Archive – 2020

Uber Tests Driver Pricing Flexibility and Critics Decry Independence and Exploitation

Report from the Washington Post

In Brief – With AB 5, California’s new worker classification law, going into effect, Uber appears to be leading the way in making policy changes to reinforce the independent nature of drivers who use the platform, a critical distinction between employees and independent contractors. As the year began, Uber implemented new policies in California that included providing drivers with increased fee and route transparency, as well as allowing drivers to reject ride offers without penalty. The latest report is that Uber is testing a new driver pricing tool at three California airports allowing drivers to set a price at increments above or below the Uber-recommended fare. The initial version of the new driver pricing tool distributes rides first to drivers who are willing to accept lower fares, creating a market disincentive to raising prices, causing some opponents of the platform to claim that price-based competition among independent drivers is further evidence of an unfair system that exploits workers.

Context – As other states pick up the baton of AB 5, the impact on freelance writers is generating the most coverage, but in California the response of the biggest gig platforms remains in the spotlight. Uber and Postmates have filed a lawsuit challenging AB 5 on constitutional grounds, and they have joined Lyft in proposing a state ballot initiative to override AB 5 and expend benefits to independent drivers. However, Uber’s policy changes deserve attention because the level of control exerted by a digital platform over users is a key worker classification question, including under the ABC Test of the California Dynamex decision, and will be the most important for many digital platforms. The changes being explored by Uber also hearken to a pair of decisions from the European Court Justice (ECJ), including the 2017 ruling that Uber’s level of control over rides and pricing meant it was operating as a transportation business rather than a digital platform, while more recently the ECJ determined that AirBNB was a digital platform due to the pricing and availability flexibility provided to property renters.

Poland Digital Tax Plans Appear to be Starting with AirBNB and Short Term Rentals

Report from shorttermrentalz.com

In Brief – The new Finance Minister of Poland has indicated that AirBNB and digitally-enabled short-term property rentals will be a focus of Poland’s digital services tax (DST) endeavors in the coming year. While Poland has been one of the European countries that has been following the French lead and exploring a new national corporate DST, it was reported last fall that the country was going to delay implementing a general DST and support the multilateral corporate tax reform initiative that is increasingly focused on the OECD Pillar One negotiations. As described, the Polish short-term rentals tax initiative would combine taxes on the Polish property owners themselves, with collection facilitated by platforms like AirBNB, as well as new taxes on the platforms themselves, which sounds like a type of DST.

Context – Digitally-enabled short-term rentals is a hotbed of tax and regulatory activity in markets globally because the rental property owners are physically located in the market that wants to tax and/or regulate the transaction and so the authority to tax or regulate is quite clear. In addition, the traditional hotel industry is regularly pressing claims of regulatory and tax fair play. However, many governments are reluctant to aggressively enforce against small local property owners and would prefer that large platforms operate as tax collectors and regulators. AirBNB has been at the forefront of platform tax collection with agreements with almost 50 U.S. states and territories, a dozen countries and various cities. France is demanding new data from AirBNB that it proposes to use to improve rental tax compliance and the Mayor of Paris is proposing a referendum in the city on new limits on short-term rentals, which she claims are undermining neighborhoods and affordable housing. This follows a positive decision from the European Court of Justice exempting AirBNB from real estate business regulations in France. In Scotland, new authority is being provided to localities to impose restrictions on short-term rentals, likely setting up new rounds of pressure on the platforms to police compliance.

DoJ Proposes Conference on Section 230 as AG Criticizes Ideological Discrimination

Report from the New York Times

In Brief – The Department of Justice is reported to be planning a conference on the role and future of Section 230 of the Communications Decency Act, a core legal foundation of the Internet and any digital platform model that includes user-generated content, including reviews, boards, posts, items for sale and any digital media. Sec. 230 largely exempts platforms from civil liability for material users post online, as well as liability for user content moderation decisions that platforms make.

Context – Large digital platforms are under fire from both sides of the political and ideological divide, and threatening Sec. 230 is often the cudgel of choice by those pressing platforms to change. While anger appears bipartisan, when user content involves political speech, the two ideological sides are nearly always coming from opposite directions. Conservatives, including AG Barr, often claim that Sec. 230 enables platforms to engage in discriminatory anti-conservative restrictions, the topic of a White House summit last summer, and legislation to penalize platforms for perceived discrimination includes a federal bill from Sen. Josh Hawley (R-MO) and Florida State Senate legislation to permit lawsuits against platforms who engage in anti-conservative censorship. Democrats and progressives are equally impassioned in their criticism of the same platforms for not policing aggressively enough against what they see as conservative fakes and falsehoods, including Speaker Nancy Pelosi’s recent outburst against Facebook and presidential candidate Joe Biden calling for an end to Sec. 230. The complete lack of consensus on the failings of digital platforms to police political speech reduces the chances of fundamental legislative change to Sec. 230 absent overwhelming one-party control of the federal government, although the bipartisan anger likely increases prospects for other more narrow anti-platform initiatives. Finally, here is an excellent summary of how Sec. 230 is critical to protecting the ability of regular people to continue using the Internet to speak, which is mostly good but always includes some bad.

1st Amendment Legal Challenge to FOSTA Reinstated by the DC Circuit Court of Appeals

Report from Electronic Freedom Foundation

In Brief – The DC Circuit Federal Court of Appeals has overturned a District Court decision denying standing to a group of plaintiffs challenging the constitutionality of the Fight Online Sex Trafficking Act (FOSTA) on a range of First Amendment grounds, setting up the matter for federal court review. Enacted in 2017, FOSTA makes it a felony to use or operate an online service with the intent to “promote or facilitate the prostitution of another person,” expanded the scope of other federal sex trafficking laws to include online speech, and limited Sec. 230 immunity provided to digital platforms for related user speech and content. The plaintiffs, who filed a pre-enforcement suit because they claim the law’s overbroad language sweeps up a wide range of Internet speech about sex, sex workers, and sexual freedom and would lead to broad self-censorship. Large platforms including Craigslist and Reddit have shut down personals sections in response to FOSTA, and sites supporting sex workers have censored themselves for fear of running afoul of the law.

Context – As opposed to calls to broadly rewrite or eliminate Sec. 230 (see related story on the Department of Justice’s Sec. 230 “conference”), narrow and targeted changes to Sec. 230 focused on especially unpopular online conduct can avoid the political divisions inherent in stepping directly into political speech. FOSTA, targeting sex trafficking, is a high-profile examples. As expected by many online analysts, the result appears to be platforms implementing broad content restrictions, impacting many legal forms of online speech, hence the constitutional challenge. A bipartisan drive by Senators Lindsey Graham (R-SC) and Richard Blumenthal (D-CT) to use Sec. 230 to force new policies on digital platforms related to activities of young people online, including on gaming platforms, fits this online morality model. The hotel industry effort to amend Sec. 230 to require home sharing platforms to enforce all local regulations in place of their users is a more transparent business-competition version of narrow Sec. 230 legislation on a topic the European Court of Justice recently rejected.

UK Data Protection Authority Proposes New Data Standards Related to Young People Online

Report from Tech Crunch

In Brief – The UK Information Commissioner’s Office (ICO), the country’s data protection watchdog, has published a set of design standards for Internet services aimed at reducing the collection and use of data related to young people. The ICO has been developing the Age Appropriate Design Code since the 2018 as part of the UK’s effort to create what the government calls ‘world-leading’ standards for children when they’re online. The new code outlines 15 standards of “age appropriate design,” including stipulating that “high privacy” should be the default privacy setting for children’s services, and that a range of data minimization priorities be adhered to. (The full design code can be accessed here.) The ICO also recommends expanding the definition of young people up to age 18 (from today’s 13), going well beyond children, and proposes that young people should be notified when the service they are using includes parental controls and monitoring.

