Archive – 2020

September 2020

Judge Appears to Reject Epic Games Arguments to Get Offending Fortnite Back on App Store


Report from Ars Technica

In Brief – The federal judge presiding over the antitrust lawsui filed by Epic Games, the maker of Fortnite, against Apple, harshly questioned the Epic Games legal team on the company’s conduct and legal theories in the hearing to consider Epic’s motion to require Apple to allow a non-compliant Fortnite back in the App Store, and pointed to a jury trial likely next summer. Epic Games had initiated the legal battle by modifying the Fortnite app to violate Apple’s rules to avoid paying Apple’s 30% fee. Apple blocked the Fortnite app, and Epic Games kicked off a well-prepared PR and legal campaign. Apple also threatened to block Epic’s popular “Unreal Engine” game development tool used by many independent developers. Judge Yvonne Gonzalez Rogers ruled in August that Apple could maintain their ban on Fortnite but could not block the Unreal Engine. Nothing from the hearing points to a change.

Context – Epic Games is a leader in the effort to overturn the Apple and Google mobile operating system business models and a founder of the Coalition for App Fairness with its take-no-prisoners App Store Principles. Judge Gonzalez Rogers’ comments highlight the challenge of overturning the App Store model without a new competition framework. She noted that payments fees have been the App Store monetization model from the beginning, rejected any claim of illegal tying, and did not see fees rising. She noted that online gaming is a tough market to make this case because there are many platforms, Apple is not a particularly large one, and the game console companies operate similar “walled gardens” with similar fee levels. Finally, there is Google with an equally large mobile operating system. It’s worth noting that Google is tightening its own Google Play app store payment rules to collect fees on paid digital downloads. A big issue going forward is whether large platforms that face large platform competitors will be considered dominant based only on the scale of their own services rather judged in a broader market in which they operate. This case will help frame that in the United States.

Judge Dismisses New Mexico AG’s Suit Charging Google Education Suite Violates COPPA

Report from Axios

In Brief – A federal lawsuit filed against Google by the New Mexico Attorney General contending that the G Suite for Education violates the Child Online Privacy Protection Act (COPPA) and state privacy laws has been dismissed in Federal District Court. G Suite for Education, introduced by Google in 2006, which provides schools, teachers and students with free and low-cost technology tools, gained greater prominence this year as many school districts expanded remote learning. In February, the NM AG claimed that Google violates the law by monitoring children while they browse the internet in the classroom and at home on private networks and collected a wide range of data. A key point in Judge Nancy Freudenthal’s order is that the G Suite for Education agreement with school districts and officials appeared to comply with the Federal Trade Commission’s COPPA standards allowing for schools to control account access and determine when necessary to obtain parental consent.

Context – This was the second time New Mexico’s AG targeted Google regarding COPPA, following a 2018 lawsuit targeting online games developer Tiny Labs, Google, and a host of digital ad platforms. Earlier this spring a federal judge dismissed that case against most of the ad tech firms but not Google, claiming that the ad tech firms employed automated processes and could not know how Tiny Labs’ apps worked, but that Google had claimed to review the apps in some manner and therefore could have been aware of the app data collection practices. Google’s G Suite for Education is also the subject of one of the many class action suits involving Illinois’ Biometric Information Privacy Act (BIPA), with an Illinois father of two students claiming that the service collects biometric data in violation of BIPA and COPPA. Finally, it’s barely a year since Google entered in a high-profile settlement with the Federal Trade Commission and NY AG for YouTube failing to comply with COPPA.

Uber Avoids Being Banned in London for Potentially Dangerous Drivers Accessing Platform

Report from the Washington Post

In Brief – Uber has prevailed in a legal fight with Transport for London, the regulator for London’s transportation network, earning an 18-month license to operate in the city. Transport for London stripped Uber of its license in 2017 for what it described as the platform’s inability to protect passengers from unauthorized, potentially dangerous drivers who could upload their photos to other driver accounts and fraudulently pick up passengers. Uber was permitted to operate as the case worked its way through the courts. In his ruling, Judge Tan Ikram explained that Uber had largely addressed the problems and could continue to operate in the city, although he did not rule out whether new conditions would be imposed on the business. The Licensed Taxi Drivers Association called the ruling “appalling.”

Context – The driver fraud security issue that led to Uber being banned in London, and nearly resulted in the same fate in Birmingham, is far and away a secondary regulatory issue for Uber. The top issue is the employment classification of drivers. In the UK, Uber’s appeal of a critical court ruling that drivers should be employees was heard in the UK Supreme Court in July. France’s top court ruled earlier this year that a driver who left the Uber service in 2017 and sued for a range of post-employment benefits should be considered an employee. The European Court of Justice has ruled that Uber can be regulated as a transportation service business rather than a digital platform due to the level of control Uber exercised over drivers. California’s landmark AB 5 worker classification law is well into the litigation phase. California’s AG initially won a preliminary injunction to require Uber and Lyft to immediately classify drivers as employees, but the ride sharing companies, who had threatened a temporary shutdown in the state, earned a stay on appeal. The two are supporting a state ballot initiative offering voters the opportunity to exempt the platforms from the law.

Apple Offers Concession to Facebook for Live Events Payments for Remainder of 2020

Report from Reuters

In Brief – Facebook, a critic of Apple’s App Store rules and 30% payments fee structure, has reported that Apple has changed their stance and agreed to a temporary payments policy change for the remainder of the year. Apple will allow most Facebook paid online events providers to accept payments though Facebook, a notable concession from Apple. Facebook rolled out their paid online events program in August and described it as an effort to help in-person services providers harmed as the pandemic earn money offering online classes and services. Facebook asked Apple to waive its 30% fee or let Facebook process the payments without fees, but Apple initially refused. Facebook also asked Google to waive its Play Store payments fees, which Google also declined to do, but Google did approve Facebook processing payments on its own. Facebook has committed to not charging paid online events payments fees through August 2021.

Context – Apple is increasingly facing charges that its App Store rules and fees are anti-competitive and abusive, including from a new coalition dedicated to dramatically changing how app store operators can do business. Apple CEO Tim Cook was repeatedly challenged at the recent House Judiciary Committee antitrust hearing with tech CEOs. The European Competition Authority has opened an investigation of the Apple App Store policies. It is reported that Facebook and Microsoft have each submitted complaints regarding Apple refusing to approve apps related their cloud-based gaming services. The US Department of Justice also has an open investigation of Apple. Epic Games, the creator of highly popular Fortnite, has filed an antitrust suit against Apple in Federal Court (and one against Google as well) on these policies. There is a history of animosity between Apple and Facebook, with Cook regularly criticizing Facebook’s advertising-based business model as being less consumer friendly than Apple’s business model.

