Archive – 2020

February 2020

Prager U Appeal Against YouTube Content Moderation Practices Rejected in 9th Circuit

In Brief – Prager University, a non-profit organization that creates videos on political, economic and social topics from a conservative perspective, suffered another setback in its ongoing legal campaign to limit the ability of YouTube to impose restrictions on Prager videos. A three-judge panel of the Ninth Circuit Federal Court of Appeals unanimously rejected the argument that YouTube, due to its immense size and reach, no longer enjoyed the editorial rights of a private party and was instead subject to the type of 1st Amendment-based speech moderation restrictions that severely limit government entities and public utilities. The opinion of the court notes that “private property does not ‘lose its private character merely because the public is generally invited to use it for designated purposes.'” (Video of the oral argument in the 9th Circuit is here.)

Context – While progressives regularly attack the largest platforms for failing to block what they see as false and misleading content, many conservative social media activists charge social media platforms with restricting and blocking conservative content for ideological reasons. The White House regularly supports that claim, it is a favorite of Attorney General Barr, and was reportedly the “800-pound elephant in the room” during a private meeting at the DoJ’s recent Section 230 Workshop. Conservative Sen. Josh Hawley (R-MO) has sponsored legislation to make Sec. 230 liability rules contingent on federal certification of ideological neutrality, but unlike some other of his tech regulatory bills, this has no cosponsors, and progressives vehemently reject that platforms discriminate against conservatives. Finally, last summer’s Supreme Court decision in Manhattan Community Access Corporation v. Halleck, where the five conservative justices found that private companies that offer public forums are not subject to First Amendment constraints on editorial discretion, was cited in this 9th Circuit opinion.

Portable Benefits Proposal Tossed into Gig and Independent Worker Debate in New Jersey

Report from the Courier Post

In Brief – Coming off months of intense debate in New Jersey surrounding a failed effort to enact worker classification legislation mimicking California’s AB 5, NJ State Senator Troy Singleton (D-Delran) has proposed legislation to create a portable independent worker benefits system funded by contributions from companies that use large numbers of independent contractors, including Gig platform businesses. The bill would require firms to contribute $6 for every hour the freelancer works, or 25 percent of the total fee collected from the consumer for each transaction. Freelancers would be required to select a nonprofit “qualified benefit provider” to receive the fees associated with their work to fund workers’ compensation insurance, as well having the opportunity to access other traditional benefits.

Context – Flexibility and autonomy have long been valued by people engaged in independent work, a phenomenon that far precedes the Internet or Gig work platforms. The negative impacts of AB 5 on more traditional freelancers such as writers and musicians is gaining attention because most want to be independent. A landmark 2016 study of traditional and platform-enabled independent workers revealed that almost three-quarters do it voluntarily, including as second jobs, and greatly value it, often more than traditional work. Recent Gallup data indicates that the number engaged in independent work in the U.S. who claim they cannot find a traditional job is approaching zero. However, traditional employer-style benefits remain an important topic as tax and regulatory policies tend to preference benefits from an employer, a regime often criticized by conservatives. Uber, Lyft and DoorDash have proposed a portable benefits-based reform of AB 5 to better support people engaged in independent work models, and tech-policy activist Sen. Mark Warner (D-VA) has sponsored legislation to direct $20 million to support state-level portable worker benefit pilot projects.

Instacart Suffers Initial AB 5 Worker Classification Setback in California Court

Report from the Times of San Diego

In Brief – A San Diego Superior Court judge has ruled (copy available here) that Instacart is likely misclassifying some of the people who do in-store grocery shopping services as independent contractors when they should be Instacart employees. Hundreds of thousands of people have used Instacart to provide shopping services and the company has faced numerous complaints regarding pay rates and conditions. The San Diego City Attorney filed a lawsuit against the company for misclassification last September asking for the court to order Instacart to properly classify shoppers as employees and provide for a range of back pay and benefits. Judge Taylor determined that Instacart is likely not complying with AB 5 but did not order the company to come into compliance. Noting Instacart’s opportunity to appeal, he called out the legal uncertainty on worker classification and the value of higher courts providing greater clarity.

Context – Litigation surrounding AB 5 is one component of the evolving treatment of Gig platforms. Independent truckers earned a stay in federal and state courts based on federal preemption due to federal law regulating interstate shipping, but a federal suit filed by Uber and Postmates did not achieve an injunction. Meanwhile, large numbers of Uber and Lyft drivers are reported to be filing wage claims with the California Labor Commissioner’s office to press for a determination of their individual employment status. Finally, the key issue of worker independence being tied to independent contractor status appeared in Judge Taylor’s ruling where he noted that Instacart “already took steps to bring itself into compliance with Dynamex, and… relatively minor additional steps will allow it to be in full compliance by ensuring the shoppers are true free agents.” This appears consistent with Uber’s strategy to adjust its policies in California to reinforce the independence of its driving users.

Freelancer Strategy to Win Exemption from AB 5 – Spotlight on Music and Entertainment

Report from the California Globe

In Brief – Although so-called Gig worker tech platforms such as Instacart, who just received a worker classification setback in San Diego Superior Court, were the highest profile targets of AB 5, great uncertainty over the potential impact on a very wide range of traditional independent workers is reverberating through California and sending a warning elsewhere. The music and live entertainment industry, the initial home of the “gig”, has emerged as a hotbed of vocal concern and leading to calls for a new musician exemption from AB 5. And beyond just musicians, live entertainment venues, many of which operate as small businesses on narrow margins, are also expressing concerns with the new law. It is widely reported that the sponsor of AB 5, Assemblywoman Lorena Gonzalez (D-San Diego) is crafting a bill to amend AB 5 and provide additional carve-outs and exemptions, and musicians and others in the entertainment industry are working to be added to that bill.

Context – While AB 5 exempted a number of the highest-compensated professions, including dentists, doctors, psychologists, insurance agents, stockbrokers, lawyers, accountants, engineers, and real estate agents, many were not. Freelance writers and photographers, who were limited by the law to just 35 pieces a year with a single outlet, quickly emerged as sympathetic unintended victims of the law, pressing for a legislative fix and emerging as a potent lobby against AB 5-type legislation in states like New York and New Jersey where carve-outs are being discussed. Other classes of traditionally independent workers are lining up for relief from the California legislature including referees, newspaper carriers, loggers, physical therapists, franchisers, and pharmacists. Coming full circle and linking the troubles faced by freelance journalists and live arts and entertainment venues is this expose about the plight of California freelance theater journalists writing reviews of local productions.

The Federal Trade Commission Wants 10 Years of Acquisition Data From Five Tech Giants

Report from the Washington Post

In Brief – The Federal Trade Commission is requesting Google, Amazon, Facebook, Apple and Microsoft provide the agency with detailed information regarding all of their business acquisitions for the ten years from 2010 – 2019 that fell below the monetary value threshold for government antitrust review and therefore were not scrubbed by government regulators at the time. While the agency said that it is not conducting new reviews for any specific enforcement purpose, findings could lead regulators to take action to unwind improper acquisitions as well as potentially propose rule changes related to the role of acquisition policy in technology industries as well the notification and review processes. The tech giants have made hundreds of acquisitions over the decade in question, and while some were for billions of dollars and involved high-profile firms (at the time, or later), most fell below the federal notice and review threshold that was recently raised to $94 million.

