Archive – 2021-22

European Commission Pre-Notification Review Underway on Microsoft-Activision

Report from Politico

In Brief – The European Commission Competition Authority is questioning Microsoft’s gaming competitors about their concerns with the proposed $70 billion acquisition of Activision. Although Microsoft and Activision have not yet officially notified the EU’s top competition regulator of their merger plan, enforcers often engage in a “pre-notification” review process with large acquisitions that are certain to fall within the scope of the regulator’s authority. Competing game platforms are reported to be of particular interest. While Microsoft has said they won’t withhold games from the Sony PlayStation platform, there are concerns about policies related to subscription offerings that compete with Microsoft’s Game Pass service.

Context – Given all the talk about acquisitions by the biggest digital platforms, no consensus has emerged over how to deal with them from a regulatory perspective. If the biggest platforms using their financial heft to get meaningfully larger is a concern, and to some it is, then the Microsoft-Activision deal offers another landmark. Or it should. It is the most expensive ever by a digital platform giant, nearly three times bigger than deal #2, also by Microsoft, when it bought LinkedIn. FTC Commissioner Noah Phillips argues that activist antitrust regulators are more comfortable being aggressive with small deals. The UK CMA, currently reviewing Microsoft-Activision, is fighting hard to unwind Facebook’s $315 million acquisition of Gif platform startup Giphy, a platform with no UK or EU operations, while the European Commission now claims the authority to review any acquisition which it says could impact Europe without any size threshold. In terms of big deals, Amazon’s $8.5 billion purchase of MGM and Microsoft’s $19 billion deal for Nuance were both recently cleared by regulators. Activision is the biggest test for Microsoft’s strategy of pro-regulatory engagement, including backing app store regulation, cloud services competition support, and labor union organizing with labor impacts a top concern of the US FTC.

Russia Fines YouTube for Antitrust Violations Linked to Content Moderation Practices

Report from Reuters

In Brief – Google has again been fined by the Russian competition authority for abusing its dominant position in the market for video hosting services. The latest fine is 2 billion rubles ($34 million) and adds to a running string of fines and penalties imposed on Google’s various services in Russia, including a Russian court recently backing a fine of 21 billion rubles ($360 million) imposed by the country’s communications services regulator for YouTube refusing to block a wide range of content the government outlaws as “false information” regarding the Russian invasion of Ukraine and related government policies. In June, Google’s Russian business filed for bankruptcy citing a range of Russian Government actions that is said made it impossible to do business, including seizing the company’s bank accounts so that it could no longer pay employees, suppliers, and vendors.

Context – YouTube continues to play a unique role in Russia’s online ecosystem. With television in the country controlled by the government, political opponents and other voices of dissent have often turned to YouTube. The most recent collection of fines are penalties for not abiding Russia’s wartime media censorship regime. It has also been a platform that the Russian Government has used to broadcast its version of the news and other content in other countries, a practice described as disinformation by many Western Governments. Last year, YouTube blocked official German language Russian news channels at the request of German Government, which accused them of COVID, vaccine and other misinformation that violated YouTube policies. Russia threatened YouTube with sanctions and eventually dispensed more fines. However, unlike with Facebook and Twitter, which were blocked from the Russian market within a few weeks of the Ukraine invasion, YouTube, the most popular social media service in Russia used by 75 percent of the population, has been largely demonetized but not blocked.

UK Announces an Artificial Intelligence Oversight Policy in Contrast to EU Vision

Report from Science Business

In Brief – The UK government has announced its high-level vision of how it plans to regulate artificial intelligence, explicitly drawing distinctions with the European Union’s approach which it criticizes as lacking flexibility and undermining innovation. Rather than proposing a single AI regulator, the UK proposes that existing regulatory agencies oversee new technology applications in their areas of substantive expertise such as financial services, healthcare, and competition law. The AI Action Plan claims to be based on six “core principles” including that AI is used safely, is technically secure and functions as designed, is appropriately transparent and explainable, considers fairness, and that a legal person is responsible for the AI and there is a clear route to contestability.

Context – Regulating the biggest tech platforms is proving a pretty easy political lift in Europe. The EU’s Digital Markets Act creating a regulatory regime to police a dozen or so very large “digital gatekeepers” will be online in 2023. The biggest legislative fights were over whether the system was tough enough. The Digital Services Act (DSA) directs how all digital platforms address illegal and objectionable content. While there was some pushback from free speech advocates, the DSA is also a lock for final approval. As opposed to being less interventionist, the UK is on a largely parallel path. The UK Online Safety Bill is right in line with the DSA. The CMA has opened a stream of Big Tech competition investigations and the agency’s head recently said the UK is falling behind Europe on setting new digital competition rules. While the UK’s “New Digital Strategy to make UK a global tech superpower” seems to miss the mark on platform regulation, AI might be proving a tougher regulatory nut to crack. One challenge is that it is a very amorphous concept. Also, small firms like Clearview AI have proven capable of big breakthroughs. EU Member States are pushing back on the scope of the Commission’s proposed AI regulation. And unlike on platform regulation, the UK might actually be charting a path of less central regulation.

Amazon’s Medical Group Acquisition Raises Concerns from the Usual Suspects

Report from the Washington Post

In Brief – Progressive critics of Big Tech are raising objections to Amazon’s plan to acquire primary care business One Medical for $3.9 billion, a major expansion of the tech giant’s health-care offerings. Based in San Francisco, One Medical operates a network of 188 medical offices and provides virtual medical services that patients access with a $199 annual membership. The deal will give Amazon those offices, staffed by medical providers, technology that enables virtual doctor visits, as well as medical data on the firm’s more than 700,000 patients. This all adds to Amazon’s existing health-care offerings, including its online pharmacy and Amazon Care, a still small virtual urgent care service. Backed by progressive antitrust reform champions such as the Open Markets Institute and the Institute for Local Self Reliance, leading Big Tech critics in US Senate have raised concerns with the deal, including Sen. Elizabeth Warren (D-MA) arguing that the company already has “too much economic power” and Sen. Amy Klobuchar (D-MN) calling on the FTC to thoroughly investigate the deal with a focus on how the company’s accumulation of data could undermine competition.

Context – With the Prime program, Amazon “gives” subscribers billions of dollars of digital services at no additional cost to beef up their retail loyalty and direct their purchases to the goods Amazon awards the Prime mantel. This opaque business model has been roiling the legal and legislative environment for years. FTC Chair Lina Khan, who rose to prominence as a law student authoring a progressive antitrust critique of Amazon, passed on challenging the MGM acquisition, which was a longshot to overturn due to its middling status as a content producer. The One Medical deal is also small in the context of the health care market, as is Amazon’s existing health care business, but Khan now leads a Democratic majority on the FTC and may feel more pressure to aggressively step in using new theories.

