News & Insights 2 old

Long-Time Twitter CEO Jack Dorsey Supports Musk – Content Moderation May Be Why

Report from Bloomberg

In Brief – Jack Dorsey, one of Twitter’s founders and its longest-serving CEO, has announced through a series of Tweets that he supports Elon Musk’s effort to buy the platform and take it public. “Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.” “Elon’s goal of creating a platform that is “maximally trusted and broadly inclusive” is the right one.” Ev Williams, another one of Twitter’s four founders who also served as CEO from 2008 to 2010, is excited to see what happens with Elon Musk at the helm, saying “I am pro free speech, but what are the nuances of that? What I’m interested in, and I think it has a lot of promise, is how we decentralize moderation.”

Context – Many journalists, pundits and pundit-journalists (mis)characterize Musk’s comments about dialing back content moderation with statements like “Most of all, it seems, he wants to ensure that views, however abhorrent, aren’t curtailed.” Comments from Dorsey and Williams point to a far more nuanced view of the complicated issue. The concise, but not Tweet-length thing to know is that Musk has outlined interest in a kind of open, transparent, content moderation model that seems similar to an idea that Dorsey endorsed in 2019 and dubbed the “Bluesky project”. The proposal, which Dorsey attributed to super-smart digital policy thinker Mark Masnick, is to allow users to choose from among many alternative content moderation algorithms that are transparent in their operations, including ones designed by non-affiliated programmers and entities, that connect into the platform. This creates the opportunity for a much wider range of content moderation alternatives meeting user desires, as well as largely removing the company from making most of the calls on politically sensitive moderation. Williams was likely referring to this concept as well. Doing something dramatic and outside-the-box on such a big and sensitive matter might be what these founders think can only be done in a private company.

Musk Targeting “spam bots” Leads to Experts Speculating on Threats to Anonymity

Report from the Washington Post

In Brief – Elon Musk has not been highly specific in his plans to change Twitter, but he has said (on Twitter) that he will “defeat the spam bots” and “authenticate all real humans”. While he has not provided detail on his plans, legal and policy experts are speculating on a range of possibilities and describing how they might threaten free expression and marginalized people. Requiring individuals to post Tweets under their real name, which has not been mentioned by Musk, is considered especially threatening to vulnerable people, in particular those who criticize authoritarian regimes. Requiring people to certify to the platform that they are a person, while allowing them to post anonymously through a pseudonym, is considered a less threatening method of attempting to remove automated spam accounts, but questions were raised about risks from hackers breaking into company databases of user information. Finally, some experts speculated that Musk’s Twitter could try to develop a technical solution to non-human accounts.

Context – While Musk-Twitter spam bot plans at the pure speculation stage, there are real changes underway on social media user authentication outside the US that are worth being aware of. In Australia, Prime Minister Scott Morrison, never one to back away from criticizing Big Tech, argues that anonymity on social media is abused by “trolls” and “cowards” to “say the most foul and offensive things” and is proposing legislation would require social media companies to collect personal details of all users, such as name, phone number and email address, and establish a process to have the user’s identity revealed to facilitate defamation suits. In the UK, the massive Online Safety Bill to regulate all digital platforms for user-generated content will require large digital platforms to create a system that allows users to verify their identity to the platform, and combine it with a parallel system to allow users to block communications from other users who have not verified their identity.

California Bill Establishing Website Design Standards for Younger Users Passes First Test

Report from TheCenterSquare.com

In Brief – The California Assembly Privacy and Consumer Protection Committee voted unanimously in support of AB 2273, the California Age Appropriate Design Code Act, legislation requiring websites and online services likely to be frequented by children to offer upgraded privacy and safety protections by default unless there is a “reasonable certainty” that a particular user is an adult. Under existing law, online platforms are required to treat users under age 13 as children, but that would be raised to under 18 by the legislation, a change opposed by groups including TechNet and the Chamber of Commerce. The web site design practices included in the legislation are drawn from the UK’s landmark Age Appropriate Design Code, which went into effect last fall, and includes 15 design practices including prohibiting collecting and retaining a child’s personal information that is “not necessary to provide a service”, and restricting the collection of precise geolocation information. The bill would establish a Children’s Data Protection Task Force within the California Privacy Protection Agency and the body would establish and oversee the regime.