Context – These new children’s online privacy design standards are distinct from the comprehensive online regulation embodied in UK Online Harms White Paper (OHWP), which was also initiated in 2018 and justified in large part by calls to protect children online. The OHWP proposes one of the most aggressive online regulatory regimes in any western democracy, detailing how platforms should address user hate speech, revenge porn, harassment, promotion of self-harm, disinformation, trolling, and the sale of illegal goods, enforced by a new UK Internet regulator. Rather, the ICO’s effort to further limit data usage for those under 18 is more akin to the debate underway over the Child Online Privacy Protection Act (COPPA). On one hand, where some opponents of online data usage are proposing to expand COPPA restrictions from 13 years-old up to 15 years-old and further limit data practices, others see the tightened enforcement of COPPA-based rules on Google’s YouTube platform as demonetizing high quality children’s video programming, essentially protecting young people from thousands of micro entrepreneurs who have been creating widely varied and innovative digital content.

NY Governor Proposes Task Force on Gig Work Platforms to Report by May 1

Report from the Gotham Gazette

In Brief – After being highly critical of gig economy business models in his State of the State Address, Governor Andrew Cuomo (D) of New York has included in his FY 2021 Budget a proposal to create a Digital Marketplace Worker Classification Task Force, charged with recommending measures to regulate the gig economy, with wages, worker classification, employment criteria, safety and health regulations, collective bargaining, and anti-discrimination protections all within scope. While some see expert task forces as tools to bury politically tough issues, the Governor’s office points to group’s tight one-month time frame and deadline of May 1 as providing the legislature and Governor enough time to come together and enact recommendations before the legislative session ends in early June.

Context – In the wake of California’s landmark AB 5 worker classification legislation, which is forcing compliance decisions on a wide range of California companies and independent workers, New Jersey and New York have been among the most engaged states entertaining similar legislation. Legislation akin to AB 5 failed at the final hurdle in New Jersey during the 2019 legislative session, a series of limited worker classification bills were instead recently signed into law in the state, and AB 5 advocates are promising another NJ push in 2020. Freelancers, especially writers, have been some of the most visible and effective critics of the negative impacts of AB 5 due to the fact that many of them greatly value their independence and flexibility, and professional writers tend to be pretty effective communicators. Freelancers were key opponents of the bill in New Jersey and are already making their presence felt in New York. California’s AB 5 set a 35-piece per-media outlet threshold on whether a writer or photographer was independent, beyond that needing to be brought on as an employee of the outlet, something heavily criticized by many writers. Look to writers and related media freelancers getting much larger carve-outs from state legislators in 2020.

JFTC Announces Investigation of Rakuten Shipping Plan After Small Business Complaints

Report from Kyodo News

In Brief – The Japan Fair Trade Commission (JFTC) has announced that it will open an investigation of the “free shipping” program of marketplace platform giant Rakuten after the competition authority received a complaint from a coalition of thousands of small Japanese merchants that sell on the platform. The sellers argue that Rakuten’s plan to offer buyers free shipping on all orders exceeding 3,980 yen ($36) and require the seller to pay for the actual shipping costs will unfairly burden small businesses operating on very narrow margins. The 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 unfair treatment of small business users, is a major focus of digital competition reviews in Japan. A cabinet-level working group created by Prime Minister Abe in September is reported to be drafting legislation on fair platform terms and conditions that will be submitted to the parliament in early 2020. 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 recently released new guidelines regarding digital platforms exploiting an unfair bargaining position in violation of Japan’s anti-monopoly law.  Concerns that small and medium-sized businesses face unfair terms on large digital platforms is also a top tier regulatory concern in Europe and the subject of so-called P2B legislation enacted by the European Parliament in April.

Truckers Win Federal Court Injunction Against AB 5 Based on Federal Preemption

Report from Fox Business

In Brief – A federal judge has extended a temporary injunction on the enforcement of AB 5 against trucking companies and independent truckers. The worker classification legislation was enacted in California last year to restrict business models that use independent contractors in lieu of employees, with a focus on digital gig economy platforms. The federal court order follows a similar California state court decision that said the state law is preempted by the Federal Aviation Administration Authorization Act, or FAAAA, which largely bars states from regulating interstate motor carriers.

Context – The legislation implementing the ABC Test of the California Supreme Court Dynamex decision has combined debate over the impact of digital gig work platforms, including ride sharing and delivery services, with threats to a large number of more traditional independent contractors and freelancers. The litigation phase of the AB 5 process is firmly underway in California. An Uber driver class action suit has been filed in California state court, and Uber and Postmates have filed a lawsuit challenging AB 5 on constitutional grounds. Freelance writers have become one of the more prominent and sympathetic victims of the law, with many claiming to be harmed by freelancer cuts by media outlets in the state. A group of freelance writers and photographers has filed a constitutional challenge in federal court but they do not benefit from the type of clear federal preemption that the truckers have highlighted.

Taxes and Tariffs Temporarily Averted in Latest France-U.S. Perils of Pauline DST Episode

Report from the Washington Post

In Brief – The impending digital services tax (DST) and tariff retaliation clash between France and the United States has possibly been averted for 2020 with both sides recommitting to multilateral negotiations to develop new international tax rules for very large consumer-facing businesses. France has led the effort to tax large digital services companies in a new way based on revenues rather than profits and focusing on the jurisdiction where customers reside rather than where the company operates. The U.S. has pushed back against the new taxes for their discriminatory nature, as well as criticizing the complexity of creating a new country-by-country set of tax rules for one type of business.

Context – With the on-again off-again saga of the French DST entering a new negotiation phase, the DST plans of other countries that followed the French model will come into focus. U.S. trade officials recently warned Italy, Austria and Turkey against implementing their taxes, and UK plans to implement a 2% DST starting in April elicited a very direct tariff threat this week from Treasury Secretary Mnuchin. Whether any of the countries with a national DST on the books is willing to test the Trump Administration on retaliatory tariffs remains to be seen. In addition, remember that it appears that concerns raised by non-digital U.S. corporate interests were key to derailing the OECD-based process last fall, and there is no indication how they will be addressed. To recap, the complex OECD proposal attempts to address U.S. demands that corporate tax rules be changed multilaterally rather than country-by-country, and that they extend beyond just digital companies. However, negative feedback from non-digital U.S. industries appears to have led the U.S. Treasury Secretary to propose making the complicated new regime a voluntary “safe harbor” of some sorts, which reportedly remains an unpopular proposal in the multilateral talks.

YouTube Follows Netflix in Agreeing to Address Improper Video Subscription Practices in Korea

Report from Korea Times

In Brief – For the second time this month, a major U.S.-based digital video services provider faced a regulatory rebuke in Korea related to unfair user terms and subscription practices, with the Korean Communications Commission fining Google’s YouTube service 867 million won ($745,172) for breaching the Telecommunications Business Act and ordering the firm to amend unfair subscription contracts for YouTube Premium, the company’s paid subscription service.  The telecommunications regulator, which had been investigating YouTube since early 2019, determined that the company engaged in a range of improper practices related to its YouTube Premium paid subscription service, including failing to properly notify users of the full monthly fee and increased taxes related to adopting the paid service, failing to give proper notification regarding the right of a user to cancel a subscription, and failing to issue appropriate refunds, among other findings.