U.S. Government Again Sees Banned App Earn Injunction – This Time TikTok

Report from the New York Times

In Brief – For the second time in nine days the U.S. Department of Justice (DoJ) learned that a federal judge had delayed implementation President Trump’s orders imposing restrictions on Chinese-owned apps WeChat and TikTok, this time with TikTok being spared a prohibition from being included in app stores in the United States through the granting of a preliminary injunction in federal court in the District of Columbia. The Department of Commerce on September 18 announced a range of restrictions on WeChat effective September 20. One restriction, being blocked from app stores, was imposed on TikTok effective September 27. The rest of the restrictions were delayed until November 12 to allow for negotiations to be concluded resolving U.S. Government concerns related to the TikTok ownership and operations. A week ago a group of U.S.-based WeChat users won a preliminary injunction in federal court largely on First Amendment grounds. The TikTok injunction applies to the app store ban but not the broader set of restrictions effective in November. The DoJ is challenging the WeChat injunction, arguing that the Chinese Government’s policy of blocking most communications services cannot be the basis of overturning Presidential national security actions, and is certain to challenge the TikTok injunction as well.

Context – The efforts to ban WeChat and TikTok in the United States is one flashpoint of the digital decoupling between the U.S. and China. And the apps are under scrutiny in other global markets as well. The successful Chinese Government policy to foster a Chinese-controlled digital ecosystem inside China for security and economic reasons, with the dominant Chinese digital companies required to work closely with the state security, censorship and surveillance system, has led to this point. Whether U.S. courts will rule that U.S. citizens have a right to use those Chinese communications firms in a manner that overturns U.S. national security and foreign policy is at the heart of the WeChat case in particular. The court’s deference on security matters leans toward eventually upholding the app restrictions.

Amazon Maneuvers on Product Liability Cases to Protect Unique Hybrid Business Model

Report from Reuters

In Brief – Amazon’s ecommerce business model combining the largest online retail business, the largest ecommerce marketplace, and the business unit that sets them apart as a unique enterprise, their dominant ecommerce fulfillment center service, is resulting in seemingly contradictory company actions regarding legal responsibility when faulty products sold through the Amazon system harm consumers. The case of Bolger v. Amazon in California, which involved a faulty laptop battery stored and handled by the Amazon FBA logistics system and was sold on its marketplace, may prove to be the most important recent Amazon product liability case. In August, the California Court of Appeals found Amazon liable due to the overall retail-like role it played. In late August, Amazon expressed support for California legislation to impose retail-like product liability burdens on all ecommerce facilitators, but this week Amazon appealed the Bolger decision claiming the new liability standard would hurt ecommerce marketplaces. At the same time, in Pennsylvania, rather than continue to fight a decision in Federal 3rd District Court of Appeals in the case of Oberdorf v. Amazon, which determined that Amazon could be held liable like a retailer for injuries caused by a faulty dog leash, the company has chosen to settle the case.

Context – Retailers traditionally are directly liable for harms caused by faulty products they sell to consumers. Marketplaces that facilitate independent retailers to sell to consumers have not faced the same liability. Retailers have long argued that Internet marketplaces enjoy an unfair advantage and should be treated like retailers. Internet marketplaces have argued that they do not handle or have the ability to inspect products like a retailer. Amazon, combining a marketplace with its Fulfillment By Amazon logistics business, handles many supposed third-party products just like a retailer not a marketplace, a situation recently explained by Etsy’s CEO. Courts and legislators will continue to hash this out.

Apple (and Google) App Store Critics Form Coalition to Push App Store Freedom

Report from CNet

In Brief – Many of the leading app makers and tech companies that have publicly accused Apple of anti-competitive App Store policies and practices have created the Coalition for App Fairness. The group kicks off with thirteen members led by Spotify, the Swedish-based music app power instrumental in spurring the European investigation of Apple, Epic Games, the developer of mega-game Fortnite who has filed federal antitrust lawsuits against both Apple and Google, and Match.com, the developer of OK Cupid and Tinder. Others include Tile, who testified against Apple in the House Judiciary Committee’s antitrust panel last year, and Basecamp, the developer of the Hey email system. The organization has established operations in Washington, DC and Brussels.

Context – The Coalition setting up shop in Brussels and Washington, DC, and its take-no-prisoners 10 App Store Principles, indicates the group will focus on public policy, legal and regulatory advocacy. There will be plenty of opportunities. App store rules and fees are being investigated by competition authorities in Europe, the United StatesAustraliaKorea and Japan. Epic Games’ legal complaints against Apple and Google detail the specific charges against each, and while the Coalition directs most of its rhetorical fire against Apple, Google is also criticized and runs afoul of many of the group’s stated goals. Both Google and Apple point to the other company’s ecosystem as a major competitor with different policies, Google calling out Android’s relative openness and Apple defending their uber consistency and user experience. It’s worth noting in the context of Epic Games’ criticism of the 30% fee structures on the Apple and Google mobile set-ups that the three major game console companies also have 30% in-game fee levels. And while both Facebook and Microsoft have criticized Apple for app store and payments policies, neither has joined the Coalition.

DoJ Proposes Sec. 230 Changes to End Viewpoint-Based Content Moderation – Not Happening

Report from Reuters

In Brief – The Justice Department has unveiled a legislative proposal aimed at amending Sec. 230, the legal provision enacted in 1996 that protects digital platforms from civil liability for content created by users, while also clearly allowing platforms to restrict content the platform operator finds objectionable. The Trump Administration has also called on the FTC and the FCC to attempt to change Sec. 230 through regulation, and the President met with nine Republican state attorneys this week to encourage them to challenge platforms on content moderation policies.

Context – By this point, we all know that Sec. 230 is a key legal foundation of the Internet. It facilitates digital platforms to host all types of user-generated content such as social media, user-created video, marketplaces, and comment boards. The law has faced withering fire from the Left and the Right. President Trump and former Vice President Biden are harsh critics. But the key point is that critics on the Left and Right do not agree on what’s wrong. In fact, their critiques are directly contrary. Conservatives critics argue that the large platforms are ideologically biased and penalize conservative viewpoints. They want to hamstring the ability of platforms to restrict content that is legal but the platform finds objectionable. Progressive critics see the opposite problem, claiming platforms often fail to restrict hateful, false and dangerous content. The DoJ legislation aims to restrict platforms from viewpoint-based moderation and has no Democrat support. It is not going anywhere this year. Absent overwhelming one-party control of Congress next year, if some type of Sec. 230 reform is going to move, look to something like the Platform Accountability and Consumer Transparency (PACT) Act from Sens. Brian Schatz (D-HI) and John Thune (R-SD). It aims to expand transparency in platform content moderation practices and establish processes for users to challenge moderation decisions.

European Investigation of Google’s FitBit Acquisition Will Extend Through December

Report from Reuters

In Brief – The European Competition Authority, which in August opened an “in-depth investigation” of the competitive impacts of Google’s $2.1 billion acquisition of fitness-wearables and app business Fitbit, has announced that their investigation would likely extend through December 23. Google is reported to have offered to not use FitBit’s health-related data to bolster the Google advertising business, and has defended the deal as bolstering competition in the wearables market. Privacy advocates and tech critics on both sides of the Atlantic have aggressively questioned 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.

