Archive – 2020
AirBNB Identifies Google Search Results Practices as a Risk in IPO Prep Documents
Report from CNBC
In Brief – As it approaches its expected December IPO, Airbnb, a platform for short-term rentals and travel experiences, used its S-1 filing detailing “Risk Factors” to state that Google’s general Internet search service has favored its own travel and accommodation search services over AirBNB’s, resulting in fewer online visitors to AirBNB. Google has added more in-house search features akin to travel websites, including Google Travel and Google Vacation Rental Ads. AirBNB has stated that the introduction of those types of Google services, which then are prominently placed on Google search result pages, has resulted in reduced prominence of AirBNB in search results.
Context – Google’s practice of developing specialized search services, often called “verticals”, and displaying them in a prominent “OneBox” on its general search results page when Google believes the user is interested in a specialized search, has been an ongoing concern of specialized search competitors who see Google abusing its dominance in general Internet search. AirBNB’s S-1 aligns with the concerns expressed by European and American Internet businesses and trade groups, including top travel “vertical” services Booking.com, Expedia, Trip Advisor and Trivago, in a recent letter to EU Commissioner Margrethe Vestager calling for her to take swift action to address this Google practice and not wait for the expected Digital Markets Act regulatory changes. Google dominates general Internet search Europe with a market share exceeding 90%, and the EU’s “Google Shopping” case, one of the three the company has been fighting for a decade in the EU, challenged this practice. While the US Department of Justice’s recent complaint challenges Google practices more aligned with the EU’s Android case, it is reported that a coalition of State Attorneys General may take on these vertical search practices.
Apple’s the Latest Digital Company to Face BIPA Suit Over Photo Face Recognition
Report from Bloomberg Law
In Brief – Apple will have to face a federal class action suit claiming the facial recognition feature in its Photos app violates the Illinois Biometric Information Privacy Act (BIPA) following a decision by Chief Judge Nancy Rosenstengel of the U.S. District Court for the Southern District of Illinois. Two BIPA claims were sent back to Illinois state court for failing to meet the “concrete and particularized” harm definition for federal standing. However, the plaintiffs’ claim that the Apple Photo app violates BIPA by collecting and storing their biometric without consent survived. Apple argued that it never collects or stores the facial scan information because the entire process and storage is done locally on users’ devices, but the plaintiffs’ complaint alleged that Apple stored the data in secret facial recognition databases over which it alone had access. Judge Rosenstengel ruled that taking the plaintiffs’ allegations as true at this stage in the proceedings gives them a plausible cause of action that survives Apple’s motion to dismiss.
Context – Private class action suits tied to Illinois’ BIPA continue to impact a wide and growing range of companies that employ some manner of biometric technology, especially facial scans. As social media giant Facebook settles one and faces a new Instagram suit, TikTok, the Chinese-owned social media phenom is settling a similar challenge. The ongoing pace of BIPA lawsuits is likely to reinforce already strong disagreements over private right of action as a primary partisan sticking point on comprehensive federal privacy legislation. Texas, like Illinois, has a biometric privacy law requiring companies to obtain consent from individuals before collecting biometric information, but unlike BIPA, the Texas law does not authorize enforcement through private litigation and requires actions to be brought by the state Attorney General. It is reported that the TX AG may be preparing to do just that with Facebook.
Commissioner Breton to Meet with Tech CEOS Before DMA-DSA December Release
Report from Reuters
In Brief – In the run up to the release of the EU’s landmark Digital Services Act package currently scheduled for December 9, Thierry Breton, the Commissioner for the Internal Market and co-leader on digital policy with Commissioner Margrethe Vestager, has invited top executives from more than 20 major digital platforms to virtual meetings to discuss the Commission’s plans. Along with the four largest platforms, Google, Amazon, Facebook and Apple, it is reported that Microsoft, Booking.com, Expedia, Trivago and DuckDuckGo are among the invitees.
Context – The Digital Services Act package, an unprecedented effort to comprehensively rewrite the rules governing digital society, potentially globally, is expected to be delivered in two parts. The Digital Services Act (DSA) itself will cover platform liability, online “safety” and the duties of platforms to police objectionable content, both commercial and expressive. The Digital Markets Act (DMA) will aim to address competition in digital markets, focusing on “Large Online Platforms” (LoPs) that serve as digital “Gatekeepers”. It is expected to propose a range of new mandates and new regulatory authority to police them, including a New Competition Tool and a catalog of problematic behaviors. The four GAFA mega-giants will clearly be in scope across the board, but how far the concept of Gatekeeper extends to other platforms, how that will be measured, and whether all DMA and DSA rules and obligations will kick in at one point, or case-by-case, are among the most important questions when the plans are released. The Commission will receive feedback from EU countries and the European Parliament before a final draft or drafts can be adopted, a process which can take a year or more.
Epic Games Expands Apple App Store Crusade Bringing Antitrust Suit in Australia
Report from The Guardian
In Brief – Epic Games has opened a new front in its war against Apple by suing the phone giant for anticompetitive conduct in Australia. This follows Epic’s antitrust suits in US Federal District Court charging both Apple and Google with anticompetitive app store policies and fees. Both platform companies charge 30% fees for in-app purchases, a fee level Epic calls monopoly rents. Rod Sims, the Chair of the Australian Competition and Consumer Commission, responded to Epic’s action that this would be a first test of the application of Section 46 of Australia’s Competition and Consumer Act, which was added in 2017, to a giant digital platform. Sec. 46 prohibits a firm with a substantial degree of market power from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in a market.
Context – Epic kicked off the legal battles by modifying its Fortnite app to intentionally violate Apple App Store (and Google Play Store) rules to avoid the fees. Apple responded by blocking the Fortnite app, as did Google. Epic then kicked off a PR campaign focused on Apple. After blocking Fortnite, Apple also threatened to block Epic’s game developer tools, called Unreal Engine. In a series of hearings and rulings that have allowed the Apple ban on Fortnite to stand but have not allowed Apple to block the Unreal Engine tool, Judge Yvonne Gonzales Rogers has repeatedly noted that the game console companies also have 30% fee levels, which is a major challenge for Epic’s claims. Large companies like Epic and Spotify are investing in regulatory campaigns attempting to mobilize smaller developers. In an equally political play, Apple has announced that developers earning less than $1 million in app revenues, who make up 98% of developers but just 5% of app revenues, will be charged only 15% in 2021 as a small business incentive.
Google and DoJ Fighting Over Google’s Access to Competitor Case Data
Report from Reuters
In Brief – The US Department of Justice (DoJ) and Google continue to disagree over the access that Google’s legal team will have to the sensitive materials provided by competitors in the course of the investigation that led to the major federal antitrust complaint against Google. The DoJ and 11 State AGs, all Republican, have targeted Google for a range of anticompetitive actions aimed at protecting their dominant search business, paying particular attention to Apple devices. Google, which is preparing to respond to the complaint by December 21, is seeking expanded access to the material collected by the government, including the ability to have two Google staff counsels to review confidential information from companies including Microsoft, Oracle, Amazon, AT&T and Comcast, as well as smaller complainants. The DoJ and State AGs object to the in-house counsel arrangement arguing that it would chill third-party support for government investigations and cite the terms of access to data in the Microsoft antitrust case, which was limited to Microsoft’s outside counsel. The companies in question, who have objected to direct Google access to their data, will file their input on the protective order by November 20.
