Archive – 2021-22

Outlines of the Coming Supreme Court Battle Appear as Justices Re-Pause Texas Social Media Law

Report from the New York Times

In Brief – Five Justices of the US Supreme Court have voted to temporarily halt a Texas law that prohibits large social media platforms from blocking or suppressing the communications of users based on the viewpoint of the user. The five acted on an emergency appeal of a May 11 order delivered by a divided three-judge panel of the 5th Circuit Court of Appeals that overturned a December decision of Federal District Court Judge Robert Pitman that had blocked enforcement of the Texas law pending full court review. Judge Pitman had determined that regulating how social media companies treated the speech that occurred on their platform was a violation of the First Amendment. Texas’s Attorney General argued that social media companies were not like newspapers and other publishers whose right to control their platforms were protected by the First Amendment, but instead were like a phone company or other common carrier that could not limit legally protected speech based on the content on the communications. The appeal to the Supreme Court from trade groups representing social media companies prompted hastily-filed amicus briefs from across the ideological and policy spectrum. The decision to again put the law on hold pending full court action was supported by Justices Roberts, Breyer, Sotomayor, Kavanaugh and Barrett. The five did not deliver an opinion, which is not unusual in the case of “emergency” action. Justices Alito, Thomas, Gorsuch and Kagan dissented from the majority decision, with Alito submitting a five-page written opinion joined by Thomas and Gorsuch. Kagan did not join the Alito dissent and did not provide an explanation for her decision.

Context – The widely held belief that large social media platforms restrict content based on ideological viewpoints is strongly held among conservatives and has emerged as a top Republican political issue. While federal legislation is stymied by the complete disconnect between Democrats and Republicans on the issue, there is much action at the state level, especially where Republicans control state government. Florida was the first to enact a state law to stop what is often called “viewpoint” discrimination. As expected, its law was blocked by a federal court based on seemingly clear First Amendment grounds, as well as the argument that Federal law, Sec. 230 of the Communications Decency Act, clearly grants online platforms the right to moderate content as they desire. Texas followed Florida, and again, in a not surprising ruling, the law was blocked. The unprecedented ruling from the 5th Circuit appeals panel cannot be overstated, and the lack of an opinion ever being filed by the judges only adds to the lack of clarity. In the past week, a panel of three judges on the 11th Circuit Court of Appeals upheld the hold on the Florida law in a harsh rebuke of legislation regulating speech. However, in the minds of at least three of the High Court’s conservatives, when it comes to the First Amendment, “It is not at all obvious how our existing precedents, which predate the age of the internet, should apply to large social media companies.” We know what Justice Thomas thinks about social media content moderation. He wrote his opinion more than a year ago (starts on page 12).

EU Parliamentarians Travel to California Bay Area to Discuss Tech Regulation with Top Companies

Report from PYMNTS.com

In Brief – Just months after the governing bodies of the European Union agreed on two landmark bills regulating digital platforms, a delegation of EU Parliamentarians (MEPs) that led those legislative efforts traveled to Silicon Valley to meet with representatives from tech companies including Airbnb, Apple, eBay, Google, Meta, PayPal and Uber. Top of the agenda were the implementation challenges of the EU Digital Markets Act (DMA), which will impose a set of competition policy-inspired mandates on approximately a dozen of the largest “gatekeeper” platforms, and the EU Digital Services Act (DSA), establishing a wide range of new content moderation and transparency standards for all digital platforms. The MEPs who shepherded the two huge bills, Andreas Schwab for the DMA, and Christel Schaldemose for the DSA, were in the delegation. The group also intended to investigate developments and public policy related to e-commerce, artificial intelligence, consumer protection, online platforms and the gig economy.

Context – The impacts of the DMA and the DSA cannot be underappreciated. In about a year, they will be at the heart of a regulatory regime that is unprecedented for digital platforms. European Commissioner Margrethe Vestager describes the effort as establishing oversight of digital firms akin to the regulated banking, energy and telecommunications sectors. There is no shortage of cheerleading from champions of the EU bills for the US Congress to now follow suit. While US Progressives are all in for both DSA-style content moderation rules and a DMA-style antitrust crackdown, the former is DOA due to partisan divisions. Something on Big Tech antitrust, especially Senate legislation to prohibit a wide range of self-preferencing practices by the biggest five platforms, remains in play. There is a new draft from lead sponsor Sen. Amy Klobuchar (D-MN) based on feedback after January’s Senate committee action, but also reports of political cold feet emerging from Democrats facing tough fall elections as stock market troubles, inflation and recession fears grow.

Twitter Settles FTC Data Abuse Complaint by Paying $150 Million Fine and Changing Policies

Report from the Washington Post

In Brief – Twitter has agreed to pay a $150 million fine as part of a settlement with the Federal Trade Commission (FTC) and US Department of Justice (DoJ) to settle allegations, laid out in a complaint concurrently filed by the DoJ in federal court in California, that the social media company improperly used email addresses and phone numbers collected for account security purposes to target advertising from 2014 to 2019. The announcement from the regulators says that the agreement also bans the company from profiting off the “deceptively collected” data, requires Twitter to notify more than 140 million users that it used their phone numbers and email addresses for advertising, and implement a new privacy program that includes reviewing new products and services for security risks. The case and settlement had bipartisan backing at the FTC, with the two Republican Commissioners filing a concurring statement applauding how the matter was handled in line with long-running FTC precedents and commitments to “vigorous privacy and data security enforcement”.

Context – When the Democratic commissioners were preparing to take the reins of the FTC following the election of President Biden, aggressive enforcement of cases targeting corporate abuse by tech companies looked to be in the cards. In a series of 3-2 decisions (Facebook, YouTube, Sunday Riley, Zoom) the Democratic Commissioners strongly criticized the Republican majority for insufficiently robust settlement terms, including lack of redress, financial penalties or admission of wrongdoing. Over the ensuing year and a half, there has not been a meaningful uptick of big enforcement cases. Instead, the agency under lightning-rod Chair Lina Khan has been wracked by even greater partisan division, stymied by confirmation delays, and appeared more focused on setting up a major privacy and data handling rulemaking that could run headlong into Congressional prerogatives.

Microsoft Aims to End EU Cloud Complaints with Special Deal for Small EU Providers

Report from Bloomberg

In Brief – In response to complaints from European cloud services providers that Microsoft engaged in anticompetitive conduct to boost its cloud services business, the company is reducing the costs for European cloud services business to host Microsoft software. The effort is aimed at heading off a full investigation by the European Commission which has a preliminary review underway. Rivals argue that Microsoft uses terms and pricing of its popular Windows 10 & 11 software and MS Office Suite to dissuade customers from choosing alternative cloud vendors. The plan reduces the cost for EU-based cloud companies to host top Microsoft software on their services, but does not extend to software customers who use the cloud services of competitors like Amazon and Google. Some critics claimed that the proposal will turn EU-based cloud providers into resellers of top MS software.

Context – The lengthy blog post of Microsoft President Brad Smith admits that strategies to compete with market leader Amazon have harmed small EU providers as well as a principle that “We recognize that European governments are regulating technology and we will adapt to and support these efforts”, fully in line with the company’s brand as the digital super giant looking to partner with government regulators. Cloud services are being brought into the European digital competition debate from two directions. The largest providers are Amazon, Microsoft and Google and their cloud platforms may fall under the Digital Markets Act regulations. However, Margrethe Vestager recently said that she was not directly concerned with competition in that market. The other angle is that the cloud giants link other services and platforms to their cloud offerings creating unfair preferencing and distorting those markets. The new Microsoft offer does not fully abandon that policy, but it does appear to try to find a way to offer a specific exception that satisfies enough EU businesses and regulators to make the problem go away. Very much like a regulatory partner.

Bipartisan Senate Bill Regulating Digital Advertising Aims to Break Up Google Ad Business

Report from the Wall Street Journal

In Brief – A bipartisan group of senators led by Sen. Mike Lee (R-UT) has introduced legislation that would bar companies with more than $20 billion in digital advertising revenue from both owning services to help buy and sell online ads and operating an ad exchange where those transactions occur. The measure is intended to force Google to sell off key parts of its lucrative advertising technology business. The legislation also requires large digital advertising platforms to act in customers’ best interests and provide greater transparency on data collection, the terms of winning bids and the fees they charge, which will also impact platforms like Facebook and Instagram.

