at removing much of the hate speech it says it prohibits. The plaintiffs also claim that Facebook’s online content moderation failures have led to real-world damages.

Context – Moderation of user-posted content is a huge challenge for every digital platform. Objectionable content can range from the illegal, such as child pornography, terrorism planning or copyright piracy, to an almost limitless array of hate speech, abuse and fraud. Idealogues, advocates and public officials charge opponents with an endless range of misinformation and disinformation. In the US, Section 230 of the CDA is key because it both protects platforms from liability for most user-posted content that stays up as well as enabling them to take down or moderate content as they see fit. The result is chronic unhappiness by those who think too little is policed and those who think to much is restricted. While Republicans at the state and federal level press to stop ideological “viewpoint censorship”, and Democrats push for more aggressive policing of extreme views, private suits like this from Muslim Advocates are a wildcard court-driven angle. Similar suits have recently been filed in France regarding hate speech and related to “militia groups” that organized in response to protests in Kenosha, Wisconsin. Finally, Facebook’s highly innovative Oversight Board effort recently expanded its remit and allowed users to appeal to the independent panel to order the company to take down objectionable content.

Circuit Split on Website Accessibility Lawsuits Grows – Supreme Court, You’re Our Only Hope

Report from Reuters

In Brief – The 11th U.S. Circuit Court of Appeals has overturned a 2017 trial-court ruling that the grocery store chain Winn-Dixie violated the Americans with Disabilities Act (ADA) because Juan Carlos Gil, a visually impaired customer, could not use its website and was thus denied equal access to all of Winn-Dixie’s services. The court opinion finds both that websites are not themselves a “public accommodation” under the ADA and that the grocer’s non-accessible website did not create an “intangible” barrier for Gil to use its stores. The decision accentuates a growing “circuit split” on the issue that might prompt Supreme Court review, with the 11th joining the 3rd, 6th and 9th with similar rulings, while the 1st and 7th have ruled that virtual or digital spaces can fall under the ADA. The most recent and highest profile involved the 9th Circuit’s ruling in Robles v. Domino’s Pizza, where the court found that the ADA applied to the chain’s website and app because there is “critical nexus” between those online services and the physical restaurants that fill online orders. Domino’s appeal to the Supreme Court was rejected (as most are).

Context – Private website accessibility lawsuits dramatically expanded in 2017 with federal district courts in Florida and New York ruling that business websites failing to meet Web Content Accessibility Guidelines (WCAG) can violate Title III of the ADA, and then with the WCAG guidelines being updated in 2018. The challenge of meeting the full range of those standards is illustrated by a widely-cited 2019 study from digital services firm accessiBe that analyzed 10 million website pages for compliance on menus, images, pop-ups, forms, buttons, links and icons and found 98% of websites failing to meet at least one major standard. Legislation has again been introduced in Congress to direct the Justice Department to set clear standards for ADA website compliance as urged by business groups but is criticized by some disabled group advocates.

Europe’s Press to Turn More Independent Gig Work into Fewer Traditional Jobs

Report from CNBC

In Brief – Spanish legislation that will soon go into effect to classify food delivery riders as employees of the digital platforms they work for, rather than as self-employed independent contractors, highlights the ongoing shift in Europe against the business model of digital platforms empowering large numbers of people to engage in independent “Gig” work. The Spanish measure also requires digital platforms to reveal to the drivers’ legal representatives information about how their algorithms function in matters such as assigning jobs and assessing performance. Elsewhere in Europe, a Court of Appeals in the Netherlands ruled in February that Deliveroo couriers qualify as employees, an Italian court ruled that a reputational-ranking algorithm used by Deliveroo discriminated against gig delivery workers and breached local labor law, and in the highest profile Gig economy court result, Uber lost its worker classification appeal to the UK Supreme Court and will now classify UK drivers as company workers.

Context – Behind the policy battles over Gig-type independent work platforms is the reality different work models appeal to different people. Studies have regularly shown that most people who participate like the flexibility of independent work, even with lower pay and few traditional benefits. Often up to three-quarters. For them, it is a way to earn extra money. More money needed, more time spent. Also, skilled “freelancers” greatly value their autonomy. However, make no mistake, around a quarter of Gig workers are consistently unhappy. They want traditional jobs and think they are mistreated. This is especially a problem when traditional jobs are scarce. Turning independent Gig workers into employees will reduce the number of people working but will likely increase their hourly pay and benefits. Although the total work may fall as costs and prices go up. Finally, many participants who need the flexibility of work on platforms will drop out or be pushed into the non-digital off-the-books economy.

Epic v Apple in Australia Paused as US District Court Trial Proceeds

Report from The Verge

In Brief – An Australian Federal Judge has paused Epic Games’ antitrust lawsuit against Apple in that country for at least three months to give priority to the similar legal challenge in US Federal District Court. Epic Games, the giant game developer who owns the mega-franchise Fortnite, has been challenging mobile operating system giants Apple and Google in courts and regulatory agencies globally. Last August, the developer modified the Fortnite app to violate Apple App Store (and Google Play Store) rules to avoid each platform’s 30% fees. Apple and Google each removed Fortnite from their app stores and Epic responded by filing private antitrust lawsuits in US Federal District Court against both platforms. Epic has since filed similar suits in the UK and Australia, lodged antitrust regulatory complaints in the EU and the UK, and supported lobbying efforts in a number of US States. The ruling in Australia to defer Epic’s case in light of the US legal proceedings parallels the February decision of the UK Competition Appeal Tribunal.

Context – The headline event in this epic antitrust battle is the Epic v Apple antitrust trial in federal district court. It is moving surprisingly quickly and is scheduled to begin May 3. Exciting! Both Apple and Epic have filed their pre-trial documents for those interested in hundreds of pages of background reading. The recent antitrust case of Blix v Apple, involving a messaging app, highlighted important issues related to market definition for operating systems and app stores, and whether either Apple or Android is dominant. Importantly, fee levels and policies on Apple and Google are basically identical to those on the major game consoles, and, according to a broad cross-industry report funded by Apple, similar to a wide range of other digital platforms. It could be difficult to show what Epic calls “monopoly rents”. Epic and its allies may find more joy with legislation and regulation, such as the EU’s Digital Markets Act imposing limits on “gatekeepers”. Giants like Microsoft and Facebook are talking about supporting that effort to restrain Apple.

Twitch to Investigate and Enforce User Conduct Policies for Off Site Activity

Report from the Washington Post

In Brief – Twitch, the online streaming and gaming platform owned by Amazon, has expanded its Hateful Conduct and Harassment policy to clarify that it will take enforcement actions against Twitch users for “serious offenses” even if these actions occur entirely off Twitch. Examples of the behaviors identified by Twitch include violent extremism, terrorism, threats of mass violence, sexual assault and ties to known hate groups. Twitch has faced significant criticism in recent years over the malicious conduct of streamers on its service, as well as facing charges of harassing and demeaning conduct within Twitch itself. While the company has stated since 2018 that it would take action against users for activity off of the platform, the new announcement reiterates the company’s focus on off-platform conduct and claims to be an effort to structure and scale the process, including bringing in a third-party investigative partner to verify charges raised with the company about the conduct of users.

Context – The largest digital platforms are criticized by Democrats and Republicans for their content moderation practices. On issues such as COVID, election processes, climate change and most recently vaccines, Democrats called for far more aggressive action and Republicans charge ideological censorship. While Twitch, like other platforms, banned President Trump, this new announcement points to something different. It seems much more like User Moderation than Content Moderation. It appears to envision Twitch policing streamers for non-gaming conduct more like the way the professional sports league offices investigate and discipline athletes when they are accused of major misconduct. While the Twitch streamers are not employees, Amazon, Twitch’s parent company, is one of the most aggressive “Gig” economy companies willing to impose strict employee-type mandates on non-employee platform users, such as mandating video surveillance of non-employee delivery drivers.

Remit of the Facebook Oversight Board Expanded to Allow Appeals to Take Down Content

Report from Reuters

In Brief – Just four months after accepting its first “cases” to review, and two months from announcing its first “rulings”, Facebook has announced that the independent content Oversight Board (OB) will have an expanded remit to include the ability to review decisions by the company to allow content to remain up on Facebook and Instagram. Since it was announced over two years ago, Facebook has described the OB as an independent body that allows users to challenge company content removal decisions by appealing to a panel of eminent academics, lawyers, journalists and human rights activists. The limitation placed on the OB to only review appeals of takedown decisions was criticized from early on by those wanting to challenge company decisions to allow objectionable content to remain on the site. Facebook indicated in January 2020 that they intended to eventually make that expansion.

Context – Content moderation is a huge and politicized platform challenge. The range of topics where idealogues, advocates and public officials charge opponents with misinformation is endless. Social media platforms increased their content moderation practices in 2020, especially on COVID and election processes, and Pew reports that most Americans suspect ideological motives. Democratic officials regularly call for more aggressive action and Republicans charge ideological censorship. Vaccine views are following the same pattern. Another example is debate over “climate change”. In the recent House Energy & Commerce Committee hearing on “misinformation” over social media, Rep. Donald McEachin (D-VA) asked Facebook’s CEO to take down climate change misinformation, repeating a call from climate advocacy groups, while Rep. Dan Crenshaw (R-FL) criticized that as an effort to restrict speech on a clearly political topic. (Watch McEachin at 3:49:45 and Crenshaw at 5:26:10 of the hearing video.) And Facebook is global with over 2 billion users and political content moderation challenges that are equally global. Simple, really.

Indian Small Retailers Protest Amazon as Ecommerce Giant Holds Seller Jamboree

Report from Bloomberg

In Brief – Trade groups representing hundreds of thousands of small Indian retail businesses are organizing a protest against ecommerce retail platforms Amazon and Flipkart (owned by Walmart) to coincide with the kickoff of Amazon’s largest in-country seller event. The Amazon event is called Smbhav, or “possible” in Hindi, so the retailer groups’ have named their event Asmbhav, or “impossible”. The Indian ecommerce market is greatly influenced by the country’s strict foreign direct investment (FDI) laws that prohibit foreign ownership of multi-brand retail businesses but allow foreign-owned enterprises to operate third-party ecommerce marketplaces. Amazon and Flipkart, the largest marketplaces, have faced years of charges that they skirt FDI laws through a web of relationships with a small number of very large sellers on their platforms. Amazon was the subject of a recent Reuters expose alleging that internal documents confirm their FDI circumvention tactics. New Indian ecommerce rules, under consideration for almost two years, are expected soon, requiring ecommerce platforms to treat sellers equally, including through algorithms, and ensure greater transparency in seller terms and conditions.

Context – The dogfight pitting Indian retailers and shopkeepers against Amazon and Flipkart is interesting if repetitive. However, the emergence of Reliance Industries, the conglomerate run by Mukesh Ambani, India’s richest man, as a major Indian-owned digital and ecommerce player, may shake up the market and the politics. Reliance and Amazon have been engaged in court battles since last fall over Reliance’s effort to acquire the retail and logistics assets of Indian retailer Future Group, a move Amazon claims to be able to contractually block. The latest court ruling restored the advantage for Reliance, and Amazon is appealing to the country’s highest court. Meanwhile, Walmart’s Flipkart is bringing in their own billionaire, expanding their logistics in partnership with Gautam Adani’s Adani Group.

Hawley Calls for Big Company Merger Ban Recalling Era of Progressive Republicans

Report from The Hill

In Brief – Sen. Josh Hawley (R-MO), the Republican populist who has established himself as the most aggressive Republican critic of the largest digital platforms and champion of strictly regulating online activity and the broader digital economy, has proposed legislation to drastically limit the ability of any very large company from acquiring smaller companies. While his “Trust-Busting for the Twenty-First Century Act” does include new proposals to regulate digital platforms, including authorizing the Federal Trade Commission designate “Dominant Digital Firms” and impose restrictions on their operations, the legislation is far broader in scope and targets large companies generically. The Senator’s announcement says the bill will “ban all mergers and acquisitions by companies with market capitalization exceeding $100 billion”, which currently numbers nearly 150 firms across industries, and references “woke-mega corporations” as well as “Big Tech, Big Banks, Big Telecom, and Big Pharma.”

Context – Senator Hawley’s bills to aggressively regulate websites have not earned much support from Senate Republicans, but he has proven a harbinger on corporate “viewpoint censorship” that has emerged as a top Republican issue nationally. His willingness to push populist policy and rhetoric into the most progressive anti-corporate positions, harkening back to Teddy Roosevelt and Progressive Republicans, is reminiscent of President Trump’s regular courting of Sen. Bernie Sanders’ supporters. In terms of actual legislative possibilities on antitrust, instead watch Rep. Ken Buck (R-CO), the top Republican on the House Antitrust Subcommittee. His response last year to that subcommittee’s progressive laundry list of antitrust reforms includes some overlap with the proposal of Sen. Amy Klobuchar (D-MN) who now leads the key Senate panel, including changing the burden of proof in merger cases, clarifying that market definition is not required if there is direct proof of market power, and more resources for antitrust agencies.

Unlike Corporate Digital Taxes, EU Targets People Earning on Platforms Without Fuss

Report from Euractiv

In Brief – The Council of the European Union (EU) has adopted new rules to expand the duties of digital platforms to report all income earned by users to relevant European tax authorities to facilitate the collection of income taxes and VAT. The money-earning activities covered by the rules include individuals renting property (including housing and parking spaces), providing personal services, renting any mode of transport, or selling goods. The only de minimis level to exempt users from reporting to tax agencies involves occasional sales of relatively low-value goods, with tax reporting exempted if a person sells less than 30 items in a year for a total of less than 2000 Euros. The new rules will enter into force January 2023 and they apply to digital platforms located both within and outside the EU.

