Google Settles Android Auto Dispute with German Antitrust Regulator

Report from Reuters

In Brief – The German Federal Cartel Office (FCO) has announced the end of its antitrust probe of Google’s automotive services and maps platform with the company agreeing to changes addressing the regulator’s concerns. “I am delighted that we have been able to reach an agreement,” said FCO President Andreas Mundt. “Google’s commitments have the potential to bring about far-reaching changes in the market.” Under the settlement, automakers will be able to include non-Google services in in-vehicle infotainment systems that use Google Automotive Services, which consist of Google Maps, Google Play and Google Assistant. The company has also agreed to allow its map services to be combined in part or in whole into navigation services offered by other providers, such as HERE, Mapbox or TomTom. Google is expected to apply the terms of the agreement across the European Economic Area.

Context – The FCO investigation of Google’s auto services was undertaken under Section 19(a) of the German Competition Act. That law, enacted in 2021, allows the FCO to regulate the largest digital giants rather than rely on traditional antitrust investigations and enforcement actions. Following the FCO designation of Google as a digital company “of paramount significance on competition across markets”, the antitrust regulator was able to address company conduct it believed was anticompetitive, opening an investigation of its auto services in 2022. The German law was a harbinger of the EU Digital Markets Act. Some German officials have questioned the DMA for being too limited in the conduct it can address. While there are seven DMA “gatekeepers”, only 24 of their designated “core platform services” are covered by the law. Germany’s Section 19(a) authority allows the FCO to regulate any service of the five designated digital giants — Amazon, Apple, Google, Meta and Microsoft. For example, the FCO is challenging Apple’s in-app ad tracking rules. Allegations that Microsoft uses Office 365 to benefit products like Teams and its cloud services are not in scope for the DMA, but they are for the FCO.

European Commission Rolls Out New “AI Continent Action Plan”

Report from CNBC

In Brief – The European Commission has announced a set of actions it dubbed “The AI Continent Action Plan” to boost the EU’s artificial intelligence industry to compete more aggressively with the US and China in developing the groundbreaking technology. The effort appears to be a direct reaction to criticism from Europe’s technology firms and investors that the bloc’s regulatory and tax environment is too cumbersome and is slowing AI development. Included in the plan outlined by the Commission are a commitment to build a network of AI “gigafactories”, which are giant datacenters optimized to develop and train the most advanced AI models, as well as to create specialized labs to give startups better access to high-quality training data. In rolling out the plan, the Commission reiterated support for its landmark AI Act, saying the legal regime, “raises citizens’ trust in technology and provides investors and entrepreneurs with the legal certainty they need to scale up and deploy AI throughout Europe,” while also announcing that the action plan includes creating a new AI Act Service Desk to be “the central point of contact and hub for information and guidance” on the rules.

Context – Backers of the AI Act sincerely believe that guardrails benefit AI development by easing user uncertainty with AI-enabled service. The initial framework was a tiered, risk-based regulatory regime for applications using AI, not an effort to regulate the underlying AI technology itself. However, after the emergence of Chat-GPT, the EU Parliament moved beyond regulating specific AI applications and imposed rules on core “foundation models”. This shift was divisive among EU-based AI innovators. When the law went into force in 2024, the EU had planted the flag globally for AI regulation. That was not without risk. The US, UK, and Japan have each shifted their AI policies in a deregulatory way since last year. Some European leaders are joining in, with French President Macron calling for the EU to “resynchronize with the rest of the world” and Commissioner Henna Virkkunen saying that the Commission will be business-friendly in implementing its new rules.

Apple and Google Face Regulation Under Japan’s New Digital Regime

Report from the Japan Times

In Brief – The Japanese Fair Trade Commission has formally designated three companies as being subject to the new law regulating major information technology companies in the smartphone application market, the American mobile ecosystem giants Google and Apple, and iTunes K.K., an Apple subsidiary in based in Tokyo that manages iTunes for Apple in the market. The law regulates app stores, operating systems, browsers and search engines, and prohibits the two giants from blocking the entry of other companies into their app mobile market or giving preferential treatment to their own services. Google is subject to regulation in all four areas, while Apple will face restrictions in three areas excluding search engines. For iTunes, restrictions will apply to the app store it operates with Apple. Last December, the JFTC determined that the new law would apply to mobile companies with an average monthly user base of 40 million or more. The law goes fully into effect in December.