Context – Some version of antitrust legislation targeting the tech giants might still make it through the US Congress this year, but it won’t be as big and broad as the EU’s DMA and DSA. Last year, the House Judiciary Committee passed a sweeping set of four bills, but they sit idle. The Senate has moved slower, but progressives calling for massive antitrust changes and conservatives willing to do something harsh if it’s narrowly targeted to big tech firms they think are ideologically biased may still come together. The American Innovation and Choice Online Act would block the five largest digital platforms from preferencing their own products and services. It’s the boldest take. However, bills that divide and conquer tech giants might prove more resilient. The Open App Markets Act to regulate giant app stores, meaning just Apple and Google. Lee’s digital ad services bill would primarily impact Google. To be clear, Google’s digital ad services have drawn antitrust scrutiny in numerous markets, including a major State AG antitrust suit, inquiries in the UK and Australia, and an investigation by the European Commission. However, antitrust suits take a long time. Plus, with Google reportedly controlling just 28.6% of the $211.2 billion in US digital ad spending last year, followed by Facebook’s 23.7% and Amazon’s 11.6%, not relying on federal courts to break them up is a safer bet.

Federal Appeals Court Unanimously Upholds Stay Blocking Florida Social Media Law

Reports from the Wall Street Journal

In Brief – A unanimous three judge panel of the Eleventh Circuit Federal Court of Appeals upheld last June’s federal court order blocking Florida’s social media content moderation law that purports to prevent digital platforms from restricting online speech in an ideologically discriminatory manner. The most recent three judges, all nominated by Republican Presidents, agree that the law most likely violates the First Amendment, in particular provisions that restrict suspensions, fact-checking, and content removal, and reject the argument that the largest social media platforms are quasi-governmental public spaces or “common carriers” akin to a phone company. The judges were explicitly clear in their opinion that “social media platforms aren’t ‘dumb pipes’” and detail how most have always curated online communities with user terms of service and content policies. The appeals panel did determine that a range of transparency provisions, including notices of changes to terms of service, could go into effect.

Context – The Eleventh Circuit’s well-reasoned ruling cannot come as a surprise to anyone who has followed the years of federal litigation surrounding the legal and constitutional barriers to challenging the how online platforms moderate user content. It’s been a series of pretty much open and shut cases. Not only do companies, big and small, have First Amendment rights preventing government from directing how they speak and moderate speech, but federal law, in particular Sec. 230 of the Communications Decency Act, protects online companies from civil suits for good faith content moderation as well. This ruling is only big news because a panel of Fifth Circuit Court of Appeals recently restored a similar Texas law that had likewise been blocked for clear constitutional shortcomings. That one-sentence order, which goes against the precedents and reasoning on display from the Eleventh Circuit panel, has been appealed to the Supreme Court for emergency review. While the Fifth Circuit panel has still not turned in their work, the other amicus briefs are available here.

Labor Win Among Tech Adjacent Workers with Raven Software Game Tester Union

Report from the Washington Post

In Brief – Twenty-eight Quality Assurance (QA) workers at video game development studio Raven Software have voted to unionize, creating the “Game Workers Alliance”, a new labor organization within the Communications Workers of America, which is a major labor union that endeavors to organize high tech businesses. Raven Software, known for the Call of Duty franchise, is a subsidiary of Activision Blizzard, a giant game developer that is the target of a massive Microsoft acquisition bid. Activision Blizzard has nearly 10,000 employees and operates 11 studios, including Raven, which has approximately 350 workers. Many of Raven’s QA workers, who are game testers, were contract employees when the company moved last year to eliminate the positions of a dozen and bring the remaining employees into full-time positions. Many of the workers reacted negatively to the plan and their overall treatment by the company, and moved to create a union that kicked off a contentious months-long organizing fight.

Context – The highly politicized topic of unionizing Big Tech is rife with confusion and misunderstanding. The highest profile efforts involve the labor force working in Amazon’s huge fulfilment center network. It is a giant and important Labor effort but it’s not about tech workers. That’s a logistics workforce comparable to UPS, FedEx and the Postal Service. The Raven Software workers in this case are not programmers or designers, they are game testers who make approximately $20 per hour, so again, not quite “high tech”. It’s a similar situation with union drives underway in a handful of Apple Stores. Apple’s retail workers might form a union, but that is not the same thing as the company’s high tech labor force organizing. That all said, there was a truly notable high tech labor win earlier this year when 600+ high tech workers of the New York Times Company voted to unionize. They created the largest true high tech labor union in the country. That campaign included progressive activist investors lobbying the normally pro-Labor Times management to stop their internal anti-union efforts.

Google Reaches Temporary Deals with Match and BandCamp on Play Store App Payments

Reports from the Wall Street Journal and Billboard

In Brief – Google has temporarily resolved legal disputes with two large app developers, Match Group and Epic Games, who had filed federal lawsuits to block Google’s plan to require apps distributed through the Play Store to exclusively use Google’s payments service to make in-app sales as of June 1, 2022. Google uses its payments system to collect its commissions, which range from 10 to 30 percent. Match Group, a leading developer of popular dating apps including Tinder and OKCupid, and Epic Games, on behalf of its BandCamp music distribution platform popular with independent artists, had each filed separate lawsuits against Google in federal court in California to block Google from implementing its new in-app payments policy. The agreement reached by Google and Match allows Match apps to offer both Google payments and non-Google alternatives, 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 related to its Play Store policies. Likewise, Epic Games and Google, prodded by the federal judge handling their full antitrust case, agreed that BandCamp could continue to use alternative payments and not collect or pay any fees to Google, but would instead set aside in escrow the 10% fees Google proposes to charge BandCamp, which will be paid to Google if Google prevails in their overall litigation.

Context – Apple, with its “walled garden” business model and strict App Store rules has been more in focus in the recent app store antitrust fights. But Epic Games sued both giants in federal court. The Apple lawsuit moved much faster and the decision is now under appeal. The Google trial is expected in early 2023. Google’s June 1 deadline is now driving action. Google argues that their fee levels are the lowest among major app stores, that developers can use alternative app stores and download directly from the web, and in Korea, they have proposed to allow alternative payments with 4% lower fees. But some developers want no fees.

UK Privacy Regulator Issues $10 Million Fine and Orders Clearview AI to Destroy Data

Report from CNBC

In Brief – The UK Information Commissioner’s Office (ICO), the country’s data protection watchdog, has ruled that controversial facial recognition company Clearview AI has violated UK data protection laws, fined the company nearly $10 million, ordered it to delete all data on UK residents, and banned it from collecting any more pictures or serving customers in the country. The company has been under legal and regulatory pressure in many countries, including France, Canada, Australia, Italy and, in the United States, states such as Illinois and Vermont. While in some countries, such as the UK and Canada, the company has said it has completely withdrawn from the market, in others it says it sells exclusively to government clients, especially law enforcement. A representative for Clearview said the company continues to argue that the firm does not do business in the UK and is not subject to the ICO’s jurisdiction.

Context – The legal and regulatory challenges facing Clearview AI is probably the highest profile story involving facial recognition, and real-world artificial intelligence applications more broadly. First, it seemed to come out of nowhere just two years ago, a very small company appearing on the scene and announcing that it had scraped billions of public photos off the Internet and built a functioning facial recognition system. While social media giants like Facebook, YouTube and Twitter filed lawsuits to stop the effort, Clearview continues on, claiming to be amassing 100 billion images. Under legal, regulatory and PR pressure, the company now claims to offer the service only to government and law enforcement. And despite protestations from civil libertarians and privacy advocates, clients in the US Government and US law enforcement are growing. Internationally, government and law enforcement are equally interested in facial recognition for security and law enforcement. The EU’s landmark AI regulation proposal exempts security from facial recognition limits.

No Breakthrough as Treasury Secretary Yellen Pitches Poland on Global Tax Deal

Report from the Wall Street Journal

In Brief – Making a key stop in Warsaw on a major economic policy tour of Europe, Treasury Secretary Janet Yellen pushed Poland to step back from its opposition to the European Union implementing a global minimum tax on large multinational corporations but failed to get a commitment from the Polish Government. In early April, Poland blocked the EU from implementing the massive two-part global corporate tax reform deal by objecting to the EU establishing a 15% minimum tax rate on multinational corporations. The global corporate tax reform plan negotiated at the OECD 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” of the OECD plan, a top priority of the EU, applies new tax rules to approximately 100 highly profitable consumer-facing companies, including the digital giants initially targeted by European Digital Services Taxes (DST). “Pillar 2”, the top priority of the Biden Administration, undermines corporate tax havens by having countries agree to set their tax rate for multinational companies no lower than 15 percent. Poland claims that it will oppose EU legislation enacting Pillar 2 on tax rates until there is a legal guarantee that Pillar 1 would be enacted by the US Congress, leaving the deal in a state of uncertainty in both the EU and the US.

