Archive – 2020

Small Hoteliers in UK Object to Online Travel Platform COVID Cancellation Terms

Report from TheCaterer.com

In Brief – A trade group representing small hotels and bed-and-breakfasts in the UK has called on the Competition and Markets Authority (CMA) to investigate mandatory consumer refund policies put in place by Online Travel Agency (OTA) businesses Expedia and Booking.com in response to the COVID pandemic. Both platforms have instituted changes to booking terms and conditions giving consumers greater flexibility by abolishing all cancellation charges and introducing a blanket refunding of pre-payments, including for rooms that required complete pre-payment. Small hoteliers are arguing that they are fighting for their survival in the face of a complete crash in travel, that the OTA policies are unfair and damaging to small businesses, and that after paying bank charges on reimbursed bookings they are often taking a loss.

Context – The dramatic reduction of travel is impacting every level of the tourism industry, from airlines and corporate hotel chains to the smallest short-term rental platform users. In the U.S., independent workers, whether Gig laborers, skilled freelancers or micro businesses like B&Bs, all generally not part of the state unemployment insurance systems, were accorded federal unemployment benefits in the $2 trillion federal CARES Act. In the UK, the CMA’s ultimate review of the large OTAs’ decisions to impose mandatory refund policies on hotels will raise similar issues as the Japan Fair Trade Commission’s evolving interpretation of digital platform abusing a “superior bargaining position”, currently being tested in Japan regarding a Rakuten proposal for mandatory free shipping from platform sellers.

Instacart Shopper Group Calls for a Shopper Strike to Protest Platform COVID Policies

Report from the Washington Post

In Brief – A coalition of shoppers who use the Instacart platform to provide shopping services to those who do not want to shop, or cannot go out to grocery stores, are calling for Instacart shoppers to not work on the service to protest the platform’s policies regarding sick pay, a lack of sanitation supplies, and a demand for increased “hazard” pay rates. Hundreds of thousands of people have used Instacart to provide shopping services and the company has faced numerous complaints regarding pay rates and conditions for a number of years. While the company has consistently argued that shoppers are independent contractors, a San Diego Superior Court judge handed down an adverse ruling to Instacart in February regarding AB 5, determining that the company was likely misclassifying some users in California as independent contractors when they should be employees.

Context – Platform-enabled Gig workers have been performing important services in hard hit areas since the earliest days of the COVID 19 crisis. The flexibility provided by the range of services and platforms has been noteworthy, with food delivery and retail package logistics facing surging demand, while ride sharing opportunities have plummeted in areas with strict “stay at home” mandates. Lyft has encouraged driver-users to explore options with Amazon, while also exploring expanding into various kinds of delivery services itself, while Uber has encouraged drivers to shift themselves over to their Uber Eats food delivery platform. While some ride sharing platform drivers have sued Uber and Lyft for failing to pay unemployment insurance benefits, the recently passed federal COVID relief bill provides unemployment payments to Gig workers, freelancers and traditional small businesses.

Thierry Breton Praises Big Tech’s Responsiveness to COVID Challenges

Report from Politico

In Brief – Thierry Breton, European Commissioner for the Internal Market and widely considered one of the top two European Commissioners on technology policy alongside Margrethe Vestager, has praised the top digital video platforms, such as Netflix, Google, Facebook and Apple for reducing the quality of their video streams to help avert network congestion as many European countries engage in pandemic lockdowns. Breton believes that the willingness of the platforms to address the concerns of public officials is unprecedented and could be a turning point in how big platforms behave in the future. Breton is also asking the continent’s major telecom firms to share anonymized mobile datasets with government officials to help understand the impact of the social distance confinement measures.

Context – The major digital video platforms are reported to be voluntarily degrading the quality of video in markets globally, including recently India, Mexico, Canada and the Philippines, as governments impose various forms of social distancing mandates that are increasing remote working, education, socializing, gaming and watching video to pass the time. Disney delayed the roll-out of its Disney+ service in a number of impacted European markets to assist in this effort. This roundtable discussion among historians who’ve studied cooperation between government and leading businesses in crises such as WWII and the Cold War speculates on how the relationship between “Big Tech” and government might be influenced by the current crisis response.

Privacy Advocates Press FTC to Investigate Remote Education Firms

Report from MediaPost

In Brief – The Center for Digital Democracy and Campaign for a Commercial-Free Childhood have called on the Federal Trade Commission to open an inquiry into how digital media and “ed tech” companies collect and use data about children. With the majority of America’s schools shut down in response to the coronavirus pandemic, and many family’s strongly encouraged to stay inside to reduce physical contact with others, children are using digital services to entertain themselves with videos, gaming and connecting over social networks, but many schools are also quickly attempting to adopt digital education platforms and services to continue some learning progress pushing many students into remote digital learning platforms for the first time. The privacy groups claim that the educational technology industry has never been subject to meaningful data and privacy scrutiny despite privacy concerns being raised in the past, and that with so many families now being pushed to use the services a compulsory study is in order. A similar call from three Democratic senators encouraging the Federal Trade Commission and Department of Education to issue joint guidance to ed tech companies and parents to protect the privacy of students remote learning during the coronavirus pandemic.

Context – Google is targeted by the privacy organizations under both the recommended digital media inquiry as well their proposed ed tech inquiry. That parallels the company’s recent settlement with the FTC over YouTube practices in violation of the Child Online Privacy Protection Act (COPPA), as well as the recent suit filed by the New Mexico AG claiming that Google’s G Suite for Education likewise violates COPPA. Expanding limits on the ability to collect and use data in the context of digital applications for users under 18 are being widely considered in the U.S. Congress and the UK.