Context – The antitrust cases targeting Google are most advanced, likely due to the fact that the European Competition Authority is a decade into cases challenging Google on Search practices, its Advertising business, and conduct related to Android, where each case resulted in a finding against Google, a major fine and a succession of appeals. The Federal Trade Commission’s review of Google from 2010 – 2012 also covered similar ground. Along with the DoJ complaint, additional complaints are expected from State Attorneys General in the coming few months. Access to data in a government antitrust case is also an issue for Google in Korea, where the KFTC has set up a “data room” with procedures for Google’s outside counsel to access competitors’ charges and data under strict confidentiality rules for an expected case there on Android practices.
Apple IDFA Draws Privacy Complaints to Add to Competition Complaint
Report from TechCrunch
In Brief – Only weeks after French digital advertising companies and online publishers filed suit against Apple claiming that changes the smartphone giant is making in the iOS operating system will unfairly disadvantage smaller ad market competitors, NOYB, the online privacy non-profit founded by Austrian activist Max Schrems, has filed complaints against Apple coming from the opposite perspective that Apple illegally allows digital tracking for ads. At issue in both cases is Apple’s IDFA (ID For Advertising), a number Apple attaches to each phone that can be used to facilitate targeted advertising. Starting next year, Apple plans to require all third-party apps to get opt-in permission from users to collect their IDFA, a change Apple defends as improving user privacy. The competitors argue the move will undermine ad industry competitors because Apple has other ways to track users without asking for an opt-in. NOYB filed complaints with the Spanish and German privacy authorities challenging Apple’s IDFA itself as violating the EU’s e-Privacy Directive rules governing cookies, arguing that the IDFA is the equivalent of a cookie and the company has never required users to give proper consent for its use at all.
Context – The tension between competition concerns and privacy concerns, especially when privacy advocates look to ban targeted advertising, is an important development. Business complaints lodged against digital advertising giants, whether by nascent ad industry competitors trying to grow their services or online publishers looking to improve their ad revenue shares, support quality online advertising and fear privacy being an excuse to stifle growth and lock in the incumbents that control the platforms. Google has faced similar complaints related to the treatment of third-party cookies in its Chrome browser as well as plans to move DNS queries to encrypted HTTPS protocol, while Facebook has faced claims that it banned service providers for privacy violations as an anticompetitive tool.
Apple Lowers App Store Fees for Small Developers in Response to Criticism
Report from the New York Times
In Brief – Under pressure from app developers and government officials regarding its App Store policies and fees, Apple has announced that it will cut fees charged to smaller app developers in 2021. Currently, Apple imposes a 30% fee on digital purchases made through apps distributed through the App Store, although the commission falls to 15% in the second year and beyond for subscriptions. Starting in January, the 15% fee will be applied to the digital earnings of app developers whose apps generated less than $1 million in developer earnings after Apple fees in the previous year. Earnings through apps are very top-heavy, with 98% of app developers generating less than $1 million in digital sales through their Apple system apps, and those developers accounting for less than 5% of all sales generated by apps. Strident critics of Apple, led by Epic Games who is suing Apple for antitrust violations, decried the change as a transparent effort to reduce political heat without ending their anticompetitive practices.
Context – App store policies are facing scrutiny globally, and heat is being turned up quickly. There are just two dominant mobile operating system platforms (outside China), but there are millions of app developers who rely on them. Large companies like Epic and Spotify are investing in legal, PR and regulatory campaigns to change platform policies and fees. Apple and Google both often charge 30%, but they otherwise have very different models. Apple’s “walled garden”, which places them more squarely in control of apps in the name of user experience, has made them more the focus with US and EU regulators, and seen them criticized by giants like Microsoft and Facebook (with whom they recently made a similar compromise on fees). Google has generally had a more open system and allows non-Google app stores to operate. But Google’s Android has more users globally and is the focus in South Korea and India. Apple is exploring if segregating the largest app developers from the millions will play well legally and politically.
Senate Judiciary Committee Criticizes Social Media CEOs on Content Moderation
Special Hearing Report from PEI
Background – The Senate Judiciary Committee gathered (about half remotely) to discuss user content moderation with the CEOs of Facebook and Twitter. The focus was on the election, both the run-up (Hunter Biden stories) and aftermath (results and charges of fraud). This hearing (video here) came a month after a very similar hearing in the Senate Commerce Committee (video here). Again, the topic was ostensibly Sec. 230, a key legal foundation of the Internet that facilitates platforms blocking or restricting user content they find objectionable. Sec. 230 has been harshly criticized from both sides of the aisle. But, as most commentators increasingly recognize, the objections are different to the point of contradictory. Conservative critics claim that the largest platforms are such progressive bastions that conservative viewpoints are penalized and therefore want to limit the authority of platforms to moderate political content. Many progressives are concerned about the opposite failing, that platforms need to take a stronger hand restricting hateful, false and dangerous claims.
Context – Once again, no new ground was broken. Rep. Senators Ted Cruz (TX), Mike Lee (UT), Marsha Blackburn (TN) and Josh Hawley (MO) were the loudest in charging censorship and anti-conservative collusion. Dem. Senators Richard Blumenthal (CT), Richard Durbin (IL), Mazie Hirono (HI) and Cory Booker (NJ) were most animated in calling for the platforms to better defend democracy. Ben Sasse (R-NE) and Tom Tillis (R-NC) were noteworthy in pushing back on charges of collusion and questioning government intervention on content decisions. Amy Klobuchar (D-MN) raised her antitrust concerns and Chris Coons (D-DE) called for more policing of climate misinformation. Like a month ago, the one policy idea earning support from Senators and CEOs (both of whom responded “Yes” to the question of whether they support some change to Sec. 230) was greater transparency into corporate content moderation practices.
Dutch Call for AirBNB to be Governed as a Digital Gatekeeper Highlights Key DSA Issue
Report from Euractiv
In Brief – The Netherlands Government has released a paper calling for AirBNB, described as the leading online holiday rental platform, to be governed as a Gatekeeper under the upcoming Digital Services Act. In releasing the paper, the Netherlands Deputy Prime Minister criticized short-term rentals, especially in tourist markets such as Amsterdam, for negative impacts on housing prices and social cohesion. The paper also raises concerns with the EU “Country-of-Origin” regulatory principle when applied to platforms and activity with significant local impacts.
Context – The EU’s landmark Digital Services Act package is expected to be released by the European Commission in early December. This is an unprecedented effort to comprehensively rewrite the rules governing digital society, potentially globally. The endeavor is expected to proceed in two parts. The Digital Services Act (DSA) will broadly cover platform liability, online “safety” and the duties of platforms to police objectionable content, both commercial and expressive. The Digital Markets Act (DMA) will aim to address competition in digital markets. Get used to the terms “Large Online Platform” (LoP) and “Gatekeeper” to describe platforms with an inordinate ability to control digital activity. The DMA is expected to propose a range of new regulatory mandates for Gatekeepers and new authority for regulators to police them, including a New Competition Tool and a catalog of problematic behaviors, including on platform-to-business relations, “gig” work, interoperability and many others. EU leaders clearly see mega-giants Google, Amazon, Facebook and Apple in scope as Gatekeepers, but how far the concept extends to other platforms, how they will be measured, and whether all DMA and DSA rules and obligations will kick in at one point, or case-by-case, are key going forward. The DSA and DMA will involve a package of legislation in the European Parliament and then action by national governments.