Antitrust Class Action Targeting Sony for Game Download Policy Dismissed (for Now)

Report from Courthouse News Service

In Brief – A class action antitrust suit filed by a group of digital game players against Sony for a 2019 change in its digital game downloads policies has been rejected by a Federal District Court judge in California for failing to meet a key threshold to sustain its claims against Sony, but the plaintiffs have been given a month to amend their complaint and try again. Up until 2019, gamers could download PlayStation games directly from Sony’s online game store or they could purchase a download code from traditional game disk retail stores and use the code at the Sony store. Sony eliminated the download code option and required that all purchases needed to be directly from Sony’s store. The lawsuit argues that the change harms consumers through higher prices and reduced competition. Judge Richard Seeborg dismissed the lawsuit arguing that the plaintiffs had failed to provide evidence that Sony chose to end a profitable existing business, namely their commissions on the sale of download codes by retailers, in order to build their own dominant download business. The judge ruled that the complaint met the other necessary legal thresholds and gave the complainants 30 days to address the last deficiency.

Context – Sony’s change in policy to restrict digital downloads to its own marketplace is a model used often in digital commerce. It is a big part of the debate over Apple’s App Store policies and practices. When there is more than one major player in a broad market, say app stores, antitrust complaints often attempt to argue that the offending company’s product or service is a market onto itself. Epic Games made that argument against Apple’s App Store but failed. Federal Courts are skeptical of single brand markets, and to take advantage of the primary exception, the US Supreme Court’s 1992 Eastman Kodak decision, it is important to prove that customers are unaware of aftermarket limitations at the time of a purchase. While that threshold was not met with Apple, well-known for their restrictive platform, Judge Seeborg thought the 2019 policy change by Sony may meet that test and might still go forward.

Indian Government Planning Legislation to Force Big Tech to Pay Media Companies

Report from Manorama

In Brief – The Indian Union Minister for IT has announced that the Indian Government intends to propose legislation to require large digital platforms to pay media companies when news content appears on their online platforms. Minister Chandrasekhar did not detail the legislative plans, including the scope of the digital platforms or media enterprises to be covered, or the mechanisms to determine how payments will be determined and carried out. The Indian Newspaper Society and other representatives of media companies have long complained that digital giants such as Google and Facebook earn online advertising revenues when ads appear on their pages where digital media products appear but the media companies are often not reimbursed, especially when the content is posted by third-parties.

Context – Traditional media businesses have been complaining for two decades that the Internet ruined their business model and more recently been pushing friends in government to force Google and Facebook in particular to pay them for news online. France and Australia have been the most aggressive, but it’s long been clear that the trend would go global. The lines in the sand have been paying for basic search links by Google, and for Facebook, paying when users, including media companies themselves, post media links. Google and Facebook have both created curated media services that have paid hundreds of millions of dollars to media companies to reduce political pressure and illustrate that they will pay up. While Google recently announced a further expansion of their curated news services that pay media companies, it is reported that Meta’s leadership is frustrated with paying huge sums to media companies without resolving the political campaigns and may scale back, including reports that they may shift resources away from news-type content creators towards entertainment-style content creators as TikTok continues as the fastest growing social media giant.

House Committee Overwhelmingly Passes Compromise Federal Data Privacy Bill

Report from the Wall Street Journal

In Brief – The House Energy and Commerce Committee has passed a comprehensive data privacy bill by an overwhelming 53-2 vote. All the Republicans voted in support, and just two Democrats, both from California, voted against the bill. The bipartisan compromise is supported by the committee’s Democratic Chairman and top Republican, as well as the top Republican on the key Senate committee. It aims to resolve the two fissures stymieing agreement for years, which have been the role of private class action lawsuits in enforcing the law, and whether the federal privacy standards will preempt “stronger” state laws.

Context – We’ve been saying for a few years that a deal on federal privacy legislation was possible, but not because it’s absolutely critical and not because state laws were getting unbearable to deal with. Instead, we looked at bipartisan deals in states like Virginia and Colorado, where Democrats pulled back from class action lawsuits (which are businesses’ biggest problem) and predicted that a similar deal could come together in Congress. With that in mind, the overwhelming level of support in the House committee is the big news, especially the fact that all Republicans backed it. It’s even bigger given the fact that the initial version of the bill drew opposition from the US Chamber of Commerce for being too weak on class action lawsuits. The amended version of the bill did not get meaningfully better on class actions and yet all the Republicans supported it. In fact, the latest version moved in the direction of key Senate Democrat Maria Cantwell. And still the US Chamber did not criticize the new version. There has been speculation in recent weeks that enacting a privacy bill offers a way to legislate on Big Tech without passing the Big Tech antitrust bill. Committee members, especially Republicans, were certainly criticizing Big Tech in the mark-up (video here). To wrap up, I wouldn’t bet a parlay that both the Big Tech antitrust bill and a federal privacy bill pass this year. The privacy bill’s gains add weight to reports that the antitrust bill is slipping.

Judge Says Cydia v Apple Not Waiting for Ninth Circuit to Finish Epic v Apple Appeals

Report from Reuters

In Brief – Siding with Apple on the issue of timing, Federal District Court Judge Yvonne Gonzalez Rogers has ruled that the antitrust trial pitting defunct app store company Cydia against Apple will occur in early 2024 and not wait for the 9th Circuit Court of Appeals to rule on the appeals in the Epic Games v Apple antitrust case. Cydia was a platform that offered consumers who would “jailbreak” their Apple phones access to apps prohibited by Apple and shut out of the App Store. Cydia’s complaint alleges that Apple made a series of technology changes between 2018 and 2021 that were “overt” acts to harm iOS app distributors, resulting in the company’s demise. Last year, Gonzalez Rogers, oversaw and delivered rulings on Epic Games v Apple, the biggest app ecosystem antitrust trial in the United States. In rejecting Cydia’s request that its trial be delayed until the Epic Games (and Apple) appeals are decided, potentially changing the legal environment, Gonzalez Rogers said “[Epic’s] case could go all the way to the Supreme Court. We’re going to litigate based upon the current state of the law.”

Context – Gonzalez Rogers’ 185-page ruling in Epic Games v Apple rejected Epic’s antitrust complaint, including for failing to prove that Apple was a monopolist. However, she used language in post-trial rulings that indicates she is not a fan of Apple’s business practices, accusing them of “incipient antitrust conduct including supercompetitive commission rates resulting in extraordinarily high operating margins which have not been correlated to the value of its intellectual property.” While she largely ruled against Epic because federal law was not with them, she may be with them ideologically and would not mind a long appeal process eventually changing the state of the law. However, Epic Games was not the first antitrust plaintiff to fail in having Apple deemed an illegal monopolist. Messaging and email developer Blix saw its suit dismissed in US District Court last July, including for failing to offer direct or indirect evidence of Apple’s monopoly power.

Google Proposes EU-Wide Plan to Allow Alternative In-App Payments Services

Report from CNBC

In Brief – Google has announced that it plans to allow nongaming app developers to use alternative payments services to process purchases on their Android apps distributed through the Google Play Store in the European Economic Area. Google will reduce the commissions it collects on in-app payments by 3% when a payment is processed by a non-Google payments service. Google commissions on payments made through Android apps downloaded from its Play Store range from 15% to 30% based on the type of app and the size of the app developer, with small app developers and payments for longer-term subscriptions paying a 15% fee, while large developers processing “micro-payments”, especially for online games, paying 30 percent. Google plans to collect commissions ranging from 12% to 27% when app developers use a payments alternative. Google said that the change is part of its effort to comply with the Digital Markets Act that will regulate the largest digital “gatekeeper” platforms and will expand payments choice to gaming apps as well.