Context – Broad social media regulation is unlikely this year in the US Congress, but legislation targeting kids online may be another matter. The issue is very bipartisan. While Republicans are generally resisting calls to allow regulators to direct the operations of businesses, even tech businesses they strongly criticize for ideological discrimination, they are calling for strict regulation when kids are online. President Biden also used his State of the Union Address to call on Congress to enact stronger children’s privacy rules. Now, if you support much broader regulation of digital businesses, don’t worry, it’s happening in both the EU and UK. The regimes being enacted in both markets are extraordinarily comprehensive, and will give digital platforms a full taste of being highly regulated.

House Republican Champion of Big Tech Antitrust Reform Predicts Summer Win

Report from Time

In Brief – Rep. Ken Buck (CO), the top Republican on the House Antitrust Subcommittee and the lead Republican supporter of the aggressive anti-Big Tech antitrust bills led by progressive Subcommittee Chairman David Cicilline (D-RI), is publicly claiming that at least one major bill, the American Innovation and Choice Online Act (AICO), which prohibits the largest digital platforms from preferencing their own products and services, will be enacted into law this summer. While the House Republican Leadership strongly criticizes the largest tech companies for ideological bias that penalizes conservative viewpoints, they have opposed the anti-Big Tech legislation passed last summer in the House Judiciary Committee, claiming the measures would increase government influence over the tech platforms in ways that could make ideological bias worse. Buck claims that up to 100 Republicans could support the AICO on the House floor, offsetting Democratic defections.

Context – With the EU on course to enact two huge pieces of digital legislation, the DMA imposing new competition policy-inspired regulation on a dozen of the largest “gatekeepers”, and the DSA creating new regulatory standards for digital platforms to address objectionable content, and the UK creating their own DSA-type regulatory regime with the Online Safety Bill, the $64,000 Question is how likely is it that something similar passes the US Congress this year? We say still less than 50:50. But Rep. Buck says “not so fast”. To be clear, content moderation legislation like the DSA or Online Safety Bill is not happening. Democrats and Republicans are farther apart than ever, and Elon Musk buying Twitter probably makes those chances even more slim. However, the AICO is like the DMA, but even more targeted. The Biden Administration recently came out in support, and US regulation champions are definitely feeling FOMO with Europe acting so aggressively. But we still put our money on US digital regulation effecting kids online privacy.

Twitter Will Accept Offer of Free Speech Champion Elon Musk to Buy the Platform

Report from the Wall Street Journal

In Brief – Twitter has accepted an offer from billionaire Elon Musk, one of the richest men in the world, and one of the platform’s highest profile users, to purchase the company for $44 billion. Musk claims to be a strong advocate for free speech, has publicly advocated for the platform to take a less interventionist role in moderating content, and often has appeared to sympathize with conservatives who have argued that social media platforms interfere in debate in ways that are ideologically biased. Musk’s offer represents a meaningful premium over the market price for Twitter shares and he has indicated he believes a range of changes can improve the business.