Federal Judge Rules that COPPA Suit Targeting Google & Twitter Can Proceed in New Mexico

Report from the Albuquerque Journal

In Brief – U.S. Federal District Court Judge Martha Vazquez has rejected an effort to dismiss the State of New Mexico’s lawsuit against Twitter, Google and other digital platform and communications companies that market and distribute mobile gaming apps that are used by children, potentially in violation of the Federal Child Online Privacy Protection Act (COPPA). Judge Vazquez ruled that the case could proceed in the state, rejecting the argument that the Federal Court in New Mexico did not have personal jurisdiction over the case, noting that COPPA provides for nationwide service of process, and that proceeding in the state did not rise to a constitutionally significant inconvenience for the defendants. New Mexico Attorney General Hector Balderas filed the lawsuit in 2018, taking aim at European-based mobile app maker Tiny Labs, as well as Google and Twitter, accusing them of violating state and federal laws protecting the privacy of children through their online ad businesses.

Context – The NM AG is engaged in two COPPA-related suits targeting big digital platforms. In February, he filed another suit against Google claiming that the company’s G Suite for Education collects personal data in violation of federal and state laws, including that Google monitors children while they browse the internet in the classroom and at home on private networks, including tracking physical locations, websites visited, videos watched, saved passwords and contact lists. Google has responded that the complaint was “factually wrong” and that Google’s G Suite for Education agreement with the school districts and officials that participated in the program, and its services, comply will all relevant laws, allows schools to control account access, and requires schools to obtain parental consent when necessary. Expanding limits on the ability to collect and use data in the context of digital applications for users under 18 are being widely considered in the U.S. Congress and the UK.

Vermont AG Sues Facial Recognition Firm Clearview AI for Violating Consumer Protection

Story from CNET

In Brief – The State of Vermont has sued Clearview AI, the company that has created a facial recognition tool built on a vast database from photos of private individuals it has gathered across the internet, in particular from social media platforms without consent of the platforms or the users. The suit brought by Vermont Attorney General TJ Donovan in Vermont Superior Court alleges that Clearview AI has violated the state’s consumer protection law by illegally collecting images of Vermont residents, including children, and selling this information to private businesses, individuals and law enforcement.

Context – As facial recognition technology raises a range of ethical concerns in markets globally, including calls for various forms of regulation, a number of the largest technology companies have proposed cooperative regulatory efforts to head off severe prohibitions some cities, states and countries are weighing. Clearview AI, a small firm which has came to light in particular for actively marketing their facial recognition system to law enforcement entities, has become a major focus of concern. In late February the purported client list of Clearview AI was hacked and released publicly, and claims by the company that it was focused only on North American markets and law enforcement partnerships was contradicted by clients in industries such as law, retail, banking, and gaming in markets in Europe, South America, Asia Pacific, and the Middle East. Along with the Vermont suit, the company faces a class-action suit in Illinois alleging violation of the state’s Biometric Information Privacy Act (the law that led to a Facebook settlement based on facial recognition used on uploaded pictures) as well potential action by the European Commission and national data protection authorities in Europe.

Maryland Legislature Passes an Advertising Digital Services Tax but Faces Threatened Veto

Report from Forbes

In Brief – The Maryland legislature has passed H.B. 732, tax legislation creating a first of its kind U.S. state Digital Advertising Gross Revenues Tax similar to the Digital Services Taxes (DST) enacted by France, Italy, the UK and Spain over the past year. The Maryland bill imposes a tax that varies from 2.5% to 10% of the annual gross revenues derived from digital advertising services in Maryland, with higher rates imposed on companies with higher global annual gross revenues, and a floor of $100,000,000 of global annual gross revenues and at least $1,000,000 of annual gross revenues in Maryland. Governor Larry Hogan (R) has threatened to veto the tax, and critics have contended that it is in clear violation of the non-discrimination standard of the Federal Permanent Internet Tax Freedom Act (PITFA) which prohibits state taxation of Internet-based services in a manner different from non-Internet services, as well as other constitutional flaws.

Context – While the DST-style bill passed in Maryland, and a similar bill recently introduced in New York, illustrates that state legislators are increasingly likely to try to follow the model of European governments trying to tax large “foreign” digital businesses, look for PITFA’s non-discrimination provision to push states to explore applying state sales taxes to digital services like streaming video and music when the physical media are already taxed, something also passed in this cycle in Maryland.

Federal Coronavirus Relief Bill Will Cover Independent Workers, Including “Gig” Economy

Report from CNBC

In Brief – In response to the economic needs of the many independent workers who are generally not part of the traditional state unemployment insurance systems, the massive Federal economic relief bill demanded by the pandemic-driven economic and social shutdowns will provide payments to impacted independent workers. This relief will cover those working in the platform-enabled “gig” economy, more traditional personal services providers such as trainers, designers, musicians and hairdressers, as well as sole-proprietors of small businesses, and it includes those engaged in part-time work, as well as workers who quit their job or can’t reach their place of work as a result of COVID-19. Displaced workers who are participants in state unemployment insurance programs will be eligible to collect both state and federal payments, while the wide range of independent workers who do not generally participate in state unemployment insurance programs will be able to receive supplemental federal payments equal to 50% of their state’s benefits in addition to the standard federal payments.

Context – While “gig workers” who connect with customers over digital platforms are certainly a big, growing and very visible part of the economy, studies of independent work reveal that large numbers have engaged in a wide range of independent work as part of the traditional economy for a very long time. From every corner of the country, the huge impact of public health-driven closures and shutdowns on hair stylists, barbers, yoga instructors, tattoo artists, personal trainers and all manner of sole-proprietor shopkeepers has become quickly apparent. While both sides of digital platform “gig worker” classification debate are arguing that the current crisis validates their position, and some digital platform workers are suing platforms for access to state unemployment insurance, the Federal relief bill appears aimed to support them all.

Network and Platform Data Could Help Fight COVID 19 but Privacy Concerns Continue

Report from the Washington Post

In Brief – The U.S. government is in ongoing talks with tech giants, telecom companies and health experts about using location data from Americans’ phones to trace the spread of the novel coronavirus, including using data and analytics powered by the largest platforms to predict emerging hotspots or better study the effects of social distancing. Privacy advocates are concerned of longer-term abuses. Alphabet company Verily has launched a virus screening tool piloting in the hard-hit Bay Area designed to determine whether people need to get tested and find local places to do so. Google’s ambition to grow its health care and wellness services and ongoing privacy criticism overall resulted in a range of questions from Senate privacy advocates.