Context – Many governments have argued that digitization has undermined their tax regimes. The ongoing fight over “Digital Services Taxes” and changes to corporate tax rules for digital companies has grabbed headlines and threatened to kick off trade wars between the US and countries like France, Spain and the UK. Those tax proposals target companies with global revenues exceeding 750 million euros. Tax policies to make sure regular people don’t earn income using digital platforms without paying taxes does not cause the same fuss. And not just in Europe. Last spring, the OECD released model tax reporting rules for Gig economy platform operators with minimal fanfare. Mexico, which has not instituted a corporate digital tax, implemented digital platform income reporting last July for driving, delivery and work platforms used in Mexico. And most recently, the US Congress unexpectedly slashed the threshold for 1099-K digital payments tax reporting from 200 transactions and $20,000 down to just $600 in revenue annually in the most recent COVID relief legislation over suspected Gig worker tax avoidance. Etsy stood out objecting that increased tax complexity could dissuade some people from earning some extra income online.

UK Digital Markets Unit Joins Parade to Shift Competition Enforcement to Ongoing Regulation

Report from the BBC

In Brief – The UK Competition and Markets Authority, the country’s competition authority, has created the Digital Markets Unit (DMU), a dedicated division to regulate large technology companies to protect competition. The group launches with limited powers until Parliament approves legislation governing its regulatory powers, but is hiring staff and drawing up what is expected to become a legally binding code of conduct for companies once that legislation passes. The CMA has extensively studied the digital advertising market and Google and Facebook are expected to be initial priorities of the DMU proposals. The CMA also recently opened an investigation of Apple’s App Store. The UK Online Safety Bill, legislation to impose new regulations on digital platforms to address a wide range of harmful online content, is also moving forward, with Ofcom, the communications agency, proposed as that UK digital regulator.

Context – Addressing “competition” in digital markets through ex-ante regulation rather than ex-post enforcement of competition law is steadily advancing in major markets outside the US. Germany recently granted proactive regulatory power to its competition authority to identify digital companies “of paramount significance on competition across markets” and establish rules to protect competition in the markets they occupy rather than respond to abuses. They are now using it to consider regulation of Facebook’s Oculus unit. Japan’s competition regulator was instrumental in creating a new regulatory regime for five digital giants – Amazon, Google, Apple, Rakuten and Yahoo Japan – to improve the transparency of platform terms of use and protect small businesses from unilateral changes in rules and fees. Finally, the EU’s Digital Markets Act (DMA) “gatekeeper” proposal is likely to be the most impactful quasi-competition law digital regulatory endeavor currently underway. Just like the UK DMU is looking like a parallel to the DMA, the UK Online Safety Bill parallels the EU Digital Services Act.

Be Smart – The Alabama Amazon Union Vote was Not About Unions for Tech Workers

Analysis from PEI

In Brief – This quote is from Axios tech journalist Ina Fried’s report on the day it became clear that the workers in the Amazon fulfilment center in Alabama had overwhelmingly rejected the union drive – “The vast majority of large tech companies have been composed of non-union workers, and tech companies, including Amazon, have fought hard to keep it that way. The “no” vote in Alabama could chill or delay other unionization efforts in the industry.” To be clear, the Alabama effort was not about tech workers unionizing. Fulfilment by Amazon, the world’s largest ecommerce distribution center operation, is heavy industry factory-type work. It has nothing to do with programming or tech workers. The closest labor organizing industry comparables are in logistics, such as UPS and FedEx.

Context – Whether the blue-collar Amazon fulfilment center business ends up spawning unions is an interesting labor issue, but it is not about digital businesses. Here are two labor developments more relevant to digital platforms. First, the prospect that “Gig” platform workers gain the ability to bargain as sectoral workers while not becoming platform employees is an interesting idea and very divisive within the labor movement. The focus for Gig organizing has been on worker classification, pushing for platform workers to be platform company employees. Sectoral bargaining envisions independent workers with some negotiated standards and benefit levels. A bill to that end was recently pulled in the CT legislature over division in the labor movement. A second very interesting development involves the Alphabet Workers Union, a small non-traditional “minority union” form of worker organization established earlier this year to advocate on (but not “bargain”) company and contractor employee issues inside Google. While not a traditional union, the group did win a union-type victory on behalf of a contractor employee in a South Carolina Google data center who was punished for complaining about contract employee treatment. Google and the contractor settled with the NLRB.

Connecticut Gig Worker Organizing Bill Shelved Over Labor Movement Divisions

Report from Bloomberg

In Brief – The Connecticut’s state legislature’s Joint Committee on Labor and Public Employees has tabled for the year consideration of Gig worker legislation, including SB 1000, which would have established the country’s first “sectoral bargaining” system for Gig workers. The bill, supported by some driver advocates, would have allowed app-based workers to collectively bargain to set industry-wide standards for a new class of worker, proposing clear guidelines and processes for unionization and collective bargaining. However, the middle ground bill did not propose to change employee classification along the lines of California’s AB 5 and was strongly opposed by other labor advocates calling for legislation to change more “independent contractors” into company employees. Digital platform companies raised objections with both bills, arguing that they would undermine the flexibility that many drivers and other independent workers value. Bill supporters expressed support for returning to the issue next year.

Context – As in California with AB 5, the political energy behind tightening worker classification laws have focused on ridesharing and delivery platforms, but broad changes to worker classification laws can threaten many kinds of independent workers, professionals and creative freelancers. No states followed in 2020, California significantly pared back AB 5 last September by exempting many kinds of independent workers, and then voters enacted Prop. 22 fully exempting ridesharing and delivery platforms. The top labor movement priority federally is the PRO Act recently passed in the US House, dramatically expanding organizing rights. The bill puts the ABC Test into federal law, which freelance advocates argue will drastically harm independent work while bill supporters claim it only applies to federal labor law for organizing, allowing Gig labor unions. The highly partisan issue is unlikely to move in the US Senate and the issues will mostly play out at regulatory agencies like the US Department of Labor.

Florida Legislature Again Taking Car-Sharing Taxes and Insurance Regulation for a Spin

Report from WUSF News

In Brief – Florida has again emerged as a top state legislative battlefield over the regulatory and tax treatment of peer-to-peer car-sharing platforms that offer car owners an opportunity to offset the cost of owning a car and consumers an alternative to traditional rental cars. The two key issues are taxes and insurance coverage. The current bills require car-sharing platforms to collect the state’s 6% sales tax and a $1 per day rental car surcharge, which is half the $2 surcharge for traditional rental car companies. Last year, the rental car industry objected to the fee being lower than $2. On the insurance issue, the legislation proposes that cars rented by owners carry standard liability insurance and platforms offer a liability backstop, but some legislators are proposing insurance equivalent to ride-sharing drivers, which is a more onerous. The contentious issue of airport access taxes and policies is also being raised. Florida’s 2021 legislative session is scheduled to end on April 30.

Context – Car-sharing platform legislation is reminiscent of the hotel industry using tax and regulatory lobbying to address digital competition from short-term housing rental platforms, which also has a deep history in tourism-rich Florida. The tax debates tend to boil down to the rental industry arguing that the same taxes should be applied to all rental-type transactions, while the car-sharing platforms argue that differences in sales taxes when cars are purchased by individuals compared to companies warrants differential treatment. Like in Virginia last year, finding common ground on taxes seems possible. Agreement on insurance policies could also follow the example set out through a model insurance policy bill crafted by state legislative insurance experts last year. The most challenging disagreements appear over airport access. Leading platform Turo is in court in California over access by platform users to LAX and in Massachusetts over Logan, and the issue could torpedo the bills in Florida.

Digital Services Taxes Linked to Global Corporate Minimum Tax to Align US-EU Interests

Report from Bloomberg

In Brief – The Finance Minister of France reports that agreement may be near on a major reform in global corporate tax rules with the US Treasury Secretary providing new proposals on digital services taxes (DST). France and many others want to change tax rules for digital companies to permit them to tax revenues based on where Internet users are located, rather than the traditional method of taxing based on where the business has operations. The Trump Administration, with bipartisan backing in Congress, strongly objected and threatened major trade retaliation, creating a standoff over the past two years. Treasury Secretary Yellen has increasingly raised the related global tax issue of a Global Corporate Minimum Tax as the top Biden Administration tax priority and Finance Minister Le Maire has indicated that France would consider raising its corporate minimum tax as part of an agreement on DST.

Context – Global corporate tax reform is always a huge longshot but the outline for 2021 talks appears in place. The Biden Administration wants to increase US corporate tax rates reduced in 2017 based on the argument that US rates were higher than most other countries and uncompetitive. If there was agreement from most other countries to increase their tax rates to a floor at or near where they want to put US rates, they could argue that this competitiveness concern was addressed. They appear willing to deal on digital tax policies as part of the talks. To strengthen their hand, the USTR recently released retaliatory tariff proposals for six countries that have enacted DSTs, but it does not seem a secret what they are shooting for. The nearly decade-long OECD talks to address Base Erosion and Profit Shifting (BEPS) already includes major “pillars” to address the issues underlying the DSTs (Pillar 1) and also the minimum corporate tax issues (Pillar 2) and “tax competition”. By the way, as currently drafted, most national DSTs and the OECD Pillar 2 plan target companies with global revenues above 750 million euro.

Small Business Retail Groups Join Forces to Target Amazon and Antitrust Reform

Report from the Wall Street Journal

In Brief – Advocacy and trade groups representing small and independent retailers have formed Small Business Rising (SBR), a coalition advocating for antitrust law reform with a focus on Amazon. The group’s 23 members include associations representing small hardware, pet, running, toy, book, grocery and drug stores. The organization called out Amazon’s policy of competing directly as a retailer on its dominant ecommerce marketplace, a practice that many argue allows the conglomerate to use its voluminous marketplace data to unfairly complete. SBR calls for breaking up Amazon and implementing a suite of antitrust reforms championed by progressive Democrats. Beyond antitrust, the group advocates for capping swipe fees, closing corporate tax loopholes, and eliminating public subsidies for large corporations.

Context – European competition regulators are moving forward on two tracks related to Amazon and retailers who sell on the Amazon Marketplace. One track parallels SBR’s charge that Amazon unfairly uses marketplace data to compete as a retailer against marketplace sellers. Amazon responds that they are not a large share of overall retail, that other large retailers sell even more “house brands” and that independent sellers have been growing their share of overall sales on Amazon for years. This is all true. But this is missing the real nature of Amazon, which is better understood as a “Gig” platform, in fact likely the largest Gig business of all. More than half of retail on Amazon is products funded by hundreds of thousands of “independent” sellers who buy inventory and often turn it over to Amazon to handle, a Gig economy version of retail. Along with the marketplace data investigation, the second track of European competition enforcers is more noteworthy, investigating how Amazon uses of the Buy Box to preference the products of third-party sellers that use Amazon’s dominant FBA logistics business, the Gig retailers. The concerns of SBR retailers are much like those of cab drivers opposed to the Uber model.

Five Giant Digital Platforms Covered By Japan’s Digital Platform Transparency Law

Report from Nippon.com

In Brief – The Japanese Ministry of Economy, Trade & Industry (METI) has announced that five digital giants – Amazon, Google, Apple, Rakuten and Yahoo Japan – will be regulated under legislation enacted last year to improve the transparency of platform terms of use and policies, as well as protect smaller businesses from unilateral changes in rules and fees. The bill targeted digital businesses operating app stores with $2 billion in annual revenue in Japan, and online marketplaces with $3 billion in revenue. The covered platforms will be required to explain policies used to determine the order of search results and the use of personal data, give prior notice of changes to rules and fees, explain the reasoning behind changes, establish a mechanism to process user complaints, and detail the conditions that would lead to the termination of a vendor account. They will each be required to submit annual compliance reports to METI. The regulator can issue orders to correct disclosures, although authorized financial penalties are very modest, just JPY 1 million (less than 10k USD).

Context – Japan, home to a robust digital economy with a unique mix of domestic and foreign-based platform giants, has been a leader in the effort to improve the terms and conditions that digital platforms provide to business users, especially small businesses. In Europe, so-called P2B (Platform-to-Business) regulation was enacted by the European Parliament in 2019, and the treatment of small business users is an important component of the Digital Markets Act aimed at regulating the largest platform “gatekeepers”. The topic is also a component of the Australian Government’s Digital Platforms Inquiry work program, and the Korean Fair Trade Commission has proposed legislation to protect small businesses from unfair business practices of large platforms as well. Finally, the PACT Act from Sens. Brian Schatz (D-HI) and John Thune (R-SD), brings a similar focus on transparency and appeals to the Sec. 230 debate.

Supreme Court Sides With Google that Copying Oracle’s Java API Code was Fair Use

Report from the Washington Post

In Brief – In a 6-2 decision with the majority opinion written by Justice Breyer, the Supreme Court has ruled that Google did not violate copyright law in its use of Java computer code, owned by Oracle, in its Android smart-phone operating system, saving the platform giant from billions in damages. Justice Thomas wrote a stinging dissent (starts p 44) and was joined by Justice Alito. The case revolved around the distinction between “declaring code” often used for “application programming interfaces” (APIs) and “implementing code” used to carry out computer programs. The majority ruled that Google’s copying of the Java API code was fair use that facilitated developers being able to produce new and distinct programs on the Android system, and prevailed on the four factors uses to determine copyright fair use. Most digital industry leaders supported the idea that copying code for APIs was a fair use and common industry practice.