Context – Japan has pursued more moderate digital regulation than the EU and the UK. There are five digital giants in Japan – Amazon, Apple, Google, Rakuten and Yahoo Japan. Two are Japan-based. None of the original six digital “gatekeeper” companies regulated by the EU’s Digital Markets Act (DMA) is European. And it’s unlikely any UK-based companies will be designated as having “Strategic Market Status” under the Digital Markets Competition and Consumers Act (DMCCA). If Japan’s app store regulation reflects the country joining the European trend of regulating digital markets rather than sticking to traditional antitrust enforcement, it’s noteworthy that they have narrowly chosen a market with just two digital giants, both not Japanese. And they picked a digital market where the regulatory tide is well underway elsewhere. In the EU, the Commission has rejected both Google’s and Apple’s app store rules for not meeting the DMA’s rules on “steering”, meaning giving users easy access to low fee alternatives. In the US, federal judges are covering much the same ground in the federal antitrust cases filed by Epic. And both will soon be regulated under the DMCCA.

UK “Drip-Pricing” and Fake Review Rules Come Online

Report from The Verge

In Brief – The UK Competition and Markets Authority (CMA) has announced that rules to implement the consumer protection sections of the Digital Markets, Competition and Consumers Act (DMCCA) have come into force. The 2024 law, which notably authorizes the CMA to regulate the digital platform giants, also empowers the agency to enforce consumer protection laws directly. The DMCCA bans the posting and commissioning of fake reviews, and prohibits ‘drip pricing’, where shoppers are shown an initial price for a product, but more fees are added as they proceed with their purchase. The pricing rules apply to services like food delivery apps and ticket booking platforms, requiring that obligatory fees are clearly displayed at the start of the checkout process, although truly optional fees, such as for upgraded airline seats, are not affected. The review rules ban businesses from using or commissioning fake reviews and requires website providers to take “reasonable and proportionate steps” to prevent and remove them.

Context – Consumer reviews, widely used by nearly everyone online to gather valuable information on all manner of goods and services, have proven to be one of the top benefits of the commercial internet. At the same time, frauds and deceits, often powered by an international fake review industry, have been a chronic problem. Regulators and leading online companies are engaged. The DMCCA rules come online just months after FTC rules on fake reviews went into effect in the US. In addition, a collection of the leading review platforms has formed the Coalition for Trusted Reviews to further encourage and cooperate with government efforts. In keeping with the CMA’s recent focus on promoting a pro-growth business environment, Sarah Cardell, its chief executive, noted that the agency understands that businesses, especially small businesses, face compliance challenges and said, “We’re working hard to support them with that and keep burdens to a minimum – through accessible guidance and communications, as well as direct engagement – alongside listening and responding to feedback.”

Trial Finally Begins in Meta Antitrust Lawsuit Filed by Trump FTC in 2020

Report from the Washington Post

In Brief – The bench trial pitting the FTC against Meta before US District Judge James Boasberg is finally underway in a lawsuit initiated in 2020 by the first Trump Administration. The regulator’s antitrust complaint alleges that Meta’s acquisitions of Instagram in 2012 and WhatsApp in 2014 were used to illegally monopolize the social media market and that Meta should be forced to sell those platforms. Back in 2021, Judge Boasberg dismissed the original FTC complaint, but he gave the regulators an opportunity to improve their case and refile. They did, and the amended complaint has proceeded relentlessly since. However, Boasberg continues to express skepticism with the FTC’s case, noting in his decision to reject Meta’s motion for summary judgement that while the regulator met the “forgiving” standard to proceed to trial, “time and technological change pose serious challenges” to the FTC’s market definition.

Context – Defining markets is key in antitrust litigation. That is very much the case here. The FTC argues that Meta is the dominant “personal social networking” company whose top competitor is Snapchat. Their narrow platform market excludes social media giants like TikTok, YouTube, Reddit and LinkedIn. Meta has argued throughout that their business is as a digital advertising platform and that they compete with all those giant platforms for user attention and advertiser dollars. Meta’s continued transformation of Facebook and Instagram into platforms that operate more like TikTok, with its massive and disruptive growth, is the kind of change the judge was likely referring to. Whether the Trump Administration will accept the entreaties from Meta to settle the case short of a breakup will be a big milestone in judging how they will treat “Big Tech”. Meta has been among the most public in aligning with the new regime’s digital policies, especially on content moderation, but there is a very aggressive anti-Big Tech wing within the Trump Administration. A decision from Boasberg will likely take months and the Administration may believe their leverage in settlement talks will still grow for a while.

France Begins Requiring Age Verification for Online Pornography

Report from Politico

In Brief – France has begun implementing legislation enacted in 2024 that requires all websites displaying adult content to use technical age verification methods. The SREN law initially applies to pornography websites registered in France, such as Dorcel, along with those registered outside of the EU, like OnlyFans. As of June 7, the age verification rules will be extended to sites based in other EU countries, including the sector giants like Pornhub, YouPorn and Redtube, owned by the Aylo group and based in Cyprus. The regulation aims to address privacy concerns by requiring that porn sites offer multiple age verification options, including at least one using a “double-blind” system in which the adult site does not learn of the user’s identity and the age verification service provider does not know the site being accessed.