Context – Location data and tracking technology, both by digital platforms and services providers, and mobile phone companies, have been aggressively incorporated into governmental public health efforts in a growing number of countries, including China, South Korea, Taiwan and Israel. In China, the digital platform giants have supported the creation of tracking maps, close contact detectors and a COVID 19 risk tracking score app. Many South Koreans have volunteered to use a public safety app that tracks patients and helps enforce quarantines but has raised privacy concerns. In Israel, the government has tapped a mobile phone location database developed to fight terrorism, but the program has been challenged in court. Finally, Deutsche Telekom, Europe and Germany’s largest telecom company, is sharing anonymized customer location data with the Robert Koch Institute to help make predictions about how the virus spreads and to help answer questions about the effectiveness of social distancing.

Remote Work, School, Medicine and Entertainment Straining Networks

Report from NetworkWorld

In Brief – As countries adjust to the dramatic economic and social changes created by drastic social isolation recommendations of public health officials, the ability of tens of millions of workers, students, and even medical professionals to do some work remotely, as well as even larger numbers of people cut off from live forms of entertainment turning to digital entertainment of all types to pass time, has put an unprecedented strain on broadband networks. More than a week into very widescale social isolation orders, U.S. broadband providers appear to be handling the 30% or more increases in traffic, while networks in a number of European countries are largely handling the added traffic but with some some increase in connection failures and measures of connection quality.

Context – In Europe, the combination of increased remote work-based network usage at the same time millions are turning to streaming video to pass time has resulted in governments encouraging massive video platforms YouTube and Netflix to agree to slow connection speeds. In the U.S., with schools in 40 states closed, online education activities of many various kinds are springing up. While not appearing to overtax networks, potentially because many initial efforts involve low-bandwidth communication and posting tools rather than video or live streaming, they are highlighting the public education challenge of the “digital divide” with many lower income children not having access to Internet services and hardware. Finally, telemedicine, both as a tool to separate potentially contagious patients away from each other and from medical professionals until cases are deemed serious, as well as to facilitate doctors and nurses from less hit areas to support patients in more threatened communities, is receiving emergency regulatory exemptions in the U.S. to promote wider usage.

Judge Dismisses Class Action Discriminatory Facebook Job Ad Suit but Offers Route to Amend

Report from Bloomberg Law

In Brief – A federal judge in California has dismissed a proposed class action lawsuit accusing Amazon and T-Mobile of engaging in age discrimination through the targeting of job ads to people under 40 on Facebook. The complaint, originally brought in 2017, initially included Facebook among the defendants, but Facebook reached a settlement in March 2019 addressing this litigation and others against its advertising platform, agreeing to end targeted job ads to particular users by age, gender, ZIP code or membership in certain Facebook Groups. Although Federal Judge Beth Labson Freeman agreed with Amazon and T-Mobile that the plaintiffs failed to prove standing or personal jurisdiction, in particular by failing to show that they were personally discouraged from applying for any particular positions by specific ads, she did grant them the opportunity to collect information from the companies on the full range of their age-restricted job ads on Facebook in California in an attempt to address gaps in their lawsuit.

Context – Facebook’s advertising platform has faced charges of facilitating discrimination through targeted advertisements for housing, employment, public accommodations and credit services. Their services have been investigated by the U.S. Department of Housing and Urban Development, the Justice Department, and the Equal Employment Opportunity Commission. Last March the company announced major policy changes developed in conjunction with the ACLU to largely end ad targeting related to those covered practices, expanded its policies in December, and in January set a deadline of March 31 for advertisers to fully comply with its new requirements.

Small Competitors Complain About Google Preferencing Its Digital Ad Tools

Report from Reuters

In Brief – It is reported that the antitrust investigations of Google by the U.S. Department of Justice and a broad coalition of state attorneys general are reviewing the company’s actions to encourage app developers to employ Firebase, a Google software tool to manage online advertising. Google bundles Firebase with its Android Studio, a set of programs to support the coding of apps for the Android operating system. Software developers who have products that compete with Firebase complain that Google has been making it difficult for apps to do even common functions without Firebase tools, telling apps developers that their Google-based advertising campaigns will perform better if they use Firebase, and that Google gains greater insights into users when apps use the tool. Firebase competitors are saying they want to be promoted on the Android Studio as well.

Context – Google’s large market shares in search, operating systems and digital advertising, and the potential that policies related to one could impact the others, is increasingly being raised by competitors and shared with government investigators. In January, Google announced plans to end support for third-party cookies, which fuel much digital advertising, in its Chrome browser, which enjoys a 70% market share. While that would match browsers from Microsoft, Apple and Mozilla, and is supported by many privacy advocates, the potential for the change to benefit Google’s massive digital advertising business has led to complaints by advertising services competitors. Likewise, Google’s announced policy plan to send domain name system (DNS) queries over the encrypted HTTPS protocol, again, a policy supported by many privacy advocates, has led to complaints from major network providers that the change will undermine their ability to compete in advertising.

UK Independent Inquiry on Child Sexual Abuse Calls for New Mandates on Digital Platforms

Report from the BBC

In Brief – The UK’s Independent Inquiry into Child Sexual Abuse (IICSA) has released its report on child sexual abuse facilitated through the Internet and concludes that digital platforms have failed to do everything possible to effectively protect young people from online grooming and abuse. The IICSA compiled data and many examples of online child sexual abuse in the UK, both through images and direct abuse. The IICSA accuses social media firms of taking a “reactive” approach to the issue focusing on protecting their reputations, and platforms such as Whatsapp, iMessage and Facetime are singled out for their use of end-to-end encryption. The IICSA report recommends that platforms pre-screen all uploaded images, calls for legislation mandating more stringent age verification for online services, and publication of the interim code of practice on child sexual abuse as proposed by the Online Harms White Paper.