Context – PEI will stick with thoughts on how Musk’s acquisition of Twitter impacts public policy. First, keep in mind that Twitter is not a “digital giant”. Its user base is a fraction of Facebook or TikTok, and based on market cap it is a “mid-size” tech business. It is only oversized in terms of how the platform is used by, and appeals to, politically active people and influencers. So, don’t expect an antitrust angle. Instead, this is huge news in the online content moderation space. For the first time, a giant social media platform will be led by someone who is not seen as being ideologically progressive (or a Chinese business, but that’s a whole separate issue). Progressives in media and politics, including among Twitter employees, expressed great anxiety over what it would mean if Musk bought the platform. And many conservatives cheered the prospect. Some even threatened the Twitter Board for fighting the entreaty. It’s possible that the world will soon learn how different a platform that claims to try not to interfere too much looks like. It’s really not clear, especially when you combine the scale the platform with so many pieces of content and commentary, decisions in the innumerable policy “grey areas”, and the need to automate decisions to deal with speed and cost. That said, Pinterest recently banned climate “misinformation” across the board. Google has banned advertising, including on YouTube, with climate change “disinformation”, and Twitter just announced something similar. I wonder how that plays out now? Finally, governments are intervening in content moderation. Is it just dumb luck that Elon Musk buys Twitter days after the European Union finalizes the Digital Services Act that imposes unprecedented regulation to address online “objectionable content”? Transparency in content moderation policies is one thing the EU calls for, and so does Musk, so there’s that. But he seems to be far more interested in allowing free flowing debate on objectionable content than the European leaders, who decry an online “Wild West”.  I also think this further reduces Republican appetite for any legislation to force platforms to combat misinformation. And finally, the biggest question is whether he will pardon former President Trump?

Federal Court of Appeals Rejects Industry Effort to Block California’s Net Neutrality Law

Report from Reuters

In Brief – The Federal Ninth Circuit Court of Appeals has rejected a request made by leading telecommunications companies and trade associations to reconsider a unanimous decision made by one of its three-judge panels in January to allow a California net neutrality (NN) law enacted in 2018 to go into effect. California’s statute was crafted in response to the Trump Administration FCC acting in 2017 to overturn the Obama Administration FCC’s 2015 NN order. California’s law prohibits Internet service providers serving customers in California from blocking or throttling traffic, requiring fees from web services to deliver or prioritize traffic to consumers, or exempting favored services from data caps, often called “zero-rating”. The federal judges in the Ninth Circuit continue to side with the argument made by California and NN advocates that the FCC’s 2017 determination that broadband services were information services not regulated by the FCC left open to states the option to regulate them at the state level.

Context – With Democrats supporting “strong” regulation and Republicans objecting to mandates, Net Neutrality has become a political football. FCC rules swing back and forth depending on which party controls the White House. Another FCC reversal was fully expected after President Biden was elected, but the surprisingly long wait for the US Senate to confirm a third Democratic FCC Commissioner has thrown a wrench in the expected timetable. Filibuster rules don’t apply to confirmation votes on FCC Commissioners, so Democrats approving a pro-NN nominee seemed a formality even in a 50-50 Senate. VP Harris could break the tie. However, nominee Gigi Sohn, a longtime champion of NN and other progressive telecommunications priorities, has been tied up for months with Republicans united with the very aggressive network industry. Therefore, a single Democratic Senator can block her. If the Biden FCC cannot act as expected on NN, the California law will grow in relevance.

Facebook Challenging the CMA’s Order to Sell Off Giphy in Uphill UK Court Fight

Report from Bloomberg

In Brief – Meta Platforms (Facebook) is making arguments in front of the Competition Appeal Tribunal (CAT), a special UK competition law court, that the Competition and Markets Authority (CMA) exceeded its legal authority and substantively erred on a number of grounds when it rejected Facebook’s $315 million acquisition of GIF platform Giphy and ordered the deal to be unwound. The competition regulator determined that Giphy, a New York-based startup, was a nascent digital advertising services provider that could emerge as a meaningful display advertising competitor to dominant Facebook, as well as that Facebook could restrict access to Giphy’s GIF inventory to undermine rival social media competitors such as Snapchat and Twitter. Facebook argues that the regulator made significant errors, including in determining the markets involved, ability to exercise market power, or show that Giphy was likely to become a meaningful advertising competitor. The CAT rarely overturns CMA decisions.