Context – The role of acquisitions by the digital giants is a major component of digital competition policy reviews globally, and it is complicated and contentious. Many critics appeal to concerns that the largest digital firms gaining access to more data and applications is itself a problem, or that a small but innovative firm could eventually become a big competitor, charging giants with making intentional “killer acquisitions” or the ecosystem resulting in “kill zones”. On the other hand, the role of acquisitions in allowing the giants to more effectively compete with each other, such as with the recently approved Looker acquisition by Google to improve its competitive position against Amazon and Microsoft in cloud services, or its proposed purchase of FitBit to compete with Apple and Amazon on health services, as well as giving innovators and investors a critical monetization route, are important counter considerations. Senior Department of Justice officials were recently in the Bay Area to raise issues related to the competitive threat of the tech giants with key VC investors and reportedly received a pretty cold reception.

European Commission Tech Regulation – Spotlight on Artificial Intelligence

Report from the New York Times

In Brief – As part of the European Commission’s comprehensive digital strategy initiative, top EU digital policy commissioners Margrethe Vestager and Thierry Breton are releasing a White Paper on Artificial Intelligence, as well a European Data Strategy to better harness European public data stores to promote innovation. The artificial intelligence policy is expected to propose a balance between promoting economic and social benefits with a firm regulatory hand to address public concerns with potential risks, especially related to AI applications that can result in physical harms, such as medical devices and self-driving vehicles, as well as concerns with potential discrimination. Leaders of U.S. tech giants, including Google, Facebook, Apple and Microsoft have addressed AI in Europe expressing sympathy with greater regulatory guidance.

Context – The European Commission has attempted to stake out leadership on ethical guidelines for AI, including through the development of Ethics Guidelines for Trustworthy AI created by its EU’s High-Level Expert Group on Artificial Intelligence. On the other hand, the Trump Administration recent draft AI regulatory guidelines are seen as more hands off, including on autonomous cars. Facial recognition is raising concerns in the U.S. and Europe, including talk of a five-year EU moratorium on facial recognition in public areas. Clearview AI, a firm that has reportedly built a massive AI-enabled facial recognition system on photos scraped off social networks and is marketing services to law enforcement entities in the United States and internationally, including in Europe, is fast becoming of focus of concern, leading to a class-action lawsuit alleging violation of the Illinois 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.

Spain Joins International Trend Enacting a Digital Sales Tax but Defer Start to December

Report from The Guardian

In Brief – The Spanish Government has joined a growing host of European governments that have enacted a national digital services tax (DST) targeting large, consumer-facing, digital services companies. The Spanish DST imposes a 3% levy on the revenues earned on services involving Spanish Internet users when a company has global revenues exceeding 750 million Euros, and revenues in Spain exceeding 3 million Euros. In a nod to the fierce disagreement between the U.S. Government arguing that DST plans discriminate against U.S. companies and the many governments claiming that Internet enterprises avoid appropriate tax responsibilities, the Spanish DST will not be implemented until December 2020, in order to give negotiators the rest of the year to reach agreement on a broad-based global tech tax.

Context – Global efforts to tax large digital companies in a new way were kick-started by an EU-wide DST plan debated in 2018, and France picked up the mantle and enacted a national DST in mid-2019, which instigated a confrontation with the United States threatening major tariff retaliation. A growing number of countries globally have enacted similar DST plans (summary of European DST plans here and additional countries in Asia here), threatening a major tax and tariff outbreak. The Organization for Economic Cooperation and Development (OECD) has emerged as the lead venue for governments to negotiate a multilateral agreement with its “Pillar One” tax proposal emerging as the leading framework. The on-again-off-again talks were derailed in November with Treasury Secretary Mnuchin claiming concerns of large non-digital industries threatened U.S. support and proposing a type of “safe harbor” which appears to mean companies could choose national tax laws or the complex new system. An apparent “truce” in January restored the momentum for OECD agreement talks aiming for the end of 2020 but reports from the recent G-20 meeting indicate the safe harbor continues to cause confusion.

New Mexico Attorney General Sues Google Over Privacy Implications of Google Education Suite

Report from the New York Times

In Brief – New Mexico’s Attorney General has filed suit against Google in U.S. District Court claiming that the company is using its G Suite for Education service to collect personal data generated by children in violation of federal and state laws. G Suite for Education is marketed to school districts, teachers and parents as a way to provide schools and students with very low-cost technology tools, including a host of free Google software. The legal complaint claims that Google violates the law by monitoring 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 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.

Context – This is the second time that the New Mexico AG has sued Google regarding violations of the Child Online Privacy Protection Act (COPPA), following a 2018 lawsuit targeting online games developer Tiny Labs, Google, and other platforms. While Google has filed to dismiss that suit due to the responsibility of the games developer to comply with COPPA, privacy advocates have noted that the G Suite for Education suit follows the high-profile settlement by Google made with the Federal Trade Commission and NY AG for YouTube failing to comply with COPPA. YouTube is making significant changes that many small content creators claim will demonetize their good work. Finally, proposals to expand COPPA and restrict Internet services that serve users under age 18 include federal bills, including HR 5703, H.R. 5573 and S. 748, and new design standards from UK’s data protection authority.

European Data Protection Board Issues Google – FitBit Deal Privacy Impacts Warning

Report from Reuters

In Brief – The European Data Protection Board (EDPB), made up of representatives of the EU’s 27 national data protection authorities and the European Data Protection Supervisor, has warned Google and FitBit of their concern that the further accumulation of personal data by a data holder as large as Google, and its potential combination with other types of personal data, could pose a high level of risk to privacy and data protection. The EDPB has urged the companies to assess privacy considerations in a transparent way and mitigate privacy and data protection risks before seeking EU antitrust approval for the deal.

Context – Google’s announced plan to acquire fitness wearables company FitBit is a touchpoint for two major global digital public policy trends — new thinking on acquisitions related to the digital giants, and the implications of the biggest digital businesses expanding into health care. The U.S. Federal Trade Commission recently announced that they will be reviewing all the acquisitions of the five biggest tech firms going back a decade, including those that were too small to require government notice, looking for signs of anti-competitive intent. The European Competition Authority has also announced that they are planning to look at smaller tech acquisitions. While concerns with the biggest firms getting bigger is widespread, the potential for undermining entrepreneurship by closing off routes to monetize innovation is growing too. Google’s FitBit deal would exceed traditional thresholds review anyhow, and it is already being reviewed by the U.S. and Australia, and as the EDPB notes, the EU is likely. The expansion of the biggest tech companies into health is well underway, and it is more than just Google, with a striking summary of the moves from Google, Apple and Amazon here. Heightened interest in the data implications of such acquisitions is likewise growing in markets globally, including in the U.S. where the national security-focused CFIUS foreign acquisition review process has been expanded to cover user data in a number of ways, including special consideration for acquisition of health and biometric data.

Political Memes, Texts and Over The Top Video Services Ads… Oh My!

Story from Vox

In Brief – The unprecedented ad spending of the non-traditional Mike Bloomberg presidential campaign includes significant resources being poured into sponsored social media influencer support and Bloomberg memes. Sponsored social media, increasingly common in fashion, brand and entertainment advertising, is quickly expanding in political campaigns. The proliferation of ways people communicate and consume digital content is causing consternation for those looking to police political communications.
Memes – Facebook has announced that paid political memes and other sponsored content will be treated like all sponsored influencer content that does not involve payment to Facebook, which requires disclosing that the message is sponsored. This is consistent with general FTC guidance on sponsored content.
Texts – Campaigns have been texting voters for years, a trend expanding due to the increased reliance on mobile phones and the greater likelihood that a voter will respond to a text. Campaigns generally rely on paid and unpaid staff to send texts to avoid regulations limiting autodialing.
OTT Video– Streaming video and television services are offering campaigns more targeted political advertising capabilities and younger viewer demographics. The services are not presently covered by the same political ad regulations applied to traditional cable and television.

