Archive – 2020

October 2020

Vestager Pushes Tech Regulation Over Break Ups in Previewing Digital Markets Act

Report from Euractiv

In Brief – While EU Commissioner Margrethe Vestager has been called the scourge of the tech giants for challenging Google, Facebook, Amazon and Apple on antitrust and tax grounds, she is ironically emerging as a champion of regulating their massive operations rather than taking more aggressive action to break them up. Her reticence to break up tech giants came to light last fall when Sen. Elizabeth Warren (D-MA) made that a centerpiece of her presidential campaign and Vestager expressed caution, raising the specter of the mythological Hydra and the prospect of turning a few problem companies into more equally problematic companies. That reluctance appears to remain as Vestager expressed to the European Parliament that while the EU has the legal authority to pursue major structural remedies, breaking up a major company should be a last resort, and they have not reached that point. On the other hand, Internal Markets Commissioner Thierry Breton, France’s representative on European Commission, is pressing harder for keeping breaking up tech giants on the table, an option recently included in a position paper from the top digital affairs ministers in the French and Dutch Governments.

Commentary – The EU’s Digital Services Act (DSA) 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 the 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. Vestager has indicated that at least two 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. The DMA will include new rules for platform “Gatekeepers”, including rules on prohibited behaviors and new proactive authority for competition regulators.

UK CMA Warns Facebook That Giphy Integration Could Lead to Wider Asset Sale Demands

Report from Bloomberg

In Brief – Facebook and the Competition and Markets Authority (CMA), the UK’s competition regulator, continue to clash over the company’s $400 million deal to acquire Giphy, a platform for shareable digital images. In the latest round before a London tribunal, Facebook claimed that the CMA is exceeding its review authority while the CMA raised the prospect that Facebook may be asked to divest assets beyond Giphy if the image platform is fully integrated and the CMA later rules the deal has anticompetitive effects. The CMA review is built around concern that Giphy will give Facebook new data and insights into user activity on other messaging and social media platforms, such as TikTok, Twitter, Slack and Tinder. Antitrust reformers in the U.S. Senate and the Australian ACCC have also raised this concern with the Giphy deal. In June, the CMA asked Facebook to pause the Giphy integration into Instagram, a request that it reiterated in August.

Context – The tech acquisition spotlight is most intensely focused on Google’s $2.1 billion bid for FitBit, with many arguing that Google is simply too big to acquire a large new data source. However, concerns with “digital surveillance” informing defensive “killer” acquisitions is also gaining traction, and Facebook is often the poster child following the Instagram and WhatsApp deals. Democrats raised the issue in July’s U.S. House Antitrust Subcommittee hearing (watch for the five minutes starting at 4:27:20) and some argue that Facebook could use Giphy in a way that parallels Onavo, a VPN app company it acquired in 2013. Like many national competition authorities, the CMA claims to be actively scrutinizing digital acquisitions, but is also asking for authority to create a new merger regime for digital companies with “Strategic Market Status”. The “Furman Report” to the CMA by the Digital Competition Expert Panel, led by former Obama Administration economist Jason Furman, makes the case for the UK to establish a new digital markets regulator that would operate in combination with new merger review authority.

Senate Commerce Committee Members Criticize Tech CEOs (and Each Other)

Special Hearing Report from PEI

Background – The Senate Commerce Committee gathered (mostly remotely) to discuss user content moderation with the CEOs of Facebook, Twitter and Google. The hearing was ostensibly about Sec. 230, a key legal foundation of the Internet that facilitates digital platforms hosting user-generated content by relieving them of liability for the user comments, pictures and videos while permitting them to block or restrict content they find objectionable. Sec. 230 has come under fire from Left and Right led by President Trump and former Vice President Biden. But the objections are different to the point of contradictory. Many conservatives claim that the largest platforms are progressive bastions that penalize conservative viewpoints. They want to limit the authority of platforms to moderate political content. Many progressives are concerned about the opposite failing, that platforms often fail to effectively restrict hateful, false and dangerous claims leading to real world harms.

Commentary – Even going in with low expectations the nearly four-hour hearing fell short. Republicans repeatedly criticized the content moderation actions imposed on President Trump, especially by Twitter and Facebook, claiming worse treatment than Democrats and foreign dictators receive. Democrats said they wanted to address issues including privacy, media consolidation and antitrust, but instead repeatedly returned to the hearing as a partisan effort to press the platforms to allow dangerous election misinformation by President Trump and foreign governments such as Russia. You can view the whole hearing here, but if you start at 1:54:20 and watch Sen. Cruz (R-TX) followed by Sen. Schatz (D-HI), that 15 minutes gives all the flavor you need. From a policy perspective, the big winner was “transparency”, with the CEOs repeatedly supporting greater transparency into content moderation practices, which is a core principle behind the bipartisan Schatz-Thune PACT Act.

App Fairness Coalition Adding Developers to Multinational Effort to Police App Stores

Report from the Washington Post

In Brief – Just a month after publicly announcing themselves as a coalition of app makers and tech companies accusing Apple and Google of anti-competitive app store practices, the Coalition for App Fairness (CAF) has announced that it has added 20 new members to its 13 founders, and claims hundreds more are asking to join. The group is led by Spotify, the Swedish-based music app instrumental in spurring the EU Competition Authority investigation of Apple, and Epic Games, the developer of Fortnite who has filed antitrust lawsuits against both Apple and Google. The CAF has established operations in Washington, DC and Brussels, claims members who develop apps for Business, Education, Entertainment, Developer Tools, Finance, Health & Fitness, Lifestyle, Music, Navigation, News, Productivity, Shopping, Sport, and Travel and are based in Austria, Australia, Canada, France, Germany, India, Israel, Malaysia, Norway, Singapore, Slovakia, Spain, United Kingdom, and the United States.

Context – App store policies are facing scrutiny globally, and the 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. It’s increasingly clear that there are large companies like Epic Games and Spotify willing to invest in major legal and regulatory campaigns. While Apple and Google both charge 30% fees, they otherwise have very different policies. Apple’s “walled garden” model places the company squarely in control of apps in the name of user experience. Google has generally had a more open system and allowed non-Google app stores to operate. Apple, with its clearly more restrictive App Store policies, has been more in focus with US and EU regulators. But Google’s Android has many more users globally, is very dominant in some markets, and is increasingly in the spotlight in South Korea and India. It seems nobody likes paying 30% fees and some are willing to invest in regulation to restrain them.

Sen. Cantwell to Raise Local Media Harms in Senate Commerce Tech CEO Hearing

Report from the Wall Street Journal

In Brief – With an eye on today’s Senate Commerce Committee hearing featuring the CEOs of Facebook, Google and Twitter, Sen. Maria Cantwell (D-WA), the Committee’s top Democrat, released a report on the economic challenges facing “local media” and calling for Congress and the FTC to take action supporting local news enterprises and addressing alleged anticompetitive digital advertising and content practices of Facebook and Google. Committee Republicans are certain to grill the CEOs on content moderation they claim is biased against conservatives, accusations that reached a fever pitch after a New York Post report accusing Vice President Biden of financially benefitting from his son’s Ukraine business relationships was restricted on Twitter and Facebook. While Democrats are expected to aggressively reject those claims and instead criticize the CEOs for doing too little to control misinformation and hate speech, it also looks like they will use the hearing as an opportunity to align themselves with news media critics of the largest digital platforms.

Context – When the House Antitrust Subcommittee hosted the tech CEOs in July, Republicans focused on ideological bias. When Democrats engaged on those accusations, it got heated. Expect another session of Bizarro World bipartisan tech bashing with Senators on both sides of the aisle agreeing that the largest platforms are bad combined with disagreement on the substance. News media businesses globally blame Internet search and social media for undermining their advertising-based business model and are rallying around proposals to mandate that Facebook and Google pay them for digital media content. Regulators in Australia and France are leading the effort, and both Facebook and Google are rolling out news content initiatives that involve paying major media businesses to reduce the political heat. Democrats appear committed to bringing the regulatory movement to the United States.

UK CMA Provisionally Rules Against Viagogo’s February Acquisition of StubHub

Report from Reuters

In Brief – The UK Competition and Markets Authority (CMA) has announced its provisional findings of the Second Phase review of Viagogo’s $4.5 billion acquisition of StubHub from eBay, Inc. The deal was announced in November 2019, the CMA first expressed concerns with the competitive implications in December, and the deal was completed in February 2020 just weeks before the global pandemic largely halted the global live events industry. The CMA review concludes that the combined share of the two companies for event ticket resale digital platform services in the UK is over 90%, and that the merger would likely negatively impact competition in the market leading to increased fees for ticket resellers and buyers, worsen non-price terms and conditions for resellers and buyers, reduce customer service and harm innovation. The CMA’s notice of possible remedies indicates that it is considering proposals for Viagogo to divest itself of some or all of the StubHub operations.