Context – The ability to get something as complex as global corporate tax reform across the finish line was always a very tough ask. The progress up to now has been quite remarkable. That said, there is real uncertainty over whether tax changes needed to implement the overall deal will get through the US Congress given conservative opposition to the deal itself and to the Biden Administration’s broader goal to raise US corporate taxes. Tied to the overall effort are the national DSTs already being imposed on the largest US digital giants in Europe and India. Some of those taxes may be rebated to the companies if the full global deal goes into effect.

Draft Biden Plan to Restrict Adversaries from US App Data Shows DoJ Rising, DoC Falling

Report from Reuters

In Brief – After months of near silence, it is reported that the Biden Administration has drafted an executive order that would give the Department of Justice (DoJ) authority to stop foreign adversaries like China or Russia from accessing Americans’ personal data, as well as directing the Department of Health and Human Services (HHS) to prevent federal funding from supporting the transfer of US health data to those countries. The draft, which must still undergo review by relevant government agencies, empowers the DoJ and appears to reflect frustration with the Department of Commerce (DoC), which has failed to develop rules under similar powers granted to that agency by President Trump in 2019. The DoC was authorized to ban or restrict transactions between US firms and tech companies from “foreign adversary” nations, including Russia and China, and a Biden executive order in June 2021 expanded the authority to protect Americans’ sensitive data from foreign adversaries via transactions involving apps. But Commerce has not made public progress on any of the fronts.

Context – The Trump Administration’s efforts to ban WeChat and force ByteDance to sell off TikTok’s US operations, were unprecedented accelerations in the digital divide between the US and China. However, the Biden Administration slowed things way down in 2021, revoked the Trump WeChat and TikTok orders, stepped away from the resulting legal battles, and embarking on an effort to create a still not-yet-finalized process to address security implications of digital services, apps and equipment from countries that raise national security concerns, including China. The implications of digital platforms sharing data with businesses inside China continues to raise privacy concerns, including outside the US in countries like Japan. The aggressive Chinese crackdown on its domestic digital giants has also pressed home the reality that the Chinese Government can impose its will on even its largest companies, which legally includes the right to access their user data.

EU Commission Proposes Bill to End Strong Encryption to Enable Child Abuse Monitoring

Report from CNBC

In Brief – The European Commission (EC) has stepped aggressively into the debate over online surveillance, private digital communication, encryption and the ongoing challenge of child sexual abuse, by proposing new legislation to require online platforms, including messaging services, to more aggressively screen, identify and remove child abuse. The EC says that digital platforms and services have not taken sufficient actions to address the proliferation of child sexual images, grooming and other abuse. The legislation would establish an EU Centre on Child Sexual Abuse that will serve as a lead regulator overseeing the efforts of platforms and working with law enforcement, as well as allow Member States to request that courts order companies to implement systems that can detect abusive content and communications on their platforms. Privacy advocates reacted very negatively to the proposal, arguing that it aims to eliminate end-to-end encryption that protects all manner of private communications from snooping because a main tenant of the proposal is to require digital platforms and governments to “read and scan user messages on the massive scale.”

Context – The policy fight over encryption stretches back to the 1990’s pitting civil libertarians and technologists against law enforcement and national security advocates looking to extend analog wiretapping regimes to all forms of digital communications. It was a focus of President Trump’s second Attorney General, William Barr, who regularly lambasted Facebook and Apple. Globally, the UK and Australia have been similarly aggressive. The European Commission appears to want to jump ahead in the regulatory competition. Child sex abuse (and terrorism) is often the point of the spear in Internet regulation, for example being a headline charge behind the UK Online Safety Bill that has metastasized into a proposal to regulate a laundry list of objectionable online content from hate speech and suicide promotion to financial and romance scams. In the US, the EARN IT Act is being used in a similar Internet regulation effort.

Two GOP AGs File Federal Lawsuit to Stop Social Media Censorship by Biden Administration

Report from Fox News

In Brief – Missouri Attorney General Eric Schmitt (R) and Louisiana Attorney General Jeff Landry (R) have filed a federal lawsuit in Louisiana against President Biden and other top administration officials including former White House Press Secretary Jen Psaki, Dr. Anthony Fauci and the new head of the Homeland Security Department’s Disinformation Governance Board, Nina Jankowicz, alleging that the federal officials “pressured and colluded” with social media companies to censor and suppress information on a range of politically salient topics, including the Hunter Biden laptop story, the origins of COVID-19 origins, policies to deal with the pandemic, and security of voting by mail. The lawsuit alleges that the federal government violated constitutional rights in a massive effort to suppress free speech. The two AGs do not appear troubled by the fact that nearly all the social media actions cited as First Amendment violations occurred when Donald Trump was the President and most of the defendants were not in government.

Context – Most Americans believe that social media platforms restrict content for ideological reasons, a view most strongly held by conservatives. Prohibiting “viewpoint discrimination” is now a top Republican issue. Federal bills to regulate social media are stymied by the disconnect between Democrats and Republicans, but in states controlled by the GOP it is a different story. Last year, Florida was the first to enact a state law attempting to stop viewpoint discrimination. As expected, the law was blocked by a federal court. Texas followed months later, and again, in a not surprising ruling, the law was also blocked on First Amendment grounds. In a highly surprising reversal, a Louisiana-based panel of the US 5th Circuit Court of Appeals recently restored the Texas law. That decision has been appealed to Supreme Court Justice Samuel Alito for an emergency ruling (set of briefs available here). If that longshot does not come through, whether and how platforms like Facebook, YouTube and Twitter respond will be a very interesting question.

Second Meeting of the US-EU Trade and Technology Council is Thin on Digital Policy

Report from Bloomberg

In Brief – The second meeting of the US – EU Trade and Technology Council produced a 47-page report covering ten working groups. The latest meeting focused on a range of issues brought to the forefront by the Russian invasion of Ukraine, the ongoing war, and the largely united US-EU response, including cyber security, online information policies during crisis, and policies related to a range of strategically important technologies and industries. On the trade front, while the Trump era tariff sanctions targeting EU industries like steel and aluminum have largely been resolved, the one-time broad goal of developing a transatlantic free trade agreement has largely been abandoned. On Internet policies, the two sides expressed high level support for an open, global Internet promoting free expression, but with Europe moving forward aggressively on major legislation regulating digital platforms, while similar measures are largely stalled in the US Congress, details on Internet policies were largely absent.

Context – When the Trade and Technology Council (TTC) met last September, the EU’s massive double-barreled digital initiatives, the Digital Markets Act (DMA) and the Digital Services Act (DSA), were moving but nowhere near finished. They are now across the finish line. A year from now the DMA will be regulating a dozen giant digital “gatekeepers” and the DSA rules will govern how platforms police online content governments find objectionable. US Progressives are all in on both, and Democrats are broadly united on content moderation regulation. The latest TTC report includes language relevant to that debate as part of the digital platform working group (pp. 27-29), which was cited in the EU’s press release but not the White House Fact Sheet. But major differences with Republicans will stand in the way of any Congressional action. On Big Tech antitrust legislation, the TTC report is silent, and it remains unclear if bipartisan US legislation will cross the finish line. The European champions of the DMA are certainly rooting for it. Regulators like international fellow travelers.

DHS Halts Planned Online Disinformation Board and Controversial Leader Resigns

Report from AP News

In Brief – Just three weeks after it was announced, the ill-defined DHS Disinformation Governance Board has been scrapped and the leader of the organization has resigned from the department. DHS had described the internal group operating within its Cybersecurity and Infrastructure Security Agency as an effort to better coordinate the agency’s activities to combat online misinformation impacting illegal immigration, foreign election interference and threats to critical infrastructure. Nina Jankowicz, a scholar at the Wilson Center and expert on political disinformation in Russia and Eastern Europe and online harassment facing women, was recruited to lead the group. Conservatives reacted quickly and harshly to what appeared to be a federal agency stepping directly into policing online speech on topics that many argue are often highly political, with criticism surfacing that Ms. Jankowicz was a partisan who defended social media efforts to restrict circulation of political commentary, such as the Hunter Biden laptop story.

Context – This incident, which is worth a laugh, leaves us with one Memorable moment, one Valuable takeaway, and in the spirit of the Governance Board, one Misinformation Warning. The thing you’ll remember years from now, if you watch them, are the videos of Ms. Jankowicz, in particular her parody song about misinformation. Watch! They are hilarious, unprecedented, and in the TikTok age, maybe the first of many. Coming from the think tank “expert”, they helped blow this up. The most valuable takeaway is that this as another example of how volatile any effort to have government govern online content is in the US. There is no way to do this that won’t seem partisan. Finally, the misinformation… the claim that this was an unfair online hit job. The critical failure of DHS and the Biden Administration was in not coming out right away and clearly saying that group would only dealing with online scams outside the US. Absent that, it always looked like it could veer into domestic online debates, meaning politics. Add in Jankowicz coming across as a partisan ideologue rather than sober and balanced… Boom.