Context – The proliferation of digital communications used by campaigns is challenging traditional political advertising content and transparency regulations. While the Honest Ads Act sponsored by Sens. Klobuchar (D-MN), Warner (D-VA) and Graham (R-SC) was introduced to expand political ad regulation to new video and audio platforms in the wake of the 2016 election foreign interference, the current version sets a platform threshold at 50 million monthly users, exempting many. In addition, whether the example is the recent UK General Election, or the current Presidential election, domestic campaigns and interest groups are the ones pushing the envelope on digital communications, not foreign interests.

CFIUS Reviews Will Now Be Covering User Data (Focus on China)

Report from the Wall Street Journal (pay) or South China Morning Post

In Brief – Final rules implementing the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) are expanding the national security-focused reviews of foreign investments carried out by the Committee on Foreign Investment in the United States (CFIUS) with a particular focus on foreign acquisitions that could compromise sensitive personal data of U.S. citizens. Disclosure to CFIUS will be required for foreign acquisitions of any U.S. business if the enterprise has access to data on more than one million Americans, or targets its services to U.S. Government personnel or contractors. In addition, foreign investments in any enterprise holding certain kinds of genetic or biometric data, financial data, health data or tracks user locations, is now subject to review. The new focus on data expands the CFIUS review process beyond the traditional concerns with critical infrastructure and technology and is expected to dramatically increase the number of acquisitions and foreign investments that will face a review process. Investments by Canadian, British and Australian firms will be exempt from the new review process for two years, and it is reported that the exempt list might be expanded.

Context – The specific expansion of the CFIUS remit to user data holdings and cyber capabilities is catching up with a de facto CFIUS interest in the potential security implications of Chinese businesses investing in U.S. technology and digital firms. TikTok, with tens of millions of young American users, is reportedly currently the subject of a CFIUS investigation of its 2017 acquisition of Musical.ly which had millions of U.S. users when purchased but was never reviewed by security agencies. That follows CFIUS’s 2018 rejection of the Ant Financial acquisition of MoneyGram, and the reported CFIUS-inspired unwinding of the Grindr app acquisition by Chinese firm Kunlun Tech. Some U.S. Government officials appear concerned that Chinese businesses would not be able to say no to Chinese government or security agency requests to access company data holdings.

ACCC Kicks off New Round of Platform Regulation in Australia

Report from The Guardian

In Brief – The Australian Competition and Consumer Commission (ACCC), the country’s competition authority, has announced two new digital economy investigations that will continue its campaign as one of the most active global Internet industry regulators. The first is a targeted 18-month study of the Digital Advertising Industry, which was a major topic in the recently wrapped-up Digital Platforms Inquiry (DPI) and will again focus attention on the business models and operations of social media giants, especially Facebook and Google, as well as advertising agencies and intermediaries, advertisers and the sites that host digital ads. The second has the ACCC, which has been given expanded resources and the remit of a sort of permanent overseer of digital platforms, kicking off a broad five-year inquiry of all digital platform services markets, including search, social media, messaging, content aggregation, media referrals and electronic marketplaces. This major undertaking covering market trends in Australia and globally, mergers and acquisitions, consumer impacts and barriers to entry, is scheduled to deliver a first interim report on September 30, and then every six months through March of 2025.

Context – In December, the Government of Australia, led by a Prime Minister who is very comfortable directly challenging tech giants, released their plan of action to address 17 of the 23 recommendations included in the ACCC’s DPI report. The traditional media industry in Australia, suffering economic challenges there as elsewhere, has been a major driver of the DPI. Along with the online advertising review, which will look at key media revenue issues, the government has called on the largest digital platforms and domestic media businesses to work with the ACCC to develop “voluntary codes of conduct” to address bargaining imbalances, including how advertising revenue is shared, how media content is used by platforms, and transparency in changes to algorithms that determine how content is ranked online.

Indian Court Stays Amazon Competition Investigation with FDI Investigation Underway

Report from Reuters

In Brief – The Karnataka High Court has imposed a two-month stay of the Competition Commission of India’s (CCI) investigation into alleged unfair business practices by Amazon and Flipkart (owned by Walmart), the two dominant ecommerce platforms in India. The CCI action was prompted by independent and small business retailers’ complaints that the ecommerce giants provided sellers affiliated with their platforms with preferential listings, promotions, and deep platform-funded product discounting. The court observed that the Enforcement Directorate (ED), the regulator for India’s strict foreign direct investment (FDI) policies, was already engaged in an investigation of the two companies since March 2019 regarding the same set of activities as potentially being in contravention of retail and ecommerce FDI policies.

Context – In India, financial links between foreign-owned ecommerce marketplaces and platform sellers raises unique legal and regulatory issues due to the country’s strict FDI limits in the multi-brand retail sector compared to the open FDI rules for ecommerce marketplace platforms. In short, while foreign-owned enterprises can operate digital marketplaces, they cannot own retail businesses due to fears that deep-pocketed foreign firms would undercut India’s many small shopkeepers. The hybrid nature of Amazon’s usual ecommerce business, and Indian ecommerce marketplace Flipkart’s purchase by Walmart, has raised concerns that the two platform giants are engaged in potentially illegal tactics to circumvent the retail FDI rules. This has led to shopkeeper street protests and criticism of Amazon’s CEO. In addition, the Indian Government has proposed a new 1% withholding tax on ecommerce platforms, including both Amazon and Flipkart, as well as ride sharing and food delivery platforms. The tax proposal, which is expected to be voted on in the legislature in April, exempts online retailers selling less than $7,000 in a year, but there is no minimum for the tax on drivers or delivery providers.

PEI Reports on the Department of Justice Section 230 Workshop

Story from the Washington Post

In Brief – The Justice Department hosted a workshop allowing a range of experts (bios) to discuss Sec. 230 of the Communications Decency Act, a legal underpinning of the Internet which protects platforms hosting user-generated content from being legally liable for users’ posts and behaviors. Among the 15 speakers over three panels were a number of advocates of groups focused on fighting online sex and child abuse, the Attorney General of Nebraska, and a representative of the traditional media, a somewhat smaller number of Internet industry representatives, and a similar number of law professor-type experts. While the panels themselves were only slightly weighted toward those critical of Internet platforms and Sec. 230, the event was opened by Attorney General William Barr with remarks highly critical of Internet industry leaders, a description of Sec. 230 as an outdated infant industry provision, and concerns over platforms silencing (mostly conservative) voices online and failing to stop very bad behaviors.

PEI Comments – Following the AG’s kickoff remarks, the panel discussions, in particular the first and third, were pretty thoughtful, giving voice to a range of views and surfacing the complexity of the issue. The more neutral legal experts reinforced two points repeatedly made by the Internet-friendly participants, which was that Sec. 230 is key to enabling platform moderation aimed at the bad behaviors critics are angry about, and that all but the largest incumbent platforms would be most harmed by weakening Sec. 230. There was no discussion of ideological neutrality (or lack thereof) in content moderation, a major interest of AG Barr, in the panels, but it was reportedly raised in private afternoon discussions. In related news on a big day in global digital platform liability, the full Third Circuit Federal Court of Appeals reheard Oberdorf v. Amazon, the Sec. 230 product liability case pitting Amazon against a buyer blinded by a defective dog leash sold by a Chinese seller, and the European Commission released plans for its Digital Strategy which is expected to include a Digital Services Act that may refine the platform liability regime of the EU eCommerce Directive.