Context – The Korean Government has made addressing unfair business practices by technology giants a major priority. Last year, the Korean Fair Trade Commission (KFTC), the country’s competition authority, intervened with Google on its treatment of Korean content creators that post on YouTube, Apple related to mobile phone distributors, and a collection of online gaming businesses related in-app purchase policies. Earlier this month, the KFTC also reached agreement with Netflix, with the video service agreeing to address a number of concerns identified by the regulator, including notifying users before changes to subscription plans and prices are implemented, and allowing subscribers to terminate their account rather than accept the proposed price or service changes.

Uber To Pull Out of Colombia Following Negative Court Decision on Unfair Competition

Report from CNBC

In Brief – Uber will end its ride sharing operations in Colombia at the end of January in response to a court decision in December affirming the complaint from the Colombian competition authority that the company was operating its driver services in violation of Colombian competition law. Cab drivers in Colombia have protested against digital ride sharing platforms for years claiming that the platform services enable private drivers to operate as cabs without complying with insurance and license requirements. The court decision does not apply to Uber’s delivery services in the country.

Context – Uber’s withdrawal from Colombia follows last fall’s announcement from the London transportation authority, Transport for London (TfL), that Uber was losing its license to operate in the city for security reasons, determining among other things that more than 14,000 trips were taken with drivers who had faked their identity on the firm’s app. Uber is permitted to operate in London while they appeal the decision.  More recently, the City of Birmingham, UK, has decided to defer its decision to extend Uber’s license to operate in the city, where the company’s license expires at the end of January, pending the resolution of the Uber appeal in London.  Birmingham is reported to be one the company’s largest UK markets outside of London.

Sales Tax on Digital Advertising Proposed in Nebraska as State Digital Taxing Trend Grows

Report from National Law Review

In Brief – Legislation has been introduced in the Nebraska Legislature to apply state sales and use tax to the sale of digital advertisements, presumably when the ads appear to a Nebraska Internet user.  Like a bill recently introduced in the Maryland Senate to create a state digital services tax (DST) akin to the tax laws being proposed by a number of countries, the Nebraska bill would apply a tax to digital ads but not non-digital alternatives, meaning that if enacted it would likely be adjudged a discriminatory Internet tax and therefore blocked by the federal Permanent Internet Tax Freedom Act (PITFA).

Context – While the DST-style bills introduced in Maryland and Nebraska illustrate that state legislators are likely to increasingly follow the model of many national 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 being discussed in Maryland and also recently proposed by the Governor of Kansas. App-enabled services could also increasingly be targeted. For example, the recently-enacted Georgia bill to mandate digital marketplaces such as Amazon to collect sales taxes also applies to ride sharing app businesses. In addition, a legislator in Nebraska is proposing to extend state sales taxes to dating and escort services, which would include dating apps.

Google’s CEO Calls for Sensible Artificial Intelligence Regulation

Report from Fox Business

In Brief – Google’s CEO, Sundar Pichai, in a speech to a Brussels think tank audience, announced that artificial intelligence needs to be regulated. He described “sensible regulation” as balancing potential harms with opportunities to achieve meaningful social benefits.  He also called for “international alignment” as national governments, including the United States and the European Union, move forward with regulatory and legislative discussions of artificial intelligence concerns including various privacy, discrimination, autonomy and economic risks. Pichai was reportedly in Brussels to meet with EU Commissioner Margrethe Vestager who heads up with the EU Competition Authority (which is in the midst of a number of Google-related cases) and also has a broad new EU digital policy portfolio that includes potential regulation of artificial intelligence.

Context – Artificial Intelligence, a wide range of current, cutting-edge and futuristic technology processes, is stirring economic, ethical, security and geo-political concerns. 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 recently announced draft regulatory guidelines to federal agency heads seen as more hands off, promoting industry innovation, including on autonomous cars.  Facial recognition is a major focus of concerns from progressives and conservatives, including at a recent U.S. House hearing, and in Europe where a five-year moratorium on facial recognition in public areas is being considered. Google is not the first giant tech company to call for AI regulation, following Microsoft last year. On the other hand, Amazon’s Ring household surveillance tools and law enforcement partnerships are raising widespread concerns. (This New York Times report on a facial recognition service based on scraped social media pictures and law enforcement is truly eye opening.)

Speaker Pelosi Reminds Everyone That She is Very Upset with Facebook

Report from Politico

In Brief – Speaker Nancy Pelosi (D-CA) responded to a question regarding comments made by presidential candidate Pete Buttigieg on Facebook’s political influence in an New York Times editorial board meeting (his comments begin around half-way through this report) with a highly critical direct attack on the company and its leadership, accusing Facebook of “schmoozing” the Trump Administration to gain tax cuts and avoid antitrust action. (The 90-second interchange is viewable here.) Pelosi, the subject of a widely reported “cheap fake” video that was modified to make her look bad and circulated on social media services last spring, she was highly critical of Facebook for not blocking the video, and has since threatened Facebook’s Section 230 liability protection regarding third-party content (which she often refers to as a “gift”) at various times.

Context – While Facebook is regularly under fire from political stakeholder on both sides, it is generally for conflicting concerns, reducing the chances for broad regulation of the digital industry this year.  Progressives repeatedly criticize them for not effectively policing fakes and falsehoods, clearly believing the chief offenders are Republicans and President Trump. Presidential candidate Joe Biden, who was the subject of a Republican attack ad regarding his history on Ukraine policy, is taking a very hardline view on Facebook like Pelosi, including calling for a change to Section 230 (his tech policy thoughts start about four-fifth of way through this report). But conservative Facebook critics come from the opposite direction, claiming platforms are too aggressive silencing conservative voices. While high-profile conservative Internet critic Sen. Josh Hawley has sponsored legislation to strip Section 230 from platforms that violate what he calls political neutrality, the bill has no cosponsors and has drawn significant conservative opposition without bringing on progressives who want a crackdown on fakes and falsehoods.

Four App Developers Sue Facebook for Anti-Competitive Conduct

Report from Business Insider

In Brief – Four app developer companies have sued Facebook in the U.S. District Court for the Northern District of California, alleging that the social network engaged in anti-competitive conduct to dominate the social media data market, as well as inappropriately limited access to its platform in order to harm prospective competitors. They have sought class-action status for the suit. The companies are Circl, an online marketplace and social network; Beehive Biometric, an identity-verification firm; Reveal Chat, a chat app; and Lenddo, a financial-services provider. Circl and Beehive Biometric are now defunct, while Reveal Chat was acquired by the music-streaming service Rhapsody in 2015. A copy of the 110-page complaint can be downloaded here.

Context – Content moderation and platform user terms and conditions, especially when they impact small businesses using a platform, are increasingly being raised as competition policy concerns when the largest platforms make decisions they justify based on user experience, including data privacy policies. This most recent multi-developer lawsuit follows on a long-standing suit brought by developer Six4Three as well as a suit brought last fall by Australian data analytics firm Stackla. Stackla was banned by Facebook for alleged privacy failings, failed to prevail in their effort of to gain an injunction against the social network, and came to an agreement to regain access to the platform. Both of those suits contended that Facebook actions justified on privacy and user experience grounds were actually competition inspired. The Facebook conduct detailed in the most recent suit parallel the various antitrust investigations underway at the Department of Justice, Federal Trade Commission, a coalition of State Attorneys General, and a number of competition authorities in Europe and Asia.