Context – This case saw leading Google antagonists stab at the platform giant. Briefs (all found here) were filed by the News Media Alliance, champions in the global fight to force Google to pay for news media search results, US Telecom, the eternal opponent on net neutrality, the Trump Administration DoJ and conservative policy organizations such as ALEC and the ACU, each vocal on alleged “viewpoint censorship”. Justice Thomas appears personally invested as well. Besides directly raising monopolization charges against Google in this dissent, last October he authored an extraneous 12-page “statement” to the court’s announcement denying cert on an unremarkable Sec. 230-related case to call for a better case to allow the Supreme Court to consider the scope of Sec. 230 (pp 12-21 here), and most recently added a personal 12-page opinion (pp 9-20 here) to the one-sentence decision of the Court to dismiss as moot the case involving President Trump blocking users from posting on his Twitter account, explaining why the market power of the largest digital social media platforms demands new legal thinking on limits to their ability to censor speech.

Bill to Block Apple and Google From Controlling App Payments Fails in AZ Senate

Report from The Verge

In Brief – Legislation to prohibit Google and Apple from requiring app developers to use specific in-app payment systems appears to have failed in the Arizona State Senate after narrowly passing in the State House in early March. HB 2005 was the product of a lobbying effort by the Coalition for App Fairness (CAF), an organization created last year by large app developers including Epic Games, Spotify and Match, aiming to change the mobile operating system business models of Apple and Google. The tech giants aggressively mobilized in the AZ Senate to stop the bill, which was crafted to apply only to their app platforms, exempting gaming consoles and music players, which often have similar payments rules and fees. The CAF’s first Executive Director is a local campaign expert recruited from a DC-based lobbying firm. Similar legislation recently failed in the North Dakota Senate and is percolating in other states including Massachusetts, Georgia, Minnesota and Hawaii.

Context – While Apple and Google are two of the most valuable companies in the world, Epic Games, Spotify and Match alone are also worth tens of billions and they are proving that they have the resources to engage in major lobbying and legal fights. With just two giant mobile operating system platforms, fees reaching 30%, and millions of app developers globally, many governments are stepping into the fray. State-by-state lobbying campaigns usually benefit the largest companies, but maybe the CAF efforts turn that conventional wisdom on its head. The first two US state legislatures to move bills were Republican-controlled bodies in North Dakota and Arizona. The CAF may be tapping into conservative anger about alleged viewpoint “censorship” by big tech. Epic Games is also deep into legal campaigns. The headline event is the antitrust trial pitting Epic against Apple in federal district court. It is moving surprisingly quickly and is scheduled to begin May 3.

Facebook Canada Would Consider Blocking News If It Faced Forced Media Payments

Report from CNet

In Brief – In a possible foreshadowing of a Canadian version of the February standoff between Facebook and the Australian Government that led to the social media platform temporarily banning news media content from its site in that country, Facebook Canada’s head of public policy indicated that it is possible that Facebook would take similar actions if legislation was enacted that required the platform to pay publishers for links posted or shared by users. The comments came in a hearing of the House of Commons Heritage Committee. Canadian media firms have been calling for the government to mandate platform payments for over a year and claim it would save hundreds of journalism jobs. Canada’s Heritage Minister has stated that the federal government will soon introduce social media payments legislation and has indicated that they are studying examples from both Australia and France.

Context – The Internet has overturned the advertising-based business model of traditional print media, as well as broadcast news. First, paid newspaper classifieds disappeared. Then advertising fundamentally changed. Google and Facebook have successfully shaped the new ad-based ecosystem, and traditional news media companies and their champions in government are working to change the business relationships. Google and Facebook have each instituted multi-billion-dollar programs to pay media for using curated content in their services. The key policy fight is over mandates that the platforms pay media companies for simple search links or social media postings done by users, and even the media themselves. That fundamental change to the Internet remains on the table in Australia, leading Facebook to temporarily halt all user-posted news links and Google to threaten something similar. While nobody knows how that version of “The Internet” would even work, the issue has been pitting Google and Microsoft against each other, with Microsoft seeming to support search link and upload payments.

Epic Games Files Their Latest Competition Complaint Against Apple with UK CMA

Report from the Irish News

In Brief – Epic Games, the giant game developer who owns the mega-franchise Fortnite, has again expanded their global campaign to overturn the business models of mobile operating system developers Apple and Google, this time filing a complaint against Apple with the Competition and Markets Commission (CMA), the UK’s competition regulator. This follows similar complaints with the European Competition Authority and the Australian ACCC. Epic has also filed suits in the UK Competition Appeal Tribunal, which turned down the Apple complaint but will allow the Google complaint to proceed. Epic’s private antitrust lawsuits filed in US Federal District Court against Apple and Google are their main legal effort in the United States, although they are also supporting state-level legislative efforts under the mantle of the Coalition for App Fairness. The CMA is already reviewing Apple’s App Store practices, and the Epic complaint is expected to slot into that ongoing matter.

Context – Epic kicked off their global legal battles by modifying the Fortnite app to violate Apple App Store (and Google Play Store) rules to avoid each platform’s 30% fees. Apple and Google each removed Fortnite from their app stores. Epic has failed to win injunctions blocking either company’s ban. The recent US federal antitrust case of Blix v Apple, involving a messaging app, highlighted important issues related to market definition for app stores and operating systems, and whether either Apple or Android is dominant. In addition, fee levels and policies on Apple and Google are basically identical to those on the major game consoles, and, according to a broad cross-industry report funded by Apple, similar to a wide range of other digital platforms. It could be difficulty to show what Epic calls “monopoly rents”. Epic and its allies may find more joy with legislation and regulation, such as the EU’s Digital Markets Act imposing limits on “gatekeepers”. Giants like Microsoft and Facebook are talking about supporting the effort.

Texas State Senate Supports Republican Social Media “Censorship” Bill on Party Line Vote

Report from the Texas Tribune

In Brief – The Texas Senate has approved a bill to prohibit social media companies with at least 100 million monthly users from blocking, banning, demonetizing or discriminating against a user based on their viewpoint on a party-line vote. The platforms would be required to disclose their moderation policies, publish regular reports about content actions, and create an appeals process for users to challenge take downs, with the Texas attorney general empowered to take legal action to enforce the law.

Context – “Platform censorship” is quickly emerging as a top tier Republican issue nationally. Pew has found that 90% of Republicans (but also, 59% of Democrats) believe that social media sites censor viewpoints that they find objectionable. And the fact that the companies are based in progressive coastal bastions adds to the us-v-them framing. Legislation to limit the content moderation practices of large platforms is emerging in many states like Texas and Florida where the GOP holds more institutional power than they do at the federal level. However, these state laws are almost certain to be ruled unconstitutional due to federal preemption by Sec. 230 of the Communications Decency Act and the First Amendment rights of the platform companies. As recently as 2019 the US Supreme Court, led by the conservative justices, reiterated that private companies are not required to uphold the First Amendment rights of platform users. Given these challenges, the Republican Governor of Utah recently issued a “friendly veto” of a viewpoint censorship bill and the Wyoming House Judiciary Committee voted one down. This all said, don’t think that state-level Republicans have a lock on moving almost-certainly unconstitutional digital policy proposals, as the digital advertising services tax enacted by Maryland Democrats (and being proposed by a number of other Democratic state legislators across the country) is equally likely to fall in court due to the clear prohibition in the federal Permanent Internet Tax Freedom Act.

Biden USTR Releases UK Digital Tax Retaliation Plan Showing They Are Not Tax Pushovers

Report from The Guardian

In Brief – After weeks of signals that the Biden Administration was far more interested than its predecessor in reaching a multilateral deal to expand national taxes on large digital companies, the United State Trade Representative (USTR) has revived a Trump-initiated trade retaliation threat by releasing a proposal for UK export products that could face 25% tariffs in response to the UK Digital Services Tax (DST). USTR had already issued findings that the UK tax discriminates against US companies and can face tariff retaliation under Sec. 301 of the Trade Act. The duties are designed to raise $325 million, the amount the UK DST is expected to raise from large US-based digital services firms. While the Biden Administration continues to express support for a multilateral agreement on digital taxes and a new global corporate minimum tax rate, the decision to pick up a tariff retaliation process begun by the Trump Administration indicates that the OECD tax negotiations that many have predicted would wrap up this summer remain challenging.

Context – Europe has been a hotbed of DST efforts to increase corporate taxes paid to countries where Internet users reside rather than countries where digital enterprises operate, shifting tax revenues from countries like the US and Ireland to the UK, France and Spain. Most of the large digital companies targeted are American and US opposition has been bipartisan. The US conditions on DSTs have been that they be multilateral and that they apply more broadly than just “Internet companies”. The OECD proposal, moving in late 2019 with US support, was designed to meet both conditions, but progress broke down as non-Internet industries feared getting caught in the new regime. The willingness of the Trump Administration to engage in trade wars was the main barrier to the national DSTs, and tariffs targeting France are in place but on hold, but it seemed less likely President Biden would implement them. In light of that, Amazon, Apple and Google have announced fee increases to offset taxes in countries with DSTs.

European Privacy Regulators Told to Stop Public Spat Over Irish Big Tech Data Probes

Report from Bloomberg

In Brief – European Commissioner Vera Jourova, who leads the Commission’s work on values, transparency and upholding the rule of law, has publicly called for European privacy regulators to end their public criticism and work cooperatively to implement European data protection law. Ireland’s Data Protection Commissioner (IDPC) has been involved in public spats in recent weeks with Germany’s federal data protection regulator as well as committees of the European Parliament.

Context – Many privacy advocates are frustrated that the EU’s landmark Global Data Protection Regulation (GDPR) has not resulted in large penalties being imposed on digital giants. They often blame the GDPR’s “One-Stop-Shop” policy that establishes the privacy regulator in the Member State of a company’s EU headquarters as the lead regulatory body. Most of the largest US-based digital platforms (and TikTok, too) have located their European HQ in countries like Ireland or Luxembourg, putting those smaller countries’ data commissions in the lead role on GDPR cases for the largest digital companies. They have been accused of slow and weak enforcement. For example, the IDPC has been investigating “forced consent” complaints against Facebook for two years, and its first digital company decision was to fine Twitter 450,000 euro for a data breach. That decision led to months of contentious review by other European privacy regulator, some calling for millions of euros in fines. The Belgian data authority is challenging the GDPR “One-Stop-Shop” provision itself in front of the European Court of Justice, and a key advisory opinion proposes that the data protection agencies in any EU country can take legal action under the GDPR in some situations. Finally, national regulators are pursuing workarounds, such as the French privacy agency recently fining Google and Amazon tens of millions of euros for cookie policy violations based on the e-Privacy Directive rather than the GDPR.

Massachusetts Judge Allows State AG’s Uber-Lyft Driver Classification Suit to Proceed

Report from Reuters

In Brief – Massachusetts Superior Court Judge Kenneth Salinger has denied efforts by Uber and Lyft to dismiss a lawsuit filed last July by the state’s Attorney General to declare the drivers on the ridesharing platform to be employees of the companies. The order does not rule on whether drivers are misclassified but instead rules that AG Maura Healey’s complaint meets the plausibility standard necessary to allow the case to go forward. Massachusetts’ independent contractor classification law was enacted in 2004 and includes the three-prong ABC Test that was a forerunner of California’s AB 5, requiring companies to consider workers as employees if they control how workers perform tasks or if the work is a routine part of a company’s business. Healey challenged the companies on the issue last summer for the first time, citing the impacts of the COVID pandemic on drivers not receiving health care and unemployment benefits. The companies argue that most drivers prefer the flexibility on-demand work.

Context – To be clear, Judge Salinger’s order, while a setback, does not read like the legal beatdowns that Uber and Lyft received last summer in California court before the ridesharing and delivery platforms engineered the passage of Prop. 22 exempting their businesses from AB 5. As the companies battled then-California AG Xavier Becerra over the application of AB 5 to their businesses, Superior Court Judge Ethan Schulman (see opinion pages 23-26), and then Appeals Court Judge Jon Streeter (see opinion pages 10-14 and 22-30), harshly and unequivocally rejected the companies’ arguments that they are digital platforms not ride businesses, and argued that California’s AB 5 is clear on the point that the state believes workers benefit from being employees. The UK’s top court recently rejected Uber’s arguments on worker classification as well and the company will begin classifying UK drivers as “workers” and offering some employee-type benefits.

German Competition Authority’s Facebook Data Ruling Going to ECJ for Advice

Report from Euractiv

In Brief – An unprecedented effort by the German Federal Cartel Office (FCO), the country’s competition authority, to change Facebook’s data practices has been referred by the Higher Regional Court in Duesseldorf to Europe’s top court for an advisory opinion. Facebook’s data practices have been scrutinized by the FCO since 2016. Following a three-year investigation the competition regulator determined that the practice of combining data from across the services of the dominant social network, along with the broader Internet, without valid user consent, allowed it to build a unique dataset for each user and unfairly gain market power over competitors. The FCO ordered Facebook to end those practices, allow users to opt out of the combining of data, and the two sides have been in litigation since. The Duesseldorf court ruled in 2019 that the FCO had exceeded its authority, but that ruling was overturned in 2020 by the German Federal Court of Justice. The latest opinion from the Duesseldorf court expresses concerns with Facebook data practices but again questions with the FCO’s authority to combine privacy law and competition law, saying that the European Court of Justice will need to provide an advisory opinion, which it likely to take more than a year.