Context – This merger provides the best opportunity to observe how willing competition regulators are to expand beyond traditional antitrust formulations to rein in large digital companies. Based on traditional thinking, blocking the deal is hard to justify. FitBit, once the wearables market leader, has been passed by Apple, Xiaomi, Samsung and Huawei. However, this acquisition tests two new arguments. First, that some platforms, including Google, are too big to get bigger with more data. Second, that privacy rights are threatened by dominant platforms, with health data especially sensitive to privacy concerns (although Amazon and Apple are growing health services as much as Google). Had the European Competition Authority considered Google’s digital advertising commitments as adequate it would have hinted that they were sticking to more traditional reasoning by focusing on a specific market, digital advertising, where Google enjoys very large market shares. 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 investigating the Google-FitBit deal.

Frauds Abusing Novel Pandemic Unemployment Assistance Intended to Aid Independent Workers

Report from the New York Times

In Brief – The federal Pandemic Unemployment Assistance (PUA) program created in March to get emergency funding to independent workers, including platform-enabled “gig” workers, harmed by the pandemic shutdowns, is increasingly being targeted by large-scale frauds aimed at stealing benefits. States across the country, led by California, are increasingly estimating very high levels of fraudulent claims, and many believe that rising levels of PUA claims as the economy recovers is likely due to frauds ramping up, swamping the ability to use the benefits numbers to measure how the recovery is impacting independent workers.

Context – Pandemic shutdowns had major negative impacts on independent workers, both platform-enabled “gig” workers, but also traditional independent workers, such as shopkeepers, fitness trainers, musicians and hairdressers, because so many independent workers were in fields that emphasized personal contact. With tens of millions left outside the company-based state unemployment assistance regimes, Congress created the federal-funded PUA, but required states to implement the benefit from scratch. Most state unemployment systems struggled to deal with the huge rapid spikes in unemployed people flooding their existing unemployment regimes with claims while also needing to create a completely new system to implement PUA for independent workers. The result was lengthy backlogs in approving PUA claims in many states. Backlogs have created challenges in understanding how independent workers are recovering because assistance checks are often attributed to weeks when benefits are paid, even if that is weeks or months after the fact. In addition, some states appear to have encouraged unemployed workers who worked multiple jobs, both independently and as employees, to use the federally-funded PUA program rather than state-funded traditional unemployment.

DoJ Meeting with State AGs to Ask Them to Join Google Antitrust Case Coming Soon

Report from the New York Times

In Brief – It is reported that the U.S. Department of Justice (DoJ) will brief representatives from state attorneys general offices (AGs) today on its plans to take antitrust action against Google and ask for attorneys general to sign on to the case. A DoJ-led antitrust case might be filed against Google in federal court as soon as the end of September. At the same time, a bipartisan coalition of 50 State AGs led by Texas AG Ken Paxton (R) and Washington, D.C., AG Karl Racine (D), has been actively investigating Google for more than a year and are expected to file their own antitrust case, although the timing appears somewhat slower, with some Democratic AGs reported to be advocating to delay a case until early next year. Although not finalized, the parallel DoJ and State AG investigations are reported to have different focuses, with the DoJ primarily targeting anticompetitive abuses related to Google’s search business while the State AGs are reported to be focused on Google’s role in the digital advertising market.

Context – While Google, Amazon, Apple and Facebook have each been facing criticism for a wide range of potential anti-competitive abuses, in the U.S., the antitrust cases targeting Google appear most advanced. This is likely due to the fact that the DoJ and the AGs can draw on a deep well of prior investigations and cases targeting Google that collected data and developed thinking. The European Competition Authority is a decade into investigations of aspects of Google’s search practicesadvertising business and conduct related to Android. The FTC also engaged in a less robust review of similar aspects of the Google operations from 2010 – 2013. In Europe, each case has resulted in a finding against Google, a major fine, and a succession of appeals. Google’s role in the digital advertising market has also been subject to competition reviews by Australia’s ACCC and the UK CMA. The CMA report on Google’s ad business was referenced repeatedly in the recent Senate antitrust subcommittee hearing on Google.

Korea Expanding Digital Content Company Contributions to Broadband Providers

Report from Business Korea

In Brief – As part of an ongoing effort to have large U.S.-based online content providers such as Google, Netflix and Facebook contribute more to the maintenance of robust broadband networks in Korea, rules have been promulgated by the Ministry of Science, ICT and Future Planning to implement amendments to the country’s main telecommunications law enacted earlier this year. The new rules require digital content businesses with more than one million daily users in Korea, and account for more than 1% of total digital traffic in the country, to take action such as procuring enough in-country server capacity and bandwidth from Korean network providers to ensure quality service to consumers. They will also be required to submit annual network quality support plans to regulators. The new rules have drawn criticism both from large Korean digital companies, who claim that they already pay significant network usage fee payments to telecom companies and should not be required to contribute further, as well as the U.S. Government, which objects to U.S.-based companies being forced to subsidize Korean Internet access.

Context – In 2012, Korea instituted a unique regime of mandatory data usage fees requiring Internet businesses to pay broadband companies to effectively subsidize the data usage of consumers. Korean Internet companies and broadband companies have both argued that large non-Korean digital companies were unfairly able to avoid the fees, and both Facebook and Netflix have been involved in long-running legal, regulatory and business conflicts. While Korea has been praised by net neutrality advocates for its network investments, high speeds and relatively low consumer broadband costs, the ability of Korean network companies to charge content companies for consumer bandwidth raises serious net neutrality concerns. In addition, as we see in Australia, where the government is proposing mandated payments by Google and Facebook to domestic media companies, special payment regimes imposed on digital companies are growing in popularity.

EU President Promises Go-It-Alone EU Digital Services Tax in 2021 If Global Talks Fail

Report from TechCrunch

In Brief – In the latest episode of the long-running drama over a potential new form of corporate taxes on large “digital” companies, EU President Ursula von der Leyen stated that Europe will propose an EU-wide digital services tax (DST) in early 2021 if there is no agreement at a global level to update corporate taxation for the Internet economy. President von der Leyen, who highlighted a range of technology policy initiatives in her first State of the Union speech to the European Parliament, expressed commitment to the global tax effort at the OECD and G20, but claimed that Europe would move forward if there was not agreement to achieve “a fair tax system that provides long-term sustainable revenues”. In anticipation of further efforts by the EU to impose a unilateral revenue tax on a narrow range of large companies that offer digital services, the U.S. Government has initiated trade sanction proceedings that could impose retaliatory tariffs on targeted EU exports if the EU does implement a DST.