Context – Concerns with acquisitions by deep-pocketed digital giants are widespread, but no consensus is emerging on actual policy. As acquisition “thresholds” for government review are shrinking, more regulators in more countries are claiming authority to review more acquisitions, many which involve small startups with no connection to the countries of the regulators. That is the case with Giphy. Also, as more regulators get involved and claim veto power over deals, prospects increase that regulators and courts in different countries do not agree. A European court recently approved Facebook’s Giphy bid with conditions, while US regulators did not intervene, and the CMA proposes to dissolve it globally. The big 2020 Google-FitBit tie-up was approved by the EU but Australia did not accept the same conditions, and the CMA’s head said the UK would have rejected it. Who’s in charge? Who truly can veto deals? Entrepreneurs and venture capital firms are worried.

Online Content Moderation Regulation Main Event – The EU Wraps Up The DSA

Report from CNBC

In Brief – Following last month’s agreement finalizing the Digital Markets Act (DMA) that imposes new competition policy-inspired regulations on likely a dozen “digital gatekeepers”, the European Union has finalized the Digital Services Act (DSA), an equally massive effort to direct how all digital platforms address illegal and objectionable online content. Keeping users safe online includes new rules covering “dark patterns”, which are deceptive website practices to influence user decisions, limitations on targeted advertising, including banning targeted ads to minors and ads based on sensitive data such as religion, gender or sexual preference, and specific duties to take down objectionable content, including transparency duties related content moderation practices. Regulators, including in the Member States, will have authority to determine objectionable content. Inspired by online content on COVID and the Russian invasion of Ukraine, the DSA includes an “emergency” mechanism that permits the EU to force platforms to rapidly disclose what steps they are taking to tackle what regulators consider misinformation or propaganda. The largest digital platforms, those having at least 45 million users, will be charged a new revenue-based regulatory fee of .1% of global earnings to fund enforcement.

Context – It’s hard to over-hype the change in governance of digital platforms embodied by the DMA and DSA. While the “Wild West” rhetoric of many EU leaders is misinformed, imposing broad new regulatory rules on so many digital platforms is certain to dramatically impact the digital ecosystem. Given that “misinformation” is often inherently political, the EU’s grand regulatory experiment, applauded by Democratic leaders in the US who call for social media companies to crack down on content that is often partisan in nature, will be interesting to watch. Compare their vision to the many Republicans applauding Elon Musk’s efforts to buy Twitter with an apparently different vision of online content moderation.

Private Class Action Antitrust Complaint in US Federal Court Targets Google Maps

Report from Bloomberg

In Brief – Google has been hit with a private federal class action antitrust complaint alleging that the digital giant has built a dominant position in the GPS navigation mapping market and engaged in a range of anticompetitive practices to stifle competition and drive up the cost of accessing their mapping-related digital services. Maps is one of Google’s most widely used services, with the company reporting that more than a billion people use it every month and more than 5 million active apps and websites are using core products of the Google Maps Platform every week. The lawsuit was filed by a trio of companies that pay Google for online mapping services. They contend that Google’s 2013 acquisition of Waze, the leader in digital turn-by-turn navigation, allowed it to consolidate the top two digital mapping services and build a market share that the plaintiffs allege exceeds 80 percent. The complaint also alleges that Google has drastically increased the prices paid by business users to access Maps APIs, as well as engaging in other tactics tying various Maps services together to lock users into the Google ecosystem and undermine nascent competition.

Context – This is the second time in a matter of weeks that competition concerns focused on Google’s mapping services was in the news, following reports that the US Department of Justice Antitrust Division was increasing the pace of an open investigation of a similar set of competition concerns into Google Maps, including how it is bundled in the Google Automotive Services infotainment system service, as well as the terms and conditions of the Maps APIs. While the EU’s Digital Markets Act regulating gatekeepers is certain to impact Google’s search and digital advertising services, Maps is very likely to fall under the new regime as well. The Italian competition authority has already fined Google for anticompetitive practices on their auto platform, and Google Maps preferencing the Lime App has drawn criticism in Denmark.