Context – The German parliament recently enacted a major competition law reform bill for digital giants, empowering the FCO to identify digital companies “of paramount significance on competition across markets”, and then establish proactive rules to protect competition in the markets they occupy. This effectively overturns the competition enforcement model of regulators investigating dominant business for anticompetitive abuses and then imposing penalties. The EU’s Digital Markets Act is a similar competition-inspired regulatory proposal. Some see the new German law as an effort to drive the DMA process forward, while some tech leaders argue it undermines the EU effort to set uniform standards.

Dem State AGs Call for Anti-Vax Takedowns Highlighting Partisan Speech Divide

Report from the Washington Post

In Brief – A dozen Democratic State Attorneys General led by William Tong of Connecticut have called on Facebook and Twitter to “take immediate steps” to more aggressively enforce their policies against vaccine misinformation. While the social media giants have instituted a range of content moderation policies aimed at countering anti-vaccine communications, the AGs say the companies have not effectively blocked the most prominent anti-vaccine accounts that repeatedly violate the companies’ terms of service. The letter was sent the day before the House Energy & Commerce Committee hearing on “misinformation” with the CEOs of Facebook, Twitter and Google.

Context – Social media platforms increased their content moderation practices in 2020, especially on COVID and election processes, and most Americans suspect ideological motives. On both issues, Democrats called for more aggressive action and Republicans saw ideological censorship. Anti-vaccine views currently include partisan and religious divisions that also have Democrats more comfortable calling for crackdowns. For an even more clear example of how pushing the platforms to police public policy issues is inherently political look to calls for the platforms to restrict debate over “climate change”. In the House E&C hearing, Rep. Donald McEachin (D-VA) asked Facebook to apply their COVID policy rules to climate change, a call he made with 30 other Democrats last summer. Sen. Chris Coons (D-DE) made a similar request in last November’s Senate Judiciary Committee’s social media hearing. A coalition of climate activists has called on the new Facebook Oversight Board to ban “climate misinformation” on Facebook. Of course, conservatives see climate policy as clearly appropriate for open debate. Rep. Dan Crenshaw (R-FL) criticized McEachin’s climate policy content restrictions as a clear and direct attempt at political intervention. (Watch McEachin at 3:49:45 and Crenshaw at 5:26:10 of the hearing video. Yes, 5 hours, 26 minutes.)

UK CMA Opposes Facebook’s GIPHY Acquisition on Traditional Competition Grounds

Report from CNBC

In Brief – The UK’s Competition and Markets Authority (CMA) has announced that its initial review of Facebook’s $400 million acquisition of GIF website GIPHY could hamper competition in the digital advertising and social media services markets. The CMA reviewed the acquisition’s impact on the worldwide supply of searchable GIF libraries (determining that GIFs are a distinct online product), the worldwide supply of social media services, and the display advertising market in the UK, all in the context of CMA’s recent determination that Facebook has significant market power in social media services and display advertising. The CMA found that GIPHY had begun offering advertising services is the US, was exploring overseas growth including to the UK, and that Facebook’s acquisition would prevent GIPHY emerging as an ad market competitor. The CMA also believes it is likely that Facebook would restrict access to GIPHY’s inventory to undermine rival social media competitors like Twitter and TikTok.

Context – A digital acquisition policy scorecard should include reviews based on “digital surveillance”, “killer acquisitions” and the idea that some of the platforms are too big to acquire large new data sources, like with Google-FitBit. When Facebook’s GIPHY bid was initially reported, it was criticized as a potential “digital surveillance” acquisition to help Facebook identify threats and targets for “killer acquisitions”, similar to how Onavo was used by FB to target Instagram and WhatsApp (deals being re-litigated in the FTC and State AG antitrust complaints). The CMA’s Phase One report steps back from that theory, identifying more traditional competition harms regarding dominant Facebook using the acquisition to reduce competitive threats, similar to the reasoning of US DoJ in challenging Visa’s acquisition of digital financial services firm Plaid as an effort to block the digital firm from developing into a debit payments challenger, or the CMA opposing Viagogo, the UK’s top digital platform for secondary market tickets, buying StubHub.

Republican Utah Governor Issues “Friendly” Veto of Republican Social Media Censorship Bill

Report from Deseret News

In Brief – Utah Governor Spencer Cox (R) has vetoed a bill passed in the closing days of the state legislative session that proposed to regulate the content moderation practices of social media companies. Many Republican legislators claim the largest platforms are biased against conservative viewpoints and censor legally protected speech. Cox expressed sympathy with the concern, announced the veto was done with the consent of legislative leaders, and said they would work to address technical issues. The bill would have required the platforms to clearly state their content moderation policies, inform users within 24 hours when they violate the rules, and provide an appeals process. The state consumer protection agency was authorized to investigate complaints of inconsistent content moderation and the state Attorney General could initiate civil actions against social media companies with penalties of $1,000 per affected consumer. The bill faced meaningful constitutional problems and the effective date had been pushed back to July 2022 to allow the measure to be further amended in next year’s legislative session. Sponsors indicate that they intend to work with stakeholders to pass a better bill next year.

Context – State “Platform censorship” bills are pretty much a lock to be ruled unconstitutional if enacted due to problems with federal preemption and the First Amendment rights of the platform companies. Nevertheless, they are being introduced where the GOP holds more institutional power than they do at the federal level, including Florida, Texas, Nebraska, Kentucky, Oklahoma, Arizona and North Dakota. It is a stark reminder that the partisan divide on content moderation and Sec. 230 is not narrowing. There is a deepening belief among all voters, but especially Republicans, that the platforms are not ideologically balanced, with Pew finding that 73% of all adults (including 90% of Rs and 59% of Ds) believe that social media sites intentionally censor political viewpoints that they find objectionable. Hill Democrats called for more active moderation in a recent hearing.

Google Continues Expansion of Global Media Payments Adding Italy to News Showcase

Report from RTE

In Brief – In the face of growing momentum to require Google and Facebook to pay media companies directly to help them deal with long-term revenue challenges, Google has announced it has signed licensing deals with a number Italian media publishers to pay for news content by adding them to the Google News Showcase. Google announced a major expansion of its News Showcase program last October and has been negotiating business agreements with major media outlets in a growing number of countries, including recent expansions to the UK and Australia, as well as reports of talks in Spain.

Context – Traditional news businesses and their champions in governments globally are working to force the largest digital platform companies pay traditional media companies for content distributed online. The Internet has overturned the advertising and subscription-based business model of traditional print media, as well as broadcast news. First, paid newspaper classifieds disappeared. Then the advertising business fundamentally changed overall. Google and Facebook have been especially successful in the current ad ecosystem, and both companies have instituted billion-dollar programs to pay media for curated content. But both have strongly opposed requiring payment for simple search links or social media postings done by users and the media themselves. That fundamental change to the Internet, paying for search results or user posts, remains on the table in Australia, leading Facebook to temporarily halt user-posted news links and Google to threaten something similar. Nobody knows how that version of “The Internet” would even work, but the high-level concept is now pitting giants Google and Microsoft against each other, with Microsoft seeming to support payments for search links and uploads. In the US, federal legislation to address the media funding challenge proposes to grant a four-year antitrust exemption to media businesses to collectively bargain with large digital platforms and enjoys bipartisan support.

Energy & Commerce Committee Harshly Criticizes Social Media CEOs on Content Moderation

Special Hearing Report from PEI

Background – Two subcommittees of the House Energy & Commerce Committee held a remote hearing to challenge the CEOs of Facebook, Twitter and Google on their content moderation practices. Democrats have criticized social media platforms for many months over objectionable posts and advertisements on COVID, election processes and results, vaccines, hate speech and other issues they claim are fraught with misinformation and disinformation. They call for much more to be done to block objectionable content, change recommendation systems, and even end their advertising-based business models. Republicans also harshly criticize the platforms, but they charge them with being ideologically biased and censoring conservatives. Biased platform moderation is a widespread public concern, especially among conservatives nationwide.

Commentary – Even going in with low expectations the more than five-hour hearing fell short. Big Tech bashing is Bizarro World Bipartisanship. The two parties compete to be the most harsh. There were repeated threats of drastic legislation from committee members. However, each side opposes, often drastically, the changes in content moderation practices called for by the other party. Viewpoint censorship was an expected Republican theme, but it was noteworthy that the Republicans were even more focused on charges the platforms harm young people. While there was little agreement on moderation standards, the two sides might be able to come together to further regulate online services to children under 13. In terms of substantive content moderation reform ideas, Twitter and Facebook each offered thoughtful, but very different, proposals. Facebook calls for some Sec. 230 reforms, asks for direction from government, and has created its innovative independent “Oversight Board”. Twitter raises objections to government-set standards for free speech reasons, threats to innovation, and because costly mandates would benefit the largest platforms. Twitter’s CEO also advocates for an interesting protocol-based overhaul to how moderation would work on social media. Regrettably, but not surprisingly, there was little discussion of those ideas.

UK and Italian Finance Ministers Optimistic About A Global Tax Deal by Mid-2021

Report from Bloomberg

In Brief – The Finance Ministers of the UK and Italy, whose governments are presently leading the Group of Seven and Group of 20 respectively, are optimistic that a global corporate tax reform deal will be achieved by mid-year in light of the change in US leadership. The effect of digitization on corporate taxes has been driving calls for reform for a number of years, with Internet services giants and Digital Services Taxes (DST) at the forefront. Both the UK and Italy are among more than a dozen national governments, many in Europe, that have enacted national DSTs. Treasury Secretary Yellen recently announced that the US was no longer demanding a “Safe Harbor” allowing corporations to opt-out of a new global corporate tax regime, which was seen as a clear sign that the Biden Administration wanted to get to a global tax deal.

Context – Digital Services Taxes (DST) change how governments tax the largest digital companies, taxing revenue based on where users live rather than where the company operates. The “Safe Harbor” concept remains a vague and not well understood interlude in the DST fight. Keep in mind that the two high-level US conditions on DSTs have been that they be multilateral, not national, and that they apply more broadly than just “Internet companies”. The OECD proposal, moving in late 2019 with US support, was designed to meet both conditions. Increasing taxes on the digital giants was understood. Problems on the US side emerged from the impending reality that other industries would be caught in the complicated new tax net and the Safe Harbor was proposed to keep such industries from derailing the plan in Congress. Now, with that opt-out idea off the table, it remains to be seen if the US will continue to demand that the tax plan cover more than just Internet-based companies or if that condition will be jettisoned too. Secretary Yellen’s call for a “global corporate minimum tax” deal points to a focus on some new corporate tax rules applying very broadly, and the EU may press to keep tax changes focused on just on Internet firms as with their DSTs.

Top Texas Court Hears Arguments on Liability for Amazon’s Marketplace + Logistics Model

Report from Bloomberg

In Brief – At the request of the Federal Court of Appeals the Texas Supreme Court is hearing arguments on the question of whether Amazon is appropriately considered a retailer, rather than a marketplace, for product liability purposes when a third-party sells a product on the Amazon Marketplace and Amazon stores, handles and ships the product through Amazon’s FBA logistics business. The case of McMillan v. Amazon involved a toddler injured by the battery of a defective television remote sold by a Chinese-based seller on the Amazon Marketplace but where Amazon’s logistics service also stored and handled the product. As usual in cases involving Amazon and product liability, the US Chamber filed on behalf of the digital retail giant, while a public interest brief was filed by lead lawyer in a similar case in California that saw Amazon liable when their Marketplace was combined with FBA logistics.

Context – Amazon is fundamentally unlike other ecommerce marketplaces. It is also the dominant player in the physical business of ecommerce logistics, stocking and handling the goods for most of the top sellers on its marketplace in its distribution centers, much like a retailer handles products from wholesalers in its stores. The retailer-like Amazon model is coming to the fore in a series of product liability cases. Along with the McMillan case in Texas, the California Court of Appeals ruled last year in Bolger v Amazon that the company could face product liability charges like a retailer when the product was also handled by FBA, and the Federal District Court for the Southern District of New York will similarly allow the Brodie v. Amazon product liability case to move forward for a food product sold by third-party seller but stored and handled by Amazon FBA. An ecommerce logistics industry report last year estimated Amazon’s market share in ecommerce fulfilment center services at 60%, and Amazon marketplace policies to push sellers to use its logistics services is also the subject of antitrust investigations in Europe.

LINE Messaging App in Japan Will Stop Allowing Chinese Firms to Process User Data

Report from Nikkei Asia

In Brief – Messaging app LINE, the most popular in Japan, has stopped allowing data on its Japanese users from being accessed by Chinese-based tech partners after data security questions were raised about Chinese Government authority to demand Chinese firms give them access to user data under the country’s National Intelligence Law. LINE faced criticism after media reports that four employees of a LINE affiliate in China had access to personal information about some Japanese users. While data flows between Japan and China are not illegal, there is growing public concern with data transferred to China that is similar to concerns raised in recent years by the United States. LINE’s messaging service, launched in 2011 by South Korean digital powerhouse Naver, but now owned by Z Holdings which is led by Softbank, has over 86 million users in Japan, offers services such as e-payments, and is even used by Japan’s national and municipal governments for public communications and making electronic filings. The company also announced it would move some user payments data from South Korea to Japan.