The Federal Trade Commission Wants 10 Years of Acquisition Data From Five Tech Giants

Report from the Washington Post

European Commission Tech Policy – Spotlight on Artificial Intelligence Regulation

Report from the New York Times

Google and the EU Competition Authority Argue Shopping Case Appeal Before Lux Judges

Report from the New York Times

In Brief – Google and the European Competition Authority squared off in the General Court in Luxembourg over Google’s appeal of the European Commission’s 2017 decision that Google acted illegally in the preferencing of its Google Shopping “comparison shopping service” and corresponding search demotion of competing comparison shopping services. The case, which began a decade ago, resulted in a decision that Google has consistently objected to, and included a then-record $2.6 billion fine to a technology company. The lengthy hearing in front of a panel of five judges covered a wide range of topics, including the relevance of the distinction between comparison shopping sites and ecommerce marketplace sites like Amazon and eBay, whether Google has a duty to carry competitive services in a non-discriminatory manner on its platform, and the legal underpinning for the fine. A decision could come next year and be appealed to the European Court of Justice.

Context – This long battle between a U.S.-based platform giant and a leading global competition authority is important for a number of reasons. First, it is one of three major EU competition cases brought against Google under the leadership of Commissioner Margrethe Vestager, being followed by a $5 billion fine related to the Android operating system and a $1.7 billion fine related to Google’s AdSense advertising platform. Google is challenging each decision and fine while also working to come into compliance with each service. Second, while similar complaints to those that led to the three EU decisions against Google were investigated by the U.S. FTC in 2011-12, but resulted in no major action, they may be resurrected by the new Department of Justice and State AG Google reviews. Lastly, and maybe most importantly, the final resolution of the search-related shopping case is key to related complaints regarding platform self-preferencing and competitor-demoting, including those raised by other “search verticals” such as the job search and vacation rentals search industries.

Facebook CEO Uses Trip to Europe to Propose New Platform Content Moderation Regime

Report from the New York Times

In Brief – Facing increasing regulatory scrutiny in markets globally, and with the European Union appearing to take a particularly activist approach, Facebook has released a White Paper on content moderation policy and regulation and CEO Mark Zuckerberg held a series of meetings with top EU digital policy leaders. The Facebook paper calls for a new regulatory regime differentiating platforms from online content creators, due to the important distinction between hosting user-generated content and creating the content oneself, but accepting greater responsibility for the materials posted by users than would be applied to telecommunications providers. Zuckerberg’s meetings in Europe included sessions with EU Competition and Digital Commissioner Margrethe Vestager, Internal Market Commissioner Thierry Breton, and Justice Commissioner Vera Jourova, and in addition to content moderation and free speech policies reportedly included discussions of increased EU antitrust activism as well as European interest in a new digital services tax, which Facebook’s CEO reportedly supported in the form of a new global levy.

Context – Content moderation is important for all digital platforms enabling user-generated content, but Facebook’s immense global scale (2.9 billion people using Facebook, Instagram or WhatsApp) has created unique issues and challenges due to its disproportionate impacts on all aspects of online communications. Looking to thread a path forward between competition policy concerns and mandates, including calls for some manner of a corporate breakup, Facebook has been one of the most active tech giants proposing new government regulation. Facebook’s European roll-out of this content moderation regulatory think piece comes in anticipation of forthcoming action this spring on an EU Digital Services Act and UK action to implement the highly regulatory Online Harms White Paper.

UK Announces Platform Regulation Plan with Ofcom as the Online Regulator

Report from The Guardian

In Brief – Continuing the UK’s Internet platform regulation drive initiated by the release of the comprehensive Online Harms White Paper last spring, the UK Government has released its initial public consultation response outlining its regulatory and legislative intentions. The Office of Communications (Ofcom), the UK’s existing media regulator, will be tasked as the Internet industry regulator, and Melanie Dawes, a senior civil servant, will serve as Ofcom’s new chief executive. For illegal user content, particularly terrorism advocacy and child sexual abuse, platforms will be charged with blocking before it appears, and will face tight take-down requirements if it does. For objectionable but not illegal content, adults will not be prohibited from posting or accessing, but companies will be required to clearly state what content is acceptable and enforce the standards consistently and transparently. The government’s proposal, to be crafted into legislation presented to parliament, claims to be intent on safeguarding free speech, defending the press, promoting tech innovation and ensuring businesses do not face disproportionate burdens, all issues raised by critics. Finally, the government continues to focus on protecting young people online and some manner of age verification may be pursued.

Context – Regulation of the Internet, and variously the largest digital platforms, continues apace in markets globally. Last spring, the UK Online Harms White Paper was seen by many advocates of free speech as one of the most aggressive efforts to regulate online conduct in any western democracy. Given the ongoing regulatory developments in Canada, Australia, Germany, France, the expected EU Digital Services Act, and competition authorities globally exploring a range of data, privacy and platform policies, it is increasingly hard to tell who is proceeding in the most restrictive manner.

JFTC Officials Raid Rakuten on “Free Shipping” Program

Report from Reuters

In Brief – The Japan Fair Trade Commission (JFTC), the country’s competition authority, has carried out a raid of the offices of Rakuten, one of Japan’s largest digital platform companies and online commerce marketplaces. The JFTC is investigating Rakuten’s plan, announced last fall, to implement a “free shipping” program this spring 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. A coalition of thousands of small Japanese merchants that sell on the platform complained to competition officials that eliminating their flexibility on shipping will unfairly burden small businesses operating on very narrow margins. Many sellers also raised concerns with Rakuten policies related to its mobile payment system, various commissions and fees, and unfairly fining sellers for minor rules violations.

Context – Platform terms and conditions, and the treatment of small business users, is a major focus of digital platform policy in Japan. Last spring, the JFTC undertook a review of the seller policies of the country’s largest ecommerce platforms, Amazon, Rakuten and Yahoo! Japan, and pressed Amazon to change a proposed buyer rewards program that imposed the costs of Amazon 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 in violation of Japan’s anti-monopoly law. Finally, a cabinet-level working group on the regulation of large digital businesses is reported to have finalized their legislative plan to improve the transparency of platform terms of use and policies to protect smaller businesses from unilateral changes in rules and fees, which will include annual reports to the Ministry of Economy, Trade and Industry and requirements to give prior notice and explanations of changes.

Mandated Talks Between Platforms and Big Media Begin in Australia Aimed at New Relationships

Report from AdNews

In Brief – Traditional media publishers and the largest social media platforms, in particular Facebook and Google, are beginning negotiations in Australia to establish new “voluntary codes of conduct” in which each major platform would agree to provide Australian media enterprises greater transparency into how the platform treats content, and increased payment for news content appearing on the platforms. The new reimbursement and transparency regimes to improve the standing of traditional media is one of the 17 recommendations from Australia’s comprehensive Digital Platforms Inquiry (Chapter 5) included in the Australian Government’s “Implementation Roadmap”. The roadmap proposes industry negotiations, overseen by the Australian Competition and Consumer Commission (ACCC), from February through April, an interim ACCC report in May, and a final report on mutually acceptable regimes in November. The roadmap and senior Australian officials have indicated that if acceptable agreements are not reached this year that the government may institute a new regulatory regime in 2021.

Context – The traditional media industry has been a key force driving the Digital Platforms Inquiry (DPI) regulatory campaign targeting the social media and digital advertising giants in Australia. Proposals to improve the business prospects of traditional media firms are more heavily weighted in the DPI package compared to most digital competition reviews globally. In a similar vein, the recent report of the Canadian Broadcasting and Telecommunications Legislative Review Panel includes expanding the authority of the Canadian Radio-Television and Telecommunications Commission (CRTC), Canada’s regulator of radio and television media and telecoms companies, to cover a wide range of digital platforms and require them to pay into a fund that the government would use to support news organizations, a proposal that some critics believe could create media dependencies on the government.