Context – Like many national competition authorities, the CMA claims to be increasing scrutiny of large digital platforms, thoroughly reviewing deals including Google-LookerPayPal-iZettle, and Amazon-Deliveroo. The global tech acquisition spotlight is brightest on Google’s bid for FitBit, offering the best insight into whether regulators, in this case the European Competition Authority, will adjudge some platforms to simply be too big to acquire large new data sources. Another emerging concern is the practice of “digital surveillance” to inform defensive acquisitions to ward off future competition. Facebook is often accused of this behavior, and its Giphy acquisition is being compared to the company’s oft criticized 2013 acquisition of VPN app company Onavo. In Japan and Korea, the merger of Yahoo! Japan and Line App into a digital app giant owned 50:50 by Softbank and Naver is being cleared by Japanese and Korean regulators based on the competition regionally from U.S. and Chinese digital giants.

Independent Facebook Oversight Board Open for Users to Appeal Moderation Decisions

Report from NBC News

In Brief – After nearly two years planning, the independent Facebook content Oversight Board (OB) has begun accepting requests from Facebook users to appeal company content moderation decisions. The OB has staff and board members funded with a $130 million grant from Facebook. Thomas Hughes was named Staff Director in January and the first 20 Board members include five Americans and fifteen other nationalities. The organization is a sort of appeals body that allows Facebook users to review company content removal decisions. Facebook is committing to abide by the COB’s decisions on specific cases but not necessarily to change overall content moderation policy as cases are decided.

Context – Content moderation is a huge challenge for digital platforms, and the political ramifications grow when a platform is especially large. The EUFranceUKGermanyAustraliaTurkey and others are proposing content moderation mandates. It is worth stepping back and noting there is nothing like this Facebook effort. It is bold and creative. Scale is an immense challenge. Can a 20-person “Supreme Court” of Facebook (planned to grow to 40 members next year) give confidence to a community of nearly 1.7 billion people posting 72 million links and 216 million messages a day? Throw in political leaders, idealogues and advocates globally on a platform where a third of top stories are political. The top OB policy controversy is that users can only appeal Facebook decisions to restrict content, not to ask the OB to review company decisions to allow other users’ content to remain on the platform. Facebook decisions to permit content some consider misinformation, hate speech or abuse accounts for much criticism. For example, earlier this summer, before the OB was even operating, a coalition of climate activists appealed to the OB to ban “climate misinformation”. Facebook has indicated that the company itself, rather than users, can ask the board to review content the company allows to stay on the site.

EU Will Press Forward on Digital Services Taxes in 2021 and Defend National DST Plans

Report from Reuters

In Brief – Led by France, the EU is rallying around instituting a Europe-wide Digital Services Tax (DST) in 2021, arguably to avoid the complexity of many EU member states enacting different national DSTs. While European leaders continue to express support for a multilateral international agreement negotiated at the Organization for Economic Cooperation and Development (OECD) that would include the United States, with talks slowed into 2021 at best, enacting a unilateral EU DST could result in US tariff retaliation and EU counter-retaliation that OECD economists warn could negatively impact trade and economic growth by up to $1 trillion per year. Despite the threats, European leaders argue that setting corporate tax policy is a protected national authority and they are prepared to defend it.

Context – Europe has been the hotbed of DST efforts to increase digital company taxes paid to countries with large Internet user bases rather than countries where digital enterprises set up most of their business operations. National DST proposals and the plans being negotiated at the OECD are expected to shift tax revenues from the US and countries like Ireland, Switzerland, Luxembourg, and Singapore, toward countries like the UK, France, Italy, and India. France has led the campaign, enacting a 3% DST last summer which following over a year of threats and counterthreats with the US is now scheduled to go into effect in December. The US-France standoff has provided the model, with taxes and tariffs being pushed off in hopes of an OECD deal, but those talks have been slow and European countries are moving forward, with seven adding their own DST and six more announcing plans. The US has set in motion tariff retaliation against the EU and nine countries. Spain has included DST revenue in their 2021 national budget and European parliamentarians are calling for the same in the EU 2021 budget. AmazonGoogle and Apple have begun announcing in-country tax-related fee increases.

Uber & Lyft Suffer Appeals Court Setback Further Increasing the Focus on Prop 22 Initiative

Report from the New York Times

In Brief – A California appeals court has sided with the California Attorney General and granted an injunction that will require Uber and Lyft to treat drivers as employees during litigation over whether the landmark AB 5 worker classification law requires drivers to be employees. A California Superior Court judge had initially issued an injunction in August. Uber and Lyft argued that they would need to shut down in the state at least temporarily if the injunction was not stayed, and the appeals court did issue a temporary stay while it heard arguments. That court has now reinstated the trial court injunction and given the companies 30 days to come into compliance once the formal ruling is released in a few weeks.

Context – The latest California Court of Appeals defeat for Uber and Lyft focuses even more attention on Proposition 22, the ballot initiative that will exempt ride sharing and delivery businesses from AB 5 and allow platform drivers to receive a range of employee-like benefits while remaining independent contractors. The current stay will not expire before Election Day, so while the companies will continue to argue that forcing them to change their business model will harm many drivers and reduce services for riders, including potentially shutting down in some parts of the state, users will not face a shutdown before they vote. Polls indicate a close call, the companies have pumped over $200 million into the campaign, and have been regularly using their apps to communicate with users, prompting a group of anti-Prop 22 drivers to file suit against Uber for unfair worker communications. One thing that should be clear is that the state appeals court, like the trial court, found the Uber and Lyft arguments that they are digital platforms not ride businesses to be unconvincing (latest opinion can be found here, see pp 10-14 and 22-30), and that AB 5 is clear on the point that the state believes workers benefit from being employees. These views could prove key to other digital platforms that facilitate service providers in California.

Facebook Refusing to Comply with Turkish Social Media Law and Faces Escalating Penalties

Report from Bloomberg

In Brief – Facebook is reported to be refusing to comply with Turkey’s new social media regulations that seek to tighten control over services by requiring companies to name a representative in Turkey, store certain user data on local servers, and take down objectionable content within 48 hours when instructed by the Turkish Government. The legislation enacted earlier this year aims to help the government identify and crack down on dissenters using online platforms. Facebook has 37 million users in Turkey and, if the legislation is fully enforced, will initially face a series of escalating fines and then would see Turkish network providers ordered to reduce bandwidth by 90% when their users access Facebook. Turkey has not been shy about efforts to police Internet businesses, intermittently blocking sites including Twitter, Facebook, WhatsApp, YouTube and Wikipedia in recent years.

Context – Political leaders around the world are frustrated with things people post online. The Avia Online Hate Speech law requiring platforms to take down some classes of objectionable content within an hour, and most within 24 hours, went into effect in May. It was soon struck down by the French Constitutional Court for excessively restricting speech. The European Parliament passed legislation last year to require platforms to take down pro-terrorism content in one hour, but it remains bogged down over concerns with the impact on expression. The EU’s landmark Digital Services Act expected later this year will likely include new EU-wide platform speech policing mandatesGermany and Australia already have takedown regimes in place, the British Government remains committed to legislating recommendations of the UK Online Harms White Paper, and Ireland is considering social media legislation. Finally, in the U.S., the debate over Sec. 230 sees both Presidential candidates expressing frustration over their treatment by social media platforms, although unsurprisingly they object to different content and policies.

NY AG Reports State Google Investigation Continues and is Likely to Unite with Feds

Report from Fox News

In Brief – New York Attorney General Letitia James (D) has announced that a bipartisan coalition of seven State Attorneys General — Colorado, Iowa, Nebraska, North Carolina, Tennessee and Utah — continue to engage in investigations of Google and plan to determine in the coming weeks whether to file their own antitrust complaint. James indicated that at that point the seven would likely move to consolidate their case with the federal complaint filed by the U.S. Department of Justice (DoJ). Eleven State AGs, all Republican, joined the federal antitrust complaint targeting Google for a range of anticompetitive actions aimed at protecting their dominant search business, leading some to raise concerns that partisan differences had undermined cooperation in the weeks approaching the election.