Context – The past year saw official charges of Chinese threats to online data of non-Chinese Internet users ramp up dramatically as the Indian Government banned dozens of Chinese apps from operating in the country, including hugely popular TikTok and WeChat, and the Trump Administration endeavored similar prohibitions that have been stalled by US courts. The same week that LINE ended data access for Chinese firms due to popular concerns with open-ended Chinese Government authority under its National Intelligence Act, the University of Toronto’s Citizen Lab released a report concluding that TikTok’s computer code does not pose a national security threat, although the authors added that the Chinese Government might “use unconventional ways to obtain user data; for example, by using the domestic National Security Law on TikTok’s parent company ByteDance” based in Beijing.

Supreme Court Rejects Facebook’s Appeal of Decision That Tracking Violates Wiretap Act

Report from Reuters

In Brief – The Supreme Court has rejected Facebook’s appeal of a decision by the Ninth Circuit Federal Court of Appeals that allows a $15 billion class action lawsuit to proceed accusing the tech giant of violating the federal Wiretap Act by tracking users’ online activities across the Internet through the use of “plug-ins” and cookies employed by websites. For example, when a Facebook user visited a website that included a Facebook “Like” button, Facebook was notified of the visit even when the user was not signed into Facebook. The Facebook terms of use did not inform users of this broad off-Facebook data collection during the 2010-2011 time period covered by the suit. Facebook says it changed its policies in 2011 and now informs users of its broad data collection both for users and non-users. A federal judge dismissed the case in 2017 but the Ninth Circuit Court of Appeals overturned that decision in 2020, allowing the Wiretap Act and state privacy claims to go ahead. The Supreme Court rejection of the appeal to hear the case applied only to the Wiretap Act charge and was made without comment by the high court.

Context – The pre-Internet federal Wiretap Act prohibits companies from intercepting electronic transmissions without at least one party’s consent. Facebook argues that the use of its cookies and plug-ins by the website operators made the company a direct participant in the communications related to the web visits, a view backed by the leading Internet and technology industry trade groups (their brief is available here). The appeals court rejected that argument, which the digital companies argue casts doubt on the legality of many common business and technology practices integral to the internet’s basic operation. While Google prevailed in a similar Wiretap Act case related to cookie tracking in 2016 in the US Third Circuit, the interpretation in the Ninth Circuit could spur significant new litigation, such as the recent class action filed against Microsoft for data practices related to users of its Office software.

Microsoft and Amazon Can Face Class Action Suits for Trying to Improve Facial Recognition

Report from Reuters

In Brief – A federal judge in Washington State has rejected motions filed by Amazon and Microsoft aiming to scrap class action suits filed by Illinois residents claiming that both companies violated Illinois’ Biometric Information Privacy Act (BIPA). The complaints against the two digital giants, as well as Google, stemmed from the companies each using a photo database built by IBM, called “Diversity in Faces”, as a research tool to help companies improve their facial recognition algorithms to address concerns with racial, ethnic and gender accuracy and fairness. IBM came under fire and is also the subject of a BIPA suit for collecting a million photos from online photo storage service Flickr, annotating the images with data regarding the faces of the unnamed subjects, and allowing access to facial recognition researchers.

Context – Private class action suits tied to Illinois’ BIPA continue to target a wide and growing range of companies that employ some manner of biometric technology, especially facial scans. Widespread BIPA lawsuits are likely reinforcing already strong partisan disagreement over to role of consumer class action lawsuits, “a private right of action”, in privacy legislation, the biggest sticking point on comprehensive federal privacy legislation. Some privacy advocates consider the growing string of lawsuits to be a great feature of BIPA. But class action enforcement is stymieing bipartisan compromise. For example, a bipartisan privacy bill that does not include consumer class action enforcement was recently signed into law in Virginia, where Democrats control both the state legislature and governorship, while similar legislation is bogged down in the State of Washington where progressive insist on allowing private class actions. Finally, the US Supreme Court will hear arguments on March 30 in the case of TransUnion v. Ramirez on the question of whether class members need to suffer actual harm, or theoretical harm is adequate, in class action lawsuits, a key issue in many digital privacy-related class action lawsuits.

Amazon Settles Class Action Case with Contractor Delivery Drivers in Washington State

Report from Vice

In Brief – Amazon package delivery drivers who work for eight contractors in Washington State have won an $8.2 million class action settlement from Amazon for wage violations by the contractors. The suit was filed in 2017. Court documents show that rampant wage and benefit violations have impacted the tens of thousands of delivery drivers nationwide who are employed by the network of small third-party delivery companies set up by Amazon to do “last-mile” delivery. California recently fined Amazon $6.4 million for overtime violations by the same type of contractor firms. Amazon’s relationship with third-party drivers is also at issue as it attempts to monitor independent contractor drivers with AI-enabled cameras.

Context – While people often think of ridesharing, short-term home rentals or digital freelancing as the “Gig Economy”, Amazon may be the largest Gig business of all. Gig platform models, where the platform company directs the provision of a service while having the work done by “independent” third parties, can rapidly scale because many of the investments related to labor, infrastructure, equipment or inventory are paid by the third parties. A key legal and policy question is the degree of control the platform exerts on the third-party providers, especially when a platform appears to be attempting to run a traditional business while shifting liability costs, or worker costs, over to third-party users who are not actually “independent”. When Amazon initially built their FBA distribution center network, most distribution center workers were not actually employees of Amazon, they worked for staffing companies. Along with the fleet of small delivery companies at issue here, Amazon also runs its own Uber-style delivery platform for individual drivers. Finally, more than half of the Amazon “retail” business is funded by hundreds of thousands of “independent” sellers who buy inventory and often turn it over to Amazon to handle, a Gig version of traditional retail. That model is central to a number of recent Amazon product liability cases.

Zillow Faces Antitrust Suit for Deal with National Association of Realtors to Preference Listings

Report from Politico

In Brief – REX Homes, a digital real estate platform and brokerage, has filed a federal antitrust complaint against Zillow, the largest consumer real estate platform, and the National Association of Realtors (NAR), the largest real estate trade group in the US, for altering the Zillow search results page to only show NAR listings on the main results page, consigning REX listings to a secondary “Other listings” tab that is less visited by users. REX provides a lower commission realtor alternative to the NAR and has been engaged in ongoing complaints with the larger realtor group, including filing a complaint with the US Department of Justice that led to a settlement with the NAR last year. Zillow, Realtor.com (owned by the NAR) and Trulia (owned by Zillow) are the first, second and fourth-largest real estate listing sites in the US. Zillow recently expanded its business beyond an advertising and search platform and engaging more directly as a real estate broker, joining the NAR as a member.

Context – Regulators and legislators in major markets, including the United States and the European Union, are aiming to reign in the authority of digital giants. One of the big questions is how big will a platform need to be before restrictions bite? The European Commission’s Digital Markets Act proposes new regulatory mandates on digital “Gatekeepers” that are designed to address behaviors highlighted by investigations of super-giants like Google, Apple, Amazon and Facebook. But European platform Booking.com, the largest “vertical” search platform for hotel stays, has been outspoken that the new regulations could harm innovation and growth for smaller platforms like it is. In the US, the momentum appears more on the antitrust rather than the platform regulation front, and there is some Republican support for legislation hitting the digital super-giants accused of ideological censorship. This Zillow case will provide insight into court thinking related to a very large, but not super-giant, web platform.

Google Cuts Play Store Fees on Small Developers in Latest Move in App Store Battles

Report from the New York Times

In Brief – Under pressure from app developers and government officials regarding its app store policies and fees, Google has followed the example of Apple and announced that it will cut fees charged to smaller app developers. Starting in July, Google will charge a 15% fee on the first $1 million of digital earnings by developers with apps in the Pay Store, after which it will be 30 percent. Apple announced a similar small business fee promotion in November. Earnings through apps are very top-heavy with just 1% of app developers in the Play Store earning more than $1 million in digital sales, and so the revenue impact on Google is estimated to be slightly less than $600 million. Critics of the two app store giants decried the change as a transparent effort to reduce political heat without ending anticompetitive practices.

Context – A few large digital companies, led by Epic Games and Spotify, are investing in legal, PR, lobbying and regulatory campaigns to regulate app store policies and the limit the fees of Apple and Google. Both mobile platform giants often charge 30%, but they otherwise have very different models. Apple’s very restrictive “walled garden” has been more in focus with US and EU regulators and has increasingly drawn public criticism from super giants Facebook and Microsoft. Google’s Android is a more open system and has been the less public target of the app developers, but Epic’s federal antitrust complaints against Google and Apple offers insight into how they allege both engage in anticompetitive conduct.  Google has been more of the focus in markets such as India and Korea where Android has more users than Apple, and Korean legislators recently called on Google to make a fee change like Apple. The huge, potentially epic, Epic v Apple federal antitrust trial is scheduled to kick off May 3. Finally, you should scan this report, funded by Apple, that details fee levels for over 50 digital platforms of many types, as well as the comparable offline distribution fees. Shockingly, 30% is pretty average.

Uber Makes Changes to Driver Pay and Benefits in the UK Following Major Court Setback

Report from CNBC

In Brief – Following the UK’s top court deciding that Uber drivers were misclassified as independent contractors and should have received certain worker benefits, Uber has announced major changes in driver compensation. Uber will pay at least the UK National Living Wage, provide paid “holiday time” equal to 12.07% of drivers’ earnings, and provide a pension plan with contributions from Uber. One aspect of the new policy that drew immediate criticism was that the company’s plan was based only on the time drivers spent transporting passengers, not the time drivers were signed into the Uber app. Uber argues that paying drivers simply for signing on would necessitate traditional driver scheduling and take away driver autonomy and scheduling flexibility, which Uber says most drivers greatly desire. Analysts expect the increased costs to cause Uber to reduce its UK footprint, including drivers, by around 30 percent.

Context – Uber’s UK situation highlights a key fact about independent work and digital platforms. Most people like it. About three quarters of workers who participate. It is a flexible way to earn extra money and (pre-pandemic) most people who wanted traditional jobs could get one. Also, skilled freelancers greatly value their autonomy. See California’s experience with the AB 5 worker classification law where they had to exempt many freelancers. However, make no mistake, around a quarter of the workers are consistently unhappy. They prefer traditional jobs and think they are mistreated and underpaid. If you turn “Gig” independent worker into employees, that group benefits (when they fill the diminished slots) but many fewer people will work. Many need a level of flexibility traditional jobs don’t offer. And per-worker costs go up. The ability of independent work platforms to bring people into the workforce has been so striking that a Dallas Fed economist credited them (pre-pandemic) with reducing the natural rate of unemployment, meaning inflationary pressures remained muted at lower level of unemployment than previously possible. (A good thing.)

Congressional Bill to Help Media Deal with Digital Giants Pits Microsoft v Google

Report from Reuters

In Brief – A bipartisan coalition of US lawmakers are proposing legislation that will exempt traditional news media businesses, including “print” and broadcasters, from antitrust laws for 4 years allowing them to temporarily bargain collectively with the largest digital platforms to improve the financial condition of news media businesses. The sponsors include Sen. Amy Klobuchar (D-MN) and Rep. David Cicilline (D-RI), who lead the Senate and House Antitrust Subcommittees, as well as Rep. Ken Buck (R-CO), the top Republican on the House antitrust panel. The exemption from antitrust laws applies only to negotiations with digital platform businesses with more than 1 billion active monthly users globally. Microsoft supports the effort.

Context – The Internet has overturned the advertising and subscription-based business model of traditional print media, as well as broadcast news. First, paid newspaper classifieds disappeared. Then advertising fundamentally changed. Google and Facebook have successfully shaped the new ad-based ecosystem, and traditional news businesses and their champions in government are working to adjust the underlying business relationships. France and Australia have been most out front, but the movement is spreading globally. Google and Facebook have each instituted multi-billion-dollar programs to pay media for using content in their services. The key policy fight is over government mandating that the platforms pay media companies for simple search links or social media postings done by users, and even from media themselves. That fundamental change to the Internet remains on the table in Australia, leading Facebook to temporarily halt user-posted news links and Google to threaten something similar. Nobody knows how that version of “The Internet” would even work. The US collective bargaining bill does not mention payments for user uploads or basic links. However, that concept is now pitting giants Google and Microsoft against each other, with Microsoft seeming to support search link and upload payments.

French Tech Group Adds Privacy Complaint to Growing Charges Dogging Apple on IDFA

Report from CNBC

In Brief – France Digitale, a French tech start-up trade group, has filed a complaint against Apple with France’s privacy regulator, the CNIL, arguing that the digital giant’s new iOS 14 mobile operating system violates the EU’s privacy rules, including the GDPR and the e-Privacy Directive. The complaint is the latest stemming from a change Apple is making to their IDFA (ID For Advertising), a number Apple attaches to each phone that can be used to facilitate targeted advertising. Starting this year, Apple will require all third-party apps to get opt-in permission from users to collect their IDFA, a change Apple defends as improving user privacy. Many competitors argue the move will undermine ad industry competition because Apple has other ways to track users without asking for an opt-in. A coalition of French companies have filed an antitrust suit against Apple on this matter, and NYOB, a leading EU privacy advocate, has filed complaints with the Spanish and German privacy authorities challenging Apple’s IDFA itself as violating the EU’s e-Privacy Directive rules governing cookies.