Another Price Parity Antitrust Suit – Valve Faces Antitrust Complaint for Steam Game Platform

Report from Bloomberg

In Brief – US District Court Judge John Coughenour has rejected Valve Corporation’s motion to dismiss a class action antitrust complaint lodged by Wolfire Games accusing Valve of employing anticompetitive price parity rules and practices on its dominant Steam videogame distribution platform to push third party game distributors to raise their prices on other game distribution platforms. The judge ruled that it is plausible that Valve exploits the market dominance of the Steam platform for downloaded PC games to engage in unlawful conduct by threatening and retaliating against game developers that sell games for lower prices through other retailers or platforms. It is estimated that up to 70% of PC-based video game sales occur on the Steam platform, which imposes a commission of 30% on game distributors.

Context – The practice of not allowing suppliers to offer lower prices on alternative venues is often referred to as a “price parity”, “MFN” or “no-price competition” clause. Some argue that those policies can drive up consumer prices across an entire market when the offending business holds a dominant market share because third party sellers won’t be willing to charge lower prices to consumers on other venues, even if those venues charge lower fees, for fear of losing sales on the dominant platform. Coughenour’s ruling is the latest in a series on digital platform MFN lawsuits with federal judges leaning towards allowing complainants to make their case.  A federal judge in New York is allowing a case to proceed charging delivery platforms Grubhub, Uber Eats, Postmates with anticompetitive policies driving up prices of meals not delivered by the apps. A federal judge in Washington state is allowing a case to proceed against Amazon accusing it of driving up prices on other online venues by penalizing sellers on Amazon if they sell for lower prices elsewhere, even when fees would permit it. Finally, while a District of Columbia Superior Court rejected essentially the same Amazon MFN case brought by the DC Attorney General, the US Department of Justice has asked the DC Court to reverse its ruling.

Google Paying More Money Than Ever to European Media Companies for News Content

Report from the Washington Post

In Brief – Google has announced a further expansion of its efforts in Europe to pay traditional media businesses when their content appears in Google news feeds. The search and advertising giant says that it is paying 750 European publications as members of its curated Google News Showcase service, and that they had reached agreement with more than 300 national, local and specialist news publications in Germany, Hungary, France, Austria, the Netherlands and Ireland to license content under the European Copyright Directive that appears with snippets in Google News. Finally, the company is launching a digital tool to make similar Google News offers to thousands more news publishers, starting in Germany and Hungary, before rolling out to other EU countries.

Context – Traditional media businesses have been aggressively complaining for two decades that the Internet ruined their business model. The result has been a steady campaign by the industry leaders, starting with newspapers and expanding to TV and radio, to press national governments to force Internet giants, in particular advertising behemoths Google and Facebook, to pay them for news content. France and Australia have been the most aggressive. France, the European leader in recent years, has been focused on Google after quickly amending its copyright law in 2019 to create “neighboring rights” in line with EU copyright law and demanding the search giant pay French media companies for snippets and links. The line in the sand for Google has been refusing to pay for basic search links, and for Facebook it has been refusing to pay when users post media links. But Google and Facebook have also both created billion-dollar media payments programs to reduce pressure globally 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 authorities will step in and set better terms.

Clearview AI Settles BIPA Suit with ACLU Limiting US Sales to Government Agencies

Report from the New York Times

In Brief – Controversial facial recognition firm Clearview AI, who built a leading service by downloading billions of publicly available pictures off the largest online social media sites and training its algorithm on the massive image database, has settled a lawsuit filed by the American Civil Liberties Union that alleged the company violated the Illinois Biometric Information Privacy Act (BIPA). Clearview AI has agreed to limit its sales in the US to government clients, in particular law enforcement and security agencies. Illinois has been at the center of facial recognition litigation in the US because BIPA allows private class action lawsuits to enforce the law, leading to a wave of private lawsuits. Clearview AI, under legal and regulatory pressure in many countries, has already focused on government clients, although it claims to be able to market its algorithm to private firms absent access to the database.

Context – Clearview AI reaching a settlement on a BIPA lawsuit that allows the service to be marketed to law enforcement touches on all most salient aspects of facial recognition and AI regulation. (1) Despite widespread concern over facial recognition and surveillance by civil libertarians and progressives, government uses, including by the US Federal Government, is widespread and growing. US Federal legislation to slow or stop it is not moving. (2) Even where AI and facial recognition are being limited or regulated, such as with the EU’s landmark AI legislation, security services exemptions are being included. In the US, cities that have restricted facial recognition by police are considering rolling back the limits as crime rates increase. (3) Clearview AI will continue to be a controversial case study as federal courts weigh the legality of “scraping” data off publicly available websites in cases such as hiQ Labs v LinkedIn. (4) While state biometric privacy laws are not stopping law enforcement from using imperfect tools to try to identify and arrest people, companies like Facebook are turning off toy-like photo features in states like Texas and Illinois.

Confirmation of Alvaro Bedoya as FTC Commissioner Gives Khan and Dems a Majority Again

Report from the Washington Post

In Brief – More than six months after Alvaro Bedoya was nominated by President Joe Biden to serve as a commissioner on the Federal Trade Commission (FTC), the Senate confirmed him on a party line 51 to 50 vote. Bedoya’s confirmation restores a majority of three Democratic commissioners to the FTC for the first time since Rohit Chopra left the agency last October. FTC Chair Lina Khan, a proponent of activist antitrust, legal, and regulatory policies to counter large companies, especially digital giants, is widely seen as having been hamstrung in her plans to revitalize the agency with progressive goals. Bedoya, a champion of online privacy policy and a former chief counsel of the Senate Judiciary subcommittee on technology, was criticized by Republicans for being an aggressively partisan Democrat who would add to frictions at an agency already accused of having a more partisan tone under Khan. Just a day before the final Senate vote, Minority Leader McConnell called for the nomination to be pulled, a request backed by the US Chamber of Commerce that has been an ardent critic of Khan’s policies.

Context – If Democrats and Republicans were ever on the same page to regulate digital companies, that alignment has quickly frayed. Senate Republicans have stonewalled key Biden nominations, freezing tech industry regulations at the FTC and FCC. Republican FTC Commissioner Christine Wilson recently said “New Brandesian” proponents like Lina Khan used Marxist thinking. While some advocates of major tech legislation hold out hope for antitrust reform akin to the EU’s Digital Markets Act, or a breakthrough on federal privacy legislation, bills remain stalled in Congress due to partisan differences and election pressures. So, Progressives hoping for big action on Big Tech are now looking squarely to Khan’s FTC for action challenging Amazon’s purchase of MGM, opposing Elon Musk’s Twitter bid, or a creating new federal privacy law through FTC rulemaking. Major agency action absent new law will face fierce Republican blowback on Capitol Hill.

Vestager Outlines Timeline and Regulatory Demands of the Digital Markets Act

Report from TechCrunch

In Brief – In a Berlin speech to antitrust officials, Margrethe Vestager, the European Commission’s top competition regulator and leader on digital policy, said that the Digital Markets Act (DMA) establishing a new regulatory framework for the largest digital platform “gatekeepers” will become effective in spring 2023. There had been some thought that the novel legislation could come into force in late 2022. Vestager also outlined the operational challenges facing the Commission as it steps into a new role as the lead regulatory body overseeing at least a dozen giant gatekeeper companies and their compliance with a set of 18 “Do’s and Don’ts” (a handy table can be found here). She says the EC will need to hire staff, build technology tools and tap existing expertise from across the Commission. Finally, she also claimed that the DMA, with its ex-ante regulatory model, will operate effectively side-by-side with traditional antitrust investigations and enforcement, as well as in cooperation with national antitrust authorities inside and outside of Europe. She claims there is widespread agreement, citing Germany and South Korea as two examples, that digital markets require regulation as well as antitrust enforcement in a manner like the telecommunications, financial services and energy industries.

Context – In the EU’s two-part digital regulation overhaul, the DMA is paired with the Digital Services Act (DSA) that establishes a regulatory regime for digital platforms to address objectionable content. The nuts and bolts of supporting regulatory bodies is no laughing matter. The DSA includes a new revenue-based fee of .1% of global earnings on platforms with 45 million or more EU users to fund enforcement, but the DMA is silent on the topic. Vestager’s comments only scratch the surface of the demands of regulating some of the largest and most complex businesses in the world. As digital regulation and auditing regimes proliferate globally, as Commissioner Vestager foresees, company costs and regulatory funding mechanisms are certain to as well.