Context – “Protecting” teenagers from various online harms is a global phenomenon. Porn sites are a popular target, but so are social media platforms. As France begins age verification for adult sites, they are simultaneously working to implement legislation to impose age-based requirements on social media, including requiring parental approval for users under age 15. The EU’s Digital Services Act regulates how digital platforms address a wide range of objectionable online content, including harm to young people, and TikTok and Meta are both being investigated by the European Commission for failing to protect young users. Ofcom, the lead UK digital regulator, is implementing the Online Safety Act, including requiring that adult sites available in the UK use approved age verification technology as of this July. They are also requiring social media sites to “consistently enforce their age limits” and protect children from inappropriate content. Many countries in Asia are actively considering online age limits, and Australia has set a firm minimum age of 16 for social media. Finally, the US Supreme Court heard oral arguments in January on a Texas-law requiring age checks for online porn sites. Their decision will further inform US courts scrutinizing the flood of state laws regulating social media.

Trump “Reciprocal” Tariff Pause Leads EU to Reciprocate on Retaliation

Report from the Washington Post

In Brief – Following an announcement from US President Donald Trump that new “reciprocal” tariffs would be paused for 90 days for all countries other than China, the EU announced a similar delay in the 25% tariffs it had announced in response to the US steel and aluminum tariffs imposed in March. That set of US tariffs was expected to impact over $25 billion in EU exports and the EU retaliation list hit a collection of US exports including agriculture products, steel, tobacco, and yachts, valued around $23 billion. European Commission President Ursula von der Leyen had responded to the additional US tariff rounds, both against auto exports and then the 20% across-the-board duties announced on April 2, by emphasizing diplomacy over escalation, including delaying until the end of April additional retaliation besides the counterpunch to the steel and aluminum tariffs, and hoping negative public and market reaction in the US could lead Trump to step back. He did.

Context – A trade war between the US and EU probably won’t be caused by tech regulation, but Big Tech’s treatment in Europe is intertwined with the trade standoff. The EU runs a major surplus with the US in goods, while the US has a big, although smaller, surplus with Europe in services. Retaliation against those services exports, including digital services, is on the table if the trade conflict escalates. Top US officials also argue that EU “gatekeeper” regulation and digital taxation discriminates against American businesses. Penalties for Apple and Meta in the first DMA investigations are expected soon, but may be delayed while the tariff battle plays out more, and fines may be modest with a focus on conduct remedies to avoid tariff antagonism. But EU officials repeatedly say they will not walk back their digital rules, and they almost certainly won’t. The first big US target under the DSA is X, with lightning rod Elon Musk’s platform in line for a big fine and a rejection of its speech moderation policies, which could prove especially explosive with the Trump Administration and even European populist conservatives.

Utah Governor Cox Signs Bill Requiring App Stores to Confirm User Age

Report from Engadget

In Brief – Utah Governor Gov. Spencer Cox (R) has signed the App Store Accountability Act into law, making it the first state to require app stores to verify users’ ages and facilitate getting parental consent for minors to download apps to their devices. The law, which is scheduled to go into effect on May 7, requires companies that operate app stores to confirm the age of each person creating an app store account. Today, Apple and Google are dominant, but the number could grow as app store antitrust trust cases target the two giants, If a new app store account holder is determined to be 18 or younger, the account would also need to be linked to the account of a parent or guardian. App developers distributing age-restricted apps through the app store are required to confirm from the app store operator that the user requesting the download is above the necessary age, and if the user is under age 18, gain consent for the app download from the affiliated parent account. Meta has regularly argued that Apple and Google, playing central roles in the app ecosystem, are best positioned to manage age verification by confirming a user’s age one time at set-up and then simply telling app developers that a user is old enough for any single app download, as well as managing parental consent regimes. Meta, X and Snap applauded Governor Cox’s decision to sign the bill, while Apple and Google object to mandates that require them to collect and manage age-related data for all users.

Context – Governments worldwide, including Australia, the EU, UK, and a growing number of US states, are introducing measures that are intended to protect children and teens from so-called online harms, especially involving social media and pornography. They operationally require age verification. Singapore’s digital and media regulator recently announced that large app stores will need be take on system-level age verification measures in that country. The US Supreme Court heard oral arguments in January regarding the privacy and free speech implications of a Texas law imposing age verification duties on pornography websites, which is certain to impact the proliferation of online teen protection laws.