UK Tribunal Rejects Facebook Attempt to Block CMA’s Order to Freeze Giphy Integration
Report from CNBC
In Brief – The UK Competition Appeal Tribunal (CAT) has comprehensively rejected the appeal of Facebook to overturn the Initial Enforcement Order (IEO) of the Competition and Markets Authority (CMA) that called on the social media giant to freeze the integration of Giphy, a platform for shareable digital images, into Instagram, while the CMA conducted its competition review. The CMA has expressed concerns that the acquisition of Giphy will give Facebook new insights into user activity on other messaging and social media platforms, such as TikTok, Twitter, Slack and Tinder. Facebook requested a derogation from the IEO exempting much of its business from the CMA’s initial order. The two sides disagreed over the level of effort undertaken by each side to reach a mutually acceptable agreement, and Facebook appealed to the CAT overturn the CMA’s position. At the August CAT hearing, the CMA raised the prospect that Facebook may be asked to divest assets beyond Giphy if the image platform is integrated into Instagram and the CMA later ruled the deal has anticompetitive effects.
Context – Acquisition review policy has its own chapter of thinking on how competition policy reformers want to address digital economy challenges. Review of Google’s $2.1 billion bid for FitBit is raising concerns that some platforms are simply too big to acquire large new data sources. Facebook’s acquisition of Giphy raises concerns with acquisition of “digital surveillance” tools that could be linked to “killer acquisitions” and is also under review in the US and Australia. The head of the CMA is also calling for Parliament to adopt a new merger regime for large digital companies, the chief of the French competition authority is calling for all acquisitions by digital giants to be investigated, and the House Antitrust Subcommittee’s digital markets report includes merger policy reforms, some of which received positive feedback from Republicans and could lead to some bipartisan action in the new Congress.
The RCEP and eCommerce – It’s In There, It’s Just Not Ambitious
Report from The Register
In Brief – Fifteen Asia-Pacific countries accounting for 30% of the world population and global economy have completed an eight-year trade negotiation and signed the Regional Comprehensive Economic Partnership (RCEP). Like the Comprehensive and Progressive Trans- Pacific Partnership (CPTT) trade agreement, which includes seven RCEP countries, the new deal includes a section on eCommerce (text here, summary here). A top aim was to block national data localization policies requiring the use of local computing facilities or prohibiting the cross-border transfer of data. The agreement also proposes developing standards for paperless trade, maintaining current policies against import duties on digital goods (but allows countries to impose VAT or GST taxes on digital services, which are proliferating in the region), and promoting greater cooperation on cybersecurity and digital capacity-building. The agreement includes the 10 member states of ASEAN (Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Cambodia, Myanmar and Laos), China, Japan, South Korea, Australia and New Zealand.
Context – RCEP negotiations were begun when the US was leading the parallel Trans-Pacific Partnership effort, seen regionally as the more aggressive free trade initiative. The RCEP included China and India, both absent from the TPP. India withdrew from the RCEP process last year as relations with China soured, citing trade with China and also the ecommerce section on data localization. While the RCEP section on ecommerce is similar in scope to the CPTTP, the provisions are not ambitious. The financial services sector is exempted. Countries are allowed to the avoid ecommerce commitments, even on data localization, for national security or other public policy reasons, for example giving complete latitude to China for its Internet governance regime or Australia on privacy or other digital regulations.
CFIUS Adds 2 Weeks to the Deadline for ByteDance to Divest TikTok
Report from Reuters
In Brief – The Committee on Foreign Investment in the United States (CFIUS) has extended until November 27 the deadline given to Chinese-based digital giant ByteDance to divest itself of TikTok in the United States. CFIUS has the authority to review all acquisitions by foreign firms, including after the fact when not notified initially, and it claims authority over ByteDance’s operations of TikTok in the US due to the company’s 2017 acquisition of video app Music.ly. CFIUS began a review of that acquisition last October, released an order in August finding that TikTok threatened national security due to its US user data holdings, and ordered ByteDance to address data security concerns through divestment by Nov. 15. ByteDance subsequently filed a motion in federal court to extend the deadline 30 days, claiming that CFIUS had not substantively replied to its remediation proposals. CFIUS granted a 15-day extension.
Context – The Trump Administration effort to ban the WeChat and TikTok apps is unprecedented. Federal Courts in California, Pennsylvania and DC have imposed a series of injunctions freezing the bans on the app operations. The WeChat injunction was granted largely on First Amendment issues. Two federal judges granted injunctions blocking the TikTok bans based on limitations to the President’s otherwise broad authority under the International Emergency Economic Powers Act. The CFIUS order to divest TikTok is based on different legal authority. CFIUS interest in Chinese businesses holding US user data has been growing for years and Congress expanded its authority in 2018. Rather than be forced to sell TikTok outright, ByteDance is reportedly hoping to establish a business arrangement with Oracle to house, handle and control data on US TikTok users to allay data security concerns, looking to a CFIUS decision on Genworth Financial as precedent. It is possible that simply delaying action into the next Administration is the primary ByteDance goal at this point.
Partisan Divide on the FTC Again Comes Through in Zoom Privacy Settlement
Report from TechCrunch
In Brief – The Federal Trade Commission (FTC) has reached a settlement with online video conference service Zoom, which exploded into the public consciousness when the pandemic pushed tens of millions of people to regularly use online video services for the first time. The company has agreed to implement a new information security program to better protect user privacy. The FTC charged Zoom with deceptive and unfair practices regarding privacy that gave users a false sense of security when using the service. Zoom’s claim that it employed “end-to-end” encryption, a way of scrambling calls that blocks anyone — even Zoom — from listening in, was untrue and calls were not encrypted in that fashion. The settlement was approved by a partisan 3-2 Commissioner vote, with three Republicans supporting (statement here) and two Democrats dissenting (statements here and here), arguing that that the settlement did not include any help for affected parties, monetary penalty or compensation, or admission of liability.
Context – A divided Congress means comprehensive federal privacy legislation will remain somewhat a longshot in 2021. However, a Biden Administration FTC is likely to be meaningfully more aggressive than its predecessor and could have a real impact even absent new laws. Look to a series of 3-2 decisions of the FTC on digital cases where the two Democratic Commissioners criticized the Republican majority for insufficiently robust settlement terms — the Facebook settlement over Cambridge Analytica (Republican statement here, Democratic dissents here and here), the Google settlement over YouTube COPPA violations (Republican statements here and here, Democratic dissents here and here), and the Sunday Riley Modern Skincare settlement involving manipulated and fake reviews (Republican statement here, Democratic dissent here), where like in this Zoom case, the minority decries the lack of redress, financial penalties or admission of wrongdoing.
Vertical Search Firms Want Effective EU Action Soon Against Google Search Practices
Report from Reuters
In Brief – A collection of 165 European and American Internet businesses and trade groups have sent a letter to EU Commissioner Margrethe Vestager, who heads the European Competition Authority (ECA), accusing Google of giving its specialized search services, such as for accommodations, travel and jobs, preferential placement in its general search results and urging swift and effective action to stop the anticompetitive practices. Among the 135 companies on the letter were Yelp, Expedia, Trivago, Kelkoo, Stepstone and Foundem. The group accuses Google, which dominates general Internet search Europe with a market share exceeding 90%, of unfairly highlighting Google-run specialized search “vertical” services in a “OneBox” on its search engine results page when Google believes the user is interested in that type of specialized search, providing a distinct advantage over any other specialized search provider. The group calls for swift action under competition law rather than waiting for a possible new regulatory regime under the expected Digital Markets Act.