Context – State Attorneys General banded together last fall to cooperate on antitrust investigations of Google and Facebook. Both coalitions grew to nearly 50 strong. NY AG James was widely seen as first among equals in the State AG Facebook review while Texas AG Ken Paxton was likewise seen as the leader of the Google review coalition. While the Paxton-led Google review was reported to be focused on the Google digital advertising business, when the DoJ chose to go in a different direction focusing on Google search, the Texas AG still joined the federal complaint. It now appears that NY AG James has stepped forwarded to lead a pared down bipartisan group of State AGs. Google has faced years of competition law challenges meaning many issues remain on the table for the AGs. The European Competition Authority is a decade into challenging Google on Search practices, its Advertising business, and conduct related to Android. The DoJ suit draws heavily from the EU Android case. Google’s outsized role in the digital advertising market, expected to be the focus of the Paxton-led AG coalition, has also been subject to investigations by Australia’s ACCC and the UK CMA.

New Government of Japan Committed to Cooperative Regulation of Digital Platforms

Report from Reuters

In Brief – The new Chairman of the Japan Fair Trade Commission (JFTC) has indicated that the government of Prime Minister Yoshihide Suga is aligned with the United States and Europe in the commitment to address anticompetitive abuses of digital platform operators. Merger reviews will be part of that effort, with Chairman Furuya mentioning that the JFTC was following the European Competition Authority’s review of the Google acquisition of FitBit and may open their own investigation. Furuya, who assumed leadership of the JFTC when PM Suga formed a new government following the resignation of PM Abe, stated that the largest platforms engage in similar businesses across the globe and therefore competition regulators should be working together to respond to practices that undermine competition.

Context – Serious thinking on digital platform terms and conditions, and the treatment of small business users, is going on in Japan. The JFCT has successfully challenged both Amazon and Rakuten for imposing unfair conditions on platform sellers. The JFTC released comprehensive guidelines last December regarding the evaluation of digital platforms exploiting an unfair bargaining position as well as updating the process of acquisition reviews. In May, Japan’s parliament enacted legislation to require the largest digital commerce platforms, both Japanese-based Yahoo Japan and Rakuten, and U.S.-based Google, Apple, Amazon and Facebook, to be more transparent and fair in dealing with merchants using their platforms, including providing advance notice of any contract changes, set up processes to reply to user complaints, and improve transparency into how search results are determined. Platform terms and conditions is also a major regulatory concern in Europe where it was the subject of so-called P2B legislation enacted by the European Parliament in April of 2019 and is expected to be a part of the upcoming Digital Services Act.

FCC Chairman Announces Rulemaking Effort to Change Section 230

Report from the Washington Post

In Brief – The Chairman of the Federal Communications Commission (FCC) has announced his plan to proceed with rulemaking to govern how social media companies moderate user content. The effort to create a new regulatory structure around Sec. 230 of the Communications Decency Act is in response to President Trump’s May 28 Executive Order aiming to withdraw Section 230’s liability shield from companies adjudged to be ideologically biased in their user content moderation practices. FCC rulemaking will likely take months to complete.

Context – The Republican FCC Commissioners, while sympathetic to the President’s concerns with partisan bias, were initially non-committal on Sec. 230 rulemaking. The FCC Democrats have ridiculed the idea. Republicans have consistently opposed Internet regulation. However, after Republican Commissioner Michael O’Rielly publicly questioned the FCC regulating online speech, his nomination to a second term was withdrawn and replaced by a candidate supporting linking Sec. 230 to ideological neutrality. Conservative anger over perceived social media bias escalated after Facebook and Twitter restricted a New York Post report only weeks before the election that alleges influence efforts of Hunter Biden when his father was Vice President. The CEOs of Facebook, Twitter, and Google will testify at a Senate Commerce Committee hearing on October 28. Republicans will grill them on bias. To be clear, the concerns over social media bias are highly partisan, rejected by Democrats who criticize the platforms for the opposite offense, not doing enough on disinformation and hate speech. The Sec. 230 rulemaking is similarly controversial, rejected by many FCC and telecommunications law experts due to the clear language of the law that Sec. 230 was intended to avoid federal government regulation of Internet content, a point made in a thoughtful FCC filing from Chris Cox and Ron Wyden, the congressional authors of Sec. 230.

Google Latest FitBit Concession Bid May Line Up EU Merger Approval

Report from Reuters

In Brief – Months of back-and-forth between Google and the European Competition Authority (ECA) over concessions needed to win approval of the company’s $2.1 billion purchase of fitness wearables business FitBit might be coming to a conclusion as the digital platform giant has tweaked its offers to address the regulator’s top concerns. Europe has emerged as ground zero with ongoing complaints from wearables’ manufacturers, wellness app competitors, consumer groups and privacy advocates. Google has offered to wall off Fitbit data from its ad services to address privacy and advertising market concerns, as well as committing to maintain Android access for rival wearables makers and FitBit user data access for wellness services providers. EU competition regulators, who have repeatedly given competitors opportunities to provide feedback on Google concessions, are reported to have not sought further feedback on the latest proposal. The ECA has extended its own decision deadline from Dec. 23 to Jan. 8 in agreement with Google.

Context – This acquisition is providing the best opportunity to take the temperature of competition regulators to go beyond traditional antitrust analysis to shut down the ability of the largest platforms to grow through acquisition. Blocking the Google-FitBit deal is hard to justify by traditional measures. FitBit was once the wearables market leader but has fallen well behind giants Apple, Xiaomi, Samsung and Huawei. However, privacy advocates and consumer groups strongly oppose Google gaining access to new data stores that will boost its dominance in online search and digital advertising, and claim threats to health privacy. The deal is also being reviewed by the U.S. Department of Justice, who has recently filed a major antitrust complaint against Google over its alleged search monopoly, the Australian ACCC, who is investigating Google over its digital ads business, and now might face scrutiny in Japan.

Department of Justice Files Long-Expected Google Antitrust Case – Focus on Search Dominance

Report from the Washington Post

In Brief – After months of planning and discussions the U.S. Department of Justice (DoJ) has filed a major antitrust lawsuit against Google focused on a range of allegedly anticompetitive practices designed to protect and grow its dominance in Internet search. The DoJ is joined in the case by 11 State Attorneys General, all Republican, a number significantly smaller than the bipartisan group of 50 State AGs that have been engaged in a parallel Google investigation, indicating that a partisan split has emerged in the weeks approaching the election. The DoJ-led suit, the highest profile since the epic battle with Microsoft two decades ago, is just one reflection of the emerging challenges facing digital giants and likely kicks off a multiyear legal battle that will run alongside other legislative, political, regulatory and legal fights.   

Context – While Google, Amazon, Apple and Facebook are each facing intense criticism, in the U.S., the antitrust cases targeting Google have been most advanced. This is likely due to investigators being able to draw on a deep well of prior investigations and cases targeting Google that collected data and developed legal analysis. The European Competition Authority is a decade into investigations challenging Google, including on Search practices, its Advertising business, and conduct related to Android. The DoJ suit draws heavily from the EU Android case by focusing on Google practices to preference Google search on a wide range of devices and services, paying particular attention to Apple devices. The FTC’s review of Google from 2010 – 2012 (it wrapped up very early in 2013) also covered similar ground. In Europe, each case has resulted in a finding against Google, a major fine, and a succession of court appeals. Like in Europe, the filing of this complaint is likely the start of a multiyear legal process. Google’s outsized role in the digital advertising market has also been subject to competition reviews by Australia’s ACCC and the UK CMA and is reported to be the focus of the State AG coalition that continues to build its own antitrust complaint.

European Governments Come Together and Commit Resources to Build EU Cloud Industry

Report from Politico

In Brief – Twenty-five countries of the European Union have come together to announce a European Cloud Federation and pledge a total of 10 billion Euros ($11.7 million) over the next seven years to develop the EU’s cloud computing services industry and reduce reliance on US and Chinese industry leaders such as Amazon, Microsoft, Google and Alibaba. The financial commitment was made as part of a broader discussion of the importance of expanding Europe’s digital economy as part of the recovery from the devastating pandemic economic downturn. The national governments are permitted to use funding from the EU’s coronavirus economic relief package on cloud industry projects. Thierry Breton, EU’s Internal Markets Commissioner and France’s representative on the European Commission, is a leading champion of the cloud project and European “digital sovereignty” that leverages EU data, financial and regulatory capabilities to foster new market leaders.

Context – Germany and France are strong supporters of the EU cloud federation and the GAIA-X initiative to use a Brussels-based non-profit organization to develop European data infrastructure standards based on “European values” of transparency, openness, data protection and security. The participation of non-EU firms in GAIA-X has been a matter of some uncertainty and controversy, and the organization’s rules aimed to limit the influence of non-European enterprises. However, Germany’s Economic Minister recently announced that international cloud leaders from countries like the U.S., China and India were welcome to participate in GAIA-X as long as they abided by the project standards. The issue of data security, including rules prescribing law enforcement and intelligence access to digital communications, promises to be a central issue, as it has been in the context of cross-border data transfers following the European High Court overturning the US-EU Privacy Shield this summer (and the Safe Harbor in 2015).