Context – The drumbeat linking online harms to young people, law enforcement opposition to encryption, and imposing new mandates on platforms to police users, is underway in multiple major markets. The UK Government has based its calls for a wide range of new digital platform mandates, primarily outlined in the Online Harms White Paper, on child protection. A similar regime of platform mandates is envisioned in the EARN IT Act recently introduced in the U.S. Senate, which proposes linking Sec. 230 liability protection, key to hosting user-generated content, on platforms implementing child protection practices proposed by a Department of Justice (DoJ) panel. Forcing platforms to stop sexual abuse was a focus of the DoJ Workshop on Sec. 230 and the agency recently brought together six major platforms and law enforcement from five major U.S. allies, including the UK, to announce agreement on 11 voluntary principles to fight online child threats. The principles do not include encryption but law enforcement took the opportunity call for changes to strong encryption that many claim carry data and privacy risks to honest users.

Senate Legislation Introduced to Limit Online Services Used by Young People

Report from The Verge

In Brief – Sens. Ed Markey (D-MA) and Richard Blumenthal (D-CT), two of the Senate’s foremost champions of new mandates on digital businesses, have introduced S. 3411, the Kids Internet Design and Safety (KIDS) Act, to impose a regime of limits and directives on digital platforms serving children and teenagers under 16 years old. The bill sponsors aim to curb the amount of time young people spend on digital platforms and dramatically reduce child-directed advertising and influencer content. The bill would prohibit features such as “auto-play”, push alerts that encourage users to engage, the display of positive feedback received from other users, the use of badges or other visual incentives and rewards based on engagement with the platform, and recommending or amplifying adult or “wholly commercial content.”

Context – The KIDS Act’s proposed new rules applied to digital services and platforms that cater to younger Internet users adds to a range of bills to expand the Children’s Online Privacy Protection Act (COPPA) restrictions on data collection, including raising the age of covered users above the current 13 years, such as S. 748, sponsored by Sens. Markey and Josh Hawley (R-MO), as well as H.R. 5573 and H.R. 5703 in the U.S. House. The UK Information Commissioner’s Office (ICO), the country’s data protection watchdog, has proposed new design standards for Internet services to reduce the collection and use of data related to young people through age 18. All such changes could seriously impact creators of quality online content. Sen. Hawley also introduced legislation he calls the SMART Act that bans features like auto-play and infinite scroll for all users, not just young people. Sen. Mark Warner (D-VA) has sponsored S. 1084, the DETOUR Act, a similarly prescriptive bill that prohibits large digital firms from employing online “Dark Patterns”, including a range of relatively commonplace design tactics some consider deceptive to encourage users to buy things, share data or sign up for services.

Internet Critics Turn Up Pressure on Section 230 Aimed at Conservative Coalition

Report from Multichannel News

In Brief – A top Department of Justice (DoJ) official has presented a broad criticism of Sec. 230, a core legal foundation of digital platform models that include user-generated content, protecting platforms from civil liability for user actions as well as for good-faith content moderation decisions. The key points raised by Deputy AG Rosen include claiming that Sec. 230 was an “infant industry” Internet provision no longer needed in a world of digital giants, that civil liability protection for user conduct is allowing platforms to ignore horrid conduct online (especially targeting children), that a law intended to enable online speech is being exploited to facilitate unfair business practices, such as by short-term rental platforms where users ignore regulations or ecommerce marketplaces where counterfeits are sold, and that Sec. 230, intended to promote platform moderation of lewd and obscene content, is instead facilitating ideological censorship. (Speech text here.)

Context – DAG Rosen lays out the conservative case against Sec. 230 and provides insight into the coalition of long-time Internet adversaries being assembled. Allowing lawful access to encrypted communications has been a goal of law enforcement for decades. Many conservative activists are convinced that ideological content moderation has been ongoing. Finally, many traditional industries threatened by Internet business models believe digital platforms enjoy legal preferences and are joining the anti-Sec. 230 coalition. Narrow Sec. 230 legislation is targeting child sexual abuse (encryption) and ideological content discrimination and were both topics were featured in the recent DoJ Sec. 230 workshop. And Rosen’s speech was at a conservative telecommunications policy conference among advocates for many network industry adversaries of digital giants and a senior ATT leader reinforced Rosen’s message. If you are interested in a smart, if lengthy, rebuttal from an Internet advocate and expert, read this.

UK Government Reiterates Digital Services Tax Set for Implementation on April 1st

Report from The Guardian

In Brief – As part of a budget announcement that unsurprisingly focused on the response to the rapidly expanding threat of the new coronavirus, as well as the massive political and economic changes involved in carrying out Brexit, the British Government confirmed that their long-planned 2% digital services tax targeting search engines, social media services and online marketplaces will go into effect on April 1.  The UK DST, first proposed in 2018, has drawn consistent opposition from U.S. tech businesses, bipartisan criticism from U.S. Government leaders, and threats of stringent tariff retaliation, which has ratcheted up as the implementation date approached. Unlike other countries, the UK Government has not yet backed down. In announcing the imminent start of the tax, the UK’s finance head expressed support for an OECD-led consensus digital tax agreement and indicated the UK DST would be repealed at that point.

Context – France has played the role of lead antagonist in global efforts to tax large digital companies in a new way over the past two years, enacting a 3% national DST in mid-2019 that was targeted at a narrow range of Internet-focused businesses with global revenues high enough to mostly impact U.S.-based companies. This instigated a confrontation with the United States, which threatened major tariff retaliation, and the French has deferred implementation a couple of time in the name of international agreement. Other countries have followed a similar path — enacting a national DST, the U.S. responding with tariff threats, and the confrontation being deferred in hopes of a deal centered on an OECD plan that remains troubled. As recently as January, France again deferred their DST and Spain enacted a DST but delayed the effective date to December. It appears the UK is making a legitimate run at taking the lead role for DST tax-tariff war tripwire from their French neighbors.