Context – This is big news but not remotely surprising. We’ve been saying for many months that Google and Apple would eventually accept payments processing alternatives while also defending their authority to charge app developers commissions on the sales they make on their mobile ecosystems. We’ve seen this developing as Google and Apple have dealt with legislative and regulatory challenges in South Korea and the Netherlands. The two operating system giants have proposed that actually processing payments is a service worth 3 or 4 percent. (Google offered a 4% fee reduction in South Korea but only 3% in Europe.) So, what else have we been saying? That the big app developers don’t care about payments processing, they object to the overall fee levels. They criticized Google and Apple offers in the other jurisdictions and are likely to robustly object now. The big showdown will be over old-fashioned price regulation on app sales commissions. If you are interested in digital platform commission levels, here is a comprehensive report. 

Maryland’s Digital Ads Tax Might Still Face Review in Federal Court on 1st Amendment Grounds

Report from Bloomberg

In Brief – A federal judge has indicated that she believes that the State of Maryland may need to defend its landmark digital advertising tax in federal court against the charge that it unconstitutionally violates the free speech rights of the companies being taxed. In particular, the law prohibits the companies from labelling or describing any component of the price charged to Maryland customers “by means of a separate fee, surcharge, or line-item” linked to the tax, types of communications that District Judge Lydia Kaye Griggsby said companies often use with customers. Griggsby had ruled in March that most of the legal arguments challenging the constitutionality of the novel tax belonged in Maryland state courts, not federal court, due to the procedures of the federal Tax Injunction Act (TIA). However, she permitted the US Chamber of Commerce and a trio of tech industry trade groups to continue to press their case in federal court on grounds that the “anti-pass through” provision was a state tax covered by the TIA.

Context – Governments around the world want to increase taxes on the largest digital companies. Globally, that desire is powering a massive corporate tax reform effort at the OECD, although that plan recently hit turbulence in the US and Europe. Some US States feel the same urge to increase taxes on digital giants. Maryland was first in the nation to act, crafting a tax on digital ad revenues aimed to maximize the hit on Google, Facebook, and Amazon, but bills have been circulating in other states including Massachusetts, Connecticut and Texas. The most compelling argument against the state taxes is that they clearly violate the federal Permanent Internet Tax Freedom Act (PIFTA), which explicitly prohibits states from taxing commercial activity on the Internet that is not taxed the same way offline. Judge Griggsby’s original ruling was that those arguments needed to work their way through state courts, which is likely a multi-year slog. But the Maryland law’s effort to also restrict corporate speech might prove the avenue to federal court review.

Another Sec. 230 Decision Allowing Platform Liability Based on Negligent Design

Report from The Verge

In Brief – Federal District Court Judge Michael Mosman in the US Ninth Circuit has ruled that Omegle, a small chat service that randomly pairs anonymous users with each other to engage in one-off text or video communications, can be sued for liability for sexual abuse suffered by girl who, starting at age 11, met and communicated with her late-thirties abuser on the service. Judge Mosman rejected Omegle’s use of Sec. 230 of the Communications Decency Act to protect itself from liability for its users actions, arguing that liability in the case is based on negligent product design rather than the online content of the users. The decision draws heavily from a 2021 decision of a panel of the Ninth Circuit Court of Appeals that ruled that Snap, Inc. was not protected from liability claims based on negligent product design for its “Speed Filter” in a case where Snap was sued by parents of two teenagers who died in a car crash while taking a picture to post on Snapchat showing their speed at 120 mph. As an example, Mosman noted that Omegle could have designed its product to keep minors from being paired with adults.

Context – While less visible than the partisan Sec. 230 battles over online content moderation, advocates for those who suffered harm using online services have argued for years that courts have applied Sec. 230 over-broadly. The Snap speed filter product design case is the most prominent and cases like Omegle’s will determine how often judges will allow plaintiffs to reframe complaints regarding dangerous online conduct as product liability cases. In short, could every bad online outcome be avoided if platforms were properly designed to stop bad conduct? Supreme Court Justice Clarence Thomas, noted Sec. 230 critic, has often raised this objection to Sec. 230’s application. Digital services would benefit if courts would consider a services corollary to the US Supreme Court’s 1984 Sony v Universal Studios decision that device manufacturers are not liable for infringement by users “if the product is widely used for legitimate, unobjectionable purposes, or, indeed, is merely capable of substantial non-infringing uses.”

UK CMA Responds to Court Ruling by Again Reviewing Facebook’s Giphy Deal

Report from Bloomberg

In Brief – Following a recent ruling of the UK Competition Appeals Tribunal (CAT), a specialist UK antitrust court, the Competition and Markets Authority (CMA) has announced it will review its decision to require Facebook to unwind its 2020 acquisition of Gif platform Giphy for $315 million. While the CAT rejected five of Facebook’s six arguments challenging the CMA’s decision, the judges upheld the sixth, which is that the CMA erred by failing to inform Facebook that their investigation uncovered that Snapchat had themselves purchased a Gif platform, Gfycat. The regulator intends to complete the remittal report by mid-October.

Context – Despite widespread concerns over Big Tech acquisitions, there is no consensus emerging. There are different threads at play, including concerns that the largest digital firms gaining access to more data and applications is itself a problem, that small but innovative firms that could become big competitors are acquired by giants in “killer acquisitions”, and that the giant ecosystems resulting in “kill zones” if new firms get too close. The killer acquisition idea has been central to the Facebook-CMA standoff, with Giphy first described as a tool Facebook might use like Onavo to inform killer acquisitions like Instagram and WhatsApp, and the CMA eventually determined that Giphy was itself a nascent digital ads competitor that would be snuffed out by the deal. The reality that Giphy is a small New York City-based startup with no UK or European operations highlights the specter of competition authorities injecting themselves into deals involving ever smaller and more remote digital businesses based on the idea that their services can be used anywhere. A recent decision by the EU’s second highest court granting the European Commission the right to review mergers that could impact Europe regardless of their size likely accelerates that trend, and Commissioner Vestager has indicated a number of small “killer acquisitions” are in their sites. FTC Commissioner Noah Phillips argues that activist regulators are more comfortable being aggressive with small deals and avoid the biggest acquisitions which actually deserve more attention.

Google’s Federal Countersuit Against Match Shows the App Payment Fight Remains Hot

Report from the Wall Street Journal

In Brief – Google has filed a countersuit against Match Group, the developer behind dating apps Tinder and OKCupid, accusing the company of bad faith dealing and breach of contract for refusing to pay Google fees. Google’s suit is part of its legal response to Match’s federal antitrust lawsuit aiming to block Google from implementing its in-app payments policy which went into effect on June 1 requiring all apps distributed through the Google Play Store to use Google payments and collect fees that range from 15 to 30 percent. The two parties announced an agreement in late May to allow Match apps to temporarily offer both Google payments and non-Google alternatives during the court battles over Google app store policies, with Match agreeing to set aside up to $40 million in escrow to cover uncollected fees that would be owed to Google if it prevails in the antitrust suits. Google’s latest countersuit clarifies that the legal and policy standoff between the two sides remains intense with Google arguing that Match’s goal is simply to avoid paying Google fees, which at 15% for Match’s subscription-style service is the lowest among “major app platforms,” as well as reiterating that Android allows apps to be downloaded from alternative app stores.