Context – Europe has been a hotbed of DST efforts aimed at increasing corporate taxes paid by digital service businesses in countries with large Internet user bases as opposed to more traditional corporate tax regimes that focus tax obligations to countries where companies engage in their business operations. The EU debated but rejected a 3% DST on large digital companies in 2018-2019 when it was opposed by Ireland, Sweden and Denmark. A number of EU countries have since moved forward with their own DST plans, led by France. The French tax has led to U.S. trade retaliation, and the USTR has prepared similar retaliation against nine other countries and the full EU. While the OECD negotiations mentioned by von der Leyen may resolve the issue, they face many hurdles and a tax-tariff war could break out at year’s end. As DST regimes have come online in France, the UK and a few other countries, AmazonApple and Google have begun announcing in-country fee increases to offset the taxes.

Senate Republican Commerce Committee Leaders Introduce a Data Privacy Bill

Report from Bloomberg

In Brief – Almost ten months after circulating draft privacy legislation, Republican leaders of the Senate Commerce Committee, led by Chairman Roger Wicker (R-MS), have introduced a national privacy bill that the authors describe as giving Americans more control over their data and requiring businesses to be more transparent and accountable for their data practices. The SAFE DATA Act requires companies to obtain consumers’ affirmative consent before transferring “sensitive” information, such as financial account numbers, persistent identifiers, precise geolocation data, and data revealing race, ethnic origin, religion and sexual orientation, as well as allowing people to opt out of the collection, processing or transfer of any data that identifies an individual or device. There is no major movement on two key issues that divide Republicans and Democrats. The bill does not give consumers the right to sue companies over privacy failings, and would have the new federal rules preempt most state privacy state laws.

Context – Some analysts believed that enactment of the California Consumer Privacy Act, more states going their own way on privacy, and the growing bipartisan criticism of Big Tech, would lead to a bipartisan federal privacy law in the 116th Congress. It is not happening. This Senate Republican bill came months after major proposals from leading Democrats in the House and Senate. While some talk of bipartisan cooperation continues, major hurdles including meaningful policy disagreements (not limited to just “private right action” and “state preemption”), election year political and schedule challenges, and many privacy advocates believing that the 2020 elections, including a California state ballot initiative, will improve prospects for better legislative prospects in 2021. Worth noting is that the SAFE DATA Act includes proposals on “dark patterns” and “filter bubbles” aimed at imposing new regulatory mandates on how web sites and applications operate that have earned some Republican and Democrat support.

Initial U.S. Bans on Chinese-Owned Apps Hammer WeChat But TikTok May Slip Through

Report from the New York Times

In Brief – The U.S. Department of Commerce (DoC) has announced details of how the White House orders prohibiting US companies from engaging in business with WeChat and TikTok will initially be implemented. The Government proposes that companies, namely Apple and Google, cannot allow WeChat to be downloaded or updated as of September 20. That penalty is delayed until September 27 for TikTok, which is tied up in complex negotiations involving its Chinese-based owner ByteDance, U.S. companies and investors led by Oracle, a number of U.S. Government agencies, and the Chinese Government, which appears headed to a deal that will retain primary ownership with ByteDance. WeChat, a hugely influential commerce and communications “super app” in China that is heavily used by Chinese nationals and expatriates outside China because non-Chinese communications services are basically prohibited in that country, and is tied into the Chinese surveillance and censorship regime, is more at risk. It faces a range of further restrictions that appear aimed at shutting down the service. Those additional restrictions are not imposed on TikTok until November 12, aligning with the CFIUS order allowing weeks to wrap up the TikTok business negotiations.

Context – The digital decoupling of the U.S. and China is entering uncharted territory. The Committee on Foreign Investment in the United States (CFIUS) has accepted the restructuring of data operations such as ByteDance and Oracle are proposing to address Chinese data access concerns, but has also sometimes required the outright sale of U.S.-based apps, although never for a service as popular as TikTok. Likewise, there is no precedent for shutting down WeChat in the United States. A group of U.S.-based WeChat users has challenged the WeChat ban on First Amendment grounds and have won a preliminary injunction, but the track record on courts overruling the Executive Branch on security matters is not strong. On the other hand, the ByteDance-Oracle deal that will largely preserve TikTok is looking up despite opposition coming from many in the defense agencies and the Senate, with the President indicating his support for the plan. While WeChat users fight in federal court to use the service in the states, many large U.S. companies have argued that they need to work with the super app in China, and the proposed sanctions give them that flexibility. Regardless, China might retaliate against some or all of them in the Chinese market.

Spotify Criticizes New Apple Services Bundle as Anti-Competitive Threat to Music Services

Report from Reuters

In Brief – Sweden-based music streaming service Spotify is criticizing Apple’s new digital services subscription bundle offer that includes the Apple Music service as disadvantaging music streaming competitors and developers. Apple and Spotify each charge $10 a month for their streaming music service, but the Apple One package bundles it with other services such as Apple’s television or video game apps for $15 per month. Spotify, who filed a formal complaint against Apple with the European Competition Authority in March 2019 charging the hardware and digital services giant with anti-competitive practices related to the Apple App Store policies and fees, is credited by many with leading to the current Apple investigation in Europe. Apple responded to the criticism of Apple One stating that the subscription offer is aimed at current customers of its services and that a range of alternatives to each of the Apple services are available to users.

Context – Until recently, Apple was not in the top tier of digital giants accused of anti-competitive conduct. That has changed dramatically in the 18 months since Spotify touched off the European App Store investigation, with Australia, the United StatesKoreaJapan and Russia all joining in. Private antitrust lawsuits filed against both Apple and Google in U.S. federal court by Epic Games, the maker of video game Fortnight, covers much of the same ground. Despite the growing range of companies complaining about Apple’s App Store policies in recent months, including giants like Facebook and Microsoft, no others have joined Spotify in its current complaint about the Apple services bundles. For example, Peloton, the fitness hardware and app business, did not complain regarding the inclusion of Apple’s new fitness service in some Apple One bundles, but instead noted that it illustrated the potential for growth in the fitness service market.

Court Stays Preliminary IDPC Decision Overturning Standard Contract Clauses for Data Transfers

Report from Reuters

In Brief – Ireland’s High Court has placed a stay on the recent Irish Data Protection Commission (IDPC) preliminary decision that Facebook could not use Standard Contract Clauses as the legal mechanism authorizing transferring European user data to the United States. The IDPC is the lead privacy regulator in Europe for Facebook and many other international companies that have their European headquarters in Ireland. In July, the European Court of Justice (ECJ) overturned the US-EU Privacy Shield, a bilateral agreement permitting data transfers from the EU to the US, just like the US-EU Safe Harbor in 2015. Many companies, including Facebook, were expected to use Standard Contract Clauses for the data security compliance needed to continue EU-US data transfers. However, while the ECJ did not outright rule that Standard Contract Clauses were also deficient, the court’s opinion raised serious questions as to their merit. The IDPC took on the issues raised by the ECJ and passed along to Facebook that contracts were also likely not satisfactory, which threatened Facebook’s ability to engage in any data transfers and potentially many other companies as well. The court stay will provide more time for European governments, data regulators, companies and the US Government to craft new solutions.