Senator Hawley Proposes Eliminating Independent FTC and Placing it in the Department of Justice

Report from CNBC

In Brief – Sen. Josh Hawley (R-MO), leading conservative critic of the large digital platforms, released his latest proposal to shake up tech regulation, calling for eliminating the Federal Trade Commission (FTC) as an independent federal agency and folding it into the Department of Justice (DoJ) in the manner of the FBI. The FTC, charged with regulating consumer protection and federal antitrust concerns, operates as an independent agency steered by five commissioners, three from the party controlling the White House. The DoJ, on the other hand, is a more traditional arm of the executive branch, led by the Attorney General (AG) and directly accountable to the President.

Context – The FTC is a prominent agency on high profile digital issues, especially privacy and antitrust. Both involve complicated U.S. governance frameworks with parallel regulatory authority by multiple federal agencies, in particular the FTC and the DoJ, state regulation and enforcement by State AGs, and some industry-specific data and privacy regimes. This complexity and the lack of comprehensive federal laws on digital economy issues including privacy, the changing nature of communications and media, the appropriate application of antitrust to the largest platforms, and artificial intelligence, often leads to frustration and criticism. For example, last summer, after it was reported that the DoJ and FTC had agreed to divide up the antitrust investigations of Google, Facebook, Amazon and Apple, the framework broke down with the DoJ moving to investigate all four, resulting in criticism on Capitol Hill. Hawley’s FTC plan adds to his growing collection of digital regulatory proposals, one of which involves linking the Sec. 230 digital platform liability regime to certification of ideological user moderation neutrality by a bipartisan super-majority of the FTC, something that might not be consistent with a new model FTC governed by the Attorney General. One also has to wonder if legislators from the minority party will be willing to turn the FTC fully over to the control of the White House via the AG.

Federal Judge Rejects Uber and Postmates Bid for a Federal Injunction to Block AB 5

Report from the New York Times

In Brief – Federal Judge Dolly Gee of the Federal District Court in Los Angeles has rejected a request by Uber and Postmates to block implementation of AB 5, California’s landmark worker classification labor law that may dramatically impact gig labor-type digital platforms. Judge Gee determined that while the platforms could suffer a degree of irreparable harm because of the law, the plaintiffs did not prove that gig labor platforms had been singled out in a discriminatory fashion, nor that the potential harms to the platforms and some of their users exceeded the legitimate regulatory wage and benefit goals of the legislation. Judge Gee noted multiple times in her analysis that major gig work platforms themselves had indicated that both under AB 5’s ABC Test, as well as traditional worker classification standards, that the platform users might be appropriately classified as independent contractors and therefore would not in all cases run afoul of the new law.

Context – The regulatory and litigation phase of AB 5 implementation is well underway. Hundreds of Uber and Lyft drivers are reported to be filing wage claims with the California Labor Commissioner’s office to press for a determination of their appropriate employment status, one of the enforcement routes provides by the legislation. In addition, along with the Uber-Postmates federal legal challenge which failed to earn an injunction, a federal constitutional challenge is underway by freelancer writers and photographers who have emerged as particularly effective critics of the law’s unintended negative impacts, as well as an independent trucker suit that has resulted in federal and state court injunctions blocking application of the law to commercial truckers based on federal preemption by the Federal Aviation Administration Authorization Act that regulates interstate shipping businesses.

Amazon Asks Court to Block the Antitrust Investigation of the Indian Competition Bureau

Report from Reuters

In Brief – Amazon has begun legal action in India to stop the antitrust investigation recently begun by the Competition Commission of India (CCI) , saying that it could cause “irreparable” loss and damage to its reputation, as well as asserting that the regulator has failed to identify any harm to competition caused by the company’s practices. The CCI investigation into Amazon and Flipkart (owned by Walmart), India’s two largest ecommerce platforms, was initiated last month based on allegations raised by trade groups representing mobile phone sellers and independent retailers that the two platform giants provide a range of preferences to select sellers that are claimed to be affiliated or controlled-by the platforms, including preferential listings, promotions, and participation in platform-funded product discounting. Deep discounting by sellers suspected of being funded by the platform giants themselves has led to shopkeeper street protests targeting Amazon and Flipkart, as well as pointed criticism of Amazon CEO Jeff Bezos on his recent trip to India.

Context – In India, business links between ecommerce marketplace giants and some platform sellers raises issues that are distinct from the competition policy concern being raised in the U.S. and Europe regarding Amazon’s treatment of third-party sellers competing with Amazon’s retail products. In India, the issue is closely tied to the country’s strict foreign direct investment limitations in the multi-brand retail sector, while very open investment rules apply to ecommerce marketplace platforms. The hybrid nature of the Amazon ecommerce business in most markets, and the acquisition of Indian ecommerce marketplace business Flipkart by Walmart, has raised questions about whether the two platform giants are engaged in potentially illegal tactics to circumvent the retail industry foreign investment rules and operate like a retailer.

House Passes PRO Act Labor Bill that Includes Allowing Gig Workers to Organize

Report from AP News

In Brief – The House of Representatives passed the Protecting the Right to Organize Act of 2019 (“The PRO Act”), broad worker rights legislation that is strongly supported by major labor organizations. The bill would expand organizing rights, increase penalties for violating workers’ rights, and weaken state “right-to-work” laws. In addition, the bill includes a worker classification provision allowing independent contractors such as gig workers to organize and join unions, a provision that proved controversial on the House floor. With California’s AB 5 gig labor bill under fire from disaffected freelance writers and other creative professionals, including in states such as New York and New Jersey, House Democrat leaders argued that The PRO Act was distinct from AB 5 and only focused on union organizing. Republicans and the White House roundly criticized the bill, including tying it to AB 5. It passed by a partisan vote of 224-194, and is not expected to be considered in the Republican-controlled Senate.

Context – While the AB 5-style legislative battles emerging in other states are increasingly getting tied up in the issues related to freelancers, the big ride sharing and delivery platforms remain in the forefront in California. It is reported that a number of Uber and Lyft drivers are testing the enforceability of AB 5 by filing wage claims with the California Labor Commissioner’s office. This follows an Uber driver class action suit filed last fall, an Uber and Postmates lawsuit challenging AB 5 on constitutional grounds, a further constitutional challenge by freelancer writers and photographers, and an independent trucker suit seeing some success. From the other side of the Atlantic, EU Commissioner Margrethe Vestager has opined that gig workers should have the right to organize for better wages and conditions.

Child Protection Groups Call on Facebook to Halt End-to-End Encryption Plans

Report from the New York Times

In Brief – The Facebook plan to combine the underlying technical and communications infrastructure of its three major communications platforms – Facebook, WhatsApp and Instagram – has drawn fire from a coalition of 129 child protection organizations led by the UK-based National Society for the Prevention of Cruelty to Children concerned that the extension of end-to-end encryption to all three services would severely undermine efforts by Facebook and others to combat a wide range of child exploitation and pornography. Their letter calls for Facebook to halt its consolidation and encryption plan until sufficient safeguards are in place to preserve robust tracking of child predators, a call that is very similar to one made last fall in a public letter to CEO Mark Zuckerberg from U.S. Attorney General William Barr and the top UK and Australian law enforcement officials.

Context – Public safety concerns with the implications of strong encryption are increasingly coming to the forefront in Department of Justice efforts related to Facebook and Apple. Top officials have repeatedly signaled that public safety issues like encryption will be part of their broad investigation of digital platforms. In addition, the FTC is reported to be considering pursuing a federal court injunction to block Facebook’s plan to closely link their three big communications services, arguing that fully integrating the businesses could undermine antitrust reviews by making it functionally impossible to later separate the businesses units. In what appears to be a replay of the 2016 legal standoff between Apple and the DoJ over a demand that the company “unlock” a terrorist shooter’s iPhone, AG Barr has strongly criticized Apple’s level of cooperation regarding the phones of the terrorist shooter at the Naval Air Station Pensacola.