Australian Court Grants ACCC Access to Additional Google Materials Related to Location Data

Report from The Courier

In Brief – Australian Federal Court Judge Thomas Thawley has granted the Australia Competition and Consumer Commission (ACCC), the country’s competition authority, access to a range of Google documents revealing Google employees’ confusion over the company’s potentially misleading location data settings. In a pre-trial hearing, the ACCC argued that it needed to see documents which have been used in a similar lawsuit brought by Arizona Attorney General Mark Brnovich, including information related to Google employees holding a self-described “oh s***” meeting following a press report of Google’s location data policies, which Google’s legal team argued was outside the scope of the ACCC case. Judge Thawley acknowledged the “Arizona complaint” was significantly broader in scope than the ACCC’s case and granted the regulator access to some of the information it applied for, but denied a number of others deemed not relevant to the proceedings, and noted that the admission of the extra material may delay the trial until next year.

Context – Location tracking is a ubiquitous aspect of smart phones and the apps that run on them. It was reported in media stories in mid-2018 that a feature of every user’s Google Account called Location History, which offered users the option of not having their location stored in their “Location History”, did not turn off location data collection on the phone, nor did it block Google from collecting location through a number of Google apps. Regulators continue to circle, with the ACCC, Irish Data Protection Commission, and Attorney General of Arizona all engaged in investigations. Google recently failed to have the Arizona case dismissed. On the other hand, a federal consumer class action lawsuit filed in the U.S. District Court for the Northern District of California was dismissed in December 2019 for being too speculative and failing to identify any actual harms.

Federal Judge Is Likely to Maintain Injunction Protecting WeChat from U.S Ban

Report from Reuters

In Brief – U.S. Magistrate Judge Laurel Beeler, who issued a preliminary injunction on September 19 blocking the Department of Commerce (DoC) order to effectively shut down WeChat, the Chinese-owned “Super App”, indicated in a hearing to reconsider the injunction that she continues to find the U.S. Government’s security-based arguments uncompelling. The U.S. is arguing that WeChat is a national security threat because it, like all Chinese-based technology enterprises, is required to fully cooperate with the increasingly aggressive Chinese state surveillance and censorship regime, and is capable of building dossiers on millions of U.S.-based WeChat users that could be shared with (or accessed by) Chinese security services. Judge Beeler based her injunction largely on First Amendment grounds, accepting the argument of the U.S.-based WeChat users that the service was essential to engage in protected speech with people inside China, largely because the Chinese Government prohibits non-Chinese digital services in the country, and again expressed the view that the U.S. government proposal block the service was an overly broad restriction on otherwise legal speech.

Context – President Trump’s orders to ban WeChat and TikTok are highlights of an accelerating digital decoupling of the U.S. and China. Both bans are now blocked by federal court injunctions. As noted, the WeChat injunction is based on First Amendment grounds. The TikTok injunction, alternatively, is focused on two express limitations to the President’s broad authority under the International Emergency Economic Powers Act (IEEPA), the basis of the bans. The IEEPA cannot be used to sanction “informational materials” or “personal communications”, and the judge ruled that both likely apply to TikTok videos. The DoJ is arguing that those IEEPA limitations are intended to apply to bans on content, not services, and that the orders don’t ban short-video content itself, just one service to transmit them.

Digital Independent Work “Gig” Platforms on the Ballot – California Prop. 22 Prospects

Report from the Washington Post

In Brief – When the California legislature passed AB 5 to drastically scale back the ability of businesses to hire people as independent contractors rather than employees, the political focus was on digital “gig” work platforms, especially ride-sharing and deliveries. The law kicked off much litigation and lobbying to exempt traditional independent workers. Being California, the ride-sharing and delivery platforms also turned to an alternative escape route, a statewide ballot initiative. They developed Proposition 22 to give voters an up-or-down vote on independent contractor-based businesses like Uber, Lyft, DoorDash and Instacart. The initiative mandates a collection of employee-type benefits for drivers while permitting the companies to maintain their business models of managing digital platforms connecting independent contractor drivers with consumers. The companies argue that a solid majority of drivers prefer to work independently, often on multiple platforms, rather than as employees with mandatory schedules, and that Prop 22 offers them a better balance of work and benefits. AB 5 supporters reject those arguments as more anti-worker corporate abuse. The companies have invested nearly $200 million in the campaign and are communicating with millions of users. Prop 22’s fate is certain to impact the worker classification debate nationally. Polling appears to show that the initiative is slightly ahead.  

Context – Uber and Lyft are also fighting in court. Although a California Superior Court Judge ruled in early August solidly against them demanding immediate compliance with AB 5, which the companies said would require them to shut down statewide at least temporarily, they won a stay on appeal. The California Court of Appeals has heard arguments on whether that stay should extend through the litigation. In addition, following vocal complaints from a wide range of professionals and creative freelancers, the California legislature enacted AB 2257 in September to exempt many more from AB 5.

Indian Tech Start-Ups Mobilizing to Form a Trade Group Targeting Biggest Platforms

Report from Bloomberg

In Brief – The leaders of dozens of the Indian tech startups are discussing the creation of a coalition to impact digital public policy in India with the goal of pushing back on the largest global platforms. The role of Google and Facebook in the Indian digital ecosystem is particularly in focus for the tech entrepreneurs. The nascent group, which is considering names such as the India Internet Foundation and the Atmanirbhar Digital India Foundation (Atmanirbhar is a Hindi word linked to PM Modi’s economic plan) is considering lobbying to require global tech companies such as Google and Facebook to become “local” by incorporating Indian entities and listing on local stock markets to ensure governance by Indian law and policy.

Context – App store policies are facing scrutiny globally, and the 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 (or ride on) them. And it’s increasingly clear that there are large companies like Epic Games and Spotify willing to invest in legal and regulatory campaigns such as the Coalition for App Fairness. This dynamic is at play in India, with relatively large enterprises leading the nascent alliance. Apple, with its more restrictive App Store rules and fee policies, has been more in focus in the US and EU. But Google’s Android has many more users globally and is very dominant in some markets. That is the case in India, where Android enjoys a reported 99% share, as well as Korea. Google’s recent announcement to tighten its Play Store payments policies, applying its 30% fee to all in-app payments for digital content as of September 2021, is reported to be a key driver of the Indian start-up coalition, and Google has backtracked in India and announced a delay until at least April 2022. In Korea, the KFTC has already kicked of an investigation of the Google app payments plan.

KFTC Finds that Korean Search Giant Naver Manipulated Search to Penalize Shopping Rivals

Report from Yonhap News

In Brief – The Korea Fair Trade Commission (KFTC), South Korea’s competition authority, has 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. The KFTC review covered Naver actions between 2012 and 2015, beginning with search algorithm changes made just months before launching its own shopping site to lower the rankings of product listings by ecommerce competitors such as Gmarket and Interpark. Naver, which accounted for approximately 70% of product search in Korea, is accused of making six sets of changes to penalize competitors and preference its shopping services, with the KFTC noting that Naver’s share of the online shopping market was lower than 5% in 2015, but exceeded 20% by 2018. The KFTC has fined Naver 26.7 billion won ($23.1 million). Naver, which expressed regret for the KFTC decision, has denied wrongdoing, stated that all changes were made to improve user experience, and is expected to challenge the ruling.

Context – The KFTC is putting together a track record of challenging both foreign and domestic digital giants. Last year, 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. The Naver shopping decision follows on the heels of a decision to fine the domestic search giant for employing anticompetitive contract clauses to prohibit real estate data firms from dealing with other websites. When Google recently announced plans to expand their app Play Store payments policy and impose a 30% fee on many more apps, the KFTC quickly announced an investigation. 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.

OECD Officials Warn That Global Digital Tax Deal Not Likely This Year – 2021 Tax-Trade War?

Report from the New York Times

In Brief – In the latest episode of the long-running drama over threats to impose new corporate taxes on large “digital” companies, officials at the Organization for Economic Cooperation and Development (OECD) announced that multilateral negotiations were not likely to succeed this year to deliver an agreement between the United States and countries enacting national digital services taxes (DST). With the US threatening tariff retaliation against countries that impose new taxes targeted at US-based digital companies, the DST showdown is seen as a top tier threat to trade and growth in 2021.