Context – While Facebook appears to be at the center of the legal challenges undermining the tools thousands of companies use to transfer data between the EU and the United States, the court decisions are based on U.S. national security, intelligence and anti-terrorism surveillance laws and practices, many of which were first publicly revealed by the Edward Snowden. In short, the security leadership of the United States that began during the Cold War and has continued in the ongoing war on terrorism, is at the heart of the problem. Whether the U.S. will meaningfully change data access laws intended to combat terrorism and other serious criminal activities, and whether EU governments themselves actually want less robust intelligence capabilities, are major questions as governments attempt to balance the issues and permit companies, especially smaller firms, to engage in cross-border operations.

Mirroring the EU the US–Swiss Privacy Shield Found Wanting by Swiss Data Authority

Report Security Boulevard

In Brief – Switzerland’s Federal Data Protection and Information Commissioner (FDPIC), the country’s data protection authority, has announced that he no longer considers the Swiss-U.S. Privacy Shield to be an adequate legal framework allowing for the transfer of personal data from Switzerland to the United States. The decision follows on the recent decision from the European Court of Justice overturning the US-EU Privacy Shield. The FDPIC does not have the authority to invalidate the US-Swiss Privacy Shield, but instead maintains a list of countries that provide an adequate level of protection for data transfers under Swiss law, and the assessment of the US has been changed to “inadequate.” Like in the context of wider EU data transfers, the FDPIC raises a number of questions regarding the widely used alternative legal frameworks for data transfers, standard contractual clauses and binding corporate rules, encourages companies undertaking data transfers to conduct risk assessments and to consider technical measures that effectively prevent the authorities from accessing data.

Context – The European courts, and now the Swiss data protection authority, are finding that that U.S. security laws created in the Cold War and updated after 9/11 are at the heart of a privacy problem related to cross-border data practices. Whether the U.S. will meaningfully change data access laws intended to combat terrorism and other serious criminal activities, and whether other democratic governments actually want less robust intelligence capabilities, will be key questions going forward. In addition, as seen with Switzerland, many countries have adopted European data protection and privacy standards to achieve compliance with the EU’s General Data Protection Regulation. EU legal challenges against US intelligence practices, but also potentially other national intelligence services as well, could therefore threaten cross-border data transfers, as well as national security and law enforcement capabilities, in a number of non-EU countries as well.

European High Court Rules Zero Rating of Apps Violates Net Neutrality Regulations

Report from Euractiv

In Brief – The European Union’s top court has handed down its first decision on the bloc’s 2015 net neutrality rules in a case regarding the use of “zero rating” agreements (also called “zero tariff”) by Internet access providers. Zero rating is when an Internet access provider exempts some apps and online services from their consumers’ data consumption limits. In a preliminary judgement, the court stated that Hungarian telecom provider Telenor had violated the EU’s open Internet regulations that prohibits the blocking, throttling and discrimination of internet traffic by selling Internet access packages in which data traffic generated by certain specific applications, including Facebook, WhatsApp, Instagram and Twitter, did not count towards the consumption of data volume purchased by customers. The court determined that such zero tariff deals are likely to promote use of certain apps over other apps and therefore violates an obligation of equal and non-discriminatory treatment of web traffic.

Context – The legislative, legal and regulatory battles over net neutrality stretch back to the mid-2000’s in the United States and a number of markets globally. While behaviors such as blocking and throttling remain relatively rare, practices such as “paid prioritization”, where Internet access providers are paid by some apps and services for some form of preferential treatment, and “zero rating”, where Internet access providers provide preferential treatment to some apps or services potentially without payments, are more challenging from a net neutrality perspective. If Vice President Biden is elected President in November, expect the FCC to take action that moves back toward the 2015 net neutrality policies including more strict scrutiny of zero rating in the US. Another market where zero rating has been a controversial net neutrality issue is India, in particular when Facebook’s Free Basic service was offered in an effort to grow Internet access for very low income individuals.

Senate Antitrust Subcommittee Focuses Attention on the Google Digital Ad Business

Report from the Washington Post

In Brief – The Senate Judiciary Committee’s antitrust subcommittee held a hearing focused on charges that Google dominates nearly every aspect of the digital advertising market, leading to criticism of the company from Republicans and Democrats alike. Google’s search advertising business has always been the main source of the company’s revenue, but the company also built a market leading position in broader Internet advertising through acquisitions, grew YouTube into a massive advertising platform, and built a collection of third-party buy-side and sell-side advertising services linking its platforms. Subcommittee Republicans repeatedly charged that Google used ad dominance to abuse conservative blogging site The Federalist while Democrats used Google’s broad collection of massive platforms and services as proof that new antitrust authority is needed to reign in tech giants. Google’s representative argued that many charges were based on skewed market definitions, that prices for advertisers were going down, and that large and growing competitors existed, including Facebook and Amazon.

Context – This Senate subcommittee hearing was a mirror opposite of late July’s House Judiciary antitrust subcommittee event. In the House, with Google, Amazon, Facebook and Apple on the docket, scrutiny was haphazardly divided across the companies and many more issues. The Senate hearing was designed to pin down Google, and while issues like privacy and purported anti-conservative bias were raised, the focus was on advertising. And Google’s advertising business offers the most exhaustively developed antitrust critiques of the platform giants, including a decade-long clash between the company and the European Competition Authority, the FTC review of 2010 – 2013, major investigations by Australia’s ACCC and the UK CMA (the CMA report was repeatedly referenced), and now major investigations from a coalition of State AGs as well as the US Department of Justice.

Indonesia Expands List of Foreign Digital Companies Required to Collect New Digital VAT

Report from Reuters

In Brief – Indonesia, Southeast Asia’s largest economy, which on July 1 imposed a 10% VAT on digital products and services, and applied the tax to domestic and non-resident companies with a “significant economic presence” in the country, has notified 12 more companies of their duty to collect the tax. Among the companies added were social media firm Twitter, video-conference platform Zoom, Microsoft and subsidiaries LinkedIn, Skype and Mojang gaming (the maker of Minecraft), McAfee software, streaming platforms Novi Digital Entertainment (India) and PCCW Vuclip (Singapore), and a pair of larger Indonesian digital businesses. When the digital VAT was introduced it was applied to businesses in sectors such as software, video and music streaming services, applications and digital games. The economic and revenue impact of the pandemic downturn were cited as a justification of the tax change.

Context – Unlike the highly controversial “Digital Services Taxes” that countries such as France, the UK, India and Turkey are proposing to apply to the in-country revenues of large digital companies, expanding VAT, GST and other forms of sales taxes to digital services, and placing the tax collection responsibility on large, often foreign, digital platform, has been the “below the radar” front in the battle to expand taxation of the digital economy. In Southeast Asia, Singapore and Malaysia expanded VAT to cover digital services providers on January 1, Indonesia in July and the Philippines is debating the change. In Latin America, Chile imposed a 19% VAT on digital video and music earlier this year, and Mexico’s VAT expanded to streaming services on July 1. Expanding “permanent establishment” to include “virtual presence” due to digital sales is a key component of the OECD Pillar One proposal on Digital Services Taxes and US Supreme Court’s Wayfair decision expanding US online sales tax collection.