Context – There is growing tension between digital ad industry competition concerns and opposition to targeted advertising by privacy advocates. The UK competition authority is already investigating Google’s so-called Privacy Sandbox plans to phase out third-party cookies on Chrome. At the same time, Google faces twin lawsuits in Federal court alleging that data collection through Chrome violates federal and state law, with the judge publicly offended by Google data collection, while EU officials call for a ban on tracking for ads. The vitriolic battle between Apple and Facebook is also about the IDFA change. Facebook is the largest company willing to defend targeted advertising as key to millions of small businesses with very limited marketing resources and also sees anticompetitive motives behind Apple’s move. Facebook says it may support the EU’s digital “gatekeeper” legislation to reign in Apple.

Facebook Challenges Government on Social Media and Digital Advertising in Motions to Dismiss

Report from the Washington Post

In Brief – Facebook has filed motions (here and here) to dismiss the two major antitrust complaints filed last December by the Federal Trade Commission and 48 State Attorneys General. Those complaints allege that Facebook is a dominant social network service, grew that monopoly by acquiring Instagram and WhatsApp, and uses it to earn supra-competitive advertising profits and stifle innovation. Facebook argues that the government has no valid basis to allege the company is a monopoly suppressing competition or harming consumers, misrepresents the social media and digital advertising markets, and should not be permitted to reach back nearly a decade to overturn acquisitions that Facebook has since built into major businesses. Facebook’s motions to dismiss, which lengthen the court process, face a high legal standard to have the cases thrown out before trial, because they need to show that even if the factual allegations of the plaintiffs are correct, that they still don’t establish a valid legal claim. The FTC and State AGs are expected to reply next month.

Context – A key divide in the debate over the impact and conduct of the largest digital platforms is between antitrust enforcement, including potentially breaking up the largest businesses, and new regulatory models to police the platforms in an ongoing matter. Antitrust is in the forefront in the US (although don’t sleep on Democratic calls for a regulatory model). The acting-Chair of the FTC recently said that she believed a giant platform would be broken up in the US. While cases are developed and filed, there is also serious discussion in the Senate and House over a wide range of legal reforms to address perceived shortcomings in antitrust enforcement. The Facebook motions hone in on what many see as shortcomings. In Europe, the regulatory model appears dominant, with the Digital Markets Act proposing a wide range of ongoing mandates on digital “gatekeepers”, and Commissioner Vestager regularly expressing reticence about digital giant breakups.

TikTok Brings On Outside Experts to Help With EU Compliance Challenges

Report from TechCrunch

In Brief – TikTok has announced the creation of a European Safety Advisory Council, a group of external European experts to advise the company on its content moderation policies and practices. Its makeup indicates a focus on the mental health and wellbeing of young people, as well as extremism and hate speech. The impact of TikTok use on young people has been gained heightened prominence since January when Italy’s data protection authority ordered the company to block users it could not age verify after the death of a 10-year-old girl who was reported to have engaged in a “black-out challenge”. Last spring, with the company facing increased scrutiny in the United States on issues related to data security, and charges that its content moderation policies were facilitating censorship of political issues in line with the Chinese Government, TikTok established a similar U.S. Safety Advisory Council.

Context – TikTok has rapidly emerged as the one Chinese-owned platform with user numbers and engagement challenging the largest US-owned platforms in major third markets. It is quickly facing similar privacy and policy charges, such as when EU consumer groups filed complaints in February alleging violations of the bloc’s consumer, privacy and data security laws, and failing to protect children from inappropriate content. It will also be front and center, along with the US platform giants, as the EU legislates the Digital Services Act to regulate how digital platforms respond to illegal, dangerous and objectionable content. The platform’s Chinese roots also brings a unique set of issues and perspective. For example, just as the potential access of Chinese security agencies to TikTok user data has been a charge in the US, Ireland’s Data Protection Commissioner has raised a similar concern about data on EU users. On the other hand, given the imperative of working closely with the Chinese Government on content issues, it is possible TikTok will be more agreeable than US platforms to accede to government content policy requests.

New Democrat’s Privacy Bill Points to the Path That Could Result in a Federal Law

Report from CNBC

In Brief – Rep. Suzanne DelBene (D-WA), a leader of the moderate New Democrat Coalition in the House of Representatives, has introduced the Information Transparency and Personal Data Control Act, comprehensive federal privacy legislation. While Rep. DelBene is not a member of the House leadership and does not serve on one of the key privacy policy committees, her bill is noteworthy because it comes from a Democratic member and does not include enforcement by consumer class action lawsuits (“private right of action”) and would preempt state-level data privacy laws. Those have been the two biggest policy hurdles that have stymied agreement between Democrats and Republicans. Her bill requires companies to inform users in clear language what data is being collected and shared, including the types of third parties that receive data, and give consumers the ability to opt out. Specific permission is required before sharing sensitive personal data, such as health data. Businesses would have to submit to third-party privacy audits up to once every two years if requested by an enforcement agency, although very small firms are exempt. And enforcement is done by state attorneys general and the Federal Trade Commission, which would receive additional resources for the task.

Context – Confident predictions that “This is the year federal privacy legislation will pass” have come and gone for a few years. But it seems increasingly clear that if progressive privacy advocates and their Democratic champions will compromise on consumer class action lawsuits and federal preemption of state-by-state laws, legislation is possible. Rep. DelBene’s bill fits that model. The key signals are coming from states like Virginia, where a privacy bill without class action enforcement was enacted with bipartisan support, and similar legislation looks possible in Florida, where a bill modeled on California’s law is moving. In Washington State, enforcement by class action lawsuits is blocking agreement, a parallel to federal gridlock.

Taxing Digital Platforms Gaining Bipartisan Support in CT House (despite constitutional problem)

Report from the Hartford Courant

In Brief – The Connecticut House Committee on Finance held a hearing on legislation sponsored by Rep. Holly Cheeseman (R) to tax advertising revenues earned by social media companies in the state to fund programs to prevent online bullying and to address social isolation and suicide prevention. Connecticut legislators can introduce legislation in non-statutory language, and Cheeseman’s HB 5645 does not currently propose a specific tax rate or define social media companies, although bill supporters focused on Google and Facebook. Earlier this year, HB 6187, Democratic legislation proposing a range of revenue-raising measures to fund a one-time direct payment of $500 for individual pandemic relief, was introduced with a more specific digital advertising tax proposal. That bill specified a 10% tax on the annual gross revenues derived from digital advertising services in the state for any business with annual world-wide gross revenues exceeding ten billion dollars.

Context – Digital services taxes (DST), including digital ad taxes, are justified by claims that giant digital companies are uniquely able to operate remotely and unfairly escape taxation by governments where their customers live. In response, the new digital taxes are imposed on revenue earned where customers are located, and often exempt smaller (i.e. local) firms. Many foreign countries have proposed national DSTs, which have faced bipartisan opposition in Congress and trade sanction threats from the Trump Administration, but now might be resolved through a global tax deal. Not surprisingly, US States appear interested in the same revenue grab, but they face a major legal barrier in the federal Permanent Internet Tax Freedom Act, which specifically prohibits states from imposing taxes on an Internet-delivered service that is not imposed on offline equivalents. Maryland, which enacted a digital ad services tax earlier this year that does not also tax offline advertising, is seeing it challenged in federal court on these grounds.

Twitter Sues TX AG in Federal Court Charging Abusive Investigation of Content Moderation

Report from Politico

In Brief – Twitter has filed a complaint in U.S. District Court in California against Texas Attorney General Ken Paxton (R), seeking to stop the state’s investigation into the company’s content moderation practices on the basis that it is a violation of the company’s First Amendment rights. Twitter, along with Google, Apple, Amazon and Facebook, were issued civil investigative demands (CIDs) in January following the violent US Capitol riot and subsequent actions by many digital platforms to restrict activities of critics of the validity of the Presidential election, including President Trump. The company’s complaint charges that the AG investigation is an abuse of his power and a retaliatory action over Twitter’s decision to permanently suspend Donald Trump. The company said it has tried to work out an agreement to limit the scope of the office’s request, but the two parties have not been able to do so, and sharing such confidential documents would undermine its ability to effectively moderate the platform.

Context – “Platform censorship” is quickly emerging as a top tier Republican Party issue. Pew has found that 90% of Republicans (but also, 59% of Democrats) believe that social media sites censor viewpoints that they find objectionable. And the fact that the companies are based in highly progressive urban bastions adds to the us-v-them framing. Legislation is emerging in states across the country where the GOP holds more institutional power than they do at the federal level. Texas Governor Greg Abbott (R) recently joined in support of the leading bill in the Texas legislature, the Utah legislature recently sent a bill to the governor, and bills are moving in Florida, Nebraska, Kentucky, Oklahoma, Arizona and North Dakota. That all said, the First Amendment right of companies to moderate content is on solid legal ground, upheld by the Supreme Court as recently as 2019. Plus, bipartisan compromise seems unlikely as Democrats criticize platforms for the opposite problem of letting misinformation and hate speech flourish.

European Competition Authority Approves Microsoft’s Major Game Developer Acquisition

Report from CNBC

In Brief – The EU Competition Authority (ECA) has approved Microsoft’s $7.5 billion acquisition of ZeniMax Media, a major game developer that includes successful studios like Bethesda Softworks and major titles like The Elder Scrolls, Fallout, Doom, Quake and Wolfenstein. The digital giant’s Xbox gaming platform is the company’s top consumer-focused business line, competition with Sony and its PlayStation platform is fierce, and Microsoft has historically lacked the type of exclusive, high-quality games that Sony promotes as a major selling point for its PlayStation consoles. With the ZeniMax acquisition, Microsoft will own more studios than Sony and many of the world’s most popular game franchises, although it is not clear how many would become exclusive to the Microsoft platforms, the company is already announcing that more Bethesda games will be integrated into the Xbox Game Pass subscription service that is considered central to the company’s gaming plans.

Context – Video games, including games on mobile devices, PCs, and game consoles, is a $160 billion industry estimated to be four times larger than Hollywood and three times the music industry. Mobile gaming has been in the spotlight for months due to Epic Games, the giant developer behind the Fortnite mega-franchise, leading a legal and regulatory campaign to overturn the app store business models of mobile operating system giants Apple and Google. Microsoft has jumped squarely into that debate by announcing principles for running its app store for Windows devices that closely aligned with the principles of the Coalition for App Fairness led by Epic Games and Spotify. However, Microsoft’s principles don’t apply to its Xbox platform, which currently operates like an Apple-style “walled garden” with rules and fee levels in line with Apple and the other major game consoles. Microsoft acknowledged they “have more work to do to establish the right set of principles for game consoles.”

Biden Administration Loading Up on High Profile Progressive Big Tech Adversaries

Report from CNBC

In Brief – Two of the highest profile progressive antagonists of the digital giants, Tim Wu and Lina Khan, appear on their way to be serving inside the Biden Administration. Both are prolific academic writers and thought leaders. Khan is reported to be a frontrunner for appointment as a Commissioner at the Federal Trade Commission (FTC). She gained widespread attention in digital policy circles while still a Yale Law School student for her 2017 paper Amazon’s Antitrust Paradox, has worked with progressive advocates of major antitrust law reform, including as a counsel on the House Antitrust Subcommittee during its 2019-2020 review of the digital giants, and is a Columbia Law School professor. Wu, also on the Columbia Law School staff, is unquestionably in the highest tier of progressive tech policy thought leaders over the past two decades. An intellectual founder of the net neutrality movement, and heavily engaged on competition law and policy related to tech giants for the past decade, he has been named to the National Economic Council to lead policy on technology and competition. Of note, Wu spent two years as a senior policy official in the FTC in the first Obama term, an era now criticized by progressives as far too lenient on tech giants, leaving just prior to the Commission’s decision not to sue the company for search manipulation and has since expressed some regret for not being more aggressive.

Context – Back in December, progressive groups warned the Biden Transition Team not to select staffers or nominees with Big Tech ties. Along with the news on Wu and Khan, both known for arguing that breaking up digital giants will bring benefits, Rebecca Slaughter, the acting chair of the FTC, and reported to be interested in the role full-time, recently said the chances are “very high” that a large technology company would be broken up by US regulators over the next decade, arguing it was a more “conservative” outcome than trying to heavily regulate them day-to-day.

House Passes PRO Act that Includes ABC Test Threatening Freelance and Gig Work

Report from the New York Times

In Brief – The US House has passed the Protecting the Right to Organize Act of 2021 (“The PRO Act”), a top priority of the labor movement and strongly supported by the Biden Administration, but strongly opposed by Republicans and a broad range of business interests. The bill would expand organizing rights, increase penalties for interfering with labor organizing activities, and weaken state “right-to-work” laws. The measure also impacts “worker classification” by adding the ABC Test to the National Labor Relations Act. Bill opponents argue that putting the ABC Test into federal law will effectively implement California’s highly controversial AB 5 law nationally and threaten all independent contractors, freelancers and gig workers. However, supporters contend that the PRO Act provision is targeted to federal organizing law and allows independent workers to join a union related to their work, but unlike AB 5 does not directly impact wage and benefit laws. The PRO Act passed by a partisan vote of 225-206, with just five Republicans in support, and absent changes to the Senate filibuster rule, it is highly unlikely to be passed by the narrowly divided Senate.

Context – As the fight over AB 5 played out in California over the past few years, the political energy behind tightening worker classification laws focused on ride-sharing and delivery platforms. However, the AB 5 experience also exposed how many different kinds of independent workers, professionals and creative freelancers greatly value their independence and are threatened by the ABC Test. No states followed California in 2020. California pared back AB 5 last September, exempting a wide variety of independent workers, including writers and musicians. Then California voters enacted Prop. 22 fully exempting ride sharing and delivery platforms and allowing them to offer limited, employee-like, benefits, without making drivers employees. Federally, the highly partisan issue is likely to mostly play out at regulatory agencies, much like net neutrality, to avoid the narrowly divided Senate.