Context – Pressure continues to grow to shift taxes paid by digital companies from countries where they engage in most of their operations, such as the US and smaller markets like Ireland, the Netherlands, Switzerland, Luxembourg, and Singapore, toward countries with large consumer markets, such as the UK, France, Italy, and India. France has led the campaign, enacting a 3% DST last summer. The US threatened tariff retaliation, called for broad multilateral talks, and the conflict was deferred. More countries have followed suit enacting DSTs. The US-France standoff has provided the model, with taxes and tariffs being pushed off in hopes of an OECD deal, but those talks have proceeded with fits and starts. A key US demand was for new tax rules to cover all consumer-facing companies, not just digital, but as the likely result started to come into focus, non-digital U.S. industries expressed reservations, and the US slowed the OECD talks. The pandemic did not help. The economic and revenue impacts, combined with the seemingly impervious digital giants, appeared to fortify national DSTs. The US fallback continues to be tariff threats and retaliation is set for France and being prepared for the EU and other nine countries. Finally, as DST regimes have come online in France, the UK and a few others, AmazonApple and Google have begun announcing in-country fee increases to offset the national DST taxes.

Is Justice Thomas Looking to Rewrite Sec. 230 Like Justice Kennedy Did Internet Taxes?

Report from MediaPost

In Brief – The Supreme Court turned down the appeal of cybersecurity company Malwarebytes, leaving in place the 9th Circuit decision allowing rival security company Enigma Software to sue it for anticompetitive conduct in blocking its services. Malwarebytes argued that Sec. 230 protected it from liability. The District Court had agreed, but the Court of Appeals rejected the Sec. 230 defense.

Context – The Supreme Court turning down the cert petition of Malwarebytes is not big news. Whether Sec. 230 shields anticompetitive conduct, while arguable, is a fringe case. The potentially HUGE development is the “statement” from Justice Thomas agreeing with his colleagues but calling for a better case to allow the Supreme Court to consider the scope of Sec. 230. (Read pages 12-21 here.) If you follow the digital business legal and policy world, this feels like “Déjà vu all over again”. In 2015, the Supreme Court ruled against the State of Colorado in a case broadly touching on sales tax collection on the Internet, reaffirming the position of the anti-Internet Sales Tax respondents. That decision is barely a footnote, but Justice Anthony Kennedy used the opportunity to call for a better case to challenge the then decades-old Quill precedent that protected companies operating over the Internet from being required to collect taxes for states where they had customers but no operations. The result was the Wayfair decision three years later where a 5-4 decision overturned the long-established but oft-criticized physical presence test on state sales taxes and is a key stepping stone to the current digital tax battles that are based on “virtual presence”. Kennedy delivered that opinion and retired weeks later. Like Quill, Sec. 230 has never been free of well-funded critics. Asking those critics to create a case to allow the High Court to step in where Congress had rejected rewrites may prove a bigger development than any of the current Sec. 230 bills and regulatory efforts floating around.

FCC Chairman Stands by Net Neutrality Repeal after Federal Appeals Court Ruling

Report from Reuters

In Brief – The Chairman of the Federal Communications Commission (FCC) has announced that the agency’s October meeting will reaffirm the FCC’s 2018 repeal the of Obama Administration FCC’s 2015 Net Neutrality (NN) rules. When the Federal Circuit Court of Appeals for the District of Columbia upheld the FCC’s 2018 NN repeal last October, it raised three relatively narrow issues for potential further action by the FCC – public safety communications, utility pole access and funding for the Lifeline broadband subsidy program. Although the FCC opened a public consultation on those issues in February, the Chairman’s position is that no changes to the 2018 Order are needed.

Context – The legislative, legal and regulatory battles over NN stretch back to the mid-2000’s and features a firm partisan divide between Democrats supporting “strong” NN and Republicans objecting to blanket mandates. In mid-2018, the State of California responded to the FCC’s NN repeal by enacting AB 822, the California Internet Consumer Protection and Net Neutrality Act. Given the cycle of rulemaking and litigation, California agreed to refrain from enforcing its 2018 NN law while the FCC’s 2018 repeal of the FCC’s 2015 NN rules was litigated. With the Court of Appeals’ decision in the rearview mirror, net neutrality advocates and opponents have picked back up the California litigation. One component of that ruling was the Court’s rejection of the FCC’s “Preemption Directive”, an effort to preemptively overturn all state net neutrality laws, but left open the prospect that specific state NN laws could be struck down case-by-case. The US Department of Justice (DoJ) and a coalition of network providers are back arguing that the California law is preempted by federal statutes. A decision on the DoJ motion to enjoin the state law is expected soon. If VP Joe Biden is elected President, expect the FCC to move promptly to restore 2015-type NN policies.

Judge Allows Apple to Maintain Fortnite App Ban While Clash with Epic Goes to Trial

Report from The Verge

In Brief – Federal District Court Judge Yvonne Gonzalez Rogers, overseeing the clash between Epic Games and Apple, confirmed her earlier split decision on Epic’s motions to enjoin Apple from blocking its Fortnite mega-game franchise and the Unreal Engine game development tools. The Fortnite app will remain blocked from the App Store while the case proceeds to a May trial, unless Epic brings it back into compliance with Apple App Store rules, which includes Apple’s 30% fees. However, the judge continues to prohibit Apple from cutting off Epic Games’ developer services because that would harm many independent developers who are not party to the dispute. Epic Games had initiated the legal battle by intentionally modifying its Fortnite app to violate App Store rules and avoid Apple fees, and when Apple  responded by blocking the Fortnite app, Epic kicked off a well-prepared legal and PR campaign. The judge’s questions had expressed skepticism with Epic arguments regarding their need to keep Fortnite non-compliant and also raised issues regarding gaming, with a relatively large number of platforms and relatively consistent fee levels, as the best market to frame an app store antitrust case.

Context – The app store policies and fees of both Apple and Google are facing scrutiny globally. There are millions of small app developers in markets around the world, and large digital companies like Epic Games and Spotify are investing in campaigns to regulate the rules and fees of the mobile platforms. There are open investigations in the USEUAustraliaKorea and Japan. As Judge Gonzales Rogers noted, Apple and Google both charge game developers 30% fees, but they pursue quite different app policies otherwise. Apple’s “walled garden” model focuses on control in the name of user experience, and Google’s more open regime allows for, if not fully eases, competitive app practices. Epic Games objects to both, as you can read in their complaints (Apple and Google). Seems nobody likes paying 30% fees.

U.S. Department of Justice to Appeal the District Court Injunction of TikTok App Store Ban

Report from the New York Times

In Brief – As expected, the U.S. Department of Justice (DoJ) is appealing U.S. District Court Judge Carl Nichols’ order granting a temporary injunction blocking the order announced by the Department of Commerce (DoC) to prohibited app stores in the United States from hosting or updating the TikTok app as of September 27. President Trump issued executive orders on August 6 effectively banning WeChat and TikTok, the two most widely used Chinese-owned smart phone apps in the United States, on security grounds based on the relationship between the Chinese Government and Chinese tech firms. The WeChat ban was scheduled for September 20, but a group of U.S-based WeChat users won an injunction in federal court, which is now under appeal. Most of the TikTok restrictions were delayed by the DoC until November 12 for negotiations to find a new ownership structure for TikTok’s U.S. operations.

Context – The WeChat and TikTok injunctions are based on different reasoning. WeChat is a First Amendment decision. The plaintiffs argued that WeChat was essential to engage in protected speech with people in China because the Chinese Government bans all the non-Chinese services. An outright ban of the service was considered not an appropriately narrow restriction. It will be interesting to follow whether U.S. courts will rule that U.S. citizens have a constitutional right to use a foreign service that the U.S. government says is a national security threat based on the foreign government banning other options. The TikTok injunction is focused on two express limitations to the President’s broad authority under the International Emergency Economic Powers Act (IEEPA), the basis of the bans. The IEEPA cannot be used to sanction “informational materials” or “personal communications” that do not involve a thing of value. The judge ruled that both limitations likely apply to TikTok videos. Expect the DoJ to be arguing that those IEEPA limitations are intended to apply to bans on content, not services, and that the orders don’t ban short-video content itself, just one service that transmits them.

KFTC Responds to App Developers and Opens Investigation of Google Payments Plan

Report from Gadgets Now

In Brief – The Korean Fair Trade Commission (KFTC), South Korea’s competition authority, has responded to Google’s plan to require apps distributed through the Google Play Store to use the Google payments service and pay a 30% commission by launching an investigation. While Google has technically required apps distributed through the Play Store to use Google’s payments service which comes with a 30% fee, it has not generally enforced the rule outside of gaming apps. Google recently announced that will change as of January 2021 for all app-enabled digital transactions, exempting only sales of physical goods and money transfers. In Korea, home of Android mobile device giant Samsung, Google’s Play Store captured greater than 60% of total app store sales in South Korea last year, followed by Apple’s App Store with just under 25 percent. Korean app developers therefore responded to the Google announcement with great concern over the implications for dramatically increased fee levels.