CFIUS Approves Netherlands-based Just Eat Takeaway Bid to Grab Grubhub

Report from StreetInsider.com

In Brief – Just Eat Takeaway, the Netherlands-based food ordering and delivery platform, and Grubhub, the third-largest meals delivery platform in America, have announced that they have received all necessary regulatory approvals for Just Eat Takeaway.com’s proposed acquisition of Grubhub. The companies reported that the Committee on Foreign Investment in the United States (CFIUS) has concluded its review of the Transaction under Section 721 of the Defense Production Act of 1950 and has determined that there are no unresolved national security concerns with respect to the transaction. The CFIUS nod followed up the UK’s Competition and Markets Authority and the US Federal Trade Commission. Along with announcing the approvals, the companies reported a six month delay in the expected close of deal to December 2021.

Context – The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) expanded the national security-focused reviews of foreign investments carried out by CFIUS beyond its traditional concerns with critical infrastructure and technology, with a particular focus on foreign acquisitions that involved sensitive personal data of U.S. citizens. Foreign acquisitions of any U.S. business with access to data on more than one million Americans now requires disclosure and review, and in this case that would include Grubhub. CFIUS’s expanded remit over data was clearly intended to align with bipartisan congressional concerns over Chinese digital acquisitions. In a very high profile CFIUS action, the Trump Administration has ordered ByteDance to unwind it’s 2017 acquisition of Musical.ly and sell the TiTok app to a new owner acceptable to the US Government by November 12.

ByteDance Hopes Data Agreement with Oracle Can Avoid TikTok US Shutdown or Sale

Report from Reuters

In Brief – Oracle is the preferred U.S. corporate partner of ByteDance, the Beijing-based digital business that owns TikTok, to solve the data security problems that the Trump Administration has cited in their order requiring TikTok be shut down in the United States. Microsoft, the most public suitor to acquire TikTok, has confirmed their bid will not go forward. The proposed Oracle arrangement appears quite different, being a business arrangement for Oracle to house, handle and control data on U.S. users rather than an acquisition of TikTok itself. Discussions of a TikTok sale were instigated by mid-summer US Government actions based on the contention that a Chinese business holding data on so many Americans was a security risk, but the Chinese Government intervened by imposing export controls on the type of algorithms ByteDance uses for TikTok to recommend videos to users, meaning the Chinese Government would need to approve any sale. It was reported that the Chinese Government preferred TikTok shut down rather than the US Government force a sale. The ByteDance-Oracle arrangement must be approved by the Committee on Foreign Investment in the United States (CFIUS), a federal interagency committee with authority to approve or reject acquisitions by foreign businesses in the United States. ByteDane is offering to create a TikTok global headquarters in the US to increase jobs as part of the deal, and some believe relationships between Oracle leaders and the Trump Administration will help win CFIUS approval.

Context – CFIUS interest in Chinese businesses investing in U.S. digital firms has been growing for years and Congress expanded the remit of CFIUS in 2018 to cover the acquisition of data on U.S. citizens. It is reported that ByteDance and Oracle hope that CFIUS’ approval two years ago of China Oceanwide’s purchase of U.S. insurer Genworth Financial, following agreement to use a U.S.-based third-party service to manage Genworth’s U.S. policyholder data, will be a convincing precedent to CFIUS. However, the level of tension between the countries on digital issues is much greater than two years ago.

Amazon Agrees with JFTC to Compensate Japanese Suppliers for Unfair Company Practices

Report from Japan Today

In Brief – Amazon’s business unit in Japan has pledged to return around 2 billion yen ($18.8 million) to approximately 1,400 small and mid-size suppliers to the company’s retail business as part of a set of voluntary commitments to settle a two-year long investigation of the Japan Fair Trade Commission (JFTC), the country’s competition authority. The JFTC began an investigation of Amazon in 2018 regarding practices such as forcing suppliers to shoulder part of the costs of discounts that Amazon chose to offer consumers as part of Amazon’s program of online price matching. The settlement employed a still novel JFTC process of voluntary remedial commitments in which the company is exempted from further penalties and avoids a determination of whether there was a violation of antitrust law. Agency officials defended the process as delivering compensation directly to harmed small businesses and achieving commitments to rapidly change a range of objectionable practices.

Context – It is important to distinguish between Amazon’s interrelated but different business operations when tracking the company’s competition law issues. The JFTC was investigating the Amazon retail business that purchases goods from traditional wholesale suppliers and sells them on to consumers like a traditional retailer. The Amazon ecommerce marketplace, where the Amazon retail business sells, but where third-party retail businesses also sell, is under investigation in Europe, the United States and Canada. Finally, Amazon is the one non-Chinese ecommerce platform operating a massive fulfillment center business, which handles logistics for Amazon retail and many other sellers on Amazon’s marketplace. Italian and Spanish competition authorities have opened investigations focused on Amazon’s logistics practices. The way Amazon combines their third-party marketplace and logistics services in a way that replicates a traditional retailer was highlighted by the judges in the recent Bolger v. Amazon product liability case in California.

Australian Competition Authority Adds App Stores to Their Digital Targets

Report from The Guardian

In Brief – The Australian Competition and Consumer Commission (ACCC), the country’s competition authority, has announced that it is opening an inquiry into the operations of the Apple and Google app stores and plans to present a report in March 2021. The ACCC released a paper introducing the topic and the March report is expected to review how Google and Apple position their own apps in their app stores, the competition between the two app stores, fees charged to app developers, how apps are ranked, and consumer protections to protect users from harmful apps. The ACCC is conducting a five-year inquiry into markets for the supply of digital platform services in Australia with report every six months on different digital platform services. The report on app marketplaces is the second report, and a report on messaging, social media and search services is due on September 30, 2020.

Context – Google has been at the top of the ACCC’s digital platforms target list for years, but until recently Apple was not in the top tier of digital giants accused of anti-competitive conduct. Australia’s app store review adds to similar inquiries focused on Apple’s App Store policies in Europe, the United StatesKoreaJapan and Russia. Private antitrust lawsuits filed against both Apple and Google in U.S. federal court by Epic Games, the maker of video game Fortnight, covers much of the same ground. Like the ACCC, Epic is also going after Google, which unlike Apple, allows developers to offer Android apps outside the Google Play Store. Apple has always operated a closed system requiring iPhone apps to go through the Apple App Store. Of course, both Google and Apple point to the other company’s ecosystem and policies, with Google comparing their relative openness and Apple defending their consistency and user experience. While many question the 30% fee structures on the Apple and Google mobile set-ups, the Epic case highlights that the three major game console companies also have the same 30% in-game fee levels.