Deliveroo Loses Another European Worker Classification Suit, This Time in France

Report from Reuters

In Brief – A French court has fined UK-based “Gig work” food delivery platform Deliveroo 375,000 euros, and two former company managers were handed one-year jail sentences that were suspended, for violating the rights of delivery riders. The case, filed in 2018 and covering company conduct from 2015 to 2017, accused the delivery platform of intentionally misclassifying delivery riders as independent contractors rather than employees in order to avoid a range of social security payments and worker protection regulations. Judge Sylvie Daunis’s ruling focused on the level of control that Deliveroo imposed on riders, belying the contention that they were independent contractors. Deliveroo responded that the ruling is inconsistent with a string of earlier cases in France and it will consider an appeal, as well as claiming that many of the practices in question have since been changed to give riders greater independence.

Context – Food delivery and ridesharing are ground zero in Gig work platform regulation. Last year, Spain, followed by Portugal, enacted legislation to require ridesharing and delivery drivers to be treated as employees of the digital platforms that they use. The Spanish law has faced mixed reviews, with the large platforms largely reacting by outsourcing delivery to independent small businesses that deal with delivery workers but limit hours to stay below employment thresholds. Many couriers complain that things are now worse. Deliveroo, not a market leader in Spain, withdrew from that market in response. The French court setback is not Deliveroo’s first, following similar results in the Netherlands and Italy. In what is likely to prove the most important long-term development, the European Commission is proposing a new directive on “Digital Labor Platforms” that attempts to address platform-enabled work where workers are controlled in the manner in traditional employees, while allowing digital platforms for freelancers, often quite skilled, to continue serving truly independent workers.

Federal 9th Circuit Court of Appeals Reaffirms that Public Web Scraping is Not a CFAA Violation

Report from TechCrunch

In Brief – A three-judge panel of the Federal Ninth Circuit Court of Appeals has reiterated its view that the Computer Fraud and Abuse Act (CFAA) does not prohibit the scraping of publicly available information on the Internet. The decision is the latest in the five-plus year legal saga pitting HiQ Labs, a firm offering clients insights into the dispositions of their workers based on data gleaned from their public LinkedIn profiles, and LinkedIn, which has attempted to block HiQ from the mass downloading of data from LinkedIn user pages, claiming they violate its Terms of Service, are therefore unauthorized, and based on the CFAA, is a violation of the federal anti-hacking law. HiQ Labs won a preliminary injunction in District Court in 2019 barring LinkedIn from blocking its access to the site, a result upheld by the Ninth Circuit Court of Appeals. LinkedIn’s appeal to the Supreme Court resulted in the high court directing the Ninth Circuit to reconsider its decision based on the Supreme Court’s CFAA ruling in Van Buren v. the United States, which ruled that a lack of authorization to engage in website activity is not, itself, a violation of the CFAA if the website data is open to the public. The Ninth Circuit used that standard and reaffirmed its 2019 view that HiQ’s downloads were from public LinkedIn profiles that were not protected and therefore were not a CFAA violation.

Context – While many advocates of the open Internet have supported HiQ and objected to the CFAA being used to criminalize accessing online data, the issue of scraping data from public social media profiles is tied to the highly controversial facial recognition service Clearview AI, which claims to have built its system by scraping billions of pictures from the public pages of social media users. Clearview AI is facing legal and regulatory challenges in markets globally, including Europe, the US, Canada and Australia, as well as from a range of social media companies arguing the mass social media photo scraping is illegal.

High Court Legal Advisor Wants Google Fact-Checking Claims Under Right to be Forgotten