Netflix Agrees to Change Terms of Use in Korea to Address KFTC Concerns

Report from The Korea Herald

In Brief – The Korean Fair Trade Commission (KFTC) has reached an agreement with Netflix where the video platform will make changes to their terms of use that the KFTC deemed unfair, including provisions allowing the company to change subscription fees without a user’s approval, limiting users’ right to seek damages, and a provision allowing the company to transfer its agreement with subscribers to third parties without consent of the user. Starting this week, Netflix will have to ask for permission from users when they make changes in their subscription plans and price and allow a subscriber to terminate their account rather than accept the price increase, users will only be responsible for activities and faults that happened while they are actually using the accounts rather than when their account is breached, and for the first time the company will be responsible for compensating users if the company’s error results in special damages.

Context – The KFTC has made addressing unfair trade practices in the digital and technology sector, by both foreign and domestic business giants, a top priority in recent years.  Last year, the KFTC intervened with Google on its treatment of content creators that post on YouTube, Apple related to mobile phone distributors, and a collection of online gaming businesses related in-app purchase policies. The Korean competition authority also established an internal task force to investigate unfair business practices by dominant tech firms, with subcommittees focused on online platforms, mobile services and intellectual property rights. Finally, the KFTC announced that it moving forward to penalize Naver Corp., South Korea’s biggest internet portal with a 70% search market share, over alleged abuse of its search market dominance through illegal preferencing policies.

Georgia Passes Platform Sales Tax Law and Includes Duties for App Providers

Report from US News and World Report

In Brief – Georgia lawmakers have passed legislation imposing sales tax collection duties on online marketplaces, joining 38 other states now imposing sales tax collection duties on marketplaces for all sales made by the small remote enterprises that use the marketplace. Last year, the legislation stalled in Georgia over the issue of ride-sharing services like Uber and Lyft, a form of digital services marketplace, being exempted from the tax duties. The bill that has passed the Georgia legislature does not include any exemptions, including for ride-hailing services, but the bill sponsors acknowledged that the legislature may consider a ride-sharing tax relief bill in the coming year.

Context – In the aftermath of the landmark Wayfair v. South Dakota decision by the U.S. Supreme Court on sales tax collection, nearly every U.S. state with a sales tax has imposed tax collection duties on remote retailers, and most impose the tax collection duties directly on the digital marketplaces where most small and micro business online sales occur. 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 on the horizon. In Georgia, the prospect that digital service providers like ride sharing or delivery apps are forced into tax collection is front and center. Maryland lawmakers are considering extending sales taxes to video and music streaming, with the tax collection imposed on the remote streaming services. Finally, states are starting to propose applying the concept economic nexus to a range of direct corporate taxes in new ways. These U.S. state economic nexus tax trends each have international parallels.

Google Proposal to Phase Out Third-Party Cookie Tracking in Chrome Raises Competition Concerns

Report from CNBC

In Brief – Google has announced plans to end support for third-party cookies, which fuel much of the digital advertising ecosystem, in its Chrome browser within two years. This move is being made in an environment where other web browsers, such as those from Microsoft, Apple and Mozilla, block the use of third-party cookies by default as a privacy-based browser feature. However, unlike those browser providers, Google faces unique challenges based on Chrome’s very large market share, estimated at 70%, as well as Google’s large share of the digital advertising services market, which is its largest revenue source. The combination creates potential antitrust policy risk, as some believe that the change in third-party cookie policies could advantage Google’s first-party ad business in relation in third-party advertising services competitors.

Context – Ending third-party cookie tracking in Chrome is the second instance in the past year where Google has proposed a privacy-focused change to the plumbing of the Internet only to face competition concerns regarding the impact on digital advertising competitors. Last year, Google (along with Mozilla) announced a series of policies to support the sending of domain name system (DNS) queries over the encrypted HTTPS protocol (referred to as DoH for “DNS over HTTPS”), which is a policy strongly supported by privacy advocates to address privacy and security concerns with unencrypted DNS queries being vulnerable to tracking by network companies and potentially hackers. Google’s DoH plan resulted in complaints from the major network providers to legislators and regulators and resulted in the House Judiciary Committee raising the issue with Google.

Rise of the Freelancers – Gig Worker Classification Bill Fails in New Jersey

Report from NJ.com

In Brief – Major gig worker classification legislation in New Jersey, modeled after California’s landmark AB 5 enacted last year, failed to pass before the state legislative session ended on January 15^th.  The legislation, framed as a response to abuses of the big gig work platforms, such as the driving and delivery services, drew increasingly vocal opposition from a wide range of freelancers, contractors and traditional small businesses. The state legislature sent the Governor a series of narrow labor law amendments and the sponsors of the major NJ gig labor law are promising to quickly restart the effort in the new legislative session and address the concerns raised by freelancers and small business people.

Context – New Jersey appeared to step forward last fall and claim the mantle as the most aggressive East Coast jurisdiction aiming to regulate gig worker platforms. In November, the NJ Department of Labor and Workforce Development determined that Uber drivers should have been classified as employees and fined the company $649 million for unpaid unemployment and disability insurance. While it appeared that New Jersey’s legislature would follow up with an AB 5-style law, stories of the negative impact of the California law on freelancers, such as writers, photographers and other skilled professionals, emerged in New Jersey. A similar dynamic is developing in New York, where Governor Cuomo has made worker classification a 2020 priority and freelancers are quickly mobilizing.

Mayor of Paris Continues to Campaign Against Short-Term Rental Platforms

Report from RFI

In Brief – The Mayor of Paris, running for re-election in 2020, has made affordable housing a major campaign issue and is proposing to hold a referendum in the city to establish new limits on the ability of city residents to rent out rooms or whole residences on short-term rental platforms like AirBNB. Paris is reported to be the second largest market for AirBNB globally. Mayor Hidalgo has been a consistent critic of the impact of short-term rental platforms on housing prices and availability in the city, regularly claiming to support the ability of city residents to rent a room a few days a year to make extra money, but objecting to apartments or other residential properties operating as de facto hotels. When AirBNB signed a sponsorship deal with the International Olympic Committee (IOC) last year (Paris is hosting the 2024 Summer Olympics), Hidalgo raised concerns that the IOC was working with the business, prompting IOC President Thomas Bach to respond that the sponsorship agreement did not exempt the company from any national or local regulations.

Context – Despite a litany of concerns being raised by public officials and the hotel industry, AirBNB has continued to grow their business in France. The European Court of Justice (ECJ) recently rejected the legal claim of the French hotel industry lobby that AirBNB should be regulated as a property rental firm. The ECJ opinion highlighted the fact that the property owners who used the AirBNB platform were free to offer their homes for rent through other channels, and that AirBNB did not set or cap the rent charged by home-owners.

Maryland Senate President Breaks New Ground Proposing a State Digital Services Tax

Report from the Washington Post

In Brief – The President of the Maryland State Senate has sponsored Senate Bill 2, legislation to create a new state Digital Advertising Gross Revenues Tax, which would impose a progressively higher tax on the digital advertising revenues of companies that deliver digital ads to Maryland residents, including banner advertising, search engine advertising and interstitial advertising. This appears to be a first-in-the-nation attempt to apply a state-level corporate revenue tax that mimics the kind of digital services taxes being pursued by an increasing number of countries. Internet industry representatives not surprisingly expressed concerns with the new state tax proposal.