Facebook Expands Interoperability Program Adding More Competitive Photo and Video Services

Report from Reuters

In Brief – Facebook has expanded a service initially rolled out in April that allows U.S. and Canadian users to easily and securely transfer photos and videos from Facebook over to other photo and video storage services. Initially, only Google was included as a destination, but Facebook indicated that more alternatives would be added, and Dropbox and Koofr are the next two. Due to privacy concerns related to transferring data regarding other Facebook users (or those who are not Facebook users), photo tags identifying people other than the user, and photos or video uploaded by other users, will not be able to be moved by a user. Facebook has stated support for regulations governing expanded data portability and user data transfers between services, which some believe helps address concerns with dominant digital platforms and is the topic of an upcoming Federal Trade Commission workshop.

Context – “Data portability” and other ideas based on the contention that Internet users own, or should own, data about themselves, are often raised in the context of privacy and digital platform competition. Sens. Mark Warner (D-VA), Josh Hawley (R-MO) and Richard Blumenthal (D-CT) have sponsored the ACCESS Act, legislation that would give users the right to transfer their data from large digital platforms (+100m users) to other digital platforms to promote competition and user-based data control. Mozilla has produced a paper on platform interoperability as a competition policy tool. Facebook has produced a white paper that raises important issues for governments to address regarding social network “data” that involves people besides the user with the account, namely friends and family, and also notes that competition policy proposals to require data sharing involve trade-offs over user data control. Finally, Facebook, Google, Microsoft, and Twitter have been working on open data portability technical standards through the Data Transfer Project.

Ireland Tells Facebook Standard Contract Clauses Might Be Deficient Like the Privacy Shield

Report from the Washington Post

In Brief – The Irish Data Protection Commission has informed Facebook that its use of “standard contract clauses” likely does not protect the company’s ability to transfer data on European users to the United States. Facebook’s data transfers were the subject of a recent decision of the European Court of Justice that ruled the US-EU Privacy Shield did not satisfy European legal requirements for transferring data from the European Union to the United States. Facebook’s use of data-security related contracts were also scrutinized, and while the European High Court did not rule them deficient, the opinion raised issues related to the data surveillance policies of the United States that made it clear that the use of contract clauses to justify the legality of data transfers was also legally suspect. It is unclear how Facebook will respond to the latest challenge to its data policies, but it is speculated this it could shift the location of the data centers it uses to hold and process data on European users.

Context – While Facebook is at the center of the legal challenges that continue to undermine legal tools used by companies to permit user data transfers between the EU and the United States, first the Safe Harbor, then the Privacy Shield and now potentially the Standard Contract Clauses, the court decisions are not based on how Facebook uses data. These issues are grounded in U.S. national security, intelligence and anti-terrorism surveillance laws and practices. The European courts have determined that U.S. security laws created in the Cold War, updated following 9/11, and largely maintained since are the heart of the problem. The 2013 Snowden revelations energized the tension between security and civil liberties in the U.S. but also Europe. Whether the U.S. will meaningfully change data access laws intended to combat terrorism and other serious criminal activities, and whether EU governments actually want less robust security capabilities, is a major question. Then there is EU policy toward data and China.

Competition Authorities of the Five Eyes Countries Agree on Increased Cooperation

Report from ZDNet

In Brief – The competition authorities for the “Five Eyes” nations have signed an agreement providing an enhanced framework for cooperation, including sharing intelligence and case theories, on investigations into anti-competitive practices across international borders. The Five Eyes is an intelligence and security alliance of the US, UK, Canada, Australia, and New Zealand established during the Cold War marked by enhanced sharing of signals intelligence. Competition authorities in Australia and the UK have been especially aggressive in recent years proposing new regulation of digital platforms, and the U.S. agencies have joined in more recently.  Australia’s ACCC called out the new agreement as bolstering its efforts to reign in the digital giants and the other signatories also mentioned the competition challenges of the increasingly digital global economy. The MMAC Framework includes a “Model Agreement” that can be used to establish bilateral case-by-case cooperation arrangements with third countries.

Context – Competition regulators in different markets sharing their playbooks is an important trend in digital platform public policy. Google’s position in the digital advertising market is a top focus of competition authorities in the UKAustralia and the United States among others. Google’s bid to acquire fitness wearables and wellness apps company FitBit is similarly facing reviews in multiple jurisdictions. Amazon is under review in Europe, the United StatesCanada and Japan, and Apple, which just a year ago was not facing the same level of scrutiny as the other giants is now finding its App Store policies under scrutiny in Europe, the United StatesAustraliaKorea and Germany. The unique relationships among the Five Eyes governments will also impact digital public policy in the context of data security and privacy in the aftermath of the 2013 Snowden revelations which continues to impact data transfer policy between the U.S. and the EU, which following Brexit no longer includes a Five Eyes country.

India Bans More Chinese Apps as Foreign Policy Conflicts Power Digital Decoupling

Report from The Economic Times

In Brief – Following months of increasingly tense relations between India and China, including active border confrontations in the western Himalayas, India has expanded its list of banned mobile apps from Chinese digital companies, adding 118 apps to the 59 included in the initial round in June and the 47 in the July second round. The wide range of impacted apps covers highly popular offerings from digital giants Tencent, Alibaba, Baidu and ByteDance, including major social messaging, gaming and ecommerce services. The Government of India continues to cite concerns with security, privacy and digital sovereignty.

Context – The Chinese Government has aggressively separated the country’s digital ecosystem from the rest of the world for security, economic and political reasons, creating a distinct “Chinese Internet” that has spawned digital giants that dominate the domestic tech economy and are growing their global presence. The U.S. Government is taking actions to decouple the U.S. digital ecosystem from Chinese digital businesses, a move which may be inevitable and likely reflects a growing realization by U.S. digital companies that they will never meaningfully operate inside China. The lack of Indian digital business operations inside China contributed to India targeting Chinese digital businesses for retaliation. The perception of close links between the Chinese digital giants and government security and surveillance regimes, both inside China, but also as tools to influence communications outside China, is also important. While the Presidential orders to ban ByteDance’s TikTok and Tencent’s WeChat has generated the most attention, the Administration’s Clean Network initiative proposes to segregate Chinese enterprises from telecoms, cloud services, and undersea cables, as well as apps, and app stores. The European reaction to this growing digital decoupling, whether in alignment with western democracies or to a more inward-focused European version of digital sovereignty, is a key question.

Bill Applying Strict Product Liability to Ecommerce Marketplaces Stalls in California 

Report from CNBC

In Brief – Landmark product liability legislation in California that aims to apply the same standards to ecommerce marketplaces that apply to traditional retailers failed to be approved by the state’s legislature before the end of the 2020 legislative session. The bill, AB 3262, had picked up momentum in the closing weeks of the session with the unexpected announcement from Amazon that they would support the legislation if the strict product liability standards were applied to “all online marketplaces”. While some bill supporters reacted positively to the expressions of support from Amazon, expanding the legislation to cover a much wider range of enterprises, in particular advertising-based business models, brought a wide range of new industry groups to the debate in opposition and led to the bill being tabled.