EU Competition Authority Investigating Facebook’s Use of Data from VPN Firm Onavo

Report from TechCrunch and Wall Street Journal (paywall)

In Brief – The European Competition Authority is reportedly investigating Facebook’s practices related to the use of data from the VPN services firm Onavo, a business it acquired in 2013 and shut down in 2019. Onavo collected information on the comprehensive online activity of its users. It has been claimed that Facebook used the data for anti-competitive purposes, including to track rapidly growing services such as WhatsApp or Instagram which could be acquired to avoid the emergence of a new competitor (often referred to as a “Killer Acquisition”), or to identify competitor apps and cut them off from Facebook platforms and APIs. Facebook has consistently contested the charges.

Context – Charges related to Facebook’s use of Onavo data have been fueled by internal documents obtained in a legal discovery process by app developer Six4Three through a lawsuit brought against Facebook in 2015. The documents were sealed by the court in the U.S. but a UK parliamentary committee investigating Facebook gained access to them in 2018, released them publicly and claimed that Onavo data was used for anti-competitive purposes. Four app developers are making very similar claims in a class action lawsuit filed in Federal Court in California. Acquisitions by the largest platforms is a major component of digital competition policy reviews globally, including in the United States, UK, Japan, and Australia. Along with looking back at now high-profile acquisitions like WhatsApp and Instagram, or Google’s YouTube and DoubleClick, competition authorities are potentially bringing new thinking to proposed acquisitions such as data analytics firm Looker and fitness wearables innovator FitBit by Google, as well as Amazon’s investment in delivery platform Deliveroo. While critics can appeal to concerns that the largest digital firms gaining access to more data and applications is always a problem, and that any small innovative firm could eventually become a big competitor, the role of acquisitions in allowing giant platforms to more effectively compete with each other, as well as giving innovators an important monetization route, are important counter considerations.

Charges of False Claims and Disinformation on Iowa Voter Registrations Reveal Ideological Divide

Story from the Washington Post

In Brief – Arguments surrounding the efficacy of the voter rolls in Iowa and the merits of various voter registration and election policies unexpectedly ramped into the latest storm cloud over the policies digital platforms employ on false claims, disinformation and other abuses in political debates. Judicial Watch (JW), a long-time conservative policy and advocacy organization that has been active on election process issues for years used the Iowa Democratic Caucus news cycle to do a release regarding the accuracy of voter registration lists in a handful of Iowa counties. It led to social media activity primarily among conservative. Critical media coverage and official fact-checking, including charges of disinformation, misinformation, and widespread criticism of the major platforms by progressives ensued.

Context – With each charge, countercharge and criticism of platform policies on political communication, it becomes more clear that Democrats and Republicans, Progressives and Conservatives, are not coming together on the topic of political disinformation. Because disagreeing, criticizing, slanting and puffery are political speech, and there won’t be agreement on a speech umpire. If you read the Post article, read this deep dive from a conservative analyst. And if you wonder what an “official” fact check looks like, read this one used by Facebook focused on the proper county number (5 not 8) and proper type of registration status to use. The “trial run” of the UK General Election confirmed that nearly all charges of online disinformation were between the major parties and their supporters who, shockingly, don’t agree with each other’s behaviors. And even among US progressives, Sen. Elizabeth Warren recently called on all the candidates to disavow and reject online disinformation tactics, which came shortly after reports that supporters of Sen. Bernie Sanders were especially aggressive in their online attack tactics, especially aimed at her.

UK Data Expert Panel Wants Government to Regulate Digital “Targeting” Algorithms

Report from CNBC

In Brief – The Centre for Data Ethics and Innovation (CDEI), an advisory body set up by the UK Government in 2018 to provide advice on the ethical dimensions of Artificial Intelligence and data-driven technology, has released a comprehensive a 121-page report calling for new regulation of how digital platforms and social media firms target users in the UK with posts, videos and ads. The CDEI recommendations are closely linked to the expected establishment of an online harms regulator as outlined in the UK Online Harms White Paper, proposing a number of mandates for the new regulator related to the oversight of algorithmically-targeted advertising and content recommendation systems.

Context – The term Artificial Intelligence is often more a buzzword than a technical term, covering a very wide range of technologies from current to futuristic. In this case, while the CDEI claims the mantle of ethical AI, they are proposing a landmark regulatory regime of everyday digital platform tools and technologies. The UK Online Harms White Paper outlines one of the most aggressive online regulatory regimes being discussed in any western democracy, proposing to oversee platform policies on issues as varied as hate speech, revenge porn, harassment, promotion of self-harm, disinformation, trolling, and the sale of illegal goods. The CDEI is calling for the UK Internet regulator to also oversee the algorithms used for ads and all manner of content recommendations. Regulatory oversight of company algorithms is now a key component of the Australian Digital Platforms Inquiry recommendations, the report of the Canadian Broadcasting and Telecommunications Legislative Review Panel, and likely will be on the table as part of the comprehensive Digital Services Act reform of EU Internet law.

State Insurance Policy Legislators Agree on Model Bill Supporting Platform Car Sharing

Report from Insurance News Net

In Brief – The National Council of Insurance Legislators (NCOIL), an organization of state legislators focused on insurance policy legislation, has endorsed the Peer-to-Peer Car Sharing Program Model Act as a legislative recommendation for states considering taking action on insurance policies for digital car-sharing platforms in 2020. The proposal was developed by NCOIL members working cooperatively with both the peer-to-peer car sharing and insurance industries, resulting in a model bill that was passed without objection. The legislative proposal directly notes that the agreement does not relate to any other public policy issues including motor vehicle regulation, airport regulation, or taxation.

Context – Reminiscent of the hotel industry lobbying efforts to stifle the growth of AirBNB and other short-term home rental platforms, the traditional rental car industry has been pursuing legislative and regulatory activities in a growing number of states to bring digital car-sharing platforms under a range of rental industry regulatory and tax regimes. Legislation in Nebraska that would require car-sharing platform companies to ensure insurance coverage, verify that all personal vehicles rented out don’t have any outstanding safety recalls, collect any taxes on rentals, and arrange appropriate agreements with local airports before operating in the state was recently the subject of a committee hearing. In Virginia, while a car rental industry-led coalition has been pressing for legislation to require car-sharing platforms to apply, collect and remit the same 10% car rental taxes, the Virginia General Assembly instead supported a proposal to apply a lower 6% rate due to other tax differences such as the lack of state sales tax applied to corporate rental fleets compared to consumer purchases.

Ireland’s DPC Opens GDPR Privacy Investigation of Google Location Tracking Practices

Report from TechCrunch

In Brief – The Irish Data Protection Commission (DPC) has opened a formal investigation into Google’s policies pertaining to the collection and processing of smart phone location data after receiving a series of complaints from consumer rights groups across Europe. The Irish DPC, which is the lead privacy regulator in Europe for Google (which has its European Headquarters in Dublin) under the General Data Protection Regulation’s one-stop shop regulatory regime, has come under significant criticism from strident European privacy advocates for not having the resources or commitment to aggressively challenge the many American technology businesses with their European HQs in Ireland.