Context – Apple and Google are both in the crosshairs of big app developers pushing for governments to regulate fees on their mobile ecosystems. Apple has been more in the spotlight in the US and Europe. (Google is in South Korea.) While Congress debates Big Tech antitrust proposals, including a bill to regulate the app stores, the biggest policy development in the US was Epic Games’ antitrust lawsuit targeting Apple. Epic sued Google too, but the Apple suit got to trial much sooner, with the decision largely siding with Apple. It is now in the appeal phase. The trial in Epic’s suit against Google is expected in early 2023. In the run-up, Google not only agreed to a temporary deal with Match, but also Epic Games’ Bandcamp business and Spotify, as well as reaching a settlement with small developers that maintains Google’s 15% rate for them and provides a $90 million settlement fund.

Amazon Faces a Federal Antitrust Suit on Price Fixing – Wholesaler Policy Edition

Report from Bloomberg

In Brief – A collection of consumers that shop on Amazon has filed a class action lawsuit in federal court in the Western District of Washington accusing the ecommerce behemoth of anticompetitive conduct that pushes up prices off Amazon to protect Amazon from low-price competition. The plaintiffs target an Amazon practice called Minimum Margin Agreements (MMAs) that require their wholesale suppliers to pay money back to Amazon if Amazon identifies the same product for a lower price elsewhere and price matches the competitor. The MMA guarantees a set profit margin to Amazon, so if price matching causes its profit margin to fall below the guaranteed level, the wholesaler must pay Amazon the difference. The complaint alleges that suppliers respond by ensuring that the goods they sell do not appear online at a lower price than the price on Amazon.

Context – Amazon’s price parity policies have been controversial for years. Most critics have focused on Amazon’s long-standing “price parity” or “MFN” practices that block “third-party sellers” who sell on the Amazon marketplace from offering lower prices on any other website. Amazon claimed to abandon their MFN practices in Europe in 2013 and in the US in 2019, but many sellers claim that the identical policies are enforced by Amazon through its Buy Box algorithm that penalizes sellers who sell for less elsewhere. While Amazon claims they are only interested in low prices on their platform, many argue that sellers opt to set the same prices off Amazon as on Amazon, even when fees on other venues are less and would allow lower prices. Amazon’s dominance is the key issue. Their share of ecommerce marketplace sales approaches 70 percent while charging high fees to sellers. To protect sales on Amazon, suits allege that sellers and wholesalers forgo prospective sales from lower prices off Amazon. A federal judge in Washington State has already rejected Amazon’s motion to dismiss a consumer class action suit targeting their third-party seller price parity policies. These plaintiffs hope for the same success.

European Commission May Settle Two Investigations to Change Amazon Conduct

Report from the New York Times

In Brief – The European Commission Competition Authority has reached a tentative deal with Amazon to settle two multi-year investigations. The ecommerce and logistics giant would agree to make some changes to address concerns with how the company collects and uses third-party seller data, how Amazon sets the criteria for winning the “Buy Box” that leads to most sales on its marketplace, and how Amazon establishes eligibility for products to be part of the Prime program. The linkages between sellers using Amazon’s massive FBA logistics network, which carries high fees to Amazon, and Amazon giving preferential treatment on its marketplace, are central to the Buy Box and Prime designation investigations. Rival companies and other groups have until September 9 to submit their views to the Commission.

Context – Amazon is the largest online retailer, the largest ecommerce marketplace provider, and the largest ecommerce fulfilment center services provider. Unlike true marketplaces, Amazon handles the goods for most of their top marketplace sellers as if they were their own retail goods. With the Prime program, Amazon “gives” subscribers billions of dollars of digital services at no additional cost to beef up their retail loyalty and allow Amazon to direct their purchases to the goods Amazon awards the Prime mantel. This opaque business model has been roiling the legal and legislative environment for years. Complaints about Amazon misusing third-party seller data to grow its own retail business have garnered attention for years but are largely a misdirection. Amazon’s most profitable ecommerce business is third-party sellers using FBA to sell on Amazon, not old-school retail sales. And Amazon’s India business shows they don’t need to be a traditional retailer at all. The Buy Box and logistics aspects of the proposed EC settlement are the ones to watch. Plus, between the European Digital Markets Act, new German competition regulation, and new UK investigations, the whole Amazon operation may just be fully regulated soon.

A Top Former Uber Lobbyist in Europe Becomes the Latest Tech “Whistleblower”

Report from the Washington Post

In Brief – Mark MacGann, a former Uber executive who served as a leading spokesperson and communications strategist for the company in Europe from 2014 to 2016, has revealed himself as the “whistleblower” behind a massive leak of company documents exposing internal company policies and strategies on major regulatory and public issues. He handed over more than 124,000 company documents to the Guardian, which shared them with the International Consortium of Investigative Journalists. An Uber spokesman responded that the company has undergone many changes since MacGann left the company, that “Mark had only praise for Uber when he left the company” and that he recently settled a legal dispute with Uber regarding departure pay, receiving 550,000 euros.

Context – We’ll pass on spending time or energy providing perspective on Uber conduct, messaging, strategies and tactics from 2013 to 2017. As anyone who reads these emails knows, the legal, political and policy issues facing Uber, Gig Work and Digital Labor platforms have come a long way since then. Instead, take a minute to think about the employee “leak” and “whistleblower” issue facing a growing number of tech companies. The past two years have seen the Facebook Whistleblower, a major leak of Amazon documents pertaining to their business and communications in India, a recent release of voluminous audiotapes and documents from TikTok challenging their representations regarding Chinese-based company officials accessing US user data, and now this Uber document dump. Seriously, what’s up? What’s new? We didn’t see this from rapacious banks, oil companies, coal companies, airlines, cigarette companies or other industries. Are tech company employees less loyal? More easily offended, disillusioned, or prone to fits of rage? Are they simply more tech savvy and therefore know how to copy and store massive numbers of documents better than their paper-bound predecessors? Have the companies failed in how they recruit and manage people? Or how they manage data? Hmmm.

California Drivers Sue Rideshare Companies for Controlling “Independent” Workers

Report from the New York Times

In Brief – Three rideshare drivers have filed a class action antitrust complaint against Uber and Lyft in California Superior Court alleging that the platforms have engaged in anticompetitive practices by setting the prices customers pay and limiting drivers’ ability to choose which rides they accept without penalty. The argument, which is supported by the advocacy group Rideshare Drivers United, abandons the more traditional fight over claiming that drivers are employees who deserve benefits and labor protections, and instead claims that the platforms violate state antitrust law by not treating drivers as truly independent contractors. The drivers are asking that Uber and Lyft be barred from “fixing prices for ride-share services” and be required to give drivers transparent information on per-mile, per-minute or per-trip pay before they accept a job.