DoJ Holding Antitrust Head Jonathan Kanter out of Google Matters Awaiting Recusal Call

Report from Bloomberg

In Brief – The Department of Justice (DoJ) is keeping Antitrust Chief Jonathan Kanter from participating in antitrust matters related to Google, including the federal antitrust complaints targeting the digital giant’s search practices and an additional complaint involving its advertising businesses that is reportedly being developed, while it continues to consider whether he should be recused from Google matters due to his years as a private antitrust attorney working for clients alleging Google engaged in illegal monopoly conduct. Kanter’s background as an aggressive champion of tougher antitrust enforcement against tech giants was central to his nomination in July 2021 and winning bipartisan support in the Senate. Google requested the DoJ to formally review whether Kanter should be recused soon thereafter, a call that leading progressives strongly criticized as Google attempting to “bully” the agency. Associate AG Vanita Gupta will make the final call on recusal and Kanter’s top deputy, Doha Mekki, is currently making decisions on the Google lawsuit and investigations. Kanter’s longtime work on behalf of Microsoft (which included matters targeting Google) is reported to have been a consideration in granting the FTC the lead role in reviewing Microsoft’s bid to acquire game developer Activision-Blizzard.

Context – The Biden Administration has leaned into progressive calls for major antitrust reform and aggressive enforcement, both as a broad policy matter and also to rein in digital giants. A trio of top Biden Administration officials, Kanter, FTC Chair Lina Khan, and White House advisor Tim Wu, have been top tier Big Tech critics. Google raising questions about Kanter followed similar recusal efforts by both Amazon and Facebook aimed at Chair Khan. She did not recuse herself, her fellow FTC Commissioners did not vote to recuse her, and she participated in the re-filing of the FTC’s antitrust complaint against Facebook and the agency’s consideration of Amazon’s acquisition of MGM.

In a Ruling Running Contrary to All Precedents, 5th Circuit Judges Restore Texas Social Media Law

Report from Reuters

In Brief – In a 2-to-1 decision, a three-judge panel of the US Fifth Circuit Court of Appeals has overturned a December decision of Federal District Court Judge Robert Pitman that had blocked enforcement of Texas legislation that prohibits large social media platforms from blocking or suppressing the communications of users based on the viewpoint of the user. Judge Pitman had determined that regulating how social media companies treated the speech that occurred on their platform was a violation of the First Amendment. In oral arguments before the appeals panel, Texas’s Attorney General argued that social media companies were not like newspapers and other publishers whose right to control their platforms were protected by the First Amendment, but instead were like a phone company or other common carrier that could not limit legally protected speech based on the content on the communications. In a one-page order that did not include any reasoning, the panel stayed Pitman’s injunction, allowing the law to go into effect.

Context – The widely held belief that large social media platforms restrict content based on ideological viewpoints is especially strongly held among conservatives. It has emerged as a top national issue. While federal legislation is stymied by the complete disconnect between Democrats and Republicans on the issue, there is voluminous debate and legislative action at the state level, especially in states with unified Republican control. Florida was the first to enact a state law attempting to stop what is often called “viewpoint” discrimination. As expected, its law was blocked by a federal court based on seemingly clear First Amendment grounds, as well as the argument that Federal law, Sec. 230 of the Communications Decency Act, clearly grants online platforms the right to moderate content as they desire. Texas followed Florida, and again, in a not surprising ruling, the law was blocked. The federal judge in Texas stuck to what are viewed as clear First Amendment grounds. The unprecedented nature of today’s appeals court ruling cannot be overstated. It is simply “new” legal reasoning. Besides the extremely clear language of Sec. 230, the First Amendment rights of platforms to manage their sites has seemed very clear as well. As recently as 2019, the Supreme Court, with a majority made up of the court’s conservatives, ruled in Manhattan Community Access Corp. v. Halleck that a company providing open access communications was not bound by the First Amendment limits on restricting the speech of individuals. That decision has been cited by a number of federal courts rejecting suits by conservatives claiming their free speech had been violated online. That said, many Republicans leaders clearly heard recent missives from Supreme Court Justice Clarence Thomas on the importance of regulating large social media platforms which included various legal and regulatory theories, including arguments that the networks are “common carriers”. The unprecedented nature of the new ruling means that any reaction from the platforms will be equally unprecedented. I expect them to operate as is and wait for enforcement action that they will likewise challenge in court. What will Elon Musk say about this law from the pre-Musk social media era?

Match Group Files Federal Antitrust Suit to Block New Google In-App Payments Policy

Report from the New York Times

In Brief – Match Group, a leading developer of popular dating apps including Tinder and OKCupid, has filed an antitrust lawsuit against Google in federal court in California to block Google from implementing its new in-app payments policy. Google announced in fall 2020 that it would begin fully enforcing its in-app payments rules for apps distributed through the Google Play Store starting September 30, 2021. Google uses its payments system to collect its commissions, which range from 15 to 30 percent. Following app developer complaints, Google delayed its policy to June 1, 2022, but says apps that do not comply by then will be dropped from its Play Store, the largest app store in the Android ecosystem. Match objects to being compelled to now pay the Google commissions. Google responded that the 15% fee Match would face as a subscription service is the lowest among “major app platforms” and that Android is an open system that allows apps to be downloaded from alternative app stores or the web if a developer does not want to follow Play Store rules.

Context – While both Apple and Google have been targets of big app developers pushing for government to regulate the two major mobile ecosystems, Apple has been more in the spotlight. Its “walled garden” model, with clear, consistent, strict and well-enforced rules seemed more likely to be violating antitrust laws. Plus, while Epic Games sued both, their Apple lawsuit moved much faster to trial, with a decision last August. Epic’s federal court showdown with Google is expected in early 2023! Apple largely prevailed in US court. It will be interesting to see how a federal judge reacts to Google’s arguments that its policies are less restrictive than Apple’s. Google’s June 1 deadline is now driving action. The activist Netherlands competition authority recently opened an investigation. Epic Games just filed a federal suit similar to Match’s on behalf of its music platform Bandcamp. Finally, never forget that the fight is about fee levels, not payments. Google offered developers 4% lower fees in Korea if they chose alternative payments mandated by a new law, but activist app developers have loudly complained. They want more.

The FTC is the US Antitrust Agency That Will Review Elon Musk’s Bid to Acquire Twitter

Report from Bloomberg

In Brief – The US Federal Trade Commission (FTC) is reported to be the federal antitrust agency reviewing Elon Musk’s $44 billion takeover bid of Twitter. The agency, led by Chair Lina Khan, a strident advocate for dramatically increased scrutiny of mergers and acquisitions involving digital platforms, will need to decide by next month if they will open an in-depth review of the transaction. If the FTC asks for additional information, issuing what’s known as a second request, it could delay the ability of Musk and his bid partners to close the deal. While an acquisition that does not involve a competitor would generally not raise antitrust concerns, the Open Markets Institute, an aggressive anti-monopoly advocacy organization that once counted Khan as a staff lawyer, has urged the FTC to block the acquisition, arguing that it would give Musk too much control over speech platforms and that the owner of satellite-based internet service provider Starlink should not be able to own a large online platform.

Context – Concerns with Big Tech and acquisitions are widespread, but there is no consensus on policy. Most important for this deal is that Twitter is not a “digital giant” in any sense. Its user base is a fraction of Facebook or TikTok, and its value is “mid-size” at best. It is only oversized in terms of how politically active people and influencers like to use it. An antitrust-based objection would really stretch traditional competition law standards. And given the public anxiety expressed by many progressives that Twitter under Musk will not actively moderate speech in the manner it has, a reach on the antitrust front will face major scrutiny. Instead, the bigger US regulatory risk may be from CFIUS, the national-security focused Committee on Foreign Investment in the United States that is increasingly concerned with digital acquisitions. It is a relatively non-transparent agency but reportedly may look at risks associated with some of the non-US investors Musk is bringing into the deal, especially if they would have any operational authority.