Google Offers Play Store In-App Payments Alternative in the UK

Report from TechCrunch

In Brief – Google has announced that it is offering app developers in the UK the ability to use other billing services for in-app payments in their Android apps besides Google’s own payments system. The company’s “user choice billing” program allows developers to add approved payments processor alternatives alongside Google’s service, and gives the app developer a 4% discount on Google’s fees when a payment is made through a non-Google alternative. The plan was designed in response to the many legal and regulatory challenges directed at Google (and Apple) for allegedly controlling in-app payments processing to extract large fees on purchases made on Android devices (and iPhones). The UK Competition and Markets Authority (CMA) began its antitrust investigation in 2021, and in 2023 Google proposed offering user choice billing to settle the probe. Although the CMA opened a consultation on Google’s proposal, the regulator eventually closed the matter and announced that it would instead address the app store rules and policies of Google and Apple, including in-app payments and fees, though the agency’s new regulatory authority under the Digital Markets, Competition and Consumers Act (DMCC). As the CMA continues developing its DMCC regulations for Google, the UK joins the US, EU, Japan, South Korea, India, and others in Google’s expanded payments program.

Context – Epic Games’ 2020 lawsuits against Apple and Google in US federal court kicked off a now nearly five-year global campaign by large app developers to regulate Apple and Google. While initial complaints focused on in-app payments, that was never the real point. It was always about fee levels. So, when Google and Apple eventually offered payments options, complaints continued. In the EU, the Commission has objected to both companies’ app store rules for not meeting the DMA’s rules on “steering”, meaning giving users easy enough access to lower fee alternatives. In the US, federal judges are covering much the same ground in the cases filed by Epic. Japan is regulating the two giants’ app stores. And now so is the UK.

EU’s FB Marketplace Antitrust Decision Proposed Breaking Out the Platform

Report from Bloomberg

In Brief – When the European Commission presented their antitrust decision to Meta in November finding that the company unfairly operated its Facebook Marketplace classifieds-type ecommerce service, the EU regulators pressed the company to create a separate version of its marketplace site outside the Facebook app. The commission’s then-confidential decision, now made public, shows that Meta was hit with a €798 million ($861 million) fine, told to offer its users a way to access rival services, and directed to not use all the non-public data it had collected from the ads placed on its social media sites by marketplace competitors to improve Facebook Marketplace’s own products. Meta has appealed the fine and is attempting to address the regulator’s concerns by allowing other classified ad platforms in Europe to place their listings on the Facebook Marketplace. While the potential remedies outlined in the decision are technically only suggestions from the EU regulators, they provide insights into how the antitrust authority thinks the alleged infringements could be ended.

Context – Meta launched Facebook Marketplace in 2016, quickly integrated it into its core platform, and grew it into one of the top classifieds ad platforms in many European markets. The commission claims that tying Marketplace to Facebook gave it an unfair advantage over competitors, and also that Facebook imposed unfair terms on those competing ecommerce businesses when they advertised on Facebook, often requiring them to share user data that was then used to benefit FB Marketplace. Competition regulators in the EU and the UK launched parallel investigations in 2021. Meta reached a settlement with the UK CMA in 2023. Meta has since been designated as “gatekeeper” under the EU’s Digital Markets Act and its Marketplace is a “core platform service”, meaning that the company must comply with the law’s 18 requirements on FB Marketplace without specific antitrust enforcement action. In the US, Meta faces regulatory pressure to break up the company as well, with the latest iteration of the Trump Administration’s FTC continuing the antitrust effort to break out Instagram and WhatsApp.

Arkansas Social Media Age Limit Fully Blocked by Federal Judge

Report from the Arkansas Advocate

In Brief – A federal judge has blocked Arkansas from enforcing its 2023 law that requires teenagers under age 18 to have parental consent to create accounts on social media platforms such as Facebook, Instagram, TikTok, and Snapchat. District Judge Timothy Brooks said in his order that Act 689 violates the First Amendment because it is a “content-based restriction on speech that is not narrowly tailored to serve a compelling government interest,” as well as the due process rights of the social media companies. Arkansas was one of the first states to enact an age limit for social media platforms and its law had the earliest effective data. NetChoice, a trade association of large digital platforms, has sued to block each of the state social media regulation and age-limit laws, including Arkansas’ measure, consistently winning temporary injunctions, including from Judge Brooks in August of 2023. NetChoice applauded the latest decision by Brooks, their first permanent injunction. Although he noted that the state has a compelling interest to protect minors from harms caused by “unfettered social media access”, the judge criticized the law as overly broad, by erecting barriers to entire social media platforms, unconstitutionally vague, for failing to adequately define which entities are subject to its requirements, and engaging in content-based regulation by exempting specific platforms including YouTube and LinkedIn.

Context – “Protecting” teenagers from various online harms is a global phenomenon. In the US, federal judges have identified First Amendment problems with state laws and raised privacy concerns with online age verification regimes. The US Supreme Court heard oral arguments in January on a Texas-law requiring age checks for porn sites. Age-gating online activity outside the US is not constrained by the First Amendment. In Europe, it is a major feature of the UK Online Safety Act, the EU Digital Services Act, and France is requiring age checks for online porn. Many countries in Asia are actively considering online age limits, and Australia has set a firm minimum age of 16 for social media.