Context – Antitrust scrutiny is ratcheting up against Amazon (two big ECA announcements this week), Facebook (a case is expected from the FTC soon), Apple and Google, which saw a major complaint filed by the US Department of Justice in October. But Google alone is a decade into major cases in the EU regarding Search practices, its Advertising business, and conduct related to Android. The DoJ suit, for example, builds on aspects of the EU Android case, in particular regarding practices to preference Google search on a wide range of devices and services. This recent letter to the ECA regarding specialized search is linked to the ECA’s Google Search case, which focused on “Comparison Shopping” services. There is deep disappointment that while the case identified important anticompetitive Google practices, the remedies proved insufficient and Google’s OneBox carries out similar practices today in many search “verticals”.
Facebook and Google Extend Political Ad Ban Amidst WH Tension and Georgia Runoffs
Report from the Wall Street Journal
In Brief – Facebook and Google, the largest platforms for digital advertising, have indicated that they will be continuing their current ban on political advertising for a number of additional weeks. When each company announced plans in the weeks before Election Day regarding restrictions on political advertising, they each included a ban on ads for the week after the election. The close results in a number of states and the lack of a certified winner in the Presidential race, despite most major media outlets declaring the race for Joe Biden, is leading both platforms to maintain the ad ban to reduce false election claims, confusion and potential misinformation. As currently announced, the advertising bans impact the two Senate run-off elections in Georgia that will determine control of the US Senate, which is drawing complaints from both sides in those heated campaigns.
Context – The leading social media platforms each instituted policies before the election to restrict efforts to dissuade voting, undermine the voting process or preempt official vote counts that were expected to be delayed in the context of dramatically increased vote-by-mail during the pandemic. Along with its ban on any political ads for at least the week after the election, Facebook froze new political ad content the week before Election Day. It also indicated that it would suppress posts that promote violence or misinformation around election results, and teamed up with Reuters to supply election results. YouTube indicated it would restrict misleading claims about voting or encouraging election interference, and prioritize established news outlets for election news. Twitter and TikTok had already prohibited political advertising on their services this year.
Department of Justice Clears the Uber Acquisition of Delivery Platform Postmates
Report from Reuters
In Brief – The Department of Justice is reported to have approved Uber’s acquisition of food delivery platform Postmates. The four largest food delivery platform services in the U.S. are DoorDash, Grubhub, Uber Eats and Postmates. After its May effort to acquire Grubhub, which was instead purchased by Europe-based Just Eats Takeaway, Uber made a $2.65 billion bid for Postmates. An Uber Eats-Grubhub tie-up would have created a market leader and with DoorDash, consolidated 80% of the market in two firms, raising major antitrust concerns. The Uber Eats-Postmates pairing does not exceed the industry leader. The major delivery platforms have tended to focus on building market shares in specific localities. In that light, Uber has committed to void Postmates exclusivity agreements with restaurants in Los Angeles, Las Vegas, El Paso, Charleston (SC) and Bellingham and refrain from pursuing new ones for six months.
Context – Food delivery platforms have grown in prominence during the pandemic, especially during lockdowns when in-person restaurant service was restricted. Delivery platforms generally establish business relationships with restaurants and charge them fees that often reach 30%. Many large cities have imposed fee caps and other mandates on the platforms this year, including Los Angeles, New York, Chicago, and Washington, D.C. The State of California enacted AB 2149 in September to address a different complaint, low-quality delivery from unaffiliated platforms, banning platforms from offering delivery from restaurants they do not have an “express agreement” to offer delivery, meaning without fees. Even with highly criticized fee levels, the food delivery apps continue to appear to be losing money, raising questions about the model and leading to calls for consolidation.
ByteDance Asks Federal Court to Delay the Proposed Nov 12 Deadline to Sell TikTok
Report from the Washington Post
In Brief – ByteDance, the Beijing-based digital giant that owns TikTok, has asked a Federal Court for a 30 day delay of the November 12 deadline imposed by the Committee on Foreign Investment in the United States (CFIUS) to sell its US TikTok operations. CFIUS is a federal interagency committee with the authority to approve or reject acquisitions by foreign businesses in the United States. It can unwind completed acquisitions if not notified of a deal beforehand. CFIUS claims authority over TikTok due to the 2017 acquisition of video app Music.ly by ByteDance, which merged the service into TikTok. CFIUS interest in Chinese businesses investing in US digital firms has been growing for years and Congress expanded the remit of CFIUS in 2018 to broadly cover acquisitions involving data on US citizens. Rather than sell TikTok outright, ByteDance is reportedly hoping to undertake a business arrangement with Oracle to house, handle and control data on US TikTok users to allay data security concerns, harkening to a 2018 CFIUS decision approving China Oceanwide’s purchase of U.S. insurer Genworth Financial, following agreement to use a US-based third-party service to manage Genworth’s US policyholder data. ByteDance claims they have not received substantive feedback on that proposal.
Context – The Trump Administration efforts to ban WeChat and TikTok are unprecedented. Federal Courts in California, Pennsylvania and DC have instituted a series of injunctions freezing those bans. The WeChat injunction is based on First Amendment issues. Both judges granting injunctions on aspects of the TikTok bans have based their rulings on limitations to the President’s otherwise broad authority under the International Emergency Economic Powers Act. The CFIUS authorities are very different. However, it is possible that simply delaying action into the next Administration is the primary ByteDance goal at this point.
Judge Rejects Apple Counterclaims Against Epic and Keeps Case on Course for May Trial
Report from Reuters
In Brief – Federal District Court Judge Yvonne Gonzalez Rogers, overseeing the antitrust clash between Epic Games and Apple, has rejected a range of Apple counterclaims against Epic that asked the court to award Apple lost App Store fees and other monetary damages. Judge Gonzales rejected the Apple argument that Epic harmed Apple and took Apple’s fees when Epic made the payments process in the game Fortnite noncompliant with Apple rules, leading Apple to kick Fortnite out of the App Store. In short, the judge ruled that the lost fees while the game is blocked are not Apple’s money, and that it was a breach of contract case. The case continues on its way to trial in May 2021.
Context – Epic Games filed federal antitrust suits in August charging both Apple and Google with anticompetitive practices related to app store policies and fees. Both platform companies charge 30% fees for in-app purchases, a fee level Epic objects to as monopoly rents. It’s worth noting that Judge Gonzales has repeatedly noted that the game console companies also have 30% fee levels. Epic kicked off the legal battles by modifying its Fortnite app to violate App Store (and Play Store) rules and avoid the fees. Apple responded by blocking the Fortnite app, as did Google. Epic kicked off a PR campaign focused on Apple. After blocking Fortnite, Apple also threatened to block Epic’s game developer tools, called Unreal Engine. Judge Gonzales has consistently ruled in a series of decisions related to injunction requests that Apple could continue to block Fortnite unless it comes into compliance on Apple policies and fees, but could not block the Unreal Engine developer system. The Google case has proceeded more in the shadows. Google has asked that the two cases remain separate as the two mobile platforms operate very differently, as well as asking for a delayed schedule compared to the Apple case. Presiding Judge James Donato rejected the delay request and wants the parties in court early next year.