Context – Google’s policies, practices and justifications related to the collection, use and storing of location data on Android phones and apps, the subject of this GDPR-based investigation, led to the Australian Competition and Consumer Commission (ACCC) filing a major consumer privacy lawsuit against the company last fall. (See pages 385 – 412 of the ACCC’s Digital Platform Inquiry Report.) In California, a Federal District Court judge in December dismissed a class-action complaint that Google’s location data practices violated the California Invasion of Privacy Act and the state Constitution. In other Google investigation news, it has been reported that the Department of Justice’s lead antitrust enforcer, Assistant Attorney General Makan Delrahim, will recuse himself from the ongoing DoJ investigation of Google due to his past private sector work on behalf of the company. It is also reported that Google’s digital ad network business practices are becoming a major focus of the DoJ investigation, which is moving forward is a cooperative manner with the parallel multistate Attorneys General antitrust investigation.

News Flash – Industries Challenged by Internet Models are Driving Efforts to Eliminate Sec. 230

Report from the New York Times

In Brief – Large companies in traditional industries facing competition from new, Internet-enabled, platform business models, are throwing their lobbying behind efforts to undermine Section 230 of the Communications Decency Act, a core legal foundation of any digital platform model that includes user-generated content, including reviews, boards, posts, items for sale and any digital media. Sec. 230 largely exempts digital platforms from civil liability for the actions of users absent actual knowledge, as well as liability for good-faith content moderation decisions. The lobbying of Disney and the MPAA, Marriott, Hilton and Hyatt among others in the hotel industry, the New York Times and the News Media Alliance, IBM and Oracle are all described as jumping into various efforts to limit, inject industry-specific carve-outs, or fundamentally change the key platform liability law.

Context – The major shortcoming of the article is the misimpression that the big industries lobbying to change the digital platform liability regime, including Sec. 230, the IP-related DMCA, and the EU’s eCommerce Directive, are new to the effort. Just the opposite, this lobbying goes back more than a decade. While the debate over digital liability provisions in the USMCA trade pact was new to some, U.S. trade talks have been a forum pitting Hollywood and the software giants against the Internet industry since the late 90’s. The hotel lobby has been taking on home sharing platforms for many years, and the ride sharing platforms facing taxi industry-fueled challenges use Sec. 230 protection. In Europe, the luxury goods industry has been fighting against the EU’s eCommerce Directive from the start and, not surprisingly, is pushing to pare it back as much as possible in the context of the expected EU Digital Services Act. Finally, the traditional news media industry has been an ongoing anti-Internet lobbying force globally, including driving the Australian Digital Platforms Inquiry and Europe’s rewrite of online copyright law.

Canadian Future of Media Panel Calls for Widespread Digital Platform Regulation

Report from the CBC

In Brief – The Canadian Broadcasting and Telecommunications Legislative Review Panel, established in2018 to engage in a comprehensive Digital Age review of the laws governing Canada’s communications sector, has presented a final report with 97 wide-ranging proposals. The panel recommends that the Canadian Radio-Television and Telecommunications Commission (CRTC), which regulates traditional media and telecoms companies, be given authority over three classes of digital companies: curation businesses, such as Netflix and Amazon Prime; news aggregators including sites like Yahoo! News; and sharing platforms such as Facebook and YouTube. The full spectrum of digital public policy topics are covered by the recommendations, including net neutrality, platform sales tax collection, platform treatment of harmful and illegal content, and regulation of the relationships between social media platforms and Canadian news media organizations. In addition, while the panel did not recommend a new Canadian “Netflix Tax” being imposed on foreign video streaming companies or their consumers, they do propose that curators be required to include a minimum share of Canadian-produced content in their Canadian offerings consistent with long-time Canadian policies to promote domestic content. Many of the widely varied set of recommendations will need to be fleshed-out and acted upon by the Canadian government and parliament.

Context – The report of the Canadian Broadcasting and Telecommunications Legislative Review Panel is very broad in scope, including recommendations on digital media platform tax collection in-line with tax policies coming on line in markets such as Singapore and Mexico, some form of regulation of platform policies on online harms such as proposed by the UK Online Harms White Paper and the expected EU Digital Services Act, and government moderation of the treatment of domestic news media by the giant social media platforms, which has been a major priority of the Australian Digital Platforms Inquiry.

The Latest in State Digital Tax News – New York Data Tax to Fuel Taxpayer Data Fund

Report from MediaPost

In Brief – Two New York state lawmakers are proposing to impose a 5% tax on the gross revenues of all corporations that derive income from data shared with them by state residents. The bills from Assembly Member Stacey Amato (D-Rockaway Beach) and Senator David Carlucci (D-Rockland) would establish a state government “data fund” to distribute the revenues to residents. The broad and undefined proposal has been described as being similar to the Digital Dividend idea introduced by California Governor Gavin Newsom last year, which envisions some form of tax on digital companies which financially compensates digital services users in some manner besides the ability to use free or low-cost services.

Context – U.S. state legislators are slowly but surely stepping out with digital tax proposals based on the same principles championed by advocates for digital services taxes in countries like France and Italy and being negotiated globally at the OECD. A Maryland state digital services tax was recently the subject of a State Senate hearing and a similar bill has been proposed in Nebraska. Internet-related state tax successes are also energizing the international efforts. The concept of ecommerce companies having virtual economic presence due to digital activity was a key justification of South Dakota’s authority to impose sales taxes on out-of-state and foreign businesses validated by the U.S. Supreme Court in the 2018 Wayfair decision. States are exploring applying sales taxes to digital services like streaming video and music delivered across borders, something being discussed domestically in Maryland and Kansas, and implemented in markets like Mexico, Singapore and Australia. The State of Georgia’s bill enacted to require ecommerce marketplaces like Amazon collect sales taxes for small business sales also applies to ride sharing app businesses, and a bill in Nebraska would impose sales taxes on dating services including dating apps.

Countries Recommit to Finding Agreement on New OECD Digital Tax Plan in 2020

Report from The Hill

In Brief – Following the temporary truce between the United States and France over digital taxes and tariff retaliation focused on recommitting to a multilateral corporate tax reform agreement at the Organization for Economic Cooperation and Development (OECD), representatives of 140 countries met and confirmed the goal of reaching a broad agreement in 2020. The OECD Pillar One tax proposal emerged over the past year as the leading multilateral plan to address government concerns that global digital businesses are able to avoid appropriate levels of taxation, but the effort was temporarily derailed last fall when Secretary Mnuchin indicated that significant concerns from non-digital U.S. industries were causing a major problem and proposed making the new regime a “safe harbor”, which apparently means that each company could voluntarily choose to avail itself of the new regime in lieu of facing national DSTs. The report from the most recent OECD meeting indicates that this issue remains a major uncertainty and sticking point.

Context – While France has led the effort to tax large digital services companies in a new way, the desire to increase taxes on digital companies is spreading. The U.S. has aggressively opposed country-by-country digital services taxes (DST), called for a broad multilateral corporate tax reform plan, and threated tariff retaliation against countries that tax individual U.S.-based companies, with bipartisan congressional leaders supporting the strong Administration opposition. A coalition of 130 European Members recently sent a letter to the congressional tax committee leadership calling for support of the now-reinvigorated OECD effort. In addition, with France temporarily standing down, other national DST plans will come into focus, including the recently implemented Italy DST and the proposed UK DST, which earned support from EU digital policy Commissioner Vestager just prior to UK Brexit.

Japan’s Cabinet Working Group on Digital Platform Legislation Finalizes Annual Reporting Plan

Report from Japan Times

In Brief – Japan’s cabinet-level working group on regulation of the largest digital businesses is reported to have finalized their legislative plan to improve the transparency of platform terms of use and policies, as well as protect smaller businesses from unilateral changes in rules and fees by shopping platforms and app stores. The platforms will be required to submit annual reports to the Ministry of Economy, Trade and Industry, give prior notice of changes to rules and fees, explain the reasoning behind changes, establish a mechanism to process user complaints, and detail the conditions that would lead to the termination of a vendor account. The legislation is also expected to require large search businesses to explain their policies on determining the order of search results as well as establish new rules on the collection and use of personal data. The proposal is expected to be approved by the full Abe Cabinet by March, enacted during the current parliamentary session, and enter into force by spring 2021.