President Trump Extends TikTok Spin-Off Negotiating Period into June

Report from the New York Times

In Brief – President Trump has announced that he would again extend the deadline for ByteDance to divest ownership of TikTok’s US operations by 75 days to provide time finalize a deal that the President said would “SAVE TIKTOK”. Sources involved in the deal, which was reportedly nearly final with an expected sign off by the President just prior the April 5 deadline created by his first 75-day reprieve, would have kicked off a new 120-day period to finish the deal’s financing and paperwork. However, negotiations came to a stop when the Chinese Government raised objections as part of their response to the latest round of tariffs initiated by President Trump. The TikTok spinoff deal reportedly would have several venture capital firms, private equity funds, and tech giants invest in a company that would control TikTok’s operations. ByteDance would have retained a 20% stake in the spinoff company, the maximum amount allowed by the law enacted last year, and the new TikTok would not be permitted to coordinate with ByteDance on the app’s algorithm or share its user data.

Context – There is no legal clarity surrounding the unprecedented TikTok matter. The federal law forcing the sale of the platform went into effect on January 19 after the Supreme Court rejected the First Amendment-based challenges of the company and a group of content creators. While the law gave the President the authority to extend for 90 days the provisions that prohibit app stores and hosting providers from supporting TikTok’s US services, it required him to certify that the time was needed to wrap up a qualified deal to divest the company. Conservative Republican “China Hawks” condemned the initial 75-day extension order, which they said exceeded the law’s provisions. The President has recently said that he might grant China somewhat lower tariff rates if they approve the deal, leading to criticism from Democratic backers of the law. Questions continue regarding how the app could operate without the current TikTok algorithm engineered by ByteDance, as well as the implications of the worsening US-China trade relationship.

Meta’s Zuckerberg Lobbying President Trump to Settle FTC Antitrust Case

Report from the Wall Street Journal

In Brief – Meta CEO Mark Zuckerberg recently met with President Trump in the White House and discussed settling the federal antitrust lawsuit that aims to break up the company by forcing Meta to spin out Instagram and WhatsApp. The bench trial is set to begin on April 14. The Federal Trade Commission’s complaint, originally filed during the final weeks of the first Trump Administration, alleges that Meta’s acquired Instagram in 2012 and WhatsApp in 2014 to illegally monopolize the “personal social media market” and the deals should be unwound. Back in 2021, Judge James Boasberg fully dismissed the original FTC effort. Refiled in 2021 by President Biden’s FTC Chair Lina Khan, the complaint then proceeded relentlessly. When Boasberg rejected most of Meta’s motion for summary judgement last fall, he struck a skeptical tone in his order, saying “time and technological change pose serious challenges” to the FTC’s market definition that rejects competition from TikTok. LinkedIn and other social media platforms.

Context – Whether Meta will be broken up is another scene involving the mystery box of how “Big Tech” will be treated by the second Trump Administration. The embrace of the President in the final months of the campaign and at his inauguration were much noted. Meta has been among the most public, including changing content moderation policies and naming a Republican to lead global public policy. The President and Vice President have since criticized foreign tech regulation and taxes and threatened tariff retaliation. However, the Trump DoJ continues to call for breaking up Google by forcing a spin out of Chrome in that antitrust trial. There is a very aggressive anti-Big Tech wing within the Trump Administration, seemingly led by VP Vance and MAGA thought leader Steve Bannon. Big Tech hoped that tariff threats would help protect them from foreign penalties, taxes, and policies that the prior Administration often seemed to cheer. However, it is also pulling them more tightly into the Trade War fueled by new Trump tariffs, with the EU considering services tariffs and tech company retaliation.

Much of New York Times Copyright Suit Against OpenAI Will Proceed

Report from NPR

In Brief – US District Judge Sidney Stein is allowing the core copyright infringement claims to proceed in the lawsuit filed by the New York Times alleging that OpenAI engaged in mass copyright violations by copying content without consent or compensation and using it to train its AI systems. Microsoft, a major financial and technical backer of OpenAI is also named in the suit. The case is one of several major lawsuits brought by copyright holders against developers of Generative Artificial Intelligence (GAI) services, including chatbots and image generators. The judge is allowing the Times’ claims for copyright infringement, contributory copyright infringement, and trademark dilution to proceed. He dismissed claims of unfair competition and violations of the Digital Millennium Copyright Act. The case, along with the other major AI copyright lawsuits in US federal courts, will likely hinge on the application of the fair use doctrine, which could mean much AI training using copyrighted material would be allowed without compensation, or could result in huge penalties for illegal copyright infringement.