Europe Moving Forward on Two Antitrust Cases Targeting Amazon’s Marketplace
Report from Reuters
In Brief – The European Competition Authority (ECA) has announced that it is moving forward on two cases challenging Amazon for anticompetitive conduct. First, they have made a preliminary finding that Amazon unfairly uses data from its marketplace to compete with third-party sellers and will continue with an investigation begun two years ago. Second, the ECA is beginning a new investigation of whether Amazon uses their Buy Box and other tools to preference products on their marketplace sold by Amazon itself, or alternatively, from sellers that purchase logistics services from Amazon’s FBA logistics business.
Context – European competition enforcers moving forward on two paths related to Amazon is noteworthy, and the biggest news is the second, new investigation into Amazon’s use of the Buy Box to preference certain products, in particular the products of third-party sellers that use Amazon’s FBA logistics business. The way Amazon links success on their dominant ecommerce marketplace to their dominant FBA logistics business, recently estimated to alone being 60% of the ecommerce distribution center market in the US, was raised by Rep. Mary Scanlon (D-PA) at the mid-summer antitrust hearing with the Tech CEOs. (See exchange at 5:09 here) Links between FBA and marketplace success was seen by some analysts as a clear example of tying. The ECA is now taking that up. At the same time, the ECA is also moving forward on a case accusing Amazon of unfairly using marketplace data to compete as a retailer against marketplace sellers, a complaint dogging Amazon for years, with specific abuses featuring in media reports, and leaders from Commissioner Vestager to Sen. Elizabeth Warren using Amazon as the poster child of the abuse of digital giants unfairly being the marketplace “referee” and a “player.” Amazon responds that they are not a large share of overall retail and other large retailers sell even more “house brands”. Amazon’s market share responses related to FBA, logistics and the Buy Box will be less compelling.
Maryland Previewing US State Digital Services Tax Fights with Digital Ad Tax Battle
Report from the Washington Post
In Brief – In anticipation of a January veto-override push in the Maryland legislature to enact H.B. 732, legislation creating a first of its kind U.S. State Digital Advertising Gross Revenues Tax, a business coalition has formed and is charging that the tax is anti-small business and bad for the economy. The proposal targets digital ad giants like Google and Facebook with a tax of 2.5% to 10% of annual gross revenues derived from digital advertising in Maryland, with higher rates for companies with higher global revenues. Gov. Larry Hogan (R) vetoed the bill in May. Critics contend that it clearly violates the non-discrimination provision of the Federal Permanent Internet Tax Freedom Act (PITFA) which prohibits state taxation of Internet-based services in a manner different from non-Internet services. The Maryland Attorney General has countered that it is not clear if the courts will find against the tax proposal on constitutional grounds.
Context – New taxes on digital businesses is a growing trend. The MD digital ads tax is intentionally very similar to the Digital Services Taxes (DSTs) being proposed by France and other countries. Those DSTs have been stalled primarily by aggressive trade retaliation threats from the Trump Administration. Whether a Biden Administration would be willing to threaten a trade war over national DSTs is an open question. In the US, state legislators are looking enviously at those online tax opportunities. New York entertained a similar idea and more states are reported to be following Maryland’s progress. Rather than just tax online ads, the DC Government considered, but dropped, expanding sales taxes cover to all advertising services, avoiding the PITFA problem that will probably torpedo the MD proposal because it only taxes online services. The MD anti-tax coalition argues that the digital ad tax will hurt small businesses who advertise online despite it being imposed on the giant platforms, a point reinforced as Amazon, Apple and Google have all announced fee increases to offset European digital taxes.
Ridesharing Companies Look to Prop 22 as a Benefits Model
Report from Politico
In Brief – Uber’s CEO has pointed to the strong victory of Proposition 22 overturning California’s AB 5, legislation that would have shut down “gig” ridesharing and delivery platforms in that state, to become a legislative template for a new kind of employee-style benefits system for independent workers that would not require platforms to adopt traditional corporate employment. He did not identify any states that are looking to step into the fight with a proposal that organized labor does not support.
Context – The Prop. 22 result is a major event in the fight over the treatment of independent work platforms, but not remotely the final word. While much of the political energy that led to AB 5 was focused on ridesharing and deliveries, the bill ended up generating anger from a surprisingly wide range of independent workers, professionals and freelancers. The California legislature was pushed into exempting a wide range of those independent workers this fall, and similar concerns stymied legislation even in progressive states like New Jersey and New York. In New Jersey, new thinking on benefits is gaining some traction, with the Senate Labor Committee supporting legislation to create a portable independent worker benefits system funded by contributions from companies that use large numbers of independent contractors, including gig platforms. Federal independent worker legislation is likely off the table with a divided Congress. The Trump Administration has consistently supported regulatory flexibility for independent contractor models and the Department of Labor (DoL) has been working aggressively to put new federal rules in place this year, but with President-elect Biden expressing unequivocal support for AB 5, the new DoL leadership will likely move to undo whatever the current regime accomplishes. US cities also have some flexibility to regulate. And gig work platform regulation is expected to be included in EU Digital Services Act packages being released in December.
Department of Justice Files Suit to Block Visa’s Fintech Acquisition of Plaid
Report from Bloomberg
In Brief – The Department of Justice (DoJ) has filed suit in federal court to block Visa’s $5.3 billion acquisition of Plaid, a financial technology services platform that uses APIs to connect consumer bank accounts to thousands of popular finance and investment apps, including Venmo, Robinhood and Chime. The DoJ describes Visa as a monopolist in online debit payments services, with a 70% market share and a web of restrictive contracts with merchants and banks to protect its monopoly, and contends that the acquisition is intended to block Plaid from developing into a viable debit payments challenger – a kind of “killer acquisition”. While Visa strongly challenged the DoJ’s legal reasoning and understanding of the payments market, the DoJ complaint notes that Plaid had developed plans to roll out a nascent payments service in late 2021 and internal Visa documents indicate that the company understood the potential for the fintech services company to develop into a debit services competitor.
Context – Acquisition review policy has its own chapter of thinking on how competition policy reformers want to address digital economy challenges. The review of Google’s $2.1 billion bid for FitBit, led by the European Competition Authority, is testing thinking on whether some platforms are simply too big to acquire a large new data source. The UK CMA review of Facebook’s $400 million acquisition of Giphy, a platform for shareable digital images, is described as an acquisition of a “digital surveillance” tool that could identify targets for “killer acquisitions”, as some describe Instagram and WhatsApp. The head of the CMA is also calling for Parliament to adopt a new merger regime for large digital companies, the chief of the French competition authority is calling for all acquisitions by digital giants to be investigated, and the House Antitrust Subcommittee’s report on competition in digital markets includes merger policy reforms that received some positive feedback from Republicans.
Will A Biden Administration Make a Difference on the Top 10 Digital Platform Policy Issues?
A Special PEI Report
In Brief – We’ve been tracking, analyzing and reporting on digital platform public policy issues throughout 2020 and the following ten issues were the most covered US topics. How does the election of Joe Biden as the 46th President of the United States change their trajectory in 2021 compared to the Trump Administration? For each, we’ll project Minimal, Moderate or Major Impact and share a few thoughts. (All projections are based on the Republicans maintaining a slim majority in the US Senate.)