Report from Courthouse News

In Brief – A key legal advisor to the European Court of Justice (ECJ) has proposed that the Right to be Forgotten duties of Google be expanded to include fact checking claims that online information is inaccurate. The EU’s Right to be Forgotten requires search engine companies to remove links to online information that is outdated and irrelevant. Google claims to have received requests to remove more than 2.4 million URLs since it was affirmed in a 2015 ECJ ruling, mostly related to old criminal convictions or bad business practices. The current case, originating in Germany, involves a pair of financial advisors accused of misdeeds by an online site billing itself as a fraud-fighting enterprise. The pair demanded that Google stop listing the site’s pages, claiming that the charges were false and defamatory. Google refused, arguing the information could be relevant and that it was under no obligation to investigate the allegations. The German Federal Court of Justice asked the EU’s top court to weigh in on the appropriate process for addressing such claims, with the plaintiffs arguing their request should be enough, Google calling for the plaintiffs to deal directly with the publishing web site, and the German Court recommending the plaintiffs get a court order. Advocate General Giovanni Pitruzzella’s rejected all three courses, recommending that an individual demanding de-referencing of a web page provide “prima facie” evidence to Google that the information at the site in question is false, and then the search engine is required, “within its capabilities” and “where possible,” to  “swiftly analyse using the technological tools at its disposal” and “decide whether or not to grant the request for de-referencing”. Opinions from advocate generals are not binding on the ECJ but are often reflected in final rulings.

Context – There is a meme where the subject says “I can’t come to bed, someone is wrong on the Internet!” Google sees solving that problem beyond even their reach. AG Pitruzzella, however, finds it in their remit and capability.

State Attorneys General Call on Snapchat and TikTok to Better Help Parents Monitor Teens

Report from the New York Times

In Brief – A bipartisan coalition of 43 State Attorneys General are calling on TikTok and Snapchat, two social media apps that are very popular with teens, to strengthen parental content controls, exercise greater content moderation to protect young users, and collaborate more with third party parental control applications. In their letter, the AGs claim that children are exposed to a wide range of online dangers on social media platforms, including cyberbullying, drug use and a wide range of sexual content. While explicitly noting that they are not advocating for any particular parental control applications, the AGs call for expanding their use and capabilities in general, in particular because they can monitor content that the platform itself does not monitor, such as direct messaging, which allow parents the ability to intervene when their child is exposed to a perceived threat.

Context – Despite academic scrutiny revealing that social media is unlikely to be harming most young people, the Facebook Whistleblower charge that resonated most was that the company knew its platforms were harmful to some children, in particular that a Facebook study found that nearly a third of the girls indicated that Instagram use contributed to negative body image. As we noted early in the scandal cycle, other social media platforms popular with teens were certain to also fall under scrutiny. The Senate Subcommittee on Consumer Protection soon called in social media giants Snap, TikTok and YouTube to discuss their impact on young users, and highly popular Chinese-owned TikTok has come in for especially harsh treatment. Broad social media regulation is unlikely to bear fruit in the Congress (although it is coming in the EU and UK), but legislation targeting kids online may be another matter, especially due to strong Republican support. It’s very bipartisan. In his State of the Union Address, President Biden commended Frances Haugen and called on Congress to enact stronger children’s privacy rules.

Pinterest Bans Dissenting Views on Climate Change and Related Policies

Report from the Wall Street Journal

In Brief – Pinterest has announced that it will not allow “climate misinformation” to be posted on its massive platform. The ban applies to user content and advertising. Pinterest says that it worked with experts to develop the policy and will remove content that denies the existence of impacts of climate change, denies human influence on climate change, denies climate change is backed by scientific consensus, proposes climate change solutions that contradict scientific consensus, misrepresents scientific data, and misleading content about natural disasters and extreme weather events. The new community guidelines will be enforced by technical means and users, who can report content they believe violates the rules. Pinterest currently polices content on topics including vaccines, COVID 19 and election issues.

Context – Here at PEI, we’ve long believed platforms policing “climate change” is the best example of how “misinformation” rules are destined to veer into policing basic political speech. We think it also dooms congressional efforts to legislate on broad content moderation. Over the past two years, social media platforms ramped up their restrictions on speech related to COVID, vaccines, and the 2020 election. One can argue those were short-term issues that could lead to harm. Climate policy is a long-term public policy issue more like energy or tax policy. Take a moment to watch two exchanges from a US House hearing last March. Rep. Donald McEachin (D-VA) calls for restrictions at 3:49:45 and Rep. Dan Crenshaw (R-FL) pushes back hard at 5:26:10. Mark Zuckerberg attempts to distinguish short-term harms from long-term debate in his response to Rep. McEachin. It will be interesting to watch how EU and UK regulators try to address “misinformation” on public policy issues under the EU DSA and the UK Online Safety Bill, which regulate content moderation while also calling for protecting free speech and media independence. Also, will Twitter investor Elon Muck have something to say?