Context – While the focus of most policy fights over Gig work platforms has been over whether workers should be considered employees, challenges to platforms based on the degree of control they exert over workers has been an ongoing secondary issue. The new antitrust lawsuit in California is not the first of its kind in the US. A New York City Uber driver filed a similar class action lawsuit in federal court in late 2015, experiencing some early success in the US Second Circuit before Uber ultimately prevailed after five years when the federal courts upheld Uber’s driver arbitration process and the driver lost his arbitration case. In Europe, the European Court of Justice has long considered the level of independence of platform workers to be central to the question of whether platforms where digital services providers or traditional businesses, with AirBNB prevailing in 2019 based on the independence of hosts while in 2017 Uber was adjudged to direct the activities of drivers. Finally, as Europe turns more to regulating digital platforms than pursuing legal action, the European Commission has proposed a directive to regulate Digital Labor Platforms and address issues such as “algorithmic control” and “bogus self-employment”.

TikTok Delays Change in European Privacy Policy on Ads After Regulator Complaints

Report from TechCrunch

In Brief – Faced with regulatory pushback led by the Italian Data Authority, TikTok has agreed to delay a change in its privacy policy in Europe that would have allowed for targeted advertising to users without explicit consent. The short-video social media phenom was proposing to make that change effective July 13 but was formally warned by the Italian regulator that its plan would breach both the ePrivacy Directive and the General Data Protection Regulation (GDPR) and that the company’s legal basis for the change, being in the legitimate interests of the company and its partners, was insufficient. The regulator also expressed concern that inappropriate advertising could be directed at minors given the problems that TikTok has faced in accurately monitoring the ages of its users. The Irish Data Protection Commission, which is TikTok’s lead privacy regulator for the GDPR, announced that TikTok agreed to “pause” the changes following engagement between the Irish regulator and the social media giant.

Context – TikTok’s rapid emergence as a social media giant has led to a flood of lawsuits and regulatory complaints, mainly focused on young users, including in the Netherlands, Italy, France, the UK, South Korea and the United States. The company has established US and EU safety advisory councils to help address privacy and child safety concerns. Ireland, the European home to Google, Facebook, Apple, Microsoft, Twitter and TikTok, has been the target of widespread criticism for lax regulation of the data practices of the Big Tech platforms. The Irish Data Protection Commission (IDPC), the lead regulatory authority for those platforms under the General Data Protection Regulation (GDPR), is the usual target. Last year, EU Commissioner Vera Jourova needed to publicly called on Member State privacy regulators to stop criticizing the IDPC, and there is no doubt that frustration with the GDPR “One Stop Shop” model empowering the IDPC (and Luxembourg) was a driver behind the DSA and DMA putting the European Commission in the regulatory driver’s seat for the largest platforms.

Global Corporate Tax Reform Talks Hitting Delays as Digital Tax Collections Continue

Report from the Wall Street Journal

In Brief – The Organization for Economic Cooperation and Development (OECD) has reported to the G20 Finance Ministers that the negotiations to fundamentally change the taxation of multinational companies is taking longer than expected and will likely continue at least another year. The OECD plan aims to resolve two issues — the taxation of digital giants like Google and Apple, and the efforts by some countries to promote corporate investments by offering very low corporate tax rates. “Pillar 1” was initially just a digital company tax but now aims to change the taxation of approximately 100 highly profitable consumer-facing companies who will face higher taxes from governments where their users buy services rather than from governments where they operate their businesses. “Pillar 2” aims to undermine corporate tax havens with countries agreeing to tax multinational companies at least 15 percent. The OECD facilitators report that the Pillar 1 negotiations are the problem due to the novelty and complexity of the proposed changes shifting national authority to tax from being based on where some businesses operate to where they sell goods and services.

Context – Getting global corporate tax reform across the finish line was always a very tough ask. Back in 2020, a host of EU Member States, as well India and Turkey, enacted national Digital Services Taxes (DSTs) to tax large, mostly US-based, Internet companies outside the traditional corporate tax processes. The Trump Administration argued that only the US had the right to tax the companies and threatened major trade retaliation. The Biden Administration shifted its focus to the global minimum tax, and while progress followed, getting needed changes through Congress has not happened. Problems have emerged in Europe and Africa as well. Some of the national DSTs are already being imposed on the largest US digital companies. Governments in Europe and India have agreed to rebate tax overages once the full global deal goes into effect, but if there is no deal, those agreements will expire, and the DSTs will continue.

The UK CMA Kicks Off Expected Review of Microsoft’s Massive Activision Acquisition

Report from CNBC

In Brief – The UK’s Competition and Markets Authority (CMA) has announced that it has initiated a formal investigation of Microsoft’s $70 billion acquisition of giant game developer Activision-Blizzard, one of the largest ever acquisitions by a digital giant. The initial “Phase 1” inquiry opens a process for “any interested party” to express concerns and share information with the CMA by July 20, and the agency has until September 1^st to decide whether to pursue a more extensive “Phase 2” investigation into whether the deal is likely to lead to higher prices, lower quality or reduced choice in games and the gaming ecosystem.

Context – Despite widespread general concerns over Big Tech acquisitions, there is no consensus emerging among enforcers challenging deals. US FTC Commissioner Noah Phillips argues that activist antitrust regulators are more comfortable being aggressive with small deals and avoid the biggest fights involving the largest buyers and most expensive targets. The track record from the past few years appears to back that up, at least with Big Tech. While the UK CMA continues to try to unwind Meta’s $315 million acquisition of Gif platform startup Giphy, Amazon’s $8.5 billion purchase of MGM and Microsoft’s $19 billion deal for health care digital records firm Nuance both recently cleared regulators. Back in 2020, the highest profile Internet company acquisition was Google’s bid for wearables innovator Fitbit, a deal that was completed despite opposition from consumer and privacy advocates. Microsoft’s $70 billion bid for Activision is many times larger than any of them. The company vocally supports engagement with regulators and is working overtime to build goodwill on issues including app store regulation, cloud services competition and labor union organizing, in particular as labor impacts are reported to be a concern of the US Federal Trade Commission in its own investigation of the Activision deal.

German Competition Authority Rules That Amazon is a Platform of Paramount Significance

Report from Reuters

In Brief – As expected since Germany amended its Competition Act in January of 2021 to overhaul the regulation of the largest digital platforms, the Bundeskartellamt, the German Federal Cartel Office (FCO), has announced that Amazon falls under its new legal authority to proactively address competition threats from the largest digital platforms. The regulator has determined that Amazon is dominant in regards to its marketplace services for third-party sellers. The new German regime rejects the traditional competition enforcement model of regulators investigating dominant businesses for anticompetitive abuses after they are accused of causing harms, a process criticized as too slow. The Bundeskartellamt is now authorized to identify digital companies “of paramount significance on competition across markets” and proactively establish rules to protect competition in the markets they occupy. Last year, the regulator opened proceedings to make that determination for Google (completed in January), Facebook (completed in May), Amazon and Apple. Unlike Google and Meta, who are not challenging the designation, Amazon responded to the determination stating, “We disagree with the FCO’s findings, are analyzing the decision, and will consider our options including an appeal.”

Context – While leading antitrust enforcers such as EU Commissioner Margrethe Vestager insist that traditional antitrust enforcement targeting Big Tech will continue in parallel with regulation, it increasingly seems that regulating digital platforms to address competition concerns is coming to the fore, especially in Europe. The most important development is the EU’s Digital Market Act (DMA) establishing 18 high-level “Do’s and Don’ts” on “digital gatekeepers”. It is expected to be fully operational in early 2024. The German regime, which is more open-ended in some ways, and has more than a year head-start, is a harbinger of sorts. German officials have expressed concerns that the DMA is too restrictive in scope and the European Commission does not have the regulatory heft to carry out the full job.