As Expected, Germany Designates Meta as a Platform of Paramount Significance

Report from TechCrunch

In Brief – As fully expected since Germany amended its Competition Act in January of 2021 to overhaul the regulation of the largest digital platforms, the Bundeskartellamt, the German competition authority, has announced that Meta Platforms (Facebook) falls under the regulator’s new legal authority to proactively address competition threats from the largest digital platforms. 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, Amazon and Apple. Once confirmed, the designation applies to a company for at least five years. While the regulator reported that Meta has not challenged the designation, a fact confirmed by the company, a Meta spokesperson said that the company disagrees with some findings, including that it is dominant in the market for private social networks, claiming it faces significant competition for consumers’ attention from platforms such as TikTok, YouTube, Snap and Twitter.

Context – While Big Tech antitrust enforcement will plod ahead case-by-case, it is increasingly clear that simply regulating digital platforms to address competition concerns is where the real action is, at least in Europe. The most important development is the EU’s Digital Market Act (DMA). It aims to impose unprecedented regulatory mandates on a dozen or so “digital gatekeepers”. (See a chart of the DMA’s 18 “Do’s and Don’ts” here.) The German regime, with more than a year head-start, may prove a helpful guide to how the regulatory model may work, although German officials have been concerned that the European Commission does not have the regulatory heft to carry out the full DMA job.

Connecticut Continues the March of States on the Bipartisan Path to Digital Privacy Laws

Report from The Record

In Brief – Connecticut is set to become the fifth state to enact bipartisan privacy legislation, following on the heels of Utah’s successful legislation in March. The Connecticut bill allows residents to opt out of sales, targeted advertising, and profiling, and will require companies to acknowledge opt-out preference signals for targeted advertising and sales, including browser privacy settings, which is considered a strong opt-out standard among the evolving set of state measures. Companies will be required to get affirmative consent to process a range of sensitive data and give users ways to revoke consent. On issues related to children’s privacy standards, parental consent is needed to collect personal data from children under the age of 13 but businesses are banned from using personal data for targeted advertising directed at teenagers between the ages of 13 and 16. On enforcement, the bill does not allow for a private right of action and reserves enforcement to the State Attorney General.

Context – Many digital policy experts and privacy advocates, long critical of the fact that the US does not have a comprehensive federal privacy law, have predicted that state-by-state privacy bills would create business problems that would push the Congress to act. We’ve been following the slow but steady march of state privacy laws and believe that they may be a harbinger for federal legislation, but not because of legal or compliance complexity. Instead, they point out an increasingly clear path to bipartisan compromise. In short, when Democrats compromise on including private class action lawsuits, it is the key predictor of success. Leave them out, bills can move. We think that is the case for federal legislation as well. Stay tuned. And short of a comprehensive privacy bill, an even better bet might be a bill setting new online privacy rules for teens, a top Republican priority. However, GOP leaders might not want to give Democrats a popular accomplishment before the elections.

Facebook Accused of Blocking Non-Media Sites in Australia over Media Payments Bill

Report from the Wall Street Journal

In Brief – Former Facebook employees are making “whistleblower” claims to officials in Australia and the US that the company intentionally blocked a wide range of Australian Facebook pages beyond just media sites to create political pressure in their February 2021 standoff with the Australian Government over legislation intended to force the company, and Google, to pay Australian media companies when media content appeared on their platforms. The Wall Street Journal was also the lead media site that rolled out the voluminous stories tied to the thousands of internal documents and employee discussion threads copied by former employee Frances Haugen, who has become famous as “the Facebook Whistleblower” and has emerged as a global champion of social media regulation. The new charges involve how Facebook developed and instituted a ban on Australian media content as their Parliament considered legislation forcing Facebook and Google to pay media companies. Facebook admits, and the documents confirm, that the company instituted a preemptive ban for legal reasons, broadly defined covered sites due to a lack of clarity in the proposed law, and that technical errors inadvertently caused more sites to be blocked. The company claims that it promptly corrected problems and that a quickly negotiated legislative compromise ended the standoff and facilitated Facebook (and Google) negotiating payment agreements with many Australian media companies. Facebook claims their overall strategy helped improve the legislation and arrive at a settlement while the whistleblowers claim the tactics were intentional and deceptive.

Context – Besides Facebook again being plagued by employees upset with company policies and a very open internal communications system, the Australian effort to press Facebook and Google to send payments to traditional media companies in the country continues to lead a global trend while also creating ongoing frustrations in Australia where some media sites complain that they are being left off the gravy train.

As Expected, Federal Judge Dismisses Trump’s Lawsuit to Overturn His Twitter Ban 

Report from The Verge

In Brief – A federal judge in California has dismissed the lawsuit filed by former President Trump and a group of other Twitter users banned by the platform, rejecting the argument that the social media service violated their 1st Amendment right to free speech and that Sec. 230 of the Communications Decency Act is unconstitutional. Twitter, Facebook and YouTube banned the then-President following the January 6, 2021, riot at the US Capitol. Trump sued all three to have the bans overturned, arguing that the companies violated his 1st Amendment rights because they were serving as state actors working in league with critical government officials. The suits also asked the court to strike down Sec. 230 as unconstitutional for encouraging platforms to engage in censorship. Judge James Donato gave the Trump legal team until May 27 to revise their suit but indicated a very uphill burden.

Context – With so many serious happenings on social media content moderation, the former President’s legal efforts have been light entertainment. The 1st Amendment prohibits censorship by government, not companies, so the Trump lawsuit needed to make the case that the platforms were serving as government actors when they banned the Head of the US Government. That’s funny. The case also prompted the Biden DoJ to defend Sec. 230, which was ironic given candidate Biden calling for an end to Sec. 230 and vaccine misinformation prompting similar outbursts. In the US, regulation of content moderation is stymied. Constitutional problems plague Republican state laws to block “ideologically biased” social media company efforts (Florida, Texas, most recently Ohio). Democrats in Congress cannot legislatively force more active moderation. The real action is in Europe, with the EU’s Digital Services Act coming online in the next year or so, while the UK’s similarly regulatory Online Safety Bill is an almost equally sure bet, and the prospect of major change to Twitter policies that could emerge from Elon Musk’s acquisition bid.

It’s Google’s Turn to Deal with the Netherlands on In-App Payments for Dating Apps

Report from Politico

In Brief – Continuing its focus on in-app payments on mobile phone dating apps, the Netherlands’ Authority for Consumers and Markets (ACM) is initiating an investigation into possible abuse of dominance by Google through its app store rules. Dating app providers, including Match, have complained about Google’s recent change in its Play Store rules regarding in-app payments, which now require apps to use Google’s payment service, Google Play Billing, that automatically collects Google’s commissions. The ACM is months into a high-profile regulatory standoff with Apple over its in-app payments rules, having ordered the iPhone giant to allow dating apps to offer alternative payment methods and fining it €50 million for non-compliance. A Google spokesperson responded to the investigation by noting that apps such as Match “pay just 15 percent on Google Play for digital subscriptions, which is the lowest rate among major app platforms” and that the Android operating system “provides them multiple ways of distributing their apps to Android users, including through other Android app stores, directly to users via their website or as consumption-only apps.”

Context – The Netherlands has emerged as one of the legal and regulatory hotspots in the ever-growing global campaign to change the business model of the mobile operating system giants. The others are South Korea and the 9^th Circuit of the US Federal Courts. While the in-app payments rules of Apple’s and Google’s app stores are nominally at issue, the fight is actually about fees. Many developers think that commissions that can reach 30% are unfair and apparently believe if they can avoid the two companies’ commission-collecting payments systems they can circumvent the fees. When pressed, Apple and Google have offered to allow payments alternatives and proposed dropping fees 3 or 4%, but app developers continued to object. Google’s Android has always been a far less restrictive app ecosystem than Apple’s “walled garden”. It’s a guess as to whether that will matter jurisdiction-by-jurisdiction to courts and regulators.

UK Parliament Wants to Talk with Elon Musk About Plans to Authenticate Humans 

Report from AP

In Brief – The UK Parliament’s Digital Committee has invited Elon Musk, who is leading a $44 billion bid to acquire social media platform Twitter and take it private, to testify in front of the committee on his plans. The Committee expressed particular interest in Musk’s promise (on Twitter) to “defeat the spam bots” and “authenticate all real humans”, which they noted seems to align with a user-verification proposal included in the recently submitted UK Online Safety Bill. Musk’s reaction to the invitation was that it is premature to give an answer as his acquisition bid has not yet been put to a shareholder vote.