New Federal Rules to Expand Sharing of Patient Data with Health and Wellness Apps

Report from CNBC

In Brief – After years of development, two offices of the Department of Health and Human Services have released new rules to expand the ability of consumers to access and share health records with health and wellness apps, doctors, and hospitals, as well as providing health care industry technology developers with API-like standards to improve digital interoperability and user experiences. The final rules also require electronic health records services to provide increased access to some clinical data to promote new business models and technology services, as well as support patients’ control of their electronic health data through smartphone apps. The largest incumbent providers of specialized health care records technology, and some of the nation’s largest hospitals and insurance providers, were skeptical of the rules, claiming that patient privacy would be endangered, while the largest consumer-facing digital platforms, including Microsoft, Google and Apple, supported the proposed rules and improved information sharing between health care providers. (The rules are here and here.)

Context – As opposed to too little privacy regulation in health care, many have seen HIPAA, the health care industry privacy law, as holding back technology innovation. Efforts to expand the ability of people to manage their health data through smartphone apps and digital services is creating a paradoxical situation where the platform giants investing the most to improve consumer-facing health and wellness services also face the most vocal complaints from privacy activists. A summary of the many recent health care business moves from Google, Apple and Amazon is here. Competition reviews of Google’s acquisition of FitBit, in the U.S. and internationally, as well as HIPPA compliance scrutiny of their data-sharing deal with Ascension Health, will offer insights into whether government officials are willing to accept the platform giants entrenching themselves in health care.

Senate Antitrust Panel Delves Into Concerns with Digital Platform Self-Preferencing

PEI Reports

In Brief – The Senate Judiciary Committee’s Antitrust Subcommittee held a hearing on the topic of “self-preferencing by digital platforms” with a focus on Google, Facebook, Amazon and Apple. The witness list was quite balanced, with three advocates for taking more aggressive action against preferencing and two arguing that vertical integration and preferences for integrated services resulted in better user experiences and more innovation. Google was a particular target of criticism, both because regulatory adversary Yelp was represented on the witness panel, and also because noted Google critics, Sens. Josh Hawley (R-MO) and Richard Blumenthal (D-CT), were among the five Senators at the hearing.  (The witness list, written testimony and full video are available here.) The Subcommittee’s ranking Democrat, Sen. Amy Klobuchar (D-MN), also used the hearing to announce the introduction of the Anticompetitive Exclusionary Conduct Prevention Act, a bill combating anticompetitive exclusionary conduct by shifting the burden of proof to a dominant company to prove their exclusionary conduct is pro-competitive in cases where a business has substantial market power (or +50% market share), along with other reforms to beef up antitrust enforcement.

Context – While there is bipartisan concern with the behaviors of the largest digital platforms, the lack of consensus on reforming antitrust law to restrain them was evident among even the small sample of Senators at this hearing, especially on the Republican side. Chairman Mike Lee (R-UT) was very sympathetic to the laissez faire views of Prof. Thomas Hazlett, while Sen. Marsha Blackburn (R-TN) focused on privacy and Hawley took his usual aggressive stance. Klobuchar’s new bill, like more narrow legislation she introduced last summer to increase antitrust penalties, has only garnered Democrat cosponsors.

Chinese Digital Company Announces Sale of Dating App Grindr Under Security Scrutiny

Report from Reuters

In Brief – In one of the digital platform application acquisitions that has highlighted the rapidly growing concern of U.S. security officials with the potential data security implications of Chinese-based digital businesses holding stores of personal data on American users, Chinese mobile gaming company Kunlun Tech has announced the sale of Grindr, a popular U.S.-based gay dating app it acquired in 2016. Kunlun acquired a majority stake in Grindr in 2016 and did not notify the security-focused Committee on Foreign Investment in the United States (CFIUS), the agency authorized to review foreign investments in U.S. enterprises. When a foreign acquisition is not submitted to CFIUS for review, the body can choose to retroactively scrutinize the transaction. It has been widely reported that CFIUS retroactively engaged on Grindr and called for the deal to be unwound due to the highly sensitive nature of Grindr data. CFIUS will need to approve the latest deal to a group of entrepreneurs and investors.

Context – Concerns among U.S. officials over the influence of the Chinese Government on China’s digital businesses is leading to a creeping tech disengagement. The official remit of CFIUS was recently expanded to cover the acquisition of user data holdings and cyber capabilities, but that legislative change only caught up with CFIUS interest in Chinese businesses investing in U.S. digital firms, including investigation of TikTok’s acquisition of Musical.ly, the rejection of Ant Financial purchasing MoneyGram, and the Grindr acquisition. CFIUS notification is now required for any foreign acquisition regardless of financial size of a U.S. business with data on more than one million Americans, or holds types of genetic, biometric, financial, or health data. The ability of Chinese authorities to exercise leverage over Chinese digital companies, or even American companies operating in China, is seen resulting in social media censorship, corporate self-censorship, and vulnerability to data transfers.

Rakuten Blinks, Backing Down to JFTC Pressure and Delaying Full “Free Shipping” Plan

Report from the Japan Times

In Brief – After months of tensions ratcheting up between Rakuten, one of Japan’s largest ecommerce platforms, and the Japan Fair Trade Commission (JFTC), the country’s competition authority, Rakuten announced that it would not require all third-party sellers to comply with its “free shipping” program, instead rolling out the plan on a voluntary basis. The original Rakuten plan, described as a move to compete with Amazon, will provide buyers with free shipping on all orders exceeding 3,980 yen ($36), with sellers being required to pay for the actual shipping costs. Thousands of small merchants complained to the JFTC and the regulator repeatedly expressed concerns that the plan represented an abuse of a “superior bargaining position” in violation of the Anti Monopoly Act. The company repeatedly responded that the plan was needed to compete with Amazon and an overall positive for sellers. The JFTC held firm, filing for an emergency order from the Tokyo District Court to block the company plan from going live on March 18, the first such action by Japan’s antitrust regulator in 16 years. As part of Rakuten’s pause, the company announced that it will financially support retailers offering free shipping if their profits decline.