Twitter Sues Indian Government Over Takedown Orders Authorized by 2021 Social Media Law

Report from the New York Times

In Brief – In a flair up of an ongoing battle over government policing social media, Twitter has filed suit in the Karnataka High Court challenging a new wave of requests from the Indian Government to remove content and block accounts. While Twitter reports that it has complied with the government orders, it then sought judicial relief. The suit is the company’s first legal challenge to Indian social media laws implemented last year that set new standards for platforms with at least 5 million users to cooperate with law enforcement to address unlawful content, including content the government determines affects “the sovereignty and integrity of India.” The law requires covered firms to establish three corporate positions related to cooperation with law enforcement. Each position must be filled by an Indian national residing in the country. Those executives can face criminal penalties if the social media company does not comply with the government demands. Government authorities subsequently ordered Facebook, Instagram and Twitter to take down dozens of social media posts critical of its handling of the pandemic, including posts from opposition politicians. In June, law enforcement pressured Twitter to overturn a decision to apply its “manipulated media” label to Tweets from a ruling BJP party official making claims regarding an opposition party.

Context – Social media content moderation, like all censorship, is in the eye of the beholder. Governments around the world have always looked at digital platforms, seen content they don’t like, and pushed the platforms to police it. China, Russia, Turkey, India and a growing number in Central Asia and Africa seem easy to criticize on censorship grounds. But Germany, Australia and France were early adopters as well. While the EU’s Digital Services Act and UK Online Safety Bill claim to set rules for online content moderation and also protect free speech, they are certain to create similar tensions, although likely over different disfavored content. And free speech advocates already see the Western efforts empowering authoritarians.

Global Corporate Tax Reform Talks Hitting Delays as Digital Tax Collections Continue

Report from the Wall Street Journal

In Brief – The Organization for Economic Cooperation and Development (OECD) has reported to the G20 Finance Ministers that the negotiations to fundamentally change the taxation of multinational companies is taking longer than expected and will likely continue at least another year. The OECD plan aims to resolve two issues — the taxation of digital giants like Google and Apple, and the efforts by some countries to promote corporate investments by offering very low corporate tax rates. “Pillar 1” was initially just a digital company tax but now aims to change the taxation of approximately 100 highly profitable consumer-facing companies who will face higher taxes from governments where their users buy services rather than from governments where they operate their businesses. “Pillar 2” aims to undermine corporate tax havens with countries agreeing to tax multinational companies at least 15 percent. The OECD facilitators report that the Pillar 1 negotiations are the problem due to the novelty and complexity of the proposed changes shifting national authority to tax from being based on where some businesses operate to where they sell goods and services.

Context – Getting global corporate tax reform across the finish line was always a very tough ask. Back in 2020, a host of EU Member States, as well India and Turkey, enacted national Digital Services Taxes (DSTs) to tax large, mostly US-based, Internet companies outside the traditional corporate tax processes. The Trump Administration argued that only the US had the right to tax the companies and threatened major trade retaliation. The Biden Administration shifted its focus to the global minimum tax, and while progress followed, getting needed changes through Congress has not happened. Problems have emerged in Europe and Africa as well. Some of the national DSTs are already being imposed on the largest US digital companies. Governments in Europe and India have agreed to rebate tax overages once the full global deal goes into effect, but if there is no deal, those agreements will expire, and the DSTs will continue.

The UK CMA Kicks Off Expected Review of Microsoft’s Massive Activision Acquisition

Report from CNBC

In Brief – The UK’s Competition and Markets Authority (CMA) has announced that it has initiated a formal investigation of Microsoft’s $70 billion acquisition of giant game developer Activision-Blizzard, one of the largest ever acquisitions by a digital giant. The initial “Phase 1” inquiry opens a process for “any interested party” to express concerns and share information with the CMA by July 20, and the agency has until September 1^st to decide whether to pursue a more extensive “Phase 2” investigation into whether the deal is likely to lead to higher prices, lower quality or reduced choice in games and the gaming ecosystem.

Despite widespread general concerns over Big Tech acquisitions, there is no consensus emerging among enforcers challenging deals. US FTC Commissioner Noah Phillips argues that activist antitrust regulators are more comfortable being aggressive with small deals and avoid the biggest fights involving the largest buyers and most expensive targets. The track record from the past few years appears to back that up, at least with Big Tech. While the UK CMA continues to try to unwind Meta’s $315 million acquisition of Gif platform startup Giphy, Amazon’s $8.5 billion purchase of MGM and Microsoft’s $19 billion deal for health care digital records firm Nuance both recently cleared regulators. Back in 2020, the highest profile Internet company acquisition was Google’s bid for wearables innovator Fitbit, a deal that was completed despite opposition from consumer and privacy advocates. Microsoft’s $70 billion bid for Activision is many times larger than any of them. The company vocally supports engagement with regulators and is working overtime to build goodwill on issues including app store regulation, cloud services competition and labor union organizing, in particular as labor impacts are reported to be a concern of the US Federal Trade Commission in its own investigation of the Activision deal.

Senators Press FTC on Disclosures That Chinese-Based TikTok Staff Access US User Data

Report from The Verge

In Brief – The bipartisan leadership of the Senate Intelligence Committee has called on the Federal Trade Commission to investigate whether TikTok, the short-video social media phenom, has misrepresented its corporate governance practices, in particular regarding Chinese access to the voluminous data it holds regarding tens of millions of US users. The potential for Chinese Government authorities to access sensitive data on US users has been a national security-related charge dogging the super-popular app for a couple of years, leading to the US Armed Forces prohibiting the service on government-issued devices and being the major justification behind the Trump Administration’s efforts to ban the app from US app stores and force Chinese-based ByteDance to sell TikTok’s US operations. While TikTok officials have repeatedly rejected claims that US user data could be accessed by Chinese officials, a recent report from Buzzfeed News, which claims to be based on leaked TikTok documents and audio recordings, says that TikTok staff in China has had significant access to US user data. TikTok has subsequently confirmed to a group of Republican Senators that company employees in China have been able to access US user data but only after clearing security protocols, and company officials continue to claim that such data has not and would not be shared with Chinese Government officials.

Context – The Biden Administration revoked President Trump’s WeChat and TikTok orders, stepped away from the resulting legal battles, and embarked on a bureaucratic effort to create a still not-yet-finalized process to address digital services, apps and equipment from countries that raise national security concerns, including China. While the FTC could respond to Senators Warner and Rubio by opening some manner of a TikTok investigation, the Committee on Foreign Investment in the United States (CFIUS) is likely to be the more relevant agency and is reported to be discussing with TikTok officials how they can address concerns over Chinese data access.

Google Faces Another European Job Search “Vertical” Antitrust Complaint  

Report from Reuters

In Brief – Danish online job search platform Jobindex has filed an antitrust complaint with the European Commission Competition Authority alleging that Google unfairly preferences its own job search service in its general search results. Google has faced repeated accusations that it abuses the dominance of its general search engine by downranking independent online sites that offer a range of specialized “vertical search services” dealing with topics such as travel, local, shopping or jobs while prominently featuring the Google-operated alternatives. That practice is at the heart of the Google Shopping antitrust case pitting the European Commission against Google for more than a decade, a decision the search giant continues to appeal. European-based online job search sites have been encouraging Commissioner Margrethe Vestager to take up this kind of search preferencing case since 2018.