Context – There are real changes underway on social media user authentication outside the US that privacy advocates fear could threaten marginalized people. In Australia, Prime Minister Scott Morrison argues that anonymity on social media is abused by “trolls” and “cowards” to “say the most foul and offensive things”. His government is proposing legislation to require social media companies to collect personal details of all users, such as name, phone number and email address, and establish a process to have the user’s identity revealed in defamation suits. As noted, the massive Online Safety Bill to regulate all digital platforms for user-generated content proposes that large digital platforms create a new two-part user authentication regime. First, they must implement a system that allows UK users to verify their identity. The ID verification process can include systems based on facial recognition, two-factor authentication or government issued identity documents. The second part of the regime is the requirement that platforms allow users to block communications from other users who have not verified their identity. UK officials have stressed that they are not proposing to ban anonymity or requiring online users to post under their actual names, but instead proposing to reduce the circulation of comments from people who choose not to confirm their identity to the platform.

Coordinator of UK Tech Regulation Fears Online Safety Bill Harming Small & Startup Platforms

Report from the Financial Times

In Brief – Gill Whitehead, the first head of the UK’s new Digital Regulation Cooperation Forum (DRCF), a group created to coordinate the activities of four UK regulatory bodies that are taking on increasing digital regulation roles, is concerned that startups and smaller digital firms may struggle with complying with the UK Online Safety Bill that is expected to be enacted this year. The DRCF aims to coordinate digital regulation carried out by the Competition and Markets Authority, Financial Conduct Authority, Information Commissioner’s Office and Ofcom. Whitehead, who had stints at the Bank of England, Deloitte and the BBC before spending three years at Google, is concerned that the Online Safety Bill could negatively impact competition “because there’s a cost to complying with the bill that might be prohibitive for smaller firms.” One area of new regulation is Ofcom’s authority to regulate algorithms, which Whitehead notes could result in the establishment of a third-party auditing regime similar to those in the financial sector, but she stressed that there is no industry consensus on what good algorithms look like. Ofcom believes it will require 44 million pounds and 300 staff to do that job, which Whitehead sees as itself a hiring challenge. The UK Government’s National AI Strategy also envisions a regulatory regime for Artificial Intelligence and Machine Learning, and the DRCF is providing input including proposing to use “regulatory sandbox” authorities and further algorithm auditing.

Context – The UK Online Safety Bill largely parallels the EU Digital Services Act, which likewise aims to regulate how all digital platforms address a wide range of objectionable digital content, with stiffer burdens for larger platforms. The DSA is unique in trying to squarely address regulation costs, imposing a new revenue-based fee of .1% of global earnings on platforms with 45 million or more EU users to fund enforcement. As digital regulation and auditing regimes proliferate, company costs and government funding mechanisms will as well.

India Launches Public Ecommerce Marketplace to Compete with Amazon and Flipkart 

Report from Reuters

In Brief – India’s Department of Promotion of Industry and Internal Trade (DPIIT) has launched its “open network for digital commerce” (ONDC), a public ecommerce platform designed by tech tycoon Nandan Nilekani, founder of Infosys Technologies, that aims to connect buyers, merchants, payment providers, and logistics service providers on a fully open-source ecosystem. The project aims to onboard 30 million sellers and to cover at least 100 cities by August. The goal is to provide a public alternative to the country’s two largest ecommerce companies, Amazon and Flipkart, which are both US owned. (Flipkart is a subsidiary of Walmart.) With the ONDC, the government hopes to replicate the success of its Unified Payments Interface (UPI), a country-wide digital payments platform which brought banks on a single platform and allowed seamless person-to-merchant payments starting in 2016. Indian retailers, with its base of millions of small shopkeepers, are key supporters of Prime Minister Narendra Modi, and have long accused Amazon and Flipkart of violating the country’s Foreign Direct Investment (FDI) laws. The ONDC service will emphasize ecommerce connecting small merchants and rural consumers.

Context – This news struck me as “municipal broadband” for ecommerce. But dig deeper, and it just reinforces that India is a unique ecommerce ecosystem with its massive pool of skilled IT workers and firms, the general view that it is the largest ecommerce growth market, but most of all its FDI laws prohibiting non-Indian businesses from operating retail businesses but allowing them to operate third-party ecommerce marketplaces. Amazon has long been accused of violating those FDI laws and has faced investigations by the Indian competition authority and FDI enforcement directorate. At the same time, Reliance Industries, an emerging digital conglomerate led by Mukesh Ambani, India’s richest man, has been attempting to build an Indian-based ecommerce alternative to Amazon. I wonder what he thinks of the ONDC?

Vestager Gives Hope to EU Telecom Companies on New Payments from Big Tech

Report from Reuters

In Brief – European telecommunications and broadband companies will be more optimistic about the prospect that the EU will force large digital video platforms such as Netflix, YouTube and Facebook to pay them new fees after European Commission Vice President for Digital Policy Margrethe Vestager expressed support for considering how digital companies could contribute more to network investments. Network providers have long pressed for digital giants to pay more based on the bandwidth their users consume when downloading or streaming online content, most recently releasing a report claiming that a small number of video, social media and tech companies account for more than 55% of all traffic on Europe’s mobile and broadband networks. In November, telecom company CEOs released a letter to EU policymakers calling on them to force digital giants to support network upgrades, as well as loosen competition standards to facilitate industry consolidation. Vestager, who leads the European Commission’s Competition Authority, again rejected calls for looser merger standards.

Context – Like the big media companies who have been increasingly successful in convincing governments to force Google and Facebook to pay them when consumers access their content online, telecom companies have been accusing Internet platforms of “free-riding” for decades. That despite the digital companies and all their users paying broadband companies for Internet access and bandwidth. Most inspiring to the network companies is South Korea, where telecom companies have been uniquely successful in imposing mandatory data usage fees on Internet-based businesses to subsidize the data usage of consumers despite clear net neutrality concerns. Facebook and Netflix have been engaged in long-running legal and regulatory battles, including Netflix being asked to pay added fees to Korea’s dominant network companies because its Korean-produced Squid Game was so popular with Korean viewers.

Epic Games Pulls Bandcamp into In-App Payments Fight with Google

Report from ArsTechnica

In Brief – Epic Games has filed a motion in Federal District Court in California to block Google from being able to impose its new in-app payment policy on Bandcamp, a music distribution platform popular with independent artists that Epic acquired in March. Epic Games kicked off their antitrust crusade in August 2020 by modifying in-apps payments on its massively popular Fortnite game, which caused the game to be suspended from the Apple and Google app stores. Epic then filed long-prepared federal antitrust lawsuits arguing that both platforms were illegal monopolies that charge overly high fees, often reaching 30 percent. Fortnite remains blocked on Apple’s App Store and Google’s Play Store, although users can still upload the Android game from other sites. Bandcamp is a platform that has never allowed in-app purchases on its iPhone app due to Apple’s rigid payments policy. However, Google has historically been less strict with its app upload and payments policies and Bandcamp’s Android app includes in-app purchases. Google is enforcing a tighter in-app payments policy for Play Store apps starting in June and have informed Bandcamp that it will be required to use Google’s payments service and pay a 10% commission on in-app sales. Epic Games is suing to block Google, a ruling it could not get for Fortnite, which is already blocked. Google responded to the suit arguing that the claim is meritless, that the proposed commission of 10% is less than Bandcamp itself charges users, and that there are other options to distribute Android apps.

Context – The key point is that Epic is not stepping back from their massive global legal and regulatory campaign against Apple and Google. They largely lost to Apple in US Federal Court, but a major appeals battle is underway. They continue to press on in the UK, Australia and EU. Their Google suit in US federal court has moved slower than their Apple suit and is scheduled for trial in late 2023, while the Apple suit’s appeal trial is expected in early 2024.

European Commission Files Antitrust Complaint Against Apple on Mobile Wallets

Report from the New York Times

In Brief – The European Commission (EC) Competition Authority has made an initial determination that Apple abused its dominant position in the provision of mobile wallets on its devices, in particular restricting third-party payments providers such as PayPal from accessing key technology that support mobile wallets. The Commission says that Apple’s anti-competitive practices dated back to 2015 when Apple Pay was launched, including restricting competitors from accessing Near Field Communications (NFC) capabilities that allow payments by tapping a phone or watch. Apple claims that its policies did not restrict competition in digital payments and protect iPhone users against frauds more effectively than more open access.

Context – This initial determination by the EC that Apple has engaged in anticompetitive conduct in payments is NOT part of the ever-growing fight over “in-app payments” hounding Apple and Google. Those fights are about the fees, often reaching 30%, that Apple and Google charge to app developers when the developers sell digital products and services. Developers like Epic Games and Match are not aiming for more competition in digital payments. They simply think paying 30% commissions to Apple and Google is unfair and apparently believe if they can avoid Apple’s and Google’s commission-collecting payments systems they can circumvent the fees. When Apple and Google offered to allow payments alternatives and proposed dropping their fees just 3 or 4%, app developers continued to object. These new charges are about actual competition in mobile payments services. It is similar to Spotify’s complaints to the European Commission. One set of objections involved Apple’s fees, which Spotify claims are too high. But other objections involve allegations that Apple preferences its own music service on its devices in ways to harm competitive music services such as Spotify. Hanging over all of this is that discriminatory treatment on dominant “gatekeeper” platforms will soon be regulated by the EU’s Digital Markets Act as well.