Context – Questions around the legality of “training” the neural networks of major GAI models with non-licensed copyrighted material are one of the most contentious legal and regulatory issue surrounding AI. Copyright lawsuits are taking center stage in the US where legislation on the question is unlikely, at least before judges’ rule. In the EU, with its AI Act, regulators and AI expert groups will play key roles setting the rules, or at least guidelines. US District Judge William Orrick, who is overseeing cases involving GAI image generating services, recently issued a ruling in which he explained that he is trying to ascertain how the GAI systems actually work. He will learn that they are not traditional databases and do not store and retrieve copies. But even the developers don’t know exactly why a system produces a particular output, hence the nagging existence of our favorite GAI concept, “hallucinations”. Expect governments, even in big markets like the UK and Japan, to continue to deliberate while waiting for legal developments in the US.

Brazil Steps Back from Digital Services Tax in Face of Trump Tariff Threats

Report from Reuters

In Brief – The Brazilian government has shelved the plan it announced last September to enact a new tax on big tech firms in 2025. The measure, which was expected to mostly impact US-based digital giants like Amazon, Google, and Meta, was expected to be a Brazilian Digital Services Tax (DST). The decision was reportedly taken to avoid exacerbating trade frictions with the US as the Trump Administration plans to raise tariffs on countries that impose trade barriers on US companies. As part of the President’s “America First” trade policy, he has threatened tariff retaliation against countries that impose digital taxes that disproportionately impact US businesses. The Brazilian government is reportedly going to instead focus its technology policy efforts on advancing digital competition legislation that went to public consultation in January 2024 and targets practices such as “killer acquisitions” and the privileging of a company’s own products or services in search results.

Context – During the first Trump Administration, France created the first DST to increase taxes on the biggest internet businesses. Most were US companies. Other countries followed suit. President Trump responded with tariff threats, the DSTs were delayed, and talks moved to the OECD. The second Trump Administration came out of the gate with executive orders on January 20 opposing the OECD plan led by President Biden and signaling that he would again fight DSTs with tariffs. India, like Brazil, is signaling a willingness to step back on its DST, while Poland is moving forward. If the Brazilian Government does shift its focus to ratcheting up regulation of the same US giants that it had planned to tax, the move may still be used as justification for new US tariffs in line with a further White House directive in March that broadly threatens trade retaliation against any tax or regulatory actions that are “discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities.”

Virginia Governor Vetoes Bill Regulating “High Risk” AI Systems

Report from Stateline

In Brief – Virginia Governor Glenn Youngkin (R) vetoed a bill to regulate AI, including both AI developers and companies using AI systems. Largely modeled after legislation enacted by Colorado last year, the measure imposed mandates on so-called “high-risk” AI system, including steps intended to protect consumers from discrimination. HB 2094, which passed the Democratic-controlled legislature, would have made Virginia the second state to place special duties on AI developers to discover and address bias in their systems when used for hiring, housing and health care decisions. In his veto message, Youngkin said, “There are many laws currently in place that protect consumers and place responsibilities on companies relating to discriminatory practices, privacy, data use, libel, and more,” adding that the bill, “fails to account for the rapidly evolving and fast-moving nature of the AI industry and puts an especially onerous burden on smaller firms and startups that lack large legal compliance departments.”

Context – The big question in AI public policy remains whether governments are moving toward direct regulation. Some believe regulatory guardrails will benefit AI development by easing user uncertainty. Others argue the burdens will breed uncertainty, slow innovation, and drive entrepreneurs and investment elsewhere. In early 2024, the regulatory camp was notching wins, with the EU pushing its AI Act across the finish line as the global standard for AI rules, the UK Government was focused on AI safety and pressure was building in Japan to enact AI rules as well. When Colorado legislated it signaled that US states might also become active. But now, the Trump Administration has revoked the Biden AI executive order and is clearly in the investment-focused camp joined by the latest UK and Japanese governments. No states have followed Colorado’s lead. Even in Europe, French President Macron has called for the EU to “resynchronize with the rest of the world” and Commissioner Henna Virkkunen has said that the Commission will be business-friendly in implementing its new rules.

EU Parliamentarians Tell Commission Not to Water Down AI Act Duties

Report from the Financial Times

In Brief – European Members of Parliament (MEPs) who played leading roles crafting the EU’s AI Act are urging the European Commission to reject attempts to reduce the mandates imposed on the developers of the largest general AI systems. The warning letter to Commission digital chief Henna Virkkunen comes as the Code of Practice for General-Purpose AI is being developed in a process guided by the EU AI Office that includes expert group drafting committees and officials from member state governments and the commission. The MEPs argue that the latest draft code proposes that some regulatory requirements for the largest general AI system providers would be voluntary rather than mandatory, including on important measures addressing risks such as the spread of violent and false content, and interference in democratic processes. The lawmakers say that such changes were “never the intention of the trilogue agreement” and that narrowing a legal text through a Code of Practice is “dangerous, undemocratic and creates legal uncertainty.”