Context – Some of the most focused thinking on platform terms and conditions, and the treatment of small business users, is going on in Japan. Last spring, the JFTC reviewed the seller policies of the country’s largest ecommerce platforms, and Amazon agreed to change a buyer rewards program that imposed the costs of sellers, which some see as a precedent in this case. The JFTC also released comprehensive guidelines in December regarding digital platforms exploiting an unfair bargaining position. Finally, a cabinet-level working group on the regulation of large digital businesses has finalized a legislative proposal to improve the transparency of platform terms of use and policies to protect smaller businesses from unilateral changes in rules and fees.

Senate Bill Tying Sec. 230 to Child Protection Highlights Assault on Encryption and Platforms

Report from Reuters

In Brief – A bipartisan group of U.S. Senators, led by Judiciary Committee Chairman Lindsey Graham (R-SC), top panel Democrat Dianne Feinstein (D-CA), and the most aggressive critics of the largest Internet platforms, have introduced the “EARN IT Act”. The sponsors describe it as fighting the online distribution of child sexual abuse material by making a digital company’s protection from civil liability for user conduct contingent on complying with standards to be set by a commission created by the Department of Justice and led by the Attorney General. Although encryption mandates are not included in the bill text, the open-ended commission remit and widely known concerns of the agency, AG Barr, and many bill allies, has led a wide range of technology, civil liberties and cyber security experts to describe the bill as a tool to block digital platforms from implementing strong, end-to-end encryption and force platforms to change a wide range of policies.

Context – There is an increasing drumbeat of actions tying together online harms to young people, law enforcement opposition to encryption, and Sec. 230 civil liability threats. On the same day this bill was introduced, the DoJ brought together representatives of the closest intelligence and security allies of the United States, and six major platform companies, to announce agreement on 11 voluntary principles to fight online child threats. Although the 11 principles do not specify encryption policy, the law enforcement spokespeople again called for changes to strong encryption, something cyber experts say will increase data risks. The UK has justified a wide range of new mandates on digital platforms on child protection, and Australia has enacted a controversial encryption access law. The recent DoJ Workshop on Sec. 230 featured online child protection advocates who called for paring back Sec. 230 to fight online threats. Finally, AG Barr has regularly criticized strong encryption as aiding all types of evildoers, in particular calling out Facebook (joining UK and Australian law enforcement) and Apple.

House Committee Hears Small Businesses Bemoaning Internet Sales Tax Complexity

Report from Bloomberg Tax

In Brief – The U.S. House Small Business Committee held a hearing highlighting the challenges that independent small and mid-size businesses are having complying with state and local sales tax duties in the wake of the landmark 2018 U.S. Supreme Court’s Wayfair decision overturning decades of protection against the sales taxes of states where a business had no employees or facilities. (Access the testimony, memo and video.) The retailers in the Wayfair case were billion dollar businesses, and the Court’s majority noted the simplification and small business-protection provisions included in the South Dakota law that led to overturning the long-time ban on out-of-state enforcement, including a $100,000 in-state sales threshold exempting most small businesses in the small South Dakota market. However, the witnesses claimed that a morass of varying and complex state laws and expensive compliance solutions remain in place.

Context – In the aftermath of the Supreme Court Wayfair decision, nearly every U.S. state with a sales tax has imposed tax collection duties on remote retailers, and nearly 40 impose complete tax collection duties directly on digital marketplaces where most small business online sales occur, effectively eliminating any online small business threshold. While the retail sales tax environment is settling around marketplace tax collection, new tax issues spawned by the Supreme Court’s position on “virtual presence” and “economic nexus” are emerging. In Texas, the ability of counties to sign economic development agreements with retailers who can choose to attribute all of their in-state Internet sales tax collection to a single county, often in exchange for sizeable tax rebates, is circumventing local sales collection is creating a county v. county sales tax fight in the state. In Georgia, a recently enacted marketplace sales tax collection law covers ride sharing and delivery apps. Maryland lawmakers are considering extending sales taxes to remote video and music streaming services, and many states are exploring applying the Wayfair concept of economic nexus to direct corporate taxes.

Bipartisan US House Bill Proposes New Liability for Platforms Enabling Sales of Counterfeit Goods

Report from CNBC

In Brief – The bipartisan leadership of the House Judiciary Committee has sponsored legislation to dramatically increase the liability of ecommerce platforms for counterfeit trademark goods.  The SHOP SAFE Act (text here) would establish liability for platform companies facilitating the sale counterfeit trademarked items that effect consumer health and safety, and require online platforms to vet sellers, remove listings, and ban repeat offenders. The bill proposes to apply the new standards to a wide range of sites and services, including online services that help arrange for the sale, payment, or shipping of physical goods to consumers.

Context – Industries facing competition from Internet business models have been lobbying for years to change the commercial Internet’s underlying regulatory and liability regimes. Copyright goods such as software and digital entertainment are protected by Digital Millenium Copyright Act, but trademark goods are not. In addition, while grey market and generic goods are not counterfeits, efforts to require platforms to regulate them are long-standing and was raised in a recent U.S. House hearing nominally about online platforms and counterfeits. The Trump Administration has called for expanding platform responsibility to identify and block counterfeits and ban sellers, especially focusing on products from China. Administration trade policy leader Peter Navarro recently attempted to press Amazon’s CEO on its policies related to imported Chinese-made goods, but reportedly was rebuffed. In related platform product liability law actions, the full Third Circuit Federal Court of Appeals recently reheard Oberdorf v. Amazon, a noteworthy Sec. 230 product liability case involving a buyer injured by a defective product sold by a Chinese seller. In addition, the European Commission is moving forward on a Digital Services Act that may refine the platform liability regime of the EU eCommerce Directive.