Context – The app store policies and fees of Apple and Google are facing scrutiny globally. The KFTC joins investigations in the USEUAustralia and Japan. Globally, there are millions of small app developers, and large digital companies like Epic Games and Spotify leading campaigns to regulate the rules and fees of the platforms. While Apple and Google both often charge 30% fees, they have otherwise pursued very different app store and mobile operating system policies. Apple’s “walled garden” model has always placed the company squarely in control in the name of user experience. Google has historically pursued a more open system allowing non-Google app stores to operate, such as that from Samsung, giving developers options to deliver apps to users outside the Google system. That said, the antitrust complaints filed by Epic Games against Apple and Google in August provide an opportunity to read how some find both regimes problematic. It seems nobody likes paying 30% fees.

Facebook and the EU Team Up to Defend the GDPR One-Stop-Shop Against Belgian Challenge

Report from Reuters

In Brief – The “One-Stop-Shop” policy of the EU’s General Data Protection Regulation (GDPR), which established that the privacy regulator in the locale of a company’s EU headquarters would be the “lead supervisory authority” for privacy compliance, is facing its day in court as the European Court of Justice (ECJ) hears a case pitting Facebook and the European Union against the Belgian Data Protection Authority (BDPA). The BDPA is challenging Facebook’s cookie policies but Facebook and the EU both argue that the GDPR establishes that the Irish Data Protection Commission (IDPC), where Facebook is headquartered in Europe, is Facebook’s privacy and data policy regulator. The BDPA argues that the Irish authority has not taken up its request to challenge Facebook’s cookie policy, and that while the GDRP does confer the role of lead authority to the privacy regulator of a business’s headquarters, it does not block other privacy authorities from challenging a company in court. The EU and Facebook argue that establishment of the lead supervisory authority system was a key component of the GDPR and allowing all the privacy regulators of the 27-member states to bring complaints would undermine the balance of the law.

Context – When the EU’s landmark GDPR was enacted in 2018 it was taken for granted by privacy advocates that the largest tech companies would face heavy fines and sanctions that would force them to meaningfully change their practices. That has not happened, at least not yet, and frustration is growing. The “One Stop Shop” policy that puts the privacy authorities of Ireland and Luxembourg in particularly influential roles has been criticized. Along with the ECJ case pitting Facebook and the EU against the Belgian authority, the IDPC’s August preliminary decision and fine regarding a bug in the Twitter app, the first of more than a dozen major tech company IDPC investigations, was quickly challenged by a number of other national regulators and is currently under review at the European Data Protection Board.

French Appeals Court Upholds Demand for Google to Pay Media – Funds to Flow Soon

Report from Reuters

In Brief – A Paris appeals court has upheld an April order from France’s competition authority that requires Google to implement a system to pay for the use of news story snippets and preemptively rejected the past remedy employed by Google in France, Germany and Spain of simply abandoning snippets, arguing that behavior was likely an unfair abuse of a dominant market position in search. The initial ruling followed a change in EU copyright rules including establishing a “neighboring right” which was quickly enacted in France and led to publishers demanding a fee from Google for showing news snippets. The appeals court ruling comes as Google is reported to be set to announce a payment agreement with the French media industry group Alliance de la Presse d’Information Générale (APIG) that will include Google’s acceptance of the copyright neighboring right as well as APIG members participating in Google’s newly announced News Showcase, a news curation service backed by $1 billion that rolled out with 200 leading media partners across Germany, Brazil, Argentina, Canada, the U.K. and Australia.

Context – Traditional news media businesses in markets globally blame Internet businesses for undermining their advertising-based business model and are rallying around proposals to require large platforms, in particular Google and Facebook, to pay them for creating digital media content that gets shared online. Along with France, Australia is the other national government most out front on this media payments effort. Google’s major media payments initiatives follow the Facebook News endeavor announced last fall that reportedly pays millions in payments to large media enterprises for curated content. Finally, in a major step beyond Google and Facebook, Apple is now in the crosshairs of the media industry in France, with APIG contending that publishers are in dependent on Apple for the distribution of their content on the iPhone and joining the chorus of complainants criticizing Apple’s App Store fees levels and policies.

Microsoft Jumps Into App Store Rule and Fee Fight With Its Own Fair App Store Policies

Report from the Washington Post

In Brief – Microsoft has jumped squarely into the increasingly intense debate over app store policies in announcing a set of 10 principles for running its app store for Windows devices that closely align with the 10 principles of the recently established Coalition for App Fairness, an organization led by aggressive Apple critics Spotify, the Swedish-based music app power instrumental in spurring the European investigation of Apple, and Epic Games, the developer of mega-game Fortnite who has filed federal antitrust lawsuits against both Apple and Google. The announced policies of the Microsoft Store include allowing app developers to use alternative payment mechanisms for in-app purchases, to establish or participate in competing app stores, applying the same standards to Microsoft apps as competitor apps, and applying objective standards, including those for security, privacy, quality, content, and digital safety, to developers. Microsoft, as well as Facebook, have criticized Apple for app store and payments policies, most recently in the context of refusals to accept cloud-based gaming offerings.

Context – Microsoft won’t need to change its business model to comply with its “new” principles. The Windows operating system is an open platform, users can use alternative app stores, and most software is downloaded directly from developers’ sites. The principles don’t apply to the Xbox gaming platform, which is a “walled garden” with rules and fee levels similar to Apple’s, a fact Microsoft dedicated a paragraph to in their announcement, acknowledging they “have more work to do to establish the right set of principles for game consoles.” Apple and Google app store policies were prominently featured in the recent report of House Antitrust Subcommittee, and are being investigated by competition authorities in EuropeAustraliaKorea and Japan. However, Epic Games’ legal team faced harsh questions from the federal judge overseeing the game developer’s antitrust complaint against Apple. 

House Antitrust Subcommittee Completes Big Tech Investigation with Report and Recommendations

Committee Majority Report. Rep. Jordan (R) Report on Bias. Rep. Buck (R) Report on “Third Way”. 
In Brief – The House Antitrust Subcommittee completed its 16-month investigation of competition in digital markets with a 449-page report. There is remarkable bipartisan agreement on the problematic business behaviors of Google, Amazon, Facebook and Apple. But for drama, re-watch July’s five-hour hearing with the four company CEOs. The charges —

Google. Overwhelming dominance of search, maps and other services gives it “near-perfect market intelligence” on what products and services people want and a leg up on competitors, especially in digital advertising markets. It acts to lock out other search engines.
Amazon.  A wide range of policies and practices receive attention, but the primary focus is on practices where Amazon uses its power as a dominant third-party marketplace, and the data it collects serving smaller retailers, to develop competing products that it then unfairly preferences. Released blistering rebuttal blog.
Facebook. The company, with its three major platforms, is described as unassailable. While not the only company accused of anticompetitive acquisitions, it is the poster child of “killer” acquisitions, identifying and acquiring nascent competitors, including Instagram and WhatsApp.
Apple. The company’s transition from hardware-based business to digital services has been marked by efforts to leverage its mobile platform and App Store monopoly to take huge cuts from app developers’ sales, “generate supra-normal profits,” as well as unfairly privileging its own competing apps.

POLICY RECOMMENDATIONS – Reflect state-of-the-art thinking on digital markets and antitrust law of the progressive wing of the Democratic Party. In descending order of bipartisan agreement –
Strengthening the FTC and the Antitrust Division of the DoJ. Broad agreement that federal antitrust agencies have failed to effectively enforce antitrust laws, should be given more resources, and should be more aggressive. Committee Democrats think they need new and better laws.
Data Portability and Interoperability. Giving smaller competitors access to large platforms’ data, and users greater ability to move platforms, is receiving serious attention. The subject of a recent FTC workshop and bipartisan legislation in the Senate. Hugely complicated idea and no consensus.
Monopoly Leveraging and Predatory Pricing. Some consensus that the judicially-created doctrines regarding predatory pricing are wrong. No agreement on how to address it.
Platforms providing due process to market participants. Ex ante regulatory mandates or ex post anti-trust enforcement? Democrats comfortable with the former and Republicans the later.
Acquisitions and Mergers. Broad agreement that acquisition reviews have been neutered by judicially-created standards and weak agencies. The committee proposes a wide range of changes.  Areas of agreement likely could be found here.
Platform self-preferencing. The Democrats see this as a core Gatekeeper abuse while Republicans are wary to limit platforms ability to offer improved user services. Broad non-discrimination or neutrality requirements would replicate endless net neutrality fights. Republicans again prefer targeted antitrust enforcement.
The Big Sticks – Structural separation… “Glass-Steagall” for Platforms… or otherwise “Breaking Up” the platforms would initially be longshots even in a Biden Administration.