India Ramps Up Takedown Pressure on Social Media By Threatening to Jail Executives

Report from the Wall Street Journal

In Brief – Following on the heels of new proposed rules for social media platforms to address abusive content, the Government of India is reported to have threatened to jail employees of Facebook and Twitter for failing to comply with user data and takedown requests related to politically damaging protests by Indian farmers. The new regulations, released on February 25 and effective in three months, set standards for platforms with at least 5 million users to cooperate with law enforcement to address unlawful content, including what the government determines affects “the sovereignty and integrity of India.” A key component of the regulations is the mandate that those firms must establish three corporate positions related to cooperation with law enforcement. Each position must be filled by an Indian national residing in the country. The companies are also required to remove illegal content within 36 hours of receiving an order from the government, as well as disclose to the government the original source of any “mischievous information”, clearly an attempt to settle the ongoing policy and legal conflict with messaging platform WhatsApp, which claims that it would break end-to-end encryption.

Context – Content moderation is a huge and increasingly politicized challenge for platforms. The EU, France, UK, Germany, Australia, and Canada are each proposing content moderation regulation. The Indian proposal shares a number of features of the controversial social media rules enacted last summer in Turkey, including the requirement that social media companies maintain representatives in Turkey to respond to government requests to take down content 48 hours. As we see in India, in-country executives who can be arrested can be a powerful government lever. While Facebook refused to submit to the law for months, in January it announced it would comply, joining LinkedIn, YouTube, TikTok and Dailymotion in setting up legal entities in Turkey. Twitter and Pinterest are the last major holdouts and face reduced bandwidth available to users, with a 50% cut in April and a 90% cut in May.

Utah Legislature Passes Bill to Stop Alleged Social Media Viewpoint Discrimination

Report from The Salt Lake Tribune

In Brief – The Utah state legislature has passed a bill to regulate the content moderation practices of social media companies that many Republican legislators claim are biased against conservative viewpoints and censor legally protected speech. The bill requires the platforms to clearly state their content moderation policies, inform users within 24 hours when they violate the rules and face action, and provide an appeals process for those decisions. The state consumer protection agency is authorized to investigate complaints that content moderation is applied inconsistently and the state attorney general is authorized to initiate civil actions against social media companies with penalties of $1,000 per affected consumer. An analysis by the legislature’s research office found that the bill raises meaningful constitutional concerns and bill’s effective date was pushed back to July 2022 to allow the measure to potentially be amended in next year’s legislative session. The bill passed the Senate overwhelmingly but only narrowly in the House, so opponents hope Gov. Spencer Cox (R) will veto the bill.

Context – “Platform censorship” bills like this are pretty much a lock to be ruled unconstitutional if enacted into law due to problems with federal preemption and the First Amendment rights of the platform companies. Nevertheless, a growing collection have been introduced where the GOP holds more institutional power than they do at the federal level, including Florida, Nebraska, Kentucky, Oklahoma, Arizona and North Dakota. It is a stark reminder that the partisan divide on content moderation and Sec. 230 is not narrowing. If anything, it is widening. And there appears to be a deepening belief among all voters, but especially Republicans, that the platforms are not ideologically balanced in their content practices, with Pew finding that 73% of all adults (including 90% of Rs and 59% of Ds) believe that it is likely that social media sites intentionally censor political viewpoints that they find objectionable.

Virginia Privacy Law Success Showing Strength of Bills Without Class Action Suits

Report from the Washington Post

In Brief – More than two-and-half years after California enacted the California Consumer Privacy Act (CCPA), Virginia has enacted the Virginia Consumer Data Protection Act, consumer privacy legislation taking provisions from laws in California and Europe. The bill earned strong bipartisan support in the Virginia House of Delegates and Senate. The legislation, which takes effect in 2023, gives residents new rights to access, correct, delete and obtain a copy of personal data, and to opt out of the processing of personal data for targeted advertising, and assigns new obligations to companies such as transparency, purpose limitation, data minimization, and various data-security requirements. Most notably, the Virginia bill does not provide for a private right of action (aka consumer class action lawsuits) as an enforcement tool, but instead gives the state’s Attorney General exclusive rights to bring enforcement actions.

Context – Conventional wisdom predicted that after 2018 saw California enact privacy legislation and EU’s General Data Protection Regulation going into effect that Congress would be pushed by business to enact standardized federal rules. It has not happened. But the progress of more state laws might prove a key indicator. It’s not about state complexity, it’s more about class action lawsuits. In Virginia, legislation modeled on the CCPA but without private class action lawsuit enforcement, earned business and Republican support and passed. In Washington, progressives insisting on consumer class action enforcement has bogged down legislation. In Florida, Republican leaders including Gov. Ron DeSantis, who are publicly frustrated with big tech companies, are calling for similar privacy legislation tempered by limits on private class action lawsuits. Prospects for comprehensive federal legislation likely hinge on the same dynamic. If progressives insist on a “private right of action”, opposition from Republicans and business interests will likely stymie the process in the US Senate again.

Google Raising Fees to Advertise in Spain to Offset Some Impact of Digital Services Tax

Report from El Pais

In Brief – Google has announced that it will be raising the fees charged to digital advertisers in Spain, as well as non-Spanish advertisers when they target ads to Spanish Internet users, to account for the new Spanish national Digital Services Tax (DST). The 2% “Regulatory Operating Cost” (ROC) fee is intended to partially offset the 3% digital revenue tax enacted by Spain that went into effect in January and was targeted at digital companies with global revenues of 750 million euros and at least 3 million euros in the country. Spain is one of ten countries with national DST plans that were scrutinized by the United States Trade Representative (USTR) last year. USTR issued findings in early January that the Spanish tax discriminates against US companies, is a burden on commerce, and is actionable under Sec. 301 of the Trade Act, which authorizes retaliatory tariffs. Google is also instituting a 2% ROC for France, and it imposed similar DST fees in November on advertisers located in, or targeting ads into, the UK, Austria and Turkey.

Context – Europe has been a hotbed of DST efforts to increase digital company taxes paid to countries where Internet users reside rather than countries where digital enterprises set up business operations, shifting tax revenues from countries like the US, Ireland, Luxembourg, and Singapore, to countries like the UK, France, Spain, and India. Most of the large digital companies targeted are American and US opposition has been bipartisan. But the biggest barrier to the new taxes in recent years was the belief that the Trump Administration would engage in trade wars, including with traditional allies, to stop them. While all sides claim to want a multilateral tax deal, talks at the OECD have been bogged down. The Biden Administration recently indicated that it was stepping back from controversial “safe harbor” demand which might increase odds of a tax deal. Regardless, the final result is likely to be increased costs for users, as the Google fee increases are similar to those from Amazon and Apple.

Arizona House Passes App Developer Bill Requiring Apple and Google Allow Payments Choice

Report from CNBC

In Brief – The Arizona State House has narrowly passed legislation to prohibit Google and Apple from requiring app developers to use specific in-app payment systems, siding with app companies engaged in an increasingly global campaign to overturn mobile operating system business models. HB 2005, which now goes to the State Senate, exempts gaming consoles and music players, which often have similar payments rules and fees. The bill is the product of a state-level lobbying campaign by the Coalition for App Fairness (CAF), a coalition created last year by large app developers including Epic, Spotify and Match. The Coalition recently hired a local-campaign lobbying expert from a DC-based lobbying firm as its first Executive Director. Similar legislation recently failed in the North Dakota Senate and is percolating in other states including Massachusetts, Georgia, and Hawaii.

Context – App store policies are facing scrutiny globally. With just two dominant mobile operating system platforms, fees reaching 30%, and millions of app developers residing in jurisdictions globally, governments are stepping in to scrutinize the platforms. While Apple and Google are two of the most valuable companies in the world, companies like Epic Games, Spotify and Match are also worth tens of billions and they clearly have the resources to engage in major lobbying and legal fights. State-by-state campaigns usually benefit the largest companies, but maybe this effort turns that conventional wisdom on its head. The first two state legislatures to move bills were Republican-controlled bodies in North Dakota and Arizona. The advocates may be tapping into conservative beliefs about alleged viewpoint “censorship”. Epic is also deep into legal and regulatory campaigns, including its headliner lawsuits targeting Apple and Google in US Federal District Court, as well as complaints in the EU, Australia and the UK, where the Competition and Markets Authority has recently opened a probe of Apple.

Federal Trade Commission Plans April Deep Dive on Abusive Online Dark Pattern Tactics

Report from Media Post

In Brief – The Federal Trade Commission (FTC) will hold a public workshop titled “Bringing Dark Patterns to Light” on April 29. The term “dark patterns” was coined in 2010 and is often used to describe the loose and ever-changing set of sneaky online design features intended to spur users to take actions, such as making a purchase or sharing data, or deter them from cancelling a subscription or dropping off a marketing list. The FTC event will bring together experts and advocates to examine topics such as how digital dark pattern tactics differ from traditional sales tactics, the targeting of certain groups, including those who are especially vulnerable, the current legal and regulatory regime, and whether additional rules, standards, or enforcement efforts are needed. The FTC, now led by Democratic Commissioners who have been critical of lax enforcement actions in a number of tech cases, recently received a consumer group complaint targeting Amazon’s dark patterns to deter people from cancelling Prime.

Context – In the last Congress, Sens. Mark Warner (D-VA) and Deb Fischer (R-NE) authored S. 1084, a dark patterns bill to prohibit digital firms with more than 100 million users from creating user interfaces “with the purpose or substantial effect of obscuring, subverting, or impairing user autonomy, decision-making, or choice to obtain consent or user data.” The California Privacy Rights Act, enacted by ballot initiative in November, aims to undermine “dark patterns” by invalidating consumer consent when they are used. Finally, while comprehensive US Federal privacy legislation has been bogged down over consumer class action enforcement, it is worth noting that the SAFE DATA Act privacy bill from Republican leaders of the Senate Commerce Committee last year included sections on “dark patterns” and “filter bubbles”, and if Democrats step back from demands for private class action enforcement, privacy legislation could gain traction and include unprecedented mandates on website and application design.

Biden China Policy Focuses on Alliance Partners and High Tech (But Maybe Not Apps)

Report from Bloomberg

In Brief – The Biden Administration foreign policy team, expected by many to focus on cooperation with alliance partners far more than the Trump Administration, but also aiming to continue a relatively hard line with China, appears to be moving in those directions. Reports indicate that the new administration is planning to work with targeted groups of countries to jointly stay ahead of China on key technology priorities, including semiconductors, artificial intelligence, quantum computing, biotechnology, 5G, and surveillance technology. The initial priorities appear to be semiconductors and AI. The Commerce Department also intends to continue forward with proposed rules to secure the information-technology supply chain from “foreign adversaries” that includes China. The interim rules that allow Commerce to monitor and reject covered transactions were released in the final days of the Trump Administration and have drawn criticism from large corporate trade groups.

Context – While the Biden Administration appears to be pressing forward with a potentially hard line on some high-tech areas of strategic competition with China, it is much less clear how the new Administration plans to handle consumer-focused digital services and applications. The Trump Administration tried to ban WeChat, TikTok and Chinese-based payments apps, an unprecedented consumer-focused manifestation of the digital decoupling from China, which would impact tens of millions of American app users. Those bans have been tied up in federal courts and the Biden DoJ has asked the judges to delay proceedings while they formulate their overall strategy. A group of tech industry leaders calling itself the China Strategy Group has published a memo contending that China “plays by a different set of rules”, including on data, surveillance and censorship, and concluding that “some degree of disentangling is both inevitable and preferable” to the alternative where China’s norms have “won”.

Privacy v. Competition – Google Announces Plan to End Tracking Users Across Web

Report from the Washington Post

In Brief – In a move certain to shake up online advertising, Google, the biggest provider of digital advertising services, has announced that it is moving completely away from technologies that track individuals as they use services across the Internet. This follow’s last year’s announcement that it would eliminate third-party cookies from its Chrome browser, the Internet’s most popular, by 2022. Cookies are a core digital advertising tool and the plan immediately raised concerns from ad industry competitors concerned that Google, with its vast array of services and operating systems, would be able to work around no cookie tracking in ways most competitors cannot. While some in the digital advertising industry have been working to develop alternate tracking tools, Google is now stating that user privacy concerns make broad tracking unsustainable and Google’s services will be built around other ad optimization techniques, including a focus on first-party relationships between digital services and users.

Context – There is growing tension between digital ad industry competition concerns and opposition to targeted advertising by privacy advocates. The UK competition authority is already investigating Google’s initial Privacy Sandbox plans, and dominance of online advertising is central to one State AG antitrust suit targeting Google. At the same time, Google faces twin lawsuits in Federal court alleging that data collection through Chrome violates federal and state law, with the judge publicly offended by Google data collection from the court’s own website, while EU officials call for a ban on ad tracking. The vitriolic battle between Apple and Facebook is similar. Apple insists privacy interests are behind its plan to require all third-party apps to get opt-in permission to collect a key iOS advertising identifier for targeted ads. Facebook strongly objects, defends targeted advertising as key to millions of small businesses with very limited marketing resources, and sees anticompetitive motives that may lead it to support the EU’s digital “gatekeeper” legislation to reign in Apple.