Context – As PEI readers know, France is a leader in the global effort to tax very large digital companies in a new way, focusing on taxing digital services revenues rather than profits, more in the manner of a corporate-collected sales tax. This has prompted multinational negotiations to develop a new global corporate tax model, as well as a major tax-and-tariff stand-off between the U.S. and France. The spread of this type of digital services revenues tax to U.S. states faces political challenges, but more importantly meaningful legal hurdles starting with the non-discrimination provisions of the Internet Tax Freedom Act (ITFA), which would essentially require such a tax to be applied to all forms of advertising, not just digital advertising. However, Maryland officials have also noted that digital subscription services, such as for streaming video and music, are not currently taxed in the state, and extending sales taxes to those services are less likely to face the same ITFA problems.

Mexico Proposes a July 1st Start Date for New Digital Platform Tax Obligations

Report from Reuters

In Brief – Mexico has announced that digital platforms, including international digital platform businesses, will have until July 1, 2020, to come into compliance with two new digital platform tax requirements. First, digital platforms that facilitate independent work, such as gig labor, driving and delivery platforms, will be required to withhold and remit income taxes for platform-enabled work done by Mexican residents, something voluntarily undertaken by Uber and a handful of other driving and delivery platforms since mid-2019. Second, Mexican VAT will be applied to consumer digital services, such as video streaming, and collected by the platform. A summary of the Mexican tax law can be accessed here, with digital provisions summarized on pages 7-8.

Context – One branch of the international debate over taxation of the digital economy is the expansion of consumption-type taxes to digital services. Expanding VAT, GST and other forms of sales taxes on digital services, and placing the tax collection and remittance responsibility on the large digital platform, has tended to avoid the major controversies that have been the result of proposals to expand direct corporate taxes through digital services taxes on the revenues of the largest digital businesses, such as those imposed by France, Italy and Turkey. While Mexico continues to debate a corporate digital services tax, their new VAT plan is more aligned with the digital GST that has gone into effect in Singapore and a new Indonesian VAT-collection requirement applied to large digital services providers, including those without presence in the country. (See the U.S. state tax parallel in the Maryland entry above.)

Indian CCI Opens Investigation of Amazon and Walmart-owned Flipkart Marketplaces

Report from Reuters

In Brief – The Competition Commission of India (CCI), the Indian competition authority, has initiated an investigation of practices by Amazon and Flipkart (owned by Walmart), the two largest ecommerce platforms in the country. The allegations raised in complaints by associations of mobile phone sellers and independent retailers include charges that the platforms provide a range of preferences to sellers the complainants claim are affiliated-with or controlled-by the platforms, including preferential listings, promotions, and participation in platform-funded product discounting. The deep discounting of products sold by some sellers on the platforms, funded by the platform giants themselves, is a practice that has led to shopkeeper street protests targeting Amazon and Flipkart. In addition, the new CCI investigation specifically cites marketplace-funded mobile phone discounting programs that non-participating phone retailers claim are unfair and anti-competitive.

Context – In India, the question of linkages between an ecommerce marketplace giant and some sellers on the platform goes beyond the kind of competition policy concerns being raised in the U.S. and Europe regarding Amazon’s treatment of third-party sellers competing with Amazon’s retail products. The issue in India is uniquely important because the country prohibits foreign direct investment in the multi-brand traditional retail sector, but allows foreign ownership of third-party ecommerce marketplace platforms. The hybrid nature of the Amazon ecommerce business in most markets, and the acquisition of Indian ecommerce marketplace Flipkart by Walmart, the world’s largest retailer, has raised questions about India’s retail FDI policies, but the government’s draft ecommerce rules released in early 2019 reiterated that foreign direct investment limitations on retail businesses require foreign-owned ecommerce platforms to not be engaged in direct retailing.

Attorney General Barr Increases Pressure on Apple to Unlock a Terrorist’s iPhone (again)

Report from the New York Times

In Brief – In remarks detailing findings related to a recent shooting attack by a Saudi military trainee that killed three people at Naval Air Station Pensacola, Attorney General Barr strongly criticized Apple for failing to substantively support the law enforcement investigation. In a letter sent to Apple’s general counsel, the Department of Justice states that although the FBI has court permission to search the contents of the deceased-shooter’s phones, both are password-protected, and efforts to gain access to the phones have so far been unsuccessful. Apple has rejected the characterization of the AG, stating that it has responded to all requests from law enforcement officials and turned over all information that it had access to.  However, the company continues to object to requests to unlock phones or engineer some form of backdoor access to encrypted communications.

Context – The legal and philosophical fight over encryption stretches back decades, pitting civil libertarians, generally aligned with technology firms, against law enforcement and national security interests. (The historically inclined can read about the Clipper Chip.) AG Barr is picking up the mantle from the 2016 legal standoff between Apple and the DoJ over a demand that the company “unlock” a shooter’s iPhone, when most major U.S. tech companies rallied behind Apple. The matter was resolved before final court action when the FBI gained access to the phone’s contents without Apple’s intervention. AG Barr has also been pressing Facebook to walk back its plans to extend end-to-end encryption to all of its messaging, including joining the top UK and Australian law enforcement officials in a public letter to CEO Mark Zuckerberg, and repeatedly signaling that public safety issues like encryption will be part of the DoJ’s investigations of digital platforms.

DST Confrontation Between US and France Heats Up With Both Sides Sticking to Their Guns

Report from Politico

In Brief – The United States is pressing forward with a proposal to impose up to $2.4 billion in retaliatory tariffs against a range of French exports, including wines, cheeses and luxury products, in response to France’s 3% digital services tax (DST), and a range of tech industry trade groups testified in support of the tariff plan at an early January hearing held by the United States Trade Representative (USTR). France has led the effort to tax large digital services companies in a new way based on revenues rather than profits and using the jurisdiction where consumers reside rather than where the company operates. Although an uneasy truce appeared to be emerging last fall based on a compromise engineered at the Organization for Economic Development and Cooperation (OECD) for a multilateral tax reform plan that extended beyond just digital companies, satisfying U.S. demands that new tax rules not be implemented country-by-country and target more than just Internet businesses, the compromise appeared to fall apart late in the year and the U.S. Government turned back to threats of tariff retaliation with bipartisan congressional and business support.

Context – The belief that large digital companies fundamentally upend traditional corporate tax regimes is widely held, especially by countries with large Internet-enabled consumer bases who are not also home to the largest digital companies. A number of countries are following the French DST model (a nice nine-country summary is here), and Turkey, Italy (with its DST having gone into effect on January 1st) and Austria were recently identified by the USTR as potentially next in line for U.S. tariff retaliation. As the tax and tariff conflict with France comes closer to biting, the French Minister for Digital Affairs has further expanded the scope of the digital policy confrontation, claiming that the French DST is just one method his government will pursue to strike back against digital giants that it believes require a broad set of new regulatory controls due to their unique size and role in society.

Trump Administration Announces Hands Off Regulatory Vision to Promote AI Innovation

Report from the Federal News Network

In Brief – The White House Office of Technology Policy has released a draft memorandum setting out the policy considerations that federal agencies should apply to the regulatory oversight of Artificial Intelligence (AI) by private sector companies and developers. Following up on a February 2019 executive order on AI use in the federal government, the White House is proposing ten regulatory principles that it believes demonstrate the Administration’s commitment to maintain and strengthen the U.S. of leadership on AI by providing greater certainty to innovators about how the federal government is approaching the regulation of AI technologies.  Following release of the draft general AI regulatory principles, the US Secretary of Transportation announced new non-binding guidelines for regulating driverless cars and trucks. The public will have 60 days to comment on the White House’s draft memorandum before final guidance is issued to federal agencies.