US Department of Justice Files Brief in DC Court Opposing Amazon in Price Fixing Case

Report from Bloomberg

In Brief – The US Department of Justice (DoJ) has stepped into a case in DC Superior Court brought by DC Attorney General Karl Racine (D) who charged Amazon with anticompetitive conduct through its price parity policies that allegedly penalized third-party sellers’ goods offered for sale on the Amazon Marketplace when a seller also tried to sell the same goods for lower prices elsewhere on the web. Racine’s suit was dismissed in March by DC Superior Court Judge Hiram Puig-Lugo at initial oral arguments, with the judge stating that the District’s complaint failed to plausibly allege that the policies had anticompetitive effects, including failing to show specific evidence that sellers raised prices off Amazon due to Amazon pressure or were penalized for setting a price below a certain level. The DC AG appealed the decision and that request for reconsideration is now backed by the DoJ who argues that the judge misapplied important antitrust law precedents, in particular dealing with contract provisions serving as concerted action in restraint of trade, and improperly raised the bar on plaintiffs challenging anticompetitive contractual restraints in the District of Columbia.

Context – As noted back in March, Judge Puig-Lugo’s ruling came on the heels of an opposite ruling in Federal District Court in Washington state. In DC Court, Amazon scored a win. But in federal court, Amazon suffered a setback. Amazon’s price parity policies have been controversial for years. Amazon claimed to drop their direct prohibition against selling products for lower prices off Amazon in 2013 in Europe and 2019 in the US, but they still penalize offending sellers through algorithms. Amazon’s market dominance is a key issue. Their share of ecommerce marketplace sales approaches 70 percent while charging high fees to sellers. Both suits argue that sellers won’t forgo sales on the Amazon marketplace to offer lower prices on other venues, even when lower fees on those platforms would allow it, harming consumers off Amazon.

Japanese Government Concerned with Apple-Google Dominance of Mobile Ecosystem

Report from the Japan Times

In Brief – The Japanese Government Council on Digital Market Competition has released an interim report on competition in the smartphone operating system (OS) market highlighting the dominance of Apple and Google and noting their ability to implement rules that may damage app providers and other businesses. The council said that the government will consider ways to prohibit anticompetitive actions by the two digital giant, including potential new regulatory options, such as increased disclosure of information on OS changes and granting a regulatory authority the right to block changes that could have a serious impact on businesses. The report notes that the development of a smartphone OS comes with enormous costs for companies involved, but also makes market entry difficult for newcomers, and that Apple and Google have the right to determine rules governing app developers. Apple was particularly critical of the report, which included raising concerns with the pre-installation of apps and the practice of limiting app distribution to just one app store, a practice of Apple but not Google.

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 small business users. Its Ministry of Economy, Trade & Industry (METI) is putting in place a regulatory structure to oversee five digital giants – Amazon, Google, Apple, Rakuten and Yahoo Japan – under 2020 legislation to improve the transparency of platform policies and protect smaller businesses from unilateral changes in rules and fees. Japan now joins a growing number of countries exploring some form of app store regulation. More than anything, app developers want lower fees from both OS giants, and both Google and Apple have proposed 4% discounts when apps developers use their own payments services. Many app developers appear unhappy with the offers thinking the resulting fees are too high.

DHS Ramping Up Fight Again Online “Disinformation” Shockingly Causes Partisan Anger 

Report from The Hill

In Brief – In the Q&A portion of the Department of Homeland Security (DHS) budget hearing before the House Appropriations Committee, Secretary Alejandro Mayorkas described the formation of a DHS Disinformation Governance Board that will aim to better coordinate the agency’s programs and activities to combat online misinformation impacting illegal immigration, election interference and protecting critical infrastructure. (Watch the exchange here starting a 1:39:55) The board, which will operate within DHS’s Cybersecurity and Infrastructure Security Agency (CISA), will be led by Nina Jankowicz, a scholar at the Wilson Center and expert on political disinformation in Russia and Eastern Europe. CISA, a federal agency that is tasked with combating cyber threats, has been engaged in combatting “Mis-, Dis-, and Mal-information” (MDM) for years. Conservatives reacted harshly to word that a federal agency was stepping directly into debates over countering online speech on topics that many argue are often highly political, including accusations that Ms. Jankowicz is a partisan who defended social media efforts in late 2020 to restrict circulation of commentary regarding the Hunter Biden laptop.

Context – Once again, a top takeaway from the daily dust-up on social media content moderation is that no bipartisan agreement on anything related to regulating the content policies of the platforms is coming in the US anytime soon. Yes, the EU is enacting the Digital Services Act and the UK likely to enact the Online Safety Bill. Both will set rules for platforms to deal with objectionable content, including misinformation and disinformation as governments direct. While US regulation advocates are suffering FOMO, Democrats and Republicans are farther apart than ever, and Elon Musk buying Twitter makes chances for agreement more slim as conservatives applaud a major platform being less willing to restrict politically relevant content

Is Big Tech Antitrust Pressure Making 2022 the Year for Federal Privacy Legislation?

Report from the Wall Street Journal

In Brief – Despite years of effort to enact comprehensive US federal digital privacy legislation, only to see hopes repeatedly dashed by partisan disagreement, there is an increasing sense that 2022 may be the year that the logjam in Congress will break. In recent years, some predicted that state-by-state privacy laws would create enough business concern over regulatory complexity to overcome corporate opposition to a new national regulatory regime, but that did not come to pass. Others believed that the EU’s General Data Protection Regulation (GDPR) and concerns over the US ceding leadership on tech policy would drive similar federal legislation, but it did not. However, as federal legislators look to the remainder of the 2022 legislative calendar, there is growing hope among supporters that a federal bill might be doable because the areas of substantive disagreement have been greatly narrowed in recent years, with private class action enforcement as the biggest hurdle left, as well as the fact that the tech giants, threatened by major antitrust legislation, may see major digital privacy legislation as offering federal lawmakers the chance to ring up a big online policy accomplishment in place of the antitrust reform bills.

Context – We’ve been following the slow but steady march of state privacy laws, with Utah the most recent, and noting that Democrats compromising on the inclusion of private class action lawsuits is the best predictor of success. When a “private right of action” is included to mollify progressive consumer advocates, it consolidates enough opposition from Republicans and business interests to stifle legislation. Left out, bills can move. We think that is the case for federal legislation as well. Short of a comprehensive online privacy bill, something more focused on new privacy rules for children and teens online might be an even better bet. However, standing in the way of any major bill is the likely reticence of Republicans to give the Democrats and President Biden a popular accomplishment before the elections.

CFPB Head Rohit Chopra Warns of Big Tech’s Financial Services Practices

Report from Reuters

In Brief – Rohit Chopra, the Head of the US Consumer Financial Protection Bureau (CFPB) and a recognized champion of aggressive consumer protection regulation, reiterated concerns with the growing influence of the largest digital platforms on consumer financial services and warned of the emergence of “a consolidated market structure where finance and commerce co-mingle fueled by uncontrolled flows of consumer data”. In his testimony before the Senate and House Banking Committees, he likened this development to the market structure in China, where Alipay and WeChatPay are the dominant payments services and are linked to the dominant ecommerce provider and the dominant messaging service, giving them access to “an extraordinary set of data about consumers and businesses, including financial businesses that they may compete with”. Chopra, who has been a lightning rod for Republican criticism with charges that he overregulates, exceeds the legal authority of his agency and threatens to stifle innovation, kicked off his tenure at the CFPB last fall by ordering the largest digital businesses, including  Amazon, Apple and Facebook, to hand over information about how they gather and use consumer payment data and their financial services plans.

Context – Chopra’s appearances on Capitol Hill only reinforce the reality that while Big Tech firms come in for harsh and regular criticism from both Democrats and Republicans, which it comes to the specifics of regulation there are vast gulfs between the two sides. Chopra and his plans for CFPB are a case in point, as is the ongoing Senate battle to fill his former Commissioner seat at the FTC with consumer protection advocate Alvaro Bedoya. Concerns with the impact of digital giants on the financial services system are not new, stoked by highly regulated incumbents businesses and their regulatory overseers. Case in point was the February report of the European Supervisory Authorities (ESAs) on Digital Finance.