Context – The biggest elephant in the room is huge disagreement over the content moderation policies of Google, Facebook and… Twitter? The Jordan Report is focused on anti-conservative bias and changes to Sec. 230. The Democrats reject the bias charges outright. Besides that Grand Canyon-wide gulf…

The key takeaway is that Techlash frustration is truly bipartisan, but the policy recommendations to deal with problems are not. The progressive wing of the Democratic Party is coalescing around the recommendations in this report. In Europe, the upcoming Digital Services Act proposal will cover similar ground, offer interesting comparisons, and have a clearer route to enactment. The more successful the Democratic Party is on Election Day, the more relevant this report’s proposals will be as initial proffers from the progressive wing on digital competition policy. However, they include many dramatic changes in competition law that face strong opposition from Republicans, many in business and investment circles, and even from many moderate Democratic leaders.

Facebook Restricts Trump Campaign Ads Linking Refugees to COVID Pandemic

Report from CBS News

In Brief – Facebook has pulled more than 200 ads from the Trump campaign that made claims that linked risks from the COVID-19 pandemic to refugees arriving from countries in the Middle East and Africa. Facebook responded to media inquiries regarding the action stating that the ads violated Facebook rules that do not permit “claims that people’s physical safety, health, or survival is threatened by people on the basis of their national origin or immigration status.” Earlier in the month, Facebook announced a new set of ad restrictions related specifically to the upcoming U.S. elections, including blocking new ads in the final week before Election Day, as well as rejecting ads that delegitimize the electoral process or any legal method of voting, or that claim victory in the election before the results are declared.

Context – The policies of the social media platforms related to paid political ads have made up one component of the ongoing debate over the appropriate role of the platforms to moderate political discussions. The recent Facebook policy announcements related to election-related ad content come as the company has generally stuck to allowing most political ads and not applying fact-checking to avoid ideological censorship, a position roundly criticized by progressives but generally supported by conservatives wary of biased reviewers. Twitter has chosen to ban most political ads but does permit some issue ads that raise politically sensitive issues. Google, like Facebook, is allowing most political ads but will restrict certain types of micro-targeting and attempts to provide some ad-related disclosures. This article offers an interesting comparison of the Facebook, Google and Twitter ad policies when applied to specific types of ads. Among the social media platforms less central to political communications, Reddit and Snap report that they fact check political ads, while TikTokLinkedIn and Spotify have each banned political ads.

EU High Court Rules Security-Based National Data Collection Laws Limited by Privacy Rights

Report from Fortune

In Brief – In a set of cases pitting the EU’s e-privacy directive, intended to protect the privacy of personal data in electronic communications, against the telecommunications and Internet surveillance regimes of France, Belgium and the UK, justified to protect national security and fight terrorism, the European Court of Justice (ECJ) has sided with privacy advocates and ruled that national laws on the bulk collection of data must  comply with EU rights that guarantee the protection of personal data. The ECJ determined that the unrestrained mass surveillance of phone and internet data is generally unlawful and can only be allowed when governments face a “serious threat to national security” and should be limited to a period that is “strictly necessary”. The decision comes as the EU continues to struggle with crafting a new e-Privacy Regulation to replace the e-Privacy Directive and complete the EU’s data privacy legal framework alongside the General Data Protection Regulation adopted two years ago.

Context – The latest ECJ decision continues to highlight the significant policy rift between national security and privacy advocates being played out in European courts but impacting digital policy globally. In July, the ECJ ruled that the US-EU Privacy Shield failed to meet EU privacy standards, just as it invalidated the US-EU Safe Harbor in 2015, throwing corporate data transfers between the EU and US into doubt. While Facebook is the corporate name on that Schrems II case, the court ruled against US intelligence laws. France, Belgium and the UK have each been impacted by major terrorism incidents in recent years, and many US officials have been frustrated that ECJ criticisms of US surveillance practices ignored similar policies in Europe. That is no longer the case and governments will attempt to move forward in a balanced way. In particular, the data transfer situation with the UK post-Brexit is noteworthy and might fall next given the more open-ended UK surveillance and security regime.

Spanish Competition Authority Determines Amazon is Postal Service with Compliance Duties

Report from Reuters

In Brief – Spain’s antitrust authority has ruled that Amazon’s logistics operations are effectively a postal service and the company needs to comply with the corresponding national and EU rules governing such services. The company has been given one month to declare itself as a postal operator and to meet data and user privacy rules while guaranteeing that its delivery workers fulfill appropriate labor and immigration requirements. The focus of Spain’s competition authority on the Amazon logistics operation follows a comparable review by the Italian communications regulator, which came to a similar conclusion at the end of 2017 and fined Amazon EUR 300,000, which was followed up in 2019 by Italy’s competition authority opening an investigation of Amazon’s logistics operations for abuse of a dominant position.

Context – While Amazon, like the other digital mega-giants, is facing a growing range of competition investigations regarding their digital platform practices, it is the only digital giant that is also a dominant player in a business based on traditional physical infrastructure. The company’s massive ecommerce fulfillment center system houses and handles the goods for most top sellers on Amazon’s marketplace. A recent logistics industry report estimates Amazon’s market share in ecommerce fulfilment center services at 60%, exceeding their 50% share of the public cloud services market and the almost 40% share of ecommerce retail. ChangeToWin, a coalition of four of the largest U.S. labor unions, has petitioned the Federal Trade Commission to investigate anticompetitive Amazon practices including linkages between their ecommerce platform and fulfillment centers that push merchants to buy fulfillment services in order to rank high on Amazon product search and serve Prime customers. The way Amazon combines their third-party marketplace and logistics services in a way that replicates a traditional retailer is also key to the recent Bolger v. Amazon product liability case in the California Court of Appeals.

South Korea Proposes Legislation to Govern Platform Treatment of Small Business Users

Report from Korea JoongAng Daily

In Brief – The Korean Fair Trade Commission (KFTC), the country’s competition authority, has proposed legislation to protect small businesses from unfair business practices of large digital platforms. The legislation will require online platforms to maintain contractual relationships with merchant users covering 14 components, including commission rates and fees, the contract period, notification requirement for changes to terms of use, and rules governing cancellation processes. The legislation also prohibits specific platform practices such as contract terms blocking merchants from offering lower prices on competing platforms, which has been a problem in the Korean restaurant delivery platform market, and transferring promotional activity costs to small business users. Although the KFTC did not name the platforms that it believed would be covered by their proposal, they did indicate that at least eight e-commerce platforms, two lodging platforms and at least four food delivery platforms would fall under the mandates based on the size thresholds in the bill, including search engines Naver and Google, e-commerce platform Coupang and food delivery platform Baemin.

Context – Government interventions to improve the terms and conditions that digital platforms provide to their business users, especially small businesses, with more transparent and fair treatment, are moving forward in markets globally. In Japan, legislation was recently enacted to require large digital platforms to give small business users advance notice of any contract changes, set up processes to reply to user complaints, and improve transparency into how search results are determined. In Europe, so-called P2B (Platform-to-Business) legislation was enacted by the European Parliament in 2019, and the treatment of small business users is expected to be part of the upcoming Digital Services Act. The topic is also a component of the Australian Government’s Digital Platforms Inquiry work program.

Senate Commerce Committee Subpoenas Tech CEOs With Bizarro World Bipartisanship

Report from Politico

In Brief – The Senate Commerce Committee voted unanimously to issue subpoenas to the CEOs of Facebook, Twitter, and Google to force them to testify at a hearing expected to be held on October 28. The intent of the Committee Republicans is to grill the social media leaders on their content moderation practices, which the President and many Committee Republicans charge are ideologically biased against conservatives. While Committee Democrats initially opposed the endeavor (they could not stop it), they joined in support when the Chairman agreed to expand the scope to include privacy policy and the issue of media consolidation. The Democrats argue the hearing should be held after Election Day.