Senator Hawley Again Holds Hearing on Risks of Chinese Influence on Tech Companies

Report from PEI

In Brief – The Senate Judiciary Subcommittee on Crime and Terrorism, under the leadership of Sen. Josh Hawley (R-MO), an outspoken critic of digital businesses and China, held its second hearing on the risks of China influencing the tech ecosystem. As in November, Sen. Hawley invited TikTok and Apple to appear before his subcommittee, again both refused, and again suffered pointed criticism. TikTok is under fire for a range of content moderation concerns, as well as charges that U.S. user data could be accessed by the Chinese Government. Hawley’s concerns with Apple focus on whether the tech giant is bending to Chinese Government demands, including the removal of apps from the App Store, and its labor practices. The subcommittee instead heard from cyber security experts (video and testimony here).

Context – Concerns among U.S. officials over the influence of the Chinese Government on China’s digital economy and businesses, Chinese or U.S.-based, operating in China, is leading to a creeping tech disengagement between the two. The remit of CFIUS, the national security-focused regulatory authority that reviews acquisitions of U.S. enterprises by foreign companies, was recently expanded to cover the acquisition of user data holdings and cyber capabilities, which catches up with de facto CFIUS interest in Chinese businesses investing in U.S. digital firms, including reviews of TikTok’s acquisition of Musical.ly, Ant Financial’s purchase of MoneyGram, and unwinding the Grindr acquisition by Kunlun Tech. The leverage that the Chinese Government has over Chinese digital companies, leading to rampant Internet and social media censorship, even of Chinese speakers outside China, or American enterprises who practice China-related self-censorship, including in entertainment and related to Hong Kong, is another top concern.

UK Government Trade Goals for US FTA Sees Digital Tax Confrontation on the Horizon

Report from Reuters

In Brief – As the UK Government plans to negotiate a free trade agreement with the United States as part of its post-Brexit economic plan, its official trade negotiation policy paper points to the reality that the UK digital services tax (DST) is likely to be drawn into the negotiations. Digital trade is prominently and positively highlighted in the UK Government’s view of trade with the US, including promoting the free flow of data while protecting the UK’s personal data protection standards, increasing UK access to the US digital market, and opposing customs duties on electronic transmissions. At the same time, the 2% UK DST, currently scheduled to go into effect in April, has drawn strident opposition from U.S. Government leaders and threats of stringent tariff retaliation. While the UK trade paper recognizes that digital taxes will be in the mix for any US – UK talks, a spokesperson for Prime Minister Johnson noted that the government’s DST plans had not changed.

Context – Global efforts to tax large digital companies in a new way were kick-started by France’s enactment of a 3% national DST in mid-2019, which instigated a confrontation with the United States threatening major tariff retaliation. A growing number of countries have followed a similar path — enacting a national DST, the U.S. responding with tariff threats, and the confrontation being deferred in hopes of a multilateral deal. Negotiations have centered on an OECD plan and talks have been on again, off again, since mid-2019. In January, France again agreed to defer their DST to give the OECD process more time, and Spain enacted a DST but delayed the effective date to December, but reports from recent G-20 Finance Ministers meeting indicates the talks continue to hit snags. The UK DST, which has earned praise from European Digital Policy Commissioner Vestager, may be the next DST tax-tariff tripwire.

AG Barr Reportedly Taking Personal Leadership of Tech Antitrust Investigations

Report from Politico

In Brief – Attorney General William Barr, a former attorney for Time Warner and Verizon, both long-time business and policy adversaries of the Internet industry, has tightened his control of the Department of Justice (DoJ) technology policy and the antitrust probes. The AG’s increased personal role has reportedly pushed aside the head of the DOJ’s Antitrust Division, Assistant Attorney General Makan Delrahim, who along with his chief deputy, Barry Nigro, was recused from the DoJ’s Google investigation due to past work on behalf of the search and advertising giant. Along with exploring antitrust action against one or more of the digital platform giants, AG Barr has indicated that the DoJ is looking at more general policy changes to address problems with digital services, including potential changes to Sec. 230 of the Communications Decency Act, the underlying liability regime for digital businesses hosting any user-generated content.

Context – Reports of AG Barr’s increasingly direct hand in DoJ tech policy reinforce the sense that two policy concerns will continue be front and center – law enforcement opposition to strong encryption, and concerns over ideological discrimination by social media platforms. The two primary levers at Barr’s disposal are the antitrust probes and threatening Sec. 230, and both topics featured in the recent DoJ workshop on Sec. 230. On encryption, Facebook and Apple are top targets. Barr joined the top UK and Australian law enforcement officials in a letter in October calling on Facebook to abandon their end-to-end encryption plans and has regularly claimed that end-to-end encryption is being used by terrorists, drug cartels, and child porn and molestation rings. He has also publicly criticized Apple over its handling of the phones of a terrorist-shooter in December in a seeming replay of the DoJ – Apple encryption confrontation from 2016. On anti-conservative speech restrictions, AG Barr continues to press claims made by a number of conservative activists that Sec. 230 is enabling discrimination, although no specific political speech policy remedies appear to be gaining traction.

Department of Justice Complains of Lack of Google Cooperation and Threatens Legal Action

Report from the Washington Post

In Brief – Frustrated with Google delays in responding to requests for documents and data as part of its investigation initiated last fall into the digital giant’s business practices, it is reported that the Department of Justice (DoJ) has sent Google a letter expressing its concerns and threatening to file more formal legal requests demanding greater compliance if responsiveness does not improve. The DoJ took the leadership role in the new round of federal scrutiny of Google when the agency and the Federal Trade Commission (FTC) divvied up investigations into the four largest digital platforms last summer.