Many predicted that Congress would enact federal privacy legislation in 2020. It did not happen. Interest remains on both sides of the aisle, but big policy disagreements divide Democrats and Republicans, especially over allowing consumer class action lawsuits and preempting aggressive state privacy laws with new federal standards. A divided Congress means comprehensive federal privacy legislation remains a longshot in 2021, but a Biden FTC is likely to be much more aggressive that its predecessor. A bonus question is whether a Biden Administration focused on better relationships with European allies can resolve the European courts’ concerns with US digital surveillance and anti-terrorism laws to facilitate ongoing data transfers.
9. Social Media Content Moderation – Moderate Impact
Democrats and Republicans consistently agree that the social media giants are bad at content moderation, they just don’t agree why. Democrats see disinformation and hate speech slipping through and causing harms. Republicans see ideologically narrow platforms censoring conservatives. While a Biden Administration is unlikely to be able to legislate or regulate a change in content moderation any more than the Trump Administration, the platforms may be more likely to take more aggressive action against some types of user content with new Administration concerns. All the major platforms anecdotally appeared more willing to police pandemic and election-related content as 2020 proceeded. That willingness could accelerate with a Biden Administration (as well as pressure from the EU).
8. Amazon Antitrust and Liability – Moderate Impact
Ironically, despite four years of repeated expressions of anger by President Trump aimed at the CEO of Amazon, federal antitrust authorities never moved forward on any concrete complaints. Although a major rewrite of US antitrust law is a likely casualty of Republicans holding a slim majority in the Senate, a number of leading Democrats have focused attention on a range of Amazon practices and President-elect Biden often used Amazon as his top example of corporate tax abuses. The ecommerce logistics giant may see itself more in regulatory crosshairs.
7. The DoJ’s Google Antitrust Case – Minimal Impact
Interest in getting a do-over on the Obama Administration FTC’s 2012 decision to decline to press an antitrust challenge against Google has bipartisan champions. The Trump DoJ’s Google case is relatively limited in scope. Don’t expect the Biden Administration to meaningfully change course. Instead, like the current Administration, expect them to wait to see what the State Attorneys General come forward with as the move forward.
6. TikTok, WeChat and China “Decoupling” – Major Impact
While a deep dive into the Trump Administration’s China policy reveals a real mixed bag, security-focused interests calling for increased pressure on China to address strategic and domestic repression concerns have become more dominant. The efforts to ban WeChat in the US and drive ByteDance to sell off the US operations of super-popular TikTok are unprecedented. There are leading congressional Democrats willing to aggressively challenge China, and the new Administration should be concerned with courts undermining the Executive Branch’s foreign policy and national security authority, it is very likely that the aggressive Trump policy towards WeChat and TikTok will undergo a reset as the new Administration develops its overall China policy.
5. Google & Facebook Paying Media Companies – Minimal Impact
Efforts to extract payments from Facebook and Google to help media incumbents, led by France and Australia and gaining steam globally, is not likely to slow down under a President Biden. Congressional Democrats are increasingly taking up the charge that the digital giants are unfairly harming traditional local media. Both Facebook and Google have created new programs that involve paying media enterprises to help turn down the heat. Federal legislation is not likely, and while a Biden Administration seems unlikely to pressure allies to turn down the heat on Google and Facebook, would Trump?
4. Regulating App Stores and Fees – Moderate Impact
2020 was not a good year for Apple (and Google) in terms of the pressure on their app store business models. Going into the year, Apple was the GAFA company facing the least antitrust criticism, but by year’s end, Apple’s App Store policies and fees were a top focus of competition regulators. Large app developers like Spotify and Epic Games are funding legal challenges and coalitions of smaller app developers globally. Google is also under fire, especially in Korea and India where Android is dominant. Legislation imposing meaningful new restrictions on platforms like Apple’s iOS and Google’s Android is unlikely with a divided Congress, but support for those policies are growing among Democrats and the Biden Administration’s FTC and DoJ are likely to press in that direction more aggressively.
3. California AB 5 and Gig Workers as Employees – Moderate Impact
Implementation of California’s AB 5 was the top Gig Work platform issue of 2020. Widespread freelancer concerns stymied action in other states and overwhelming passage of California ballot initiative Prop. 22 exempting ridesharing and delivery platforms from AB 5 wraps up the year. Biden and Harris have expressed unequivocal support for AB 5 and criticized digital work platforms, the opposite of the Trump Administration. Federal gig work legislation is likely off the table with a divided Congress. However, like with net neutrality, where FCC regulations shift back and forth when the White House shifts between Republicans and Democrats, expect a Biden Administration Labor Department to jump into overturning Trump Administration regulatory and labor enforcement policy on worker classification.
2. Section 230 Rewrite – Minimal Impact
Both Donald Trump and Joe Biden have expressed support for eliminating Sec. 230, the cornerstone Internet platform liability provision. But like a microcosm of conservatives and progressive critics, they see the problem from opposite sides. President-elect Biden and Democratic critics are repeatedly angered by the platforms not blocking misinformation, deceptions and hate speech. Conservatives see the platforms censoring conservatives, too often under the guise of the concerns identified by Democrats. Don’t expect Biden to solve that contradiction under divided government any more than Trump would. However, content moderation transparency remains a potential Sec. 230 middle ground.
1. Digital Services Taxes (DST) – Major Impact
The global push to impose new taxes on large digital businesses was the top PEI issue in 2020 and could be the one most significantly impacted by the shift to a Biden Administration. Opposition to DSTs is bipartisan in Washington, but the Trump Administration has been willing to engage in tariff trade wars at a rate unmatched in decades. While all sides have claimed to want a multilateral tax deal to avoid national DSTs, retaliatory trade sanctions from the US keep pushing off the reckoning. Don’t plan on a Biden Administration that is looking to reinvigorate relationships with European allies to match the Trump Administration’s anti-DST intensity or trade war threats.
California Enacts Prop 24 Creating First US-Based Privacy Agency
Report from the Wall Street Journal
In Brief – Just two years after the California state legislature enacted the landmark California Consumer Privacy Act (CCPA), the state’s voters have passed ballot initiative Proposition 24 establishing even more robust privacy protections through the California Privacy Rights Act (CPRA) enforced by a new California Privacy Protection Agency (CPPA). The CPRA expands on the CCPA’s right for consumers to access their personal information and request that it be deleted or not sold, imposes further limits on the use of a range of sensitive data, and establishes fines and other penalties for violations. In addition, Prop. 24 creates the CCPA, the first privacy agency in the United States, and gives it enforcement authority that is more robust than the Federal Trade Commission in some ways, as well as a dedicated funding source. The Board of the CPPA can be established as of January 1, 2021 and the full new regime is set for 2023.
Context – Many believed that California’s CCPA, an expected spate of additional state privacy laws, and the growing bipartisan criticism of Big Tech, would lead to a bipartisan federal privacy law by the end of 2020. It did not happen. But hope springs eternal. Senate Republicans recently introduced legislation looking to next year, following major proposals from Democrats in the House and Senate. Talk of bipartisan cooperation continues, but meaningful policy disagreements remain. Persistent partisan divides continue on headliners “private right of action”, meaning unleashing private class action lawsuits, and “state preemption”, meaning new federal standards would overturn potentially more robust state laws. California’s Prop. 24 itself saw a mix of support, neutrality and outright opposition from privacy advocates. In Europe, while European leaders laude the GDPR for exporting European data standards globally, European privacy advocates are increasingly frustrated over the lack of major penalties hitting tech giants and the “One Stop Shop” regulatory principle is under assault.