Context – It’s impossible to consider the planned Senate hearing not in the context of July’s House hearing with the CEOs from Google, Facebook, Apple and Amazon. That five-hour session (video here) was intended to focus on unfair competition, but Republicans primarily criticized Facebook and Google (and an absent Twitter too) for ideological bias. Democrats often went off-topic on privacy and media concerns, as well as pushing back hard on Republican bias charges. Honestly, this Senate Commerce Committee discussion offers a great 45-minute version (video here, debate starts at minute 31) of the same bizarro world version of bipartisan Big Tech bashing, combining agreement that the platforms are very bad and almost complete disagreement on the substance, especially on Sec. 230 and content moderation bias. Bills to change Sec. 230, sometimes narrowly and sometimes drastically, continue to proliferate, most earning deserved criticism from policy experts. When bills try to address the issue of ideological content moderation, they collapse under the disagreements on display in the Senate hearing. However, committee members Sens. Schatz (D-HI) and Thune (R-SD) do have a narrowly tailored Sec. 230 bill that might gain traction in 2021.

Google Announces Billion Dollar Media Service to Deflect Criticism and Payment Momentum

Report from CNBC

In Brief – Google has announced a new news curation service called the Google News Showcase that will launch with nearly 200 leading media partners across Germany, Brazil, Argentina, Canada, the U.K. and Australia and will involve $1 billion in payments to the participating media enterprises. Google plans to grow the product in terms of geographic coverage and the media enterprises involved. Earlier this summer, Google announced a news licensing program to pay some publications for content and allow users to access some media content behind paywalls. The $1 billion commitment Google is making regarding in the News Showcase builds on a $300 million Google News Initiative the company created in 2018 to provide grants and tools to journalists and publications. Media giants in Australia and Germany have been some of the most aggressive critics of Google and have enjoyed some recent regulatory successes against the search giant.

Context – Traditional news media businesses in markets globally blame Internet search and social media for undermining their advertising-based business model and are rallying around proposals to require Facebook and Google to pay them for creating digital media content, whether consumed directly on digital platforms on linked from them. Media payment schemes are being proposed by competition regulators in Australia, as part of its two-year digital platform competition review, and France, through a change in copyright law. Not surprisingly, the idea that big platforms pay media companies is gaining support from major media in other countries. It is more noteworthy that the Bloomberg Editorial Board and the CEO of the New York Times have raised concerns with the trend. The Google initiatives appear similar in spirit to the Facebook News endeavor announced last fall to promote the curated content of major news sources that reportedly pays millions in payments to large media enterprises.

California Enacts Legislation Blocking App Deliveries from Unaffiliated Restaurants

Report from the Los Angeles Times

In Brief – The State of California has enacted legislation to impose new regulations on “food delivery platforms,” defined as online businesses that act as intermediaries between consumers and multiple food facilities, including prohibiting the platforms to offer delivery from restaurants they do not have an “express agreement” to offer delivery, as well as establishing delivery sanitation standards. AB 2149, the Fair Food Delivery Act is most noteworthy in attempting to end the practice of delivery platforms, which often have business relationships with restaurants on the platform and charging the restaurants fees that often reach 30%, from allowing consumers to buy from restaurants that do not sign up with the platform. Those restaurants are not charged fees. While many restaurants have decried the practice claiming that customers do not understand that the restaurant is not affiliated with the delivery service and the restaurant cannot control the takeout experience and ensure the food is transported well, others have questioned the implications of being left off the popular services for takeout purchased at full price.

Context – Food delivery platforms have grown in prominence during the pandemic. While California’s novel AB 2149 bans platforms from arranging deliveries from restaurants that don’t join and therefore don’t pay any fees, fee levels are also highly controversial. Many large cities have imposed fee caps and other mandates on the platforms, including Los Angeles, New York, Chicago, and Washington, D.C. And 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 some calls for consolidation. Uber, the 3rd largest platform, benefited from growing food delivery as ride-sharing fell, attempted to acquire #2 GrubHub, which raised regulatory questions, and after that fell through, has acquired smaller platform Postmates. That deal is now facing an expanded antitrust review by the Department of Justice.

Seattle Enacts Minimum Pay Plan for Uber and Lyft Drivers Modeled on NYC Plan

Report from the New York Times

In Brief – The city of Seattle has enacted a minimum pay level for drivers on the Uber and Lyft ride-sharing platforms. The ride-sharing companies will be required to pay drivers $16 per hour after expenses, using a formula combining a minimum per-minute rate when there is no passenger in the car, a per-mile rate when there is, and a floor of $5 per trip. The Seattle law is modeled after a New York City law which went into effect in February 2019. The pay formula is intended to push the platforms to increase the utilization rate of the drivers logged into the apps so that there are fewer active drivers at any one time and less down-time. The platforms argue that raising prices and reducing active drivers will reduce riders, increase curbside waits, and force the platforms to restrict the number of drivers who can log on. In short, a trade-off between work opportunities and hourly pay. Evidence from New York in the year before the pandemic hammered ride-sharing indicated fewer rides, drivers going to extreme lengths to log in, and higher hourly pay when they could work.

Context – Reclassifying “gig” drivers and delivery people as employees is another strategy to raise hourly pay. California with AB 5 is leading on that route. That law faced strong criticism from a wide range of traditionally independent workers and creative freelancers, and the state recently enacted AB 2257 to exempt many. The gig work platform targets are fighting it out in court, recently won a stay to keep operating during the court proceedings, and are backing a November ballot initiative allowing voters to exempt them from the law. All the pay mandates boil down to a trade-off of fewer work opportunities and higher consumer prices, but higher per-hour pay for those who do get to work. The City of Seattle’s new ride-share pay plan is part of Mayor Jenny Durkan’s broader gig work “Fair Share” program that has included a new per-ride tax, pandemic-related paid-sick leave and a $2.50 per-delivery emergency fee.

Department of Labor Aiming for Permissive Independent Contractor Rules By Year End

Report from the New York Times

In Brief – As reported mid-summer, the U.S. Department of Labor (DoL) is aggressively working to finalize a rule providing guidance to businesses as to how the DoL will determine when workers are independent contractors or employees. The DoL has released a draft rule and announced a 30-day comment period. Worker classification is a key question for a wide range of independent work, including skilled freelancers and many traditional trades, but is also central to “gig” work platforms, including politicized ride-sharing and delivery. The issue is increasingly partisan. Obama Administration guidance released in January 2016 was withdrawn by the Trump Administration in 2017, and a 2019 DoL opinion letter viewed most such workers as independent contractors, as do the new draft rules, which were promptly criticized by labor right advocates. The DoL goal is to put in place more formal rules that would be more difficult to overturn if Vice President Biden wins the White House in November.

Context – The political energy behind tightening worker classification laws has been focused on digital “gig” work platforms, especially ride-sharing and deliveries. However, the experience of the landmark AB 5 in California has illustrated how wide a range of independent workers, professionals and creative freelancers were threatened by legislation undermining independent contractors. No states have followed California, with legislation stalling even in progressive New Jersey and New York. California recently amended AB 5 to exempt a wide variety of independent workers, in particular freelance writers, to dial back criticism of the law. The real targets, “gig” work platforms Uber and Lyft, are fighting it out in court. They recently won a stay to keep operating during state court proceedings, and are leading a ballot initiative campaign that gives California voters the opportunity in November to exempt ride sharing and delivery platforms from AB 5, or overturn the business model in the state.

Google Makes Additional Advertising and Data Concessions to the EU on FitBit Acquisition

Report from Reuters

In Brief – Reports indicate that Google is poised to win approval for their $2.1 billion acquisition of fitness-wearables and app business Fitbit from the European Competition Authority (ECA), a key hurdle for the deal. In August, the ECA rejected Google commitments and opened an in-depth investigation to review concerns related to privacy, expanding dominance in digital advertising markets, and the prospect that Google could undermine smaller competitors in wearables and wellness services. That review could extend through late December. In response, Google is reported to have expanded on an earlier pledge not to use Fitbit health and wellness data for advertising, extending that commitment to 10 years, and proposed strengthened external monitoring of the data separation requirements. The company is also committing to support third-party wearables manufacturers access to the Android system, and third-party wellness services providers’ existing access to Fitbit users’ data.

Context – This merger provides a great opportunity to observe how willing competition regulators are to go beyond traditional antitrust analysis to rein in large digital companies. Based on traditional thinking, blocking the Google-FitBit deal is hard to justify. FitBit, once the wearables market leader, has been passed by Apple, Xiaomi, Samsung and Huawei. However, privacy advocates and consumer groups on both sides of the Atlantic have aggressively opposed the deal on multiple grounds, including the charge that giving Google access to a large new data store will boost its dominance in online search and digital advertising, as well as threatening health privacy. The willingness of the ECA to accept Google’s collection of advertising and access (both to the Android OS and also FitBit data) commitments indicates that they are sticking to relatively traditional merger analysis. Both the U.S. Department of Justice, who is expected to file a broad antitrust complaint against Google soon, and the Australian ACCC, in a standoff with Google over mandated media payments, are also reviewing the Google-FitBit deal.

Ask A Question!