Amazon Contract Driver Monitoring Plan Polices “Independent” Drivers Like Employees

Report from Vice

In Brief – Amazon has begun to roll out cameras inside delivery vehicles that actively monitor drivers and the road. Most of the delivery vehicles are not technically operated by Amazon, but instead by small third-party delivery services that contract with Amazon, and the drivers are not actually Amazon employees, but instead work for the delivery firms or as independent contractor “Gig” drivers. While road safety experts say advanced monitoring could bring safety benefits, many drivers have expressed concerns with Amazon monitoring and five Democratic Senators have raised questions as well. Delivery companies like UPS and DHL have various systems to that track driver behavior, recording speed, acceleration and braking, but Amazon’s plan to use AI-enabled cameras is unprecedented.

Context – This is a “Gig” economy issue regarding how much control business can exert over “independent” worker conduct. Amazon’s range of businesses stretching from digital services like AWS and Twitch to its heavy industry warehousing and delivery behemoth raises varied and different employment issues. The union organizing drive at an Amazon warehousing center in Alabama involves blue-collar logistics employees. Amazon now has hundreds of thousands. But Amazon is also a leading “Gig” economy business using “independent” workers. Amazon integrates them tightly into their business operations and exercises much control. A decade ago, many Amazon distribution center workers were actually working for third-party staffing companies, not Amazon. Today, hundreds of thousands of third-party sellers who turn their inventory over to Amazon FBA are Gig economy version of retailers, and their “independence” is a key issue in a growing number of Amazon product liability cases. Given that many “Amazon” delivery drivers are not Amazon employees, real-time monitoring by Amazon’s AI-cameras raise issues related to driver independence and classification, which have dogged Amazon.

Canada Planning to Join Effort to Force Facebook and Google to Pay News Companies

Report from the CBC

In Brief – Canada’s Heritage Minister has stated that the federal government will introduce legislation within months to require digital giants, likely Facebook and Google, to pay Canadian media enterprises when their news content appears on the massive platforms. The comments were made following Facebook’s temporary ban on news article uploads or sharing in Australia, in response to that government’s plan to require Facebook to pay for all those media and user uploads at rates set by government arbiters. Canadian media firms have been calling for government intervention to mandate platform payments for over a year and claim it would save hundreds of journalism jobs. The Minister noted that Canada would look to examples from both Australia and France (who is nearly a year into a copyright-based news payments legal battle with Google over search result snippets) as they develop a plan, and that he had recently met with government ministers from Australia, Finland, France and Germany to coordinate on the issue.

Context – The Canadian Government is indicating it plans to follow European models on a number of digital platform issues. Heritage Minister Guilbeault has also said that the government will propose legislation to regulate online hate speech with monitoring and take-down obligations for platforms and a digital platform regulator. Online hate speech legislation in France briefly went into effect in 2020 before being struck down by the nation’s high court for imposing on free speech, and hate speech regulation concerns some Canadian civil libertarians and government opponents. In December, the Canadian Finance Minister indicated legislation was coming soon to enact a digital services tax (DST) modeled on European levies, effective in 2022. The Trump Administration had repeatedly threatened countries enacting DST schemes with tariff retaliation, a threat regularly raised in policy conflicts with Canada, but the Biden Administration appears less willing to press the DST fight.

Google Korea May Follow Apple’s Lead and Reduce App Store Fees for Small Developers

Report from Business Korea

In Brief – Google Korea is reported to be considering following the lead of Apple and modifying their app store fee model to reduce the fees charged to smaller app developers down to 15 percent. Last September, Google announced that it was expanding the range of apps sold through its Play Store that would be required to use Google Pay and would be charged 30% fees. The Google Play Store captured greater than 60% of total app sales in Korea last, home of Android phone giant Samsung. Google’s fee policy change, initially planned to begin January 1, 2021, was pushed back to October 1st under pressure from Korean lawmakers, regulators and app developers. The Korean Fair Trade Commission (KFTC) soon opened an investigation of the policy, and lawmakers called on Google to follow Apple’s fee-cutting lead.

Context – App store policies and fees are facing scrutiny globally. There are millions of app developers. Many are very small businesses or individual programmers, and they live in just about every country. On the other hand, there are just two giant mobile platforms (outside China). A few large companies, led by Epic Games and Spotify, are investing in legal, PR and regulatory campaigns to regulate app store policies and the limit the fees of Apple and Google. Both often charge 30%, but they otherwise have very different models. Apple’s very restrictive “walled garden” has been more in focus with US and EU regulators and has increasingly drawn public criticism from super giants Facebook and Microsoft. Last November Apple made an unprecedented change in their App Store fees to focus attention on large complaining businesses, announcing that developers earning less than $1 million in app revenues in 2020 will only pay 15% fees in 2021. While Google’s Android is a more open system and has been the less public target of the app developers, it is the focus in markets like Korea and India where Android dominates. Android is reported to have a 99% market share in India and Google has delayed their fee change there until April 2022.

Civil Liberties Advocates Calling on President Biden to Freeze Federal Facial Recognition

Report from the Washington Post

In Brief – A coalition of 40 racial justice and civil liberties groups led by the American Civil Liberties Union (ACLU) have called on President Biden to halt the use of facial recognition technology by the federal government over evidence the technology disproportionately impacts people of color and other marginalized groups. Concerns have also been raised that the Administration’s immigration reform proposal invests heavily in surveillance tools that carry similar concerns. It was revealed last year that controversial facial recognition firm Clearview AI was a contractor with the Immigration and Customs Enforcement agency, and the tool was used by law enforcement to scan videos of the Capitol riot.

Context – Facial recognition is one of the most controversial “AI” technologies. It is a central feature of the Chinese Government surveillance regime raising widespread and bipartisan concerns. In the EU, a legislative package on AI is expected soon, and facial-recognition technology is likely to be included among “high-risk” AI applications with stricter regulatory standards. In the UK, where video surveillance is a pervasive law enforcement tool, courts are now attempting the set the parameters around facial recognition. In the U.S., concerns over discriminatory aspects of the technology led IBM, Amazon and Microsoft to halt sales of the services to law enforcement in mid-2020. Sen. Ed Markey (D-MA) and Reps. Ayanna Pressley (D-MA) and Pramila Jayapal (D-WA) have sponsored legislation to ban the use of facial recognition by federal law enforcement agencies and Sen. Jeff Merkley (D-OR) has proposed a moratorium on all federal agencies until a comprehensive federal policy is in place. However, when the Massachusetts legislature enacted a policing reform bill at the end of 2020 with meaningful restrictions on the technology, Gov. Charlie Baker (R) threatened to veto the bill and defended the technology as a key crime fighting tool, causing the facial recognition section to be drastically pared back.

US Government Drops Digital Tax “Safe Harbor” Demand In Sign of Progress to Tax Deal

Report from Reuters

In Brief – In a concrete signal that the Biden Administration is more committed than its predecessor to reach a multilateral agreement to expand national taxes on large digital platform companies, the US Treasury Secretary has announced that the US was no longer demanding a “Safe Harbor” allowing corporations to opt-in or out of a new multilateral corporate tax regime. Digital Services Taxes (DST) expand the ability of national governments to tax highly digital companies based on where Internet users consume services rather than where the company operates. France has been a DST leader, enacting a national digital tax in mid-2019, but many countries have followed suit. The US Government and Internet companies opposed national tax schemes but claimed to support a multilateral deal, however talks have been contentious and uneven, highlighted by the Trump Administration announcing in late 2019 that a multilateral plan would need a “Safe Harbor” that allowed companies to opt in or out. This vague idea raised immediate objections from Europe and was soon followed by pandemic disruptions. Talks have dragged since and US trade retaliation threats have been the main barrier to new DST plans.

Context – The “Safe Harbor” concept remains a vague and not well understood interlude in the DST fight. Keep in mind that the two high-level US conditions on DSTs were that they be multilateral, and that they apply more broadly than just “Internet companies”. The OECD proposal, moving in late 2019 with US support, was designed to meet both conditions. Increasing taxes on the digital giants was understood. The “bug” was potentially catching “traditional” US industries in the complicated new tax net. The US Treasury claimed the Safe Harbor was needed to keep such industries from derailing the plan in Congress. Now, with that idea off the table, it remains to be seen if the US will continue to demand that the tax plan cover more than just Internet-based companies or if that condition will be jettisoned too.

TikTok Joins Growing List of Companies With BIPA-Based Class Action Settlements

Report from the Wall Street Journal

In Brief – ByteDance, the Chinese digital giant and owner of social media phenomenon TikTok, has announced a $92 million class action settlement to end a collection of privacy-related suits consolidated in the Federal Court for the Northern District of Illinois, including a suit alleging violations of BIPA, the state’s Biometric Information Privacy Act. While TikTok does not admit to the wrongdoing asserted by plaintiffs as part of the settlement, the company agrees to not use the app to collect or store biometric information or geolocation data, as well as not transmit US user data outside the US, an issue raised by US Government agencies in recent years. Approval by the court could take months.

Context – Private class action suits tied to Illinois’ BIPA continue to impact a wide and growing range of companies that employ some manner of biometric technology, especially facial scans. The highest profile has been Facebook’s $650 million settlement, and Instagram now faces one, as does Apple, IBM, Google, Microsoft and Amazon. The ongoing pace of BIPA lawsuits is likely to reinforce already strong disagreement over private right of action in privacy legislation, which is a primary partisan sticking point on comprehensive federal privacy legislation. Some privacy advocates consider the string of lawsuits to be a great feature of BIPA. But it also appears to be stymieing bipartisan compromise many places. For example, a bipartisan privacy bill that does not include consumer class action enforcement has sailed through the Virginia legislature while similar legislation is bogged down in the State of Washington where privacy advocates insist on allowing private class action lawsuits. Finally, the US Supreme Court will hear arguments on March 30 in the case of TransUnion v. Ramirez on the question of whether class members need to suffer actual harm, or theoretical harm is adequate, an issue in many of the class action lawsuits charging digital companies with violations of privacy laws like BIPA.

Florida Governor Calls for State Privacy Bill in Campaign to Rein in Big Tech Companies

Report from the Orlando Sentinel

In Brief – Florida Governor Ron DeSantis (R) and top Republican State House leaders are supporting consumer privacy legislation as part of their effort to reduce the power of big tech businesses that they claim discriminate against conservatives. Modeled after the California Consumer Privacy Act (CCPA), the legislation provides new rights and protections to consumers, including the right know what data is collected, the right to correct or delete data, the right to know if, and with whom, data is shared or sold, and the right to opt out of data sharing without penalty or discrimination. On the controversial issue of enforcement, like with the California data privacy law, a private right of action is allowed only in the case of a data breach where the company has failed to maintain reasonable security procedures. Otherwise, enforcement is in the hands of the Florida Attorney General. The bill applies to businesses with annual revenues over $25 million, earns at least 50% its revenue from selling or sharing personal data, or sells the personal information of 50,000 or more consumers.

Context – State legislative results in Virginia and Washington, where Democrats enjoy unified control of state government, seems to indicate that if consumer class action lawsuits are taken off the table, bipartisan privacy legislation is possible. In Virginia it was, and legislation modeled on the CCPA has been passed. In Washington, insistence on a “private right of action” has bogged down legislation. In Florida, we now see Republican leaders, who are publicly frustrated with big tech companies, comfortable with a similar model of privacy legislation tempered by limits on private class action lawsuits. Prospects for comprehensive federal legislation almost certainly hinge on the same dynamic. If progressive Democrats insist on a “private right of action”, opposition from Republicans and business interests will likely again stymie the process in Congress. However, like in Virginia, if that requirement is dropped, things could finally move.

In Latest Round of Amazon v Reliance Standoff in India, Amazon Wins Supreme Court Stay

Report from Bloomberg

In Brief – India’s Supreme Court has agreed with Amazon’s petition to stop the regulatory approval of Reliance Industries’ $3.4 billion acquisition of the retail and logistics assets of Indian retailer Future Group. Reliance is the massive conglomerate owned by India’s richest man, Mukesh Ambani, which has been rapidly building an ecommerce and digital services business capable of taking on Amazon in India. Amazon argues that the Reliance – Future Group transaction violates a contractual deal Amazon had with Future Group blocking its sale to a wide range of other retailers, including Reliance. The companies have gone back and forth in a series of tribunals and courts since last fall, with the latest ruling restoring the advantage for Amazon, which initially secured an interim stay from a Singapore arbitration tribunal in October, but saw it overturned by a lower court in India. The Supreme Court has directed the National Company Law Tribunal to refrain from a final decision until the court rules. It hears arguments in March.

Context – The Indian ecommerce market, and its retail industry more broadly, is greatly impacted by the country’s foreign direct investment (FDI) laws that prohibit foreign ownership of retail businesses but allow foreign-owned third-party ecommerce marketplaces. The two largest ecommerce marketplaces in India are Amazon and Flipkart (owned by Walmart). Each has faced years of allegations that they violate FDI laws by exceeding the scope of practices allowed of marketplaces and are under investigation by the Indian competition authority and the agency that enforces FDI laws. Like most ecommerce issues in India, this Reliance v Amazon standoff is linked to the FDI issue. Reliance and Future Group argue that Amazon, a foreign-owned business, could not legally have controlled the operations of Future Group, a retailer. Reliance is the first Indian-owned business that looks capable of challenging the two US-owned ecommerce giants with a massive Indian-owned ecommerce retail and marketplace platform.