Major Platforms Face First Round of Fines Under Turkey Social Media Law
Report from Reuters
In Brief – Turkey has imposed 10 million lira ($1.18 million) fines on five global social media platforms for not complying with a social media law criticized as a tool of online censorship efforts. The new law represents a shift of Turkish social media regulation strategy toward pressing for platforms to remove objectionable content rather than blocking Turkish users from accessing certain platforms. The law requires social media platforms with more than 1 million users in Turkey to appoint an in-country representative respond to government requests. Five social media platforms — Facebook, Instagram, Twitter, Periscope, YouTube and TikTok – have refused and have been fined, the initial penalty. There are four additional enforcement steps, which are a 30 million lira fine, a ban on providing advertising services, a requirement that Turkish telecommunications providers impose a 50% bandwidth cut on users that access the site, and finally that network providers would be required to impose a 90% bandwidth cap.
Context – Government leaders around the world are frustrated with things people post online. Germany and Australia already have takedown regimes in place, the British Government remains committed to legislating content policing and takedown recommendations of the UK Online Harms White Paper, and the EU’s forthcoming Digital Services Act package expected in December will include new EU-wide platform speech policing mandates. Balancing the interests of policing objectionable content and free speech is a major challenge. In France, the Avia Online Hate Speech law enacted in May, requiring platforms take down objectionable content, sometimes in an hour, was soon struck down by the French Constitutional Court. The free expression implications of technological upload filters have also bogged down European Parliament consideration of an online terrorism content law with a one-hour mandate. A similar division exists between Democratic and Republican critics of Sec. 230.
Ridesharing and Delivery Platforms Benefit From Strong Prop. 22 Win in California
Report from the New York Times
In Brief – Uber, Lyft, Instacart and other driver platforms won a major victory in California as voters approved Proposition 22, a California ballot initiative that protects their business model based on independent contractor drivers from state legislation that attempted to force the companies to employ drivers. The ballot initiative prevailed with 58% of the vote, exceeding support indicated by polling. The battle in California over “gig work” platforms was initiated by a key worker classification state court ruling in 2018 that was incorporated into state law through AB 5 in 2019. Uber and Lyft were targeted this year by an enforcement lawsuit brought by the State’s Attorney General, and the companies received some very critical rulings that pointed to serious risk of a court defeat. The companies are now exempted from AB 5, can offer some employee-type benefits to independent contractor drivers without triggering employee status, and are protected from further state legislation with a super-majority requirement for the legislature.
Context – The Prop. 22 win in California is a major event in the fight over the regulatory treatment of independent work platforms, but not remotely the final word. The political energy behind tightening worker classification laws was focused on ridesharing and deliveries but AB 5 generated anger from a surprisingly wide range of independent workers, professionals and creative freelancers. No states have followed California, with legislation stalling even in progressive New Jersey and New York, and California amended AB 5 this fall to exempt a wide variety of independent workers, in particular freelance writers, to dial back criticism of the law. The Department of Labor is working on new federal rules supporting independent contractor models, but nothing that could not be overturned if Democrats retake the White House. U.S. cities also have some flexibility to regulate. And gig work platform regulation is expected to be included in EU Digital Services Act packages being released in December.
Korean Fair Trade Commission Preparing to File Antitrust Complaint Against Google
Report from Reuters
In Brief – The head of the Korean Fair Trade Commission (KFTC), the country’s competition authority, has indicated that the agency believes that Google has undermined competition and the agency will present an enforcement action to its review committee this year. Google has been subject to KFTC investigations since 2016, initially for alleged abuse of dominance as the provider of the Android mobile operating system, and starting in 2018 also accusations that Google forced Korean app developers to exclusively launch on the Google Play Store. While it is not clear which case will provide the basis for the latest enforcement action, it is reported that the KFTC has set up a “data room” with procedures for Google’s outside counsel to access competitors’ charges and data under strict confidentiality rules. It is not clear if the agency will look to impose a fine, order corrective measures or initiate a more extensive court action. The KFTC also recently indicated that it would open an investigation of Google’s announced plan to charge 30% commissions for in-app purchases made through its app store.
Context – The KFTC has a growing a track record of challenging both foreign and domestic digital giants. In 2019, it took on Google over its treatment of YouTube content creators, Apple related to mobile phone distributors, and online gaming businesses over in-app purchase policies. The KFTC also established a high-tech task force. Last month, the agency concluded an investigation of Naver, South Korea’s Internet search giant, and determined that the company was guilty of manipulating search algorithms to benefit its online shopping service and imposed a fine, which followed on the heels of finding that the domestic search giant employed anticompetitive contract clauses to prohibit real estate data firms from dealing with other websites. And moving beyond investigations, the KFTC has proposed legislation to regulate the largest digital platforms that the Korean National Assembly is expected to consider next year.
North American Business Groups Call on Mexico to Abandon Internet Kill Switch
Report from Reuters
In Brief – Business groups representing members in the United States, Canada and Mexico have sent a letter to the Mexican Government urging removal of a tax-enforcement “Internet Kill Switch” provision from the 2021 Economic (Budget) Plan. The current proposal would require Mexican network providers to cut off access to the Internet in Mexico for digital services businesses, including those based abroad, that fail to collect VAT and income taxes for Mexican users. The coalition argues that the kill switch provision is “inconsistent with Mexican law and trade obligations, would have a negative impact on the Mexican economy, and is unnecessary to ensure tax compliance.” A similar tax enforcement provision was rejected last year when proposed as part of the 2020 budget plan that expanded taxes on streaming services and digital work platforms in part because smaller Mexican businesses often use free, Internet-enabled marketing and advertising tools, and those suppliers are generally not in a position to calculate and collect taxes.
Context – Requiring digital platforms to collect VAT and sales taxes on digital services has been the “below the radar” front in the battle to expand taxation of the digital economy. Conscripting foreign digital platforms into tax collection has largely avoided the international tension of national Digital Services Taxes imposed on the largest digital businesses. Last year, Mexico expanded its VAT to streaming services, required the services like Netflix to collect the taxes, and also required digital work platforms, such as ride sharing and delivery firms, to withhold incomes taxes for Mexican users, all effective June 2020. Chile, Singapore, Malaysia, Indonesia and Thailand are other recent examples of expanded consumption taxes on digital content with collection burdens on foreign digital firms. And unlike their adamant opposition to corporate digital services taxes, the Trump Administration itself argued for a digital “virtual presence” tax collection standard for consumption taxes in the U.S. Supreme Court’s 2018 Wayfair decision.
EU Startups Want DSA Platform Liability Regime to Protect Proactive Content Moderation
Report from Euractiv
In Brief – A report released by the EU-based technology trade group Allied for Startups calls for the upcoming EU Digital Services Act (DSA) to permit platforms to screen uploaded content for both illegal and harmful content while maintaining a platform liability regime that protects platforms from direct liability for user actions. The study, conducted by economics consultancy Oxera, included interviews with 1000 non-tech European businesses on digital platform policies and points to the interdependence of traditional businesses and platforms in Europe. Oxera’s report projects that major changes in the platform liability regime would harm more than 38% of European businesses and up to 3.7 million platform-enabled independent “gig” workers, projecting that EU small businesses could lose more than 23bn Euros under the most stringent DSA proposals. The startup advocacy group’s report further claims that a majority of businesses would benefit from increased digital policy harmonization and regulatory consistency, including maintaining the EU Country of Origin principle.