Context – The AI Act was initially designed as a tiered risk-based regulatory regime for applications using AI technology, not an attempt to regulate AI technology itself. But the EU Parliament changed course in response to the emergence of Chat-GPT and chose to regulate large “foundation models” such as the biggest chatbots. This shift was divisive and EU-based AI innovators pushed for lesser mandates. The compromise applied fewer mandates to developers of smaller models, which included the EU-based leaders, but more on larger developers. Yes, the EU planted the flag globally for AI regulation, but that is not without risk. The US, UK, and Japan have each shifted their AI policies in a deregulatory direction since last year. At the recent Paris AI summit, French President Macron called for the EU to “resynchronize with the rest of the world” and Virkkunen said that the Commission will be business-friendly in implementing its new rules. Don’t get distracted by talk of a US v EU standoff. It is an intra-EU disagreement over how best to incentivize investment and innovation to achieve both growth and safety.

Top German Court Rejects Apple’s Effort to Escape Big Tech Regulation

Report from Bloomberg

In Brief – Apple’s legal challenge to the German Federal Cartel Office (FCO) designation that they are a digital company “of paramount significance on competition across markets” has been rejected by the Federal Court of Justice in Karlsruhe, the country’s top civil court. Apple therefore joins Google, Meta, Amazon, and Microsoft under the regulatory scheme in Section 19(a) of the German Competition Act. The law allows the FCO to regulate digital companies that are determined to have paramount significant across markets, including prohibiting preferential treatment for their own services or hindering interoperability. The iPhone giant challenged the FCO’s April 2023 designation under Section 19(A), arguing that the regulator did not accurately account for the level of competition in the German hardware market. However, the judges sided with the FCO, citing the company’s financial power, market shares, and the fact that it bundles its hardware and software products into what the company calls the “Apple ecosystem”. Andreas Mundt, head of the FCO, lauded the decision and said it buttresses the agency’s ongoing review of Apple’s tracking rules for third-party apps. Last year, the Federal Court of Justice likewise rejected Amazon’s challenge to being designated under Section 19(a) by the FCO.

Context – When Germany enacted Big Tech regulation through Section 19(a) in 2021 it was a harbinger of the EU’s Digital Markets Act (DMA) for “gatekeepers” and added scrutiny of Very Large Online Platforms (VLOPs) under the Digital Services Act (DSA). A few companies, including Amazon (DSA) and ByteDance (DMA) have challenged their designations, but EU judges, like German judges, have not been sympathetic. Germany-based fashion marketplace Zalando is attempting to overturn its VLOP designation, with its CEO saying that VLOPs are “talked about as bad actors” and “this is bad for our brand.” With so few EU-based companies meeting the thresholds set by any of the European Big Tech laws, and the Trump Administration arguing the laws are discriminatory, how EU judges respond to Zalando’s challenge will be most interesting.

European Tech Groups Call for “Buy European” Digital Procurement Policy

Report from CNBC

In Brief – Nearly 100 European companies and lobbying groups, many representing smaller EU-based tech firms, have signed an open letter to European Commission President Ursula von der Leyen and digital chief Henna Virkkunen calling for “radical action” for Europe to “become more technologically independent across all layers of its critical digital infrastructure.” The group says that dramatic changes in US policies in the first months of the second Trump Administration highlight how Europe needs to rapidly reduce its reliance on foreign technology companies, especially from the United States and China, to ensure strategic autonomy, long-term security, and economic resilience. Citing the Eurostack Initiative, they call for policies to strengthen EU-based capabilities across all levels of the digital ecosystem, including chips, computing, connectivity, applications, and artificial intelligence. In line with last fall’s Draghi report on European Competitiveness, the letter advocates for an investment-driven approach rather than more regulations. Specific suggestions include a sovereign wealth fund for public investments in “capital-intensive” priorities such as quantum computing and chips, adding a “Buy European” requirement to public sector tech services procurement to grow demand for EU-based tech suppliers, and new policies to incentivize private sector businesses in the EU to buy more EU-tech services as well.

Context – The massive disruptions in US-EU relations in the opening months of the second Trump presidency obviously go well beyond tech regulation. But accusations that European regulation of Big Tech “gatekeepers” is de facto discrimination against American businesses, that fines are discriminatory taxes, and that content moderation regulation is anti-conservative speech control, are adding to tensions and some would argue that the largest US tech companies are aligning with the US Government. And EU-based companies, whether industrial giants like Airbus or small tech firms like Proton email, appear ready to push for EU spending preferences and industrial policies intended to erode the current dominance of US-based digital giants.