Context – Artificial Intelligence, a wide range of current, cutting-edge and truly futuristic technology processes, as well as a buzz word for general digital revolution, is stirring economic, ethical, security and geo-political concerns. One of the big policy themes is the perceived AI competition between the United States and China, both in terms of government policy and each country’s tech giants. 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. Lead European Commissioners on technology policy, including Margrethe Vestager and Thierry Breton, have indicated this will continue to be a top tech priority. Finally, AI-enabled technologies such as facial recognition and related tools claiming “emotion recognition”, are under fire for discriminatory impacts, and some criticized the new White House’s AI guidelines for ignoring the ongoing industry shortcomings.

Facebook Largely Sticks to Political Ad Policies That Avoid Censorship and Allow Targeting

Story from the Washington Post

In Brief – Facebook, the largest platform for digital political advertising, has announced its latest policies for the treatment of political advertising on the platform, a high-profile policy issue in the context of the 2020 election. Facebook will continue its policy of very limited policing of arguably misleading ads, stating that the platform should not be in a position of serving as a political or policy censor. The company will also not limit what is called micro-targeting of ads, meaning the very specific targeting of audiences for certain messages. The response to Facebook on the question of policing misleading ads has again broken down almost entirely along ideological lines, with progressives being highly critical while conservatives generally oppose “fact-checking” that they believe is inherently ideological. On the other hand, continuing to allow micro-targeting has been supported by political operatives and organizations on the left and right.

Context – The debate over political advertising on social networks has been intense since early October when Republicans ran ads related to Vice President Biden and Ukraine that Democrats claimed should be banned. The major platforms have been rolling out political speech and ad policies since. Facebook has stuck to allowing political ads and not applying fact-checking to avoid ideological censorship, a position roundly criticized by progressives but generally supported by conservatives wary of unbalanced reviewers. Twitter is banning political ads and developing policies addressing public policy issue ads. Google, like Facebook, is allowing most political ads but will restrict certain types of micro-targeting, a policy advocated by the Chair of the Federal Election Committee. Snap, TikTok and Spotify are each banning political ads. If one looks to digital advertising in the recent UK general election, most digital ad criticism was focused on claims coming from the major parties arguing that the other side was crossing the line of truth rather than any form of foreign interference or technical deception.

Indian Competition Authority Raises Concern with Largest Ecommerce Platforms

Report from the Indian Times

In Brief – The Competition Commission of India (CCI) has released a study on the business practices of the country’s largest ecommerce marketplaces, in particular Amazon and Walmart-owned Flipkart, raising concerns with their search ranking policies, discounting, and the treatment of user data.  The CCI advised the industry to adopt greater transparency and self-regulatory solutions, an approach that was criticized by trade groups representing smaller traditional and Internet retailers. The CCI report contributes to the industry discussion surrounding the government’s draft ecommerce rules released in early 2019, which reiterated key foreign direct investment limitations on ecommerce marketplaces if the platform also engaged in direct retailing, a challenge to Amazon and Walmart, who were recently targeted by Indian shopkeeper protests. Similar concerns with ecommerce platform terms and conditions have been a focus in Japan, with the JFTC reviewing the polices of the country’s largest ecommerce platforms and a cabinet-level digital policy working group reported to be proposing fair platform terms and condition legislation in early 2020.

Context – India has a wide range of active digital public policy issues. In December, the government released a draft privacy and data protection law, akin to Europe’s GDPR, proposing limits on usage, collection, and processing of personal data, along with a new Indian data protection authority. The Indian Supreme Court is scheduled to hear arguments this month on the government’s authority to compel Facebook’s WhatsApp service, and other social media services, to share private, encrypted user data with law enforcement. The government may finalize new digital intermediary guidelines in the context of the WhatApp court case. The platform-enabled “gig economy” is rapidly expanding and government discussions of extending employment benefits to gig workers are underway. Finally, the central government is moving forward on bids for a national facial recognition system that is expected to be linked into law enforcement authorities.

Uber Making Changes to Driver Terms and Conditions to Reinforce Their Independence

Story from the Washington Post

In Brief – With AB 5, California’s new worker classification law, going into effect, the reaction of the largest gig driving and delivery platforms is in the spotlight. Uber and Postmates have filed a lawsuit challenging AB 5 on constitutional grounds, and they have joined Lyft in proposing a major California state ballot initiative campaign to override AB 5 and allow platforms to offer drivers a range of employee-like benefits to independent contractor drivers. Each of the platforms has stated that they believe drivers on their platforms are appropriately classified as independent contractors even under AB 5, and the new Uber policies for California drivers, which include meaningful changes allowing drivers to reject ride offers without penalty, as well as providing increased fee and route transparency, seem squarely aimed at reinforcing that determination by expanding driver control and choice as appropriate for independent workers.

Context – The level of control exerted by a digital platform over the activities of users is a key question in a range of regulatory and legal contexts. It is one of the three questions in the ABC Test to determine worker classification from the California Supreme Court’s Dynamex decision, and it will probably prove the most important one for many digital platforms. This fact is likely behind the changes Uber is making for California drivers, and it harkens to a pair of decision from the European Court Justice (ECJ) on the regulatory treatment of digital platforms. Just last month, the ECJ ruled that AirBNB was a digital platform for property renters rather than a real estate enterprise. This was in contrast to a 2017 ECJ ruling that Uber was appropriately considered a transport business rather than just a platform from drivers. The court differentiated AirBNB from Uber based on the degree of control exerted over users, with Uber setting the fare for rides and assigning each passenger a specific driver, while AirBNB does not determine the rental price charged for property and lets customers choose which home to rent.

Polling Indicates that Americans Do Not Work Side Jobs Because They Can’t Find a Full-Time Job

Article in the New York Times

In Brief – A Gallup survey of workers indicates that independent work, in particular people working multiple jobs, is on the rise, and that the number of Americans who work multiple jobs “because they cannot get a full-time job” is approaching zero, literally just 2% of respondents. Nearly half of Americans who work multiple jobs, 48%, indicate that they do so because they prefer to, while a third indicated that they worked multiple jobs to meet financial needs. The polling also showed that self-employed people who only work one job are the most satisfied workers, meaningfully more satisfied than all other categories of traditional employees and self-employed people. The fact that self-employed people have greater control over hours and type of work, as well as a greater sense of agency and connection to their work, appears to outweigh somewhat lower pay and lack of traditional benefits.

Context – Given the current political climate surrounding the regulation of so-called gig work, including the enactment of AB 5 in California and similar action expected in other states, it is worth knowing that flexibility and autonomy have long been valued by people engaged in independent work. Although the big driving and delivery platforms have been the political focus of AB 5, negative impacts on skilled freelancers such as writers is gaining attention due to the strong preference many have to be independent. The Gallup data is also another indicator that “Side Hustles” often provide people more than just extra income, but also fulfill other needs. A 2019 poll of college graduates revealed that 30% of those who had “side gigs” as students plan to continue them after starting a full-time job. Finally, an April report from an economist at the Dallas Fed speculates that the added flexibility from digitally-enabled independent work is a factor in what might be a meaningful reduction in the natural rate of unemployment in the United States where unemployment is below 4.5% for three years running.