Context – The EU’s Digital Services Act proposal is expected to be released by the European Commission in early December. The EU is not shy about their efforts as global regulatory innovators, with their DSA potentially setting rules on platform liability, digital advertising, online safety, smart contracts, self-employment, and competition governance the way the GDPR did for data handling. EU leaders have indicated that two related digital policy vehicles will be forthcoming, with a Digital Markets Act (DMA) likely to be released side-by-side with the DSA. The DSA is expected to include new rules for platform moderation and policing harmful and illegal content and related liability. The DMA will likely include new rules for platform “Gatekeepers”, including prohibited and restricted platform behaviors and new a new competition regime for digital platforms, include proactive authority for competition regulators.
TikTok Users Win an Injunction to Block November 12 TikTok Shutdown Order
Report from the New York Times
In Brief – A federal judge has once again delayed implementation President Trump’s orders imposing restrictions on Chinese-owned apps WeChat and TikTok. This time TikTok has been spared from a range of restrictions that would have effectively shut down the US operations of the super popular video-based social media app on November 12. Federal Judge Wendy Beetlestone in the Eastern District of Pennsylvania has granted a preliminary injunction to a group of commercially successful TikTok video creators who would have suffered significant business losses if the app stopped functioning. A Federal Judge in California imposed an injunction on a similar set of restrictions aimed at the WeChat app in September on behalf of a group of US-based WeChat users. A Federal Judge in the District of Columbia blocked a relatively narrow app store ban that would have impacted TikTok in late September. That challenge was brought by TikTok itself, and that judge deferred ruling on the broad set of restrictions set for mid-November. Beetlestone has now stepped in on those restrictions on behalf of the TikTok users. The DoJ is challenging the earlier WeChat and TikTok injunctions and will challenge the latest ruling.
Context – The court decisions freezing President Trump’s WeChat and TikTok bans are based on different reasoning. The WeChat injunction is based on First Amendment arguments. Both judges granting injunctions on the TikTok restrictions based their decisions on limitations to the President’s otherwise broad authority under the International Emergency Economic Powers Act prohibiting sanction of “informational materials.” The DoJ argues those limitations apply to bans on specific content, not services, and that the President’s order does not ban short-video content, just one transmission business. The Committee on Foreign Investment in the United States’ demand for China-based ByteDance to address data security concerns through divestment or a business deal remains in front of TikTok.
Social Media Companies Prepare for Election Day and Aftermath
Report from the BBC
In Brief – Controversies over the role of social media companies in the political process are not going to slow down on Election Day, that night, or ensuing days. In that light, the leading platforms are preparing to be more active than ever before in restricting communications that attempt to dissuade voting, undermine the voting process or preempt official vote counts that could be delayed in the context of dramatically increased vote-by-mail during the pandemic.
Facebook – Halted new campaign ad content the week before Election Day. Will temporarily halt all political ads after Election Day. Will suppress posts that promote violence or misinformation around election results, and will team up with Reuters to supply accurate election results.
Google – YouTube is restricting misleading claims about voting or encouraging election interference, and will prioritize established news outlets for election news. Google Search will link to Associated Press for authoritative election results. Will temporarily halt all political ads starting after Election Day.
Twitter – Prohibits encouraging interference with the election process, will not permit candidates to claim they’ve won the election before appropriate authorities declare a result, and will direct people to resources with accurate, up-to-date information about the election. Has banned political ads all year.
TikTok – Has banned political ads this year. Will remove misinformation related to the 2020 election, including results, adding an “election misinformation” option to in-app reporting for users to flag.
Reddit – Prohibits information that seeks to mislead or misrepresent the election results and will remove them from the site. Will host a series of “Ask Me Anything” events on results after Election Day.
SnapChat – Is reminding users with content that appears on its “Discover” section not to amplify false election information.
France Responds to Terror Attacks with Renewed Press for Online Takedown Mandates
Report from Politico
In Brief – As the European Commission prepares to release its landmark Digital Services Act package, France is reported to be pressing to include strong mandates on social media platforms to proactively police terrorism content in the wake of recent attacks by Islamic extremists. The Macron Government has already been leading European efforts to aggressively regulate digital platforms and France enacted domestic legislation in May that imposed strict takedown mandates on social media to address objectionable content, including terrorism advocacy, in just an hour. However that Avia Law, named after the legislative sponsor, was struck down in June by a French court for impositions on free expression. The sponsor, Assembly Member Laetitia Avia, is reported to be drafting a revised version of the domestic legislation as well as pressing Brussels for strong action Europe-wide.
Context – The European Commission and Parliament have been engaged in efforts to impose new mandates on platforms to take down terrorism content since 2017, however legislation to set a one hour timeline has been bogged down over concerns with upload filters, impacts on smaller platforms and threats to free speech. The Digital Services Act, expected to be introduced in early December, will propose new EU-wide platform content moderation and liability proposals, including on terrorism, hate speech, and child sexual abuse material, as well as commercial issues such as IP rights and consumer protection. Takedown mandates are emerging globally. Germany and Australia already have domestic regimes in place, and the UK is actively moving forward on social media legislation. However, European Justice Commissioner Jourova is reported to support regulating platform content promotion and distribution activities rather mandating takedowns, and EU free speech advocates can look to bordering Turkey for an example of social media regulation that appears designed to police political speech and dissent.
Apple Faces Antitrust Suit in France from Advertisers Threatened by “Privacy” Change
Report from the Wall Street Journal
In Brief – Advertising companies and online publishers in France have filed an antitrust suit against Apple claiming that the changes the smartphone giant is making in the version of its iOS operating system to be released in early 2021 makes changes that will unfairly disadvantage smaller competitors. Apple is planning to require all third-party apps to get opt-in permission from users to collect their advertising identifier, a key number used to deliver targeted ads and check how ad campaigns performed. Apple defends the change as pro-privacy, but the companies charge that is a “fig leaf” for anticompetitive conduct because many users will not agree to allow apps from independent game-makers to news publishers to access data for personalized ads while Apple and its apps will not be impacted by the same requirement to gain permission for ad-based tracking. The Apple change was originally planned for September and led to widespread complaints from Internet advertising businesses, including Facebook, which is increasingly publicly sparring with Apple, most recently over App Store payments and fees.
Context – Apple is not the first of the platforms giants to be accused of couching anticompetitive conduct as efforts to improve user privacy. Google’s plan to end support for third-party cookies in its Chrome browser, matching browsers from Microsoft, Apple and Mozilla, and supported by many privacy advocates, has led to complaints from ad services competitors due to Chrome’s 70% market share and Google’s ad services dominance. Likewise, Google’s announced plan to move domain name system (DNS) queries to encrypted HTTPS protocol, a change supported by many privacy advocates, has led to complaints from major network providers that it will undermine their advertising businesses. Finally, Facebook faced a class action antitrust suit in January from app developers banned from the platform for terms of service violations that the plaintiffs argued were based on anticompetitive motivations.