Amazon Continues To Battle Consumer Product Safety Commission

Report from the AP

In Brief – Amazon has filed a suit in federal court challenging the January decision and order from the US Consumer Product Safety Commission (CPSC) that the company must abide by retailer-like recall duties for products that are stored and distributed through the company’s massive logistics network and are also listed and sold on its marketplace. The lawsuit, which pushes along the company’s four-year legal battle with the regulatory agency, continues to argue that Amazon’s FBA logistics operations are a stand-alone distribution operation like FedEx and UPS, and now also argues that the CPSC itself is unconstitutional in its structure and authority. The company is likewise challenging the constitutionality of the National Labor Relations Board, as has Space-X. The CPSC’s recall demands do not apply to Amazon when products from third-party sellers are sold on the Amazon marketplace but are not held by FBA, nor when a product handled by FBA is sold on another company’s marketplace or the seller’s own website. The ruling applies to more than 400,000 defective items sold on Amazon and handled through FBA. New Amazon duties include notifying purchasers and the public about the product hazards and providing refunds or replacements.

Context – Amazon’s biggest ecommerce innovation was to reimagine the model of retail product wholesalers. Businesses that traditionally supplied products to major retailers, with the products then housed and sold off the retailer’s store shelves, have become “third-party sellers” who pay Amazon to have their products housed and sold off Amazon’s FBA shelves. By 2019, their sales reached 60% of the total on its marketplace and the model is highly profitable for Amazon, with “seller” fees often exceeding 50%. Amazon fully controls the customer experience like a retailer, and when their Marketplace and FBA are legally considered unrelated businesses, there are benefits involving liability and recalls. The FDA and several product liability lawsuits are also slowly pushing the ecommerce giant on this point.

Trade War May Hit Big Tech as EU Considers Services Retaliation

Report from DW

In Brief – Facing an increasingly aggressive and sizeable collection of tariff increases being imposed by the Trump Administration and searching for the right mix of retaliatory responses, the European Commission is considering trade penalties against US services companies, including so-called Big Tech. The Trump Administration has imposed significant new tariffs on steel and aluminum, as well as autos and auto parts, which are major EU exports. And Trump is promising a further large round of country-by-country increases described as “reciprocal tariffs” linked to the barriers imposed by trading partners on US exports. In developing their retaliatory response to the US tariffs, the Commission and EU member states are reportedly considering extending retaliation to services industries because US services exports to Europe are so sizeable, outstripping US goods exports and therefore providing more options to choose targets that make the most sense for Europe. In developing their trade retaliation, the EU may use new trade retaliation authority enacted in 2023 with Chinese threats in mind. Referred to as their “trade bazooka”, the EU can impose a range of penalties on digital and services companies, including tariff-like levies but also restrictions on government contracting and even limits on company IP rights.

Context – Whether Willie Sutton really said, “I robbed banks because that’s where the money is,” that’s what’s going on here. The EU runs a big trade surplus with the US on goods. But services are the opposite story, including digital services. If the EU wants to match US trade barriers dollar for dollar, adding penalties on services drastically increases the EU’s ability to pick ways to impose more political pain on the US and reduce economic self-harm in Europe. President Trump’s willingness to threaten trade retaliation for all kinds of foreign taxes and regulatory penalties might be appealing to some US tech companies who thought the prior administration did not stand up for them, but a full-scale trade war that pulls them directly in is likely to be a different matter. EU tech sovereignty backers may smartly tie trade retaliation with domestic tech development initiatives.

French Regulator Dings Apple 150 million Euros for App Tracking Policy

Report from Reuters

In Brief – After years of review, France’s antitrust agency announced that it has fined Apple 150 million euros for the discriminatory implementation of their App Tracking Transparency (ATT) policy that requires all third-party apps to get explicit approval from iPhone users to collect online browsing data for use in digital advertising. The regulator has determined that while the goal of the policy is not itself objectionable, it was implemented in a manner that imposes undue user burdens third-party app developers that are not imposed on Apple’s own apps. Apple billed their ATT policy, first announced in 2020, as a major step forward for user privacy, but the move was quickly challenged by many in the digital ad industry as a way for Apple to harm competitors and grow its own ad business. A coalition of French trade groups filed an antitrust complaint asking the Autorité de la Concurrence to block its rollout. The regulator rejected the request but opened an investigation. In 2023, the regulator filed an initial objection alleging that Apple did abuse its dominant position by imposing discriminatory conditions on app developers, and its latest decision notes that Apple’s policy “particularly penalized smaller publishers” who “depend largely on the collection of third-party data to finance their activity.” Apple expressed disappointment with the decision and noted the regulator did not order that it make any specific policy changes to the policy.

Context – Similar antitrust investigations have also been initiated in Germany, Italy, and Poland. In February, Germany’s FCO announced that it too suspects that Apple’s ATT policy does not treat third-party app developers as is required by the country’s special antitrust regime for the largest digital platforms, which includes Apple. The German regulator believes that Apple applies rules to data processing for advertising by third-parties that do not apply to Apple’s own data practices, the users of third-party apps face more consent boxes than apply to Apple’s own apps, and the language Apple uses in the consent boxes for third-party apps is more negative than the language Apple uses for their own consent boxes.