Context – The EU’s landmark Digital Markets Act will impose a range of competition policy-inspired regulations on what are expected to be a dozen or so very large “digital gatekeepers”, with Google, Apple, Amazon, Meta and Microsoft certain to be covered. Jobindex’s antitrust complaint reminds us of the inspiration for the DMA, which was frustration with the pace and effectiveness of the traditional competition law enforcement model. The Google Shopping case, which is now approaching 12 years in duration, was a key example. Prohibiting digital gatekeepers like Google from preferencing their own services on their largest platforms is unsurprisingly one of the DMA’s key regulatory rules. The new regulatory model will require major resources, including many skilled staff, from the European Commission, something recently outlined by Commissioner Thierry Breton. And Vestager says that DMA regulation will effectively operate side-by-side with traditional antitrust investigations and enforcement, although only time will tell if the Commission takes up competition cases that overlap with DMA regulations.

Amazon Changes Prime Cancellation Process in Europe Under Dark Patterns Complaint

Report from TechCrunch

In Brief – Amazon has dramatically simplified the online process European users must go through to cancel a Prime subscription. The company was accused last year of breaching the EU’s Unfair Commercial Practices Directive and various Member State laws by using “dark pattern” tactics including complicated navigation menus, skewed wording, confusing choices, and repeated nudging to thwart consumers intentions. The highlights of the complaints by consumer groups led by the Norwegian Consumer Council are laid out in this short cartoon video. The European Commission has announced that Amazon is changing the process to involve just two clicks via a prominent and clear “unsubscribe” button, and Amazon stated, “By design we make it clear and simple for customers to both sign up for or cancel their Prime membership.” Amazon is reported to also be implementing the changes in the UK by the end of August. While a similar complaint was filed with the US Federal Trade Commission by consumer group Public Citizen, Amazon has not announced any changes for its US site.

Context – From the earliest days of the commercial Internet many web sites have used some sneaky tactics to spur users to take actions, including making purchases, sharing data, and signing up for marketing programs. An almost unlimited range of design tactics including fonts, colors, sizes, images, repetition, and confusing grammar have been lumped under the heading “dark patterns”. Regulation of website design dark patterns is soon coming in the EU as part of the Digital Services Act. Amazon’s European changes probably reflect that realization. In the US, bipartisan legislation in the past two Congresses aims for similar regulation. It has not moved stand-alone but could be included in broad privacy legislation. State-level digital privacy measures enacted in recent years in California and Colorado have included provisions nullifying user consent when achieved using deceptive practices. Finally, a similar coalition of European consumer groups that targeted Amazon’s cancellation processes have recently filed complaints targeting Google’s sign-up processes.

Google Settles with Small App Developers Over In-App Payments in Run-Up to Epic Trial

Report from Bloomberg

In Brief – Following in the litigation footsteps of Apple in its antitrust legal battle with giant game developer Epic Games, Google has announced an agreement with smaller US-based app developers to settle an antitrust complaint that accused the digital giant of anti-competitive policies related to in-app payments for apps distributed through the Google Play Store. Google will allow small developers to communicate with their users more easily about options to subscribe to services outside the Google Play Store, as well as establish a $90 million fund to support developers who earned $2 million or less annually through the company’s app store from 2016 to 2021, with payments ranging from $250 to $200,000 for up to 48,000 small developers. On the key issue of Google’s commission rate for in-app payments, Google pledges to maintain the 15% commission rate for the first $1 million in annual revenue earned from the Google Play Store for U.S. developers, half the normal 30% rate, a policy the company initiated in 2021.

Context – Apple and Google are both in the crosshairs of big app developers pushing for governments to regulate fees on their two mobile ecosystems. Apple has been more in the spotlight. Their “walled garden” business model, with clear, consistent, strict and well-enforced rules, seems more likely to violate antitrust laws to casual observers. Plus, while Epic Games sued both companies simultaneously in US federal court, their antitrust lawsuit against Apple moved to trial much faster. In the run up to receiving a largely positive decision late last August from federal judge Yvonne Gonzales Rogers, Apple settled a payments-based complaint from smaller developers. Like with Google’s recent settlement, they agreed to payments policy changes, a lower fee level for small developers, and a $100 million fund. Epic’s federal court showdown with Google is expected in early 2023. Like with Apple’s cases, the same federal judge is overseeing both the Epic Games-Google trial and the digital giant’s small app developer complaint and settlement.

EU Parliament Approves Final Digital Regulation Bills and Enforcement Talk Heats Up

Report from Reuters

In Brief – The European Parliament has approved final versions of the two landmark laws to regulate digital platforms operating in the EU. The Digital Markets Act (DMA) imposes new competition policy-inspired regulations (a table of high-level requirements can be found here) on what is likely to start as a dozen very large “digital gatekeepers”. The Digital Services Act (DSA) directs how all digital platforms address illegal and objectionable content, including new rules covering deceptive website practices, limitations on targeted advertising, specific take down duties, and content moderation transparency requirements. Large platforms face stricter DSA rules. As the Parliament’s work ended, the issue of enforcement and resources came to the fore. Commissioner Thierry Breton released a blog post providing the greatest insight yet into enforcement plans, including hundreds of expert staff at the European Commission, which will take the lead role with the largest platforms, and in the Member States. The lead Parliamentarian ushering passage of the DMA called for the Commission to dedicate at least 150 skilled staff to the DMA work alone. Unlike the DMA, the DSA includes a dedicated regulatory funding mechanism, with large digital platforms, those having at least 45 million users, facing a new fee of .1% of global earnings. The EU Council of Member States is expected to approve the final version of the DMA in mid-July and the DSA in mid-September. The laws should become fully operational in early 2024.

Context – It’s hard to over-hype the change in digital governance that will eventually come from the EU’s DMA and DSA. Creating broad new regulatory regimes and imposing them on so many digital platforms will dramatically impact the digital ecosystem in Europe and globally. Supporters on both sides of the Atlantic are looking for similar action in the US, seeming not to prefer a stark A/B test of major digital regulation. Prospects for DSA-style content moderation regulation in the US are slim. DMA-style regulation of the biggest tech giants has a better chance but is far from assured.

UK CMA Opening Investigation of Amazon (while Amazon Looks to Settle with the EU)

Report from CNBC

In Brief – The UK Competition and Markets Authority (CMA) has announced that it is moving forward on investigations challenging Amazon over anticompetitive conduct harming third-party sellers using its marketplace platform, the largest ecommerce platform in country. The CMA’s investigation will focus on three main areas: (1) How Amazon collects and uses third-party seller data and whether it unfairly benefits Amazon’s own retail business; (2) How Amazon sets the criteria for winning the “Buy Box” that leads to most sales on the marketplace; and (3) How Amazon establishes eligibility for products to be part of the Prime program. The linkages between sellers using Amazon’s massive FBA logistics network, which carries high fees to Amazon, and Amazon giving preferential treatment on its marketplace, is expected to be central to the second and third investigative streams.