Context – Platform terms and conditions has been a major focus of digital competition reviews in Japan, the world’s fourth largest ecommerce market. Last spring, the JFTC undertook a broad review of the seller terms and conditions of the country’s three largest ecommerce platforms, Amazon, Rakuten and Yahoo! Japan, and in December released new guidelines based on the theory that they were exploiting an unfair bargaining position. The JFTC also recently opened an investigation of a proposed Rakuten “free shipping” program where the platform would offer buyers free shipping on all orders exceeding 3,980 yen ($36) but would require the sellers to pay for the actual shipping costs. Small businesses facing unfair terms on large digital platforms is also a top tier regulatory concern in Europe, being the subject of so-called P2B legislation enacted by the European Parliament in April, as well as being part of the Australian Government’s 2020 work program to implement recommendations of the ACCC Digital Platforms Inquiry.

Another Bill to Expand COPPA Introduced as YouTube Content Creators Face Coppacalypse

Report from Consumer Reports

In Brief – Another bill to expand the Children’s Online Privacy Protection Act (COPPA) has been introduced in the U.S. House of Representatives, this time from Rep. Kathy Castor (D-FL), adding to the momentum building to create new restrictions on the collection and use of data related to young people. Castor’s bill, HR 5703, which she titled the “PRotecting the Information of our Vulnerable Children and Youth Act” or the Kids PRIVCY Act, would expand COPPA-type restrictions on data collection and use for Internet users through 18 years of age, with new rules for a new class of “Young Consumers” aged 13-17. This bill follows on bipartisan COPPA-expansion legislation from Reps. Walberg and Rush (H.R. 5573) and Sens. Markey and Hawley (S. 748).

Context – The debate over COPPA expansion at the same time YouTube changes its policies related to child-directed videos in ways that harm small video creators has created a Rorschach test related to privacy values, the role of advertising as a means of supporting creative endeavors, new bottom-up models of content creation, and the Internet as an unprecedented engine of creativity. YouTube’s settlement with the FTC over COPPA non-compliance has resulted in policies excluding child-oriented videos from YouTube’s data-enabled features including the advertising that creates meaningful revenue for content creators. In the spirit YouTube content communication, here is a solid video review. Tens of millions of people post regularly on YouTube, and millions monetize their work to some degree. The types of video styles are too varied to mention, but here is a video from a gentleman who’s business has been creating videos about Lego sets, which is basically now banned from YouTube ad revenues. “Protecting” young people from vast non-corporate creative content is not just underway in the U.S., the UK ICO, the country’s data protection watchdog, has published a new set of Internet service design standards aimed at blocking the use of data to support services and content for Internet users under age 18.

Facebook Announces Independent Policy Review Board Leader and Detail Plans

Report from CNBC

In Brief – A year after announcing their intention to create what they describe as an independent outside content policy oversight board of 40 eminent individuals to provide users with an appeal route related to the company’s content moderation decisions, Facebook has announced that Thomas Hughes, the former executive director of UK-based freedom of expression group Article 19, will be the initial leader of the organization. The Content Oversight Board will review cases where users disagree with Facebook’s content removal decisions and provide additional, independent review, and recommend subsequent action to Facebook, one way or another. Facebook’s release builds on the organizational plans outlined in September by further detailing the process and anticipated timelines, with standard decisions expected to take approximately 90 days and an expedited 30 day fast-track process as well. Facebook is committing to abide by the board’s decision on specific cases but won’t be obliged to change overall content moderation policy based on any specific case findings.

Context – Content moderation is a huge challenge for digital platforms. Facebook is the largest social network with 2.9 billion people using Facebook, Instagram or WhatsApp. The company has been the most active of the increasing number of tech giants asking for new government regulation, and their novel content moderation appeals board is more evidence of their willingness to share responsibility and criticism. But big questions remain. For example, can any 40-person group assure billions of emotional people on emotional issues that decisions to remove content are balanced and fair based on just dozens of cases? In addition, every Facebook content moderation issue is analyzed by some in light of their policy on potentially misleading political ads, which has broken down almost entirely along ideological lines with progressives increasingly frustrated. So to the Oversight Board plan, which allows users to challenge take-down decisions, but not, at least to start, policies to leave-up content.

Facebook Settles Illinois Facial Recognition Class Action Raising Prospect of More Tech Suits

Report from the Chicago Tribune

In Brief – Facebook has agreed to settle a class action lawsuit brought by Facebook users in Illinois (Patel v. Facebook) contending that the company’s use of facial recognition, in particular in its photo tagging feature, violated the increasingly high-profile Illinois Biometric Privacy Act (BIPA). The company’s $550 million settlement could result in Illinois Facebook users between 2011 and 2015 receiving as much as $200 each, and will require Facebook to obtain consent in the future from Illinois users for such purposes as face analysis for automatic tagging. Facebook had challenged the federal district court decision to certify the class action suit but was rejected by the 9^th Circuit Federal Court of Appeals. Facebook’s appeal to the US Supreme Court was not accepted, leading to the settlement.

Context – BIPA is increasingly the center of biometric privacy litigation in the U.S. since the Illinois Supreme Court decided in January 2019 that a statutory violation was sufficient to trigger standing under the law. BIPA imposes a range of obligations on companies that collect or obtain biometric information (such as facial scans, fingerprints, iris scans and voice prints), including obtaining written consent before collecting or sharing such information. The 9th Circuit Court of Appeals opinion is noteworthy in contending that the privacy rights related to the biometric information protected by BIPA are substantial enough that violations of the act represent concrete and particularized harm rather than a procedural failing, as well as determining that the state law did not involve extraterritorial enforcement because the legislature considered the location of users to be determinative. BIPA provides for a private right of action and an increasing number of tech and traditional businesses have faced suits, including IBM, Amazon, Vimeo and Clearview AI, which reportedly has built a massive AI-enabled facial recognition system on photos scraped off social networks and is providing services to law enforcement entities.

Presidential Candidate Elizabeth Warren Rejects Campaign Use of Online Disinformation

Report from the Washington Post

In Brief – Democratic presidential candidate Elizabeth Warren (D-MA) pledged Wednesday that her campaign would not share falsehoods or promote fraudulent accounts on social media. Her announcement stated – “I’m sending a clear message to anyone associated with the Warren campaign: I will not tolerate the use of false information or false accounts to attack my opponents, promote my campaign, or undermine our elections.” She paired her call for campaign integrity with complaints regarding inconsistent and ineffective efforts by digital platforms to combat disinformation and foreign interference. She called on platforms to cooperate with each other to address disinformation, clearly label content promoted by state-controlled organizations, alert users affected by disinformation campaigns, and take effective action against accounts that attempt to interfere with voting.

Context – The recent UK general election provided a sort of trial run of electoral communication and advertising policies of the major social networks, and most disinformation charges ending up being lodged back-and-forth between major parties arguing that the other side was crossing the line of truth rather than any form of foreign interference or technical deception. The same trend is emerging here, with repeated charges being leveled against the President, the Trump Campaign and related Republican entities by Democrats and progressives. Warren’s call for campaign integrity comes in the context of aggressive online activities within the Democratic primary campaign, with backers of Sen. Bernie Sanders (I-Vt.) reportedly being the most active weaponizing features on Facebook to share viral, hostile memes about his fellow Democratic contenders, including Warren. In related news, Pinterest announced that despite political messaging being limited on the site, they would be blocking disinformation about the 2020 Census and voting procedures, joining Facebook, YouTube and Twitter.

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