YouTube Announces COPPA Policy Changes Stoking Creator Fears

Story from TechCrunch

In Brief – Google’s YouTube has announced global policies to address objections of the Federal Trade Commission (FTC) regarding how the world’s largest video service handles and uses data related to viewers who are very likely children and therefore must comply with the Children’s Online Privacy Protections Act (COPPA) that forbids tracking and targeting users under 13 absent express consent of a parent. YouTube will limit data collection, advertising and a range of site services requiring tracking user interests for videos directed to children. YouTube also announced that it will determine children’s content through the self-identification by content creators as outlined by the FTC in combination with technology tools. Tens of millions of people post content on YouTube, and millions monetize their work to some degree. Many are concerned that new rules will harm their micro businesses and reduce the financial incentives to create a wide range of quality children’s content.

Context – YouTube was accused of not appropriately complying with COPPA, engaging in user tracking and targeted advertising on content it recognized as targeting children. In its FTC settlement, Google agreed to pay a $170 million fine and change a range of practices. The settlement faced significant criticism from privacy advocates, including dissents from the FTC’s two Democratic Commissioners, claiming it did not go far enough. As site changes have been discussed, many small content creators have expressed concern that reduced advertising revenues and exclusion from tools recommending videos and notifying users will dramatically harm their channels and make it much harder to create quality children’s content on the platform, harming viewers. Some are also claiming that Google can implement policies that would comply with COPPA without dramatically impacting content creator earnings. The FTC is undertaking a public consultation on the appropriate role of COPPA on the current Internet and Google has encouraged content creators to submit views. At the same time, Sens. Ed Markey (D-MA) and Josh Hawley (R-MO) have sponsored legislation to expand and tighten COPPA restrictions.

TikTok Announces New Global Content Moderation Guidelines

Report from the Washington Post

In Brief – TikTok, the Chinese-owned video-based social media app business with the largest number of users outside of China, including tens of millions of Americans, has announced new content moderation guidelines. The company has faced criticisms over objectionable user posts and lax content moderation, as well as charges that its content moderation practices are influenced by Chinese Government interests. The dearth of user content related to Hong Kong, leaked content moderation guidelines, and the temporary banning of a user who criticized Chinese treatment of Muslims, have fueled censorship charges and led the company to cancel planned December outreach to Capitol Hill.

Context – User content moderation is a very difficult challenge bedeviling digital platforms from the earliest days of the commercial Internet. Different stakeholders have different views on the appropriate role of platforms to police, judge and censor speech and commerce, making consensus impossible in many cases. The challenge is compounded for global platforms operating in markets with different underlying social values. Facebook conducted an “audit” related to charges of ideological content moderation, and has also released an innovative global plan for a 40-person Facebook Content Oversight Board described as independently funded and representing broad geographic, gender, political, social and religious diversity, that would make Supreme Court-like rulings on Facebook policy decisions. Another creative proposal has come from Twitter, which has announced plans to set up an independent research group to create an open and decentralized system of protocols for social networks to enable individuals to use a variety of social media services to create demand for different moderation standards. Finally, Chinese platforms face unique questions because the Chinese Government so directly influences digital services in China, leading to speculation that Chinese-based enterprises will adopt a political role, with such charges being raised against communications giant WeChat regarding Chinese speakers in countries like Australia, Canada and the United States.

Facebook’s New Policy on Deepfake Video Moderation Draws Mixed Reaction

Story from the Washington Post

In Brief – Facebook has announced that it will ban most “deepfake” videos that are heavily manipulated by artificial intelligence. Like nearly all Facebook content moderation efforts, the policy is being criticized by many, especially for its focus on artificial intelligence technology, an exception for satire and parody, and the sense that Facebook is sticking to its general policy against fact checking most political advertising. The combination of exceptions would likely exclude high profile political videos, such as the altered “cheapfake” video of House Speaker Nancy Pelosi that appeared last May and the recent video clip of former Vice President Biden. However, the new policy appears to impact deepfake revenge porn videos accounting for an overwhelming share of online deepfake videos.

Context – The ongoing march of digital video technology and the potential for deepfakes continues to garner attention. Potential political and campaign abuses continue to be a focus of elected officials, and some looked to the recent UK general election to gain insight into prospects for the 2020 U.S. election, identifying deceptive but not deepfake activities by domestic campaigns rather than foreign intervention as the norm. In October, Twitter announced a project to better address deepfakes and requested community and expert input. Senators Mark Warner (D-VA) and Marco Rubio (R-FL) sent letters in the fall to ten major digital platforms posing questions about current policies on user-posted deepfakes, their technical abilities to detect and track doctored media, and the steps each platform would take to notify users when such content is later identified. Finally, the House Energy & Commerce Committee is holding a hearing today on manipulation and deception in the digital age, which will include testimony from Facebook. Along with deepfake videos, the committee hearing memo provides background on concerns over web site “dark pattern” techniques as well as the use of fake social media bots and followers.  

UK Review of Amazon’s Deliveroo Investment the Latest Example of Shifting Competition Policy

Report from Reuters

In Brief – The UK Competition and Markets Authority (CMA) has announced its decision to move forward with a Phase 2 review of the Amazon investment in UK-based food delivery platform Deliveroo. The CMA initial review concluded that the deal could leave customers, restaurants and grocers facing higher prices and lower-quality services in the restaurant and grocery delivery markets. The deal was announced in May 2019, drew attention from the CMA in late June, and the Phase 1 review was initiated in October. Deliveroo is one of Europe’s fastest growing platform companies and uses 60,000 riders to deliver meals from more than 80,000 restaurants and “dark kitchens” in 13 countries. The CMA’s target to conclude its Phase 2 investigation is June 11, 2020.

Context – The UK CMA is one of a series of national competition authorities that appear committed to increasing scrutiny of merger, acquisition and investment plans by the largest digital platforms. The Amazon – Deliveroo deal review, like the PayPal – iZettle acquisition review last year, sees the CMA trying to project how competition could proceed in the absence of a deal. The CMA has also opened a review of Google’s acquisition of data analytics firm Looker. The proposed merger of Yahoo! Japan and the Naver-owned Line app business will provide insight into the trend in Japan and Korea. The Google plan to acquire FitBit, seen by many as designed to better compete with Apple, is likewise under review from the U.S. Department of Justice. Finally, back in the UK, the CMA has released its Online Platforms and Digital Advertising Market Study interim report and is moving forward on a major review of digital advertising, social media, and data policies with a focus on Google and Facebook in particular, drawing clear parallels with the Australian Government’s Digital Platform Inquiry, which is now at the government action phase after two years of study and reports.

Gig Labor Platforms and High Skill Freelancers React to California AB 5

Report from NPR

In Brief – With AB 5, the nation’s highest profile worker classification law going into effect in California, reactions are evolving along two major threads — the largest gig labor driving and delivery platforms, and the impact on more traditional skilled freelancers, especially freelance writers. A lawsuit challenging AB 5 on constitutional grounds has been filed by Uber and Postmates regarding the targeting of the major digital platforms, along with one filed on behalf of freelance writers and photographers in the state. In addition, the large gig work platforms, while claiming that under both AB 5 and established worker classification law their users are not employees, are also promising to spend nearly $100 million on a California state ballot initiative in November 2020 to override AB 5 and allow platforms to offer drivers and other users a range of employee-like benefits while maintaining their status as independent contractors.