Context – Google, like the other mega-giants, is facing a growing number of competition investigations, but unlike the others, Google’s investigators can draw on the materials developed as part of a large collection of competition investigations that stretch back to 2010. In Europe, investigations began that year with probes that eventually covered search, advertising and Android policies, with Google recently squaring off with the EC’s Competition Authority in Europe’s General Court over the $2.6 billion fine levied against it for practices related to its Google Shopping price comparison service, and the company plans to challenge the EC’s findings and fines on Android and advertising as well. In the U.S., the FTC looked into similar topics in 2011-12, deciding against meaningful corrective action, however both the DoJ investigation, and a coalition of nearly 50 State Attorneys General led by Texas AG Ken Paxton, are reportedly looking to build on data from the earlier probes. The DoJ’s frustrations with Google’s responsiveness parallels reports of months of legal wrangling between Google and AG Coalition over document and data handling procedures, as well as the terms of key outside substance matter experts working with the AGs, all of which was only recently settled. Finally, Google, like the other giants, is facing ongoing requests from the House Judiciary Committee as well as an FTC investigation of all the acquisitions of tech giants going back a decade, which for Google is in the hundreds.

Japan Fair Trade Commission Files Request for Court to Halt Rakuten Free Shipping Plan

Report from Nippon.com

In Brief – The Japan Fair Trade Commission (JFTC), the country’s competition authority, has taken the rare step of asking a court for an emergency order to block Rakuten’s plan to implement a “free shipping” program whereby buyers will receive free shipping on all orders exceeding 3,980 yen ($36) and sellers will be required to pay for the actual shipping costs. The Rakuten – JFTC conflict has ratcheted up for months, with the company repeatedly rejecting calls to meaningfully change the program, although they recently agreed to change the description to buyers from “free shipping” to “shipping fees included”. Thousands of small merchants have complained about the mandatory shipping plan and vented about other policies related to mobile payments, various fees, and fining sellers for minor rules violations. The JFTC filing with the Tokyo District Court, the first such action by the antitrust regulator in 16 years, continues to argue that the plan represents an abuse of Rakuten’s superior bargaining position in violation of the Anti Monopoly Act. The court is expected hear arguments before the March 18 launch date.

Context – Platform terms and conditions, and the treatment of small business users, is a major focus of digital platform policy in Japan. Last spring, after a JFTC review of the seller policies of the country’s largest ecommerce platforms, Amazon, Rakuten and Yahoo! Japan, Amazon agreed to change a proposed buyer rewards program that imposed the costs of sellers, which some see as a precedent in this case. The JFCT also released new guidelines in December regarding digital platforms exploiting an unfair bargaining position. Finally, a cabinet-level working group on the regulation of large digital businesses created by PM Abe last fall has finalized a legislative proposal to improve the transparency of platform terms of use and policies to protect smaller businesses from unilateral changes in rules and fees, which is expected to be enacted by Parliament this year.

Coalition of Unions Calls on the FTC to Investigate Amazon Practices

Report from the New York Times

In Brief – ChangeToWin, a coalition of four of the largest U.S. labor unions, have formally petitioned the Federal Trade Commission to investigate Amazon for anticompetitive practices. The unions collectively have more than 5.3 million members and represent transportation and trucking, telecommunications, retail, health care and other services. The petition covers a wide range of competition and policy issues that have plagued Amazon, including practices related to their marketplace for third-party sellers and how they link their platforms for ecommerce, fulfillment centers, delivery, and cloud services. The focus on logistics includes charges that Amazon pushes merchants to buy its delivery fulfillment services if they want to rank high on product search and serve Prime customers, which harms competing shipping and logistics providers, even when those alternatives offer merchants lower prices.

Context – Amazon, like the other digital mega-giants, is facing a growing range of competition investigations, but it’s uniquely massive physical infrastructure in the form of its unmatched network of modern fulfillment centers is raising issues that extend beyond digital services. The FTC was assigned Amazon when the agency and the DoJ divvied up investigations of the four digital giants last summer, and third-party sellers complaining of mistreatment were questioned, including about links between Prime, Marketplace sales and use of Amazon logistics. Italian competition authorities have opened an investigation focused on Amazon’s logistics practices. The Spanish competition authority is studying whether the Amazon logistics network should be regulated as a postal carrier. In India, competition authorities have filed a complaint challenging a range of Amazon practices preferencing some third-party sellers over others, and the European Commission is investigating whether Amazon unfairly preferences its own retail sales over merchants who sell on their marketplace.

California Assembly Sponsor of AB 5 Pushing Freelance Writer Carve Out

Story from The Hollywood Reporter

In Brief – California Assemblywoman Lorena Gonzalez (D-San Diego), the original sponsor of AB 5, is responding to freelance journalists’ strident criticisms by proposing legislation to eliminate the law’s annual cap of 35 pieces that a writer can submit to a journal or website before being classified as an employee. AB 5 aimed to crack down on companies that misclassify part-time workers as independent contractors, and is noted for its potential impact on digital “Gig” work driving and delivery platforms, but the debate has highlighted the wide range of professions that have long supported independent workers. Gonzalez’s new bill, AB 1850 replaces the per-venue cap on writer and photographer submissions with a set of conditions reinforcing a freelancer’s independence, such as the ability to work remotely and not be tied to set hours, and proposes a January 1, 2021 effective date.

Context – Independent work and freelancing is not new to the Internet, and research has consistently found that most independent workers like their way of working. When AB 5 was enacted, a number of highly-compensated professions, including doctors, lawyers, accountants and engineers, were exempted, but many were not. Freelance writers quickly emerged as sympathetic unintended victims of the law, potentially due to their skill at writing compelling stories about the harm they were facing. While litigation filed on their behalf failed to earn a stay of the law, their lobbying efforts appear to be paying off with AB 1850. And freelance writers are a key voice lobbying on AB 5-type legislation in states like New York and New Jersey, and writer carve-outs are being discussed. Other classes of traditionally independent workers that are lining up for relief from AB 5 include musicians, youth sports referees, newspaper carriers, loggers, physical therapists, franchisers, and pharmacists, but none have been added to the Gonzalez bill at this point. And the Democrat-controlled California Assembly soundly rejected a Republican motion to roll-back AB 5 pending resolution of the many independent worker complaints.