Context – Amazon is the largest online retailer, the largest ecommerce marketplace provider, and the largest commerce fulfilment center services provider, handling the goods for most of the leading sellers on its marketplace side-by-side with its own retail goods. And then there is the Prime program, where Amazon “gives” subscribers billions of dollars of digital services at no additional cost to beef up their retail loyalty and direct their purchases to the goods Amazon awards the Prime mantel. This opaque business model is roiling the legal and legislative environment. As the CMA opens these new investigations, it is reported that Amazon and the European Commission Competition Authority may soon settle similar investigations underway in Brussels since late 2020. And while US Federal Trade Commission Chair Lina Khan came to prominence authoring a landmark progressive antitrust critique of Amazon, that agency failed to challenge the company’s acquisition of MGM Studios intended to boost Prime’s video offerings. Amazon’s reported plan to invest in GrubHub and give away its service to Prime customers might offer the regulator another chance to delve into that part of the business model.

Google Reaches Agreement with French Authorities on Plan to Pay French Media Companies

Report from the Wall Street Journal

In Brief – Google and the French competition authority have resolved their two-year battle to require the digital giant to pay French media companies when their content appears in search results. The regulator has accepted Google’s proposal committing to good faith negotiations, including agreeing to make a payment offer within three months from the start of a negotiation, and turning impasses over to a binding arbitration court. Google is dropping its appeal of the 500 million euro fine imposed by the regulator last July for failing to reach enough agreements. France amended its copyright law in 2019 creating new “neighboring rights” that require media companies be paid when snippets of their stories appeared in Internet search results.

Context – Traditional media businesses have been complaining for two decades that the Internet ruined their business model and more recently pushing friends in government to force Google and Facebook to pay them for online news. France and Australia have been the most aggressive. The lines in the sand have been paying for basic search links by Google, and for Facebook, paying when users, including media companies themselves, post media links. Google and Facebook have both created curated media services that have paid hundreds of millions to media companies to reduce political pressure and illustrate that they will pay up. But negotiating deals with every “media” business in any country, let alone globally, is a huge task, especially when one side thinks government will step in and set better terms. While Google recently announced a further expansion of their curated news services that pay media companies, as well as reopening their News service in Spain after an eight-year payments dispute, it is reported that Meta’s leadership is frustrated with paying huge sums to media companies without resolving the political campaigns and may scale back. There is speculation that the company will consider dropping news, which is often politicized and carries content moderation risks, from the platform like they temporarily did in Australia.

Microsoft Changes Some AI Policies and Restricts Facial “Emotions Recognition” Service

Report from the New York Times

In Brief – Microsoft has announced that it is tightening controls over the use of its artificial intelligence products and phasing out features of its facial recognition services that claim to be able to detect a person’s age, gender or emotional state. Those facial recognition-based applications will stop being available to new users of the company’s facial recognition products and will be phased out for existing customers by the end of the year. The changes are part of a broad policy called its “Responsible AI Standard” which Microsoft describes as setting out requirements for AI systems to ensure that they do not have a harmful impact on society. A particular emphasis is on corporate accountability to find out who uses its services, meaning potential users of Microsoft’s facial recognition service will be required to tell Microsoft exactly how and where they’ll be deploying its systems and get approved by the company.

Context – Two things that come to mind besides the drumbeat of policy actions being taken by Microsoft as it works to win regulatory approval of its massive acquisition of Activision Blizzard. First, facial recognition is the AI technology creating the most regulatory and policy angst. Government uses, both current and planned, is particularly worrisome to progressives and civil libertarians. The largest companies involved, IBM, Microsoft and Amazon, all stepped back from providing services to law enforcement in 2020 due to racial justice concerns, but small, specialist companies like highly controversial Clearview AI are market leaders anyhow. Second, Amazon has been especially aggressive pushing the envelope. Microsoft is stopping facial “emotion recognition” due to inaccuracy and bias, but Amazon still offers the criticized service. Amazon was also the biggest defender of law enforcement facial recognition. Finally, as Microsoft tightening AI facial recognition, Amazon was announcing AI-based voice replication, with Alexa potentially being able to replicate the voice of people, living or dead, based on one minute of recording. Not creepy or dangerous at all.

German Competition Authority Opens Investigation of Google Maps Restrictions

Report from Bloomberg

In Brief – The Bundeskartellamt, Germany’s national competition authority, has announced that it will investigate potentially anticompetitive restrictions imposed by the Google Maps Platform. The regulator noted that Google restricts customers from combining Google mapping services with map services from other providers, potentially undermining the development of competitors. In addition, it alleged that Google imposes “very strict terms” on the use of its maps services in vehicle infotainment systems which could undermine competition in that emerging digital services market as well. The Maps investigation falls under the regulator’s new legal authority to proactively address competition threats from digital companies “of paramount significance on competition across markets”. Google and Meta have been so designated, and proceedings related to Apple and Amazon are underway. Once established, the regulator is authorized to proactively establish rules to protect competition in the markets they occupy. Google is also the subject of investigations into the terms and conditions is imposes for data processing and for participation in its Google News Showcase.

Context – While various Big Tech antitrust cases plod ahead, the path of simply regulating digital platforms to address competition concerns is where the real action is. The march of the EU’s Digital Market Act (DMA) is most important right now. It proposes a set of 18 “Do’s and Don’ts” on giant digital gatekeepers. The German regime is a helpful guide to how such a model may work. While search, advertising and the Android are certain to be top of mind with Google, platforms like Google Maps Services and Google Automotive Services will likely face new rules and restrictions. The Italian competition authority has already fined Google for anticompetitive practices on their auto services platform, and a small bike share company in Denmark has accused Google of preferencing the Lime App on Maps. In the US, the DoJ is reported to be in the later stages of a preliminary investigation of Maps similar to the German investigation.

Meta Agrees with French Competition Regulator on Fair Access for Ad Services Competitors 

Report from Bloomberg

In Brief – The French competition authority has approved commitments made by Meta Platforms (Facebook) to resolve complaints that it unfairly disadvantaged competitors offering digital advertising services. Meta has agreed to give advertising technology companies serving French audiences access to advertising inventories and campaign data on transparent, objective and predictable conditions for the coming five years. The commitments cover ad inventories on all Meta’s platforms. The company will not face a fine or other penalty. The French regulator had initiated an investigation following a complaint by French digital ad group Criteo, who publicly praised the agreement reached with Meta.

Context – Digital advertising revolutionized the ad industry by delivering more effective targeting capabilities and more quantifiable returns. Google was the first digital adtech giant to draw the attention of competition authorities, but as the overall market grew, Facebook and most recently Amazon have also emerged as giant platforms. Google is still the primary subject of digital ad services investigations, including by the European Competition Authority, a coalition of US State AGs and the UK CMA. The “Jedi Blue” business deal between Google and Facebook draws Meta into some of those investigations. Like an adtech agreement Google reached with the French competition authority last summer, Meta is only required to implement changes in France. However, given the legal and regulatory challenges facing both digital giants in major markets globally, including the EU, UK and Japan, expect them to attempt to structure other efforts to placate regulators by expanding commitments they are already implementing in France. With Google (28%), Facebook (24%) and Amazon (15%) holding the largest shares of digital ad revenues but not even 30% singularly, simply regulating may be a safer bet.