Context – Although the big gig driving and delivery platforms were the political focus of the AB 5 debate, skilled freelancers, in particular writers, have been gaining increasing attention due to the strong preference many have to be independent. While some categories of independent workers were given special exemptions, including architects, doctors, insurance agents and truck drivers, writers face a provision setting a threshold of 35 articles a year, a standard that many freelance writers describe as far too low. In an example of the impact of shifting from independent writers to employees, Vox Media is replacing a team of 200 freelance writers contributing to its sports-media site SB Nation, with 20 employees. The New Jersey state legislature is attempting to wrap up gig worker legislation before their legislative session ends on January 15, however concerns are being raised by a wide range of traditional small businesses and contractors, including freelance writers, truck drivers, bakers, wedding photographers and musicians. In New York State, Handy, the household help platform app, has proposed a threshold of 25 hours a week indicating an employee, a far cry from the 3-hours per week standard enacted by the European parliament last year, indicating the wide range of policies evolving in different markets.

US Army Bans TikTok from Digital Devices of Service Members

Report from Military.com

In Brief – The latest development in the rapidly evolving US Government concern with the widespread American consumer use of TikTok, the popular Chinese-owned social media platform, is the announcement by the US Army that TikTok is prohibited on all digital devices issued to servicemembers. The decision by the Army, based on concerns that user data could be abused by Chinese authorities, follows a mid-December determination by the Department of Defense (DoD) that the TikTok app was a potential cyber threat and follow-up action from the US Navy. While cyber security concerns related to TikTok and the US military were raised by Senators Tom Cotton (R-AR) and Chuck Schumer (D-NY) in October, the Army’s recruiting command was still using TikTok videos in recruiting efforts in November.

Context – TikTok’s emergence as the first Chinese-based digital consumer service with tens of millions of U.S. users is raising challenges for U.S. officials based on the belief that the Chinese Government holds strong influence over all Chinese digital businesses. One major concern is that Chinese enterprises holding personal data on large numbers of Americans could be coerced to share sensitive data with Chinese authorities, which could then be used to manipulate users. The CFIUS investigation of TikTok’s acquisition of Musical.ly, which follows on recent CFIUS interventions on MoneyGram and Grindr acquisitions, is based on this concern. The DoD, Army and Navy bans are also largely based on this concern. A second issue is that many large companies, both Chinese and American, engage in China-inspired censorship. China-inspired self-censorship by the U.S. entertainment industry is reported to be a major concern of many U.S. military officials. In addition, while TikTok has heretofore largely been politics-free in the U.S., a fact attributed by some former employees to company content moderation policies, TikTok videos are increasingly being uses by 2020 US Presidential campaigns. In addition, charges of politically-motivated censorship by the Chinese communications giant WeChat of Chinese speakers in countries like Australia, Canada and the U.S. are increasingly being raised.

Vestager Lays Out Vision of Internet, Technology and Role of Europe

Text of Speech

In Brief – Commissioner Margrethe Vestager, who is Executive Vice President of the European Commission for a Europe Fit for the Digital Age and is also leading the Commission’s Competition Authority for a second term, gave a speech to the Internets of the World Conference in Copenhagen in December. She concisely provided her thoughts on the evolution of digital technology and services, in particular the commercialization of the Internet, and what she believes is Europe’s role in crafting rules to protect people and promote European values online.

Context – No single elected official, regulator, judicial officer, academic or analyst is the single most influential tech policy thought leader in the world, but Commissioner Vestager is likely the most important in Europe. She speaks in public on occasion and shares her high level views. With many digital public policy issues in Europe certain to headline in 2020, including potential action on a Digital Services Act, Gig Labor Regulation, e-Privacy, Platform-to-Business Regulation, AI standards and a range of digital platform competition policy actions, it is well worth investing five minutes reading her views.

Five Top U.S. Digital Technology Public Policy Issues for 2020

Story from The Hill

In Brief – This five minute read summarizes five big issues on U.S. digital public policy landscape for 2020 – Big Tech and Antitrust, the implementation of the California Consumer Privacy Act (CCPA) and digital privacy debates in Congress and states, the Content Moderation of Political Speech by the largest digital platforms, TikTok and prospects for further disengagement between the U.S. and Chinese digital enterprises, and the Google-Oracle copyright case heading to the U.S. Supreme Court.

Context – Platform Economy Insights is has been following these and other big issues on the U.S. digital public policy front, and this concise five-minute read is a solid PEI-recommended summary that is worth your time. If there’s one big issue missing, keep an eye on the implementation of, and fallout from, AB 5 in California, the state’s new worker classification law aimed at giant “Gig Labor” platforms (but sure to impact a wide range of smaller enterprises and many kinds of workers), and the potential for more states and the federal government to engage on worker classification and gig platform issues in 2020.

ECJ Rules That AirBNB is a Digital Platform Business, Not a Real Estate Business

Report from the BBC

In Brief – The European Court of Justice (ECJ) has ruled that AirBNB should be considered an ‘information society service’ rather than a real estate business. The French hotel industry lobby had brought the case arguing that AirBNB operates as a property rental firm and should be regulated as such under French law. In ruling that AirBNB was a digital platform rather than a real estate enterprise, the court opinion highlighted the fact that AirBNB’s platform was not simply an “ancillary” or add-on service to a wider property business, that the property owners who used the platform were also able to offer their homes for rent through other channels, and that AirBNB did not set or cap the rent charged by home-owners.

Context – This decision by the ECJ stands in contrast with the court’s Uber decision in 2017 that the service is appropriately considered a transport business. The court’s reasoning differentiating AirBNB’s platform from Uber’s platform points to how the degree of control exerted over users may prove to be the most important question in gig economy platform cases. The ECJ noted the case against AirBNB was unlike the one made against Uber, with Uber setting the fare for rides and assigning each passenger a specific driver, while AirBNB does not determine the rental price charged for property and lets customers choose which home to rent. In the United States, the legal implications of the level of control exerted by a platform is playing out in a price-fixing antitrust case brought against Uber that is currently in arbitration. Likewise, the three-question ABC Test to determine worker classification from the California Supreme Court’s Dynamex decision may hinge, case-by-case, on the level of control exerted by the platform for most digital platforms. Not only might fully setting prices for “independent” users itself be an antitrust violation, it is possible that courts will see price-setting as a significant indicator of “control”.

JFTC on Platform Data Policies and Superior Bargaining Position

Report from Reuters

In Brief – The Japan Fair Trade Commission (JFTC) has released new guidelines regarding how it views the possibility that a range of data policies imposed on users by the largest digital platforms could represent an anticompetitive abuse of a superior bargaining position under the Japan Anti-Monopoly Act. The JFTC has been engaged in a broad review of large digital platforms since the spring and the new guidelines regarding anticompetitive data policies are a key component of those efforts.  The JFTC summary of the guidelines are available here. New guidelines regarding the review of mergers and acquisitions by large digital platforms have also been released by the JFTC this week.

Context – The rapidly evolving multi-billion dollar online influencer industry continues to challenge companies, users and regulators. The US Federal Trade Commission (FTC), who brought its first case against deceptive online influencers in 2017, recently provided comprehensive updated guidance to online influencers, advertising businesses and brands. This followed a recent FTC settlement with the cosmetics company Sunday Riley for intentionally misrepresenting online reviews which drew criticism for lacking meaningful penalties. Unlike Japan, where there are no official guidelines, the Advertising Standards Authority in the UK released comprehensive guidelines on the practice of paid influencers in 2018, and this report from the European Advertising Standards Alliance, a pan-European industry body, provides guidelines as well as a helpful summary on the country-by-country regulatory regime such as it exists.