Context – Traditional retailers have long objected to differences in liability for defective and dangerous products between retailers and ecommerce marketplaces, arguing that online marketplaces gain an unfair competitive advantage. A major retailer coalition has been formed to expand lobbying efforts. The Trump Administration supports expanding marketplace liability, with a particular focus on products from China, and related bills have been introduced in the U.S. House and Senate. The critical distinction between digital marketplace platforms and retailers has been that marketplaces do not see or handle goods sold by independent sellers so they cannot judge quality or find defects and so it is appropriately the seller’s duty. A retailer is different because they handle and can inspect product. Amazon is unique, combining a digital marketplace with its massive and integrated FBA fulfillment center system, handling many products just like a retailer. This could become a key fact in the product liability debate, which Amazon likely recognizes. Amazon operating like a retailer rather than a marketplace was highlighted by the judges in the recent Bolger v. Amazon liability case in California as well as in a critical blog post from Etsy’s CEO.

California Expands AB 5 Exemptions to Further Tighten Focus on Gig Labor Platforms

Report from the Los Angeles Times

In Brief – One year after the California state legislature enacted AB 5, landmark worker classification legislation targeting “gig” work platforms, the state legislature has exempted a wide range of professions from the law. When enacted in mid-2019, AB 5 exempted dozens of highly-compensated professions such as doctors, dentists, lawyers, insurance agents, accountants, engineers, financial advisers and real estate agents. However, many others complained that they also traditionally worked independently by choice, would be harmed by the law, and lobbied for changes over the past year. The result, AB 2257, passed unanimously, adding many to the exemption list, including freelance writers, editors, producers, artists, translators, narrators, cartographers, cartoonists, musicians with single-engagement live performances, musicians involved with sound recordings or musical compositions, insurance inspectors, real estate appraisers and inspectors, manufactured housing salespersons, youth sports coaches, competition judges, business consultants, animal services, landscape architects and professional foresters.

Context – The political energy behind AB 5 was always to force “gig” platforms, especially for ride-sharing and deliveries, to hire drivers as employees rather than “independent contractors”. However, such a wide variety of professionals and creative freelancers were threatened by broad worker classification legislation like AB 5 that no other states have followed California, with legislation stalling even in progressive states like New Jersey and New York. While many fortunate professions in California will benefit from the legislature’s latest bill, the real targets, the digital “gig” work platforms, in particular Uber and Lyft, are fighting it out in court. They recently won a stay to keep operating during the court proceedings, and are leading a state 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 to Increase Prices on UK Advertisers by 2% to Offset UK Digital Services Tax

Report from campaignlive

In Brief – Google has announced that as of November it will be raising its fees on UK-based advertisers by 2% to account for the new UK national Digital Services Tax (DST) that went into effect in April. While approximately 30 mostly U.S.-based digital companies are expected to be impacted by most proposed national DSTs, a few of the largest platforms are starting to step forward and announce country-by-country fee increases to offset the new national digital taxes. Amazon led the effort, announcing a 2% fee increase in the UK in early August, and later a 3% increase in France. Apple recently announced DST-related fee increases for Turkey (7.5%), Austria (5%), France (3%), Italy (3%) and the UK (2%).

Context – Pressure continues to change the taxation of digital companies to increase corporate taxes paid to governments in countries based on the location of digital consumers rather than the traditional corporate tax methodology of taxing companies where they engage in their business operations. Traditional corporate tax rules have resulted in most U.S.-headquartered digital platforms paying most corporate taxes in the U.S. and smaller markets like Ireland, the Netherlands, Luxembourg, and Singapore that often provide tax benefits to promote corporate investment. France has led the effort, imposing a 3% DST on company revenue last summer. The U.S. Government threatened tariff retaliation, and the two have engaged in threats and counter-threats for over a year. The U.S. most recently imposed $1.3 billion in tariffs on a range of French luxury goods that become effective at the end of the year if the tax issue is not resolved through a bilateral agreement or enactment of a multilateral digital tax accord at the OECD. A number of countries have followed the French model, resulting in the U.S. readying retaliation against the EU and nine countries, as well as the announced corporate fee increases, a trend likely to increase.

Facebook Announces It May Block Media Article Sharing in Australia to Avoid Payment Scheme

Report from Reuters

In Brief – In Australia, where the Federal Government is aggressively pressing forward on legislation to address the alleged competitive imbalance between platform giants Google and Facebook, and the country’s traditional media industry, Facebook has announced that it is prepared to block Australian Facebook and Instagram users from sharing links to media stories rather than expose the company to a government mandate to pay Australian media companies for user posts. A government-mandated system of payments for linking to or presenting content from media by the two digital giants is proposed in the draft News Media Bargaining Code. While the specific payment rates could be negotiated by the companies directly, if there is no agreement (and negotiations earlier this year proved fruitless), government mediators would impose rates on the companies. The Australian Competition and Consumer Commission (ACCC) replied to the Facebook statement calling it “ill-timed and misconceived.” The ACCC is yet to submit final legislation to the Parliament but it is expected in the coming weeks.

Context – Traditional media companies globally are rallying around the idea that Facebook and Google should pay them through a sort of highly-targeted social media tax scheme. Facebook’s most recent public statement in Australia follows Google’s public criticisms of the ACCC draft as potentially giving an unfair leg up to big Australian media in competition with smaller content creators by giving big media preferential insights into search ranking algorithms and user data. (The ACCC also quickly responded to Google.) France has the other government leading the media payments campaign, with a competition court ordering Google to pay media companies for media snippets and threatening a further competition challenge if Google simply ended their use. In an effort clearly intended to reduce media pressure in at least some markets, Facebook and Google have each announced news-based services that will pay some media for content.

Under Heavy App Store Policy Criticism, Apple Implements Policy Appeals Process

Report from The Verge

In Brief – Apple announced that its new App Store policy appeals process, which allows app developers to challenge Apple over whether an app is in fact violating one of Apple’s App Store guidelines, is live. Apple is also creating a submission process for developers to suggest changes to the App Store guidelines. The new policy process is rolling out in the midst of Apple facing highly public criticism over its App Store rules and fees. The European Competition Authority has opened an investigation, spurred by European-based music service Spotify, which has led to complaints being filed by giants Facebook and Microsoft. The topic was raised repeatedly with CEO Tim Cook in July’s House Judiciary Committee antitrust hearing, is the focus of a highly publicized federal antitrust lawsuit filed by Epic Games, the creator of highly popular Fortnite, and is the subject of an open investigation by the Department of Justice.

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 work program to implement recommendations of the ACCC Digital Platforms Inquiry. Finally, the PACT Act from Sens. Brian Schatz (D-HI) and John Thune (R-SD), would require greater transparency and an appeals process for users to challenge platform content moderation decisions made in the context of Sec. 230 of the CDA.