French Court Fines Google and Calls for App Developer Policies and Fees to Change

Report from Euractiv

In Brief – The Paris Commercial Court has ruled that Google acted abusively against app developers in 2015 and 2016, fined the company 2 million euros, and ordered the mobile operating system giant to change seven clauses governing app developers, including its 30% commission. The decision follows four years of court proceedings after Google and Apple were sued in 2018 by the French Government alleging that both companies unilaterally imposed prices and contract terms on developers without providing developers with the opportunity to negotiate in good faith. Google expressed disappointment with the decision and claimed that most of the disputed clauses are no longer part of developer contracts.

Context – While it’s been more than ten years since Google became the first Internet giant to face accusations of anticompetitive conduct in Europe, allegations that Google and Apple abused app developers were not top policy news until the past few years. Spotify filed its initial complaint against Apple in Europe in 2019 and Epic Games filed antitrust lawsuits against Apple and Google in US District Court in 2020. As with many aspects of digital regulation, France has been ahead of the curve. Significant attention has been paid to app “payments choice” recently, in particular in the major legislative and legal battles in South Korea, the Netherlands, and US Federal Court in California. However, the French complaint and court decision is a clear reminder that the real issue is about fees. Developers don’t want to pay 30 percent. After South Korea enacted app store payments legislation last year, Google announced a new payments plan that allows app developers to use alternative payments services, and if they do, while those services must collect Google fees, they will get a 4% discount (meaning 11% or 26%). Apple eventually offered something similar in the Netherlands, but with just 3% off, although they are expected to match Google’s 4% in South Korea. Shockingly, app developers appear unhappy and believe those fees are still too high.

EU’s DSA Supervisory Fee Likely to be .1% of a Platform’s Global Net Income

Report from Reuters

In Brief – As the EU “trilogue” negotiations over the Digital Services Act (DSA) proceed to a conclusion that advocates hope can come in late April, it is reported that the “supervisory fee” proposed by the European Commission to fund the permanent regulatory oversight of large online businesses will be set at .1% of a company’s global profits. The DSA establishes new EU-wide standards for how digital platforms deal with objectionable content. Unlike the parallel Digital Markets Act (DMA), which imposes new competition policy-inspired regulatory mandates on what is likely to be around a dozen of the largest “Digital Gatekeepers”, the DSA proposes to regulate all consumer-facing digital platforms that host user content. A subset of the platforms, designated as Very Large Online Platforms (VLOPs) based largely on the number of users, will face heightened DSA obligations. While most digital platforms will have the DSA enforced by a Member State regulator in the manner of the GDPR’s controversial “One Stop Shop”, VLOP oversight will be done by the European Commission.

Context – The DMA and DSA are the most impactful digital policy initiatives in the world. The EU is the largest Western market, and it is moving relentlessly to establish a governance framework that has government establishing wide-ranging rules that regulators will enforce. From a purely operational perspective, the DSA’s VLOP supervisory fee at least shows that the legislative drafters recognize that there will be a lot of work involved in permanently regulating so many digital businesses. That will take people and money. Like the DSA and its VLOPs, the DMA also proposes that its “gatekeepers” be regulated by the European Commission. To be clear, it’s likely that every DMA gatekeeper will be a VLOP, but the DMA rules are very different from the DSA rules. The final agreement on the DMA does not appear to include a new regulatory funding source, which has some observers nervous about its initial effectiveness.

Canada Sets Out Plan to Force Google and Facebook to Pay Canadian Media Companies

Report from the CBC

In Brief – After two years of discussion, the Canadian Government has introduced legislation to force Google and Facebook to pay Canadian news media companies when media content is used on their platforms. Largely modeled after legislation enacted in Australia last year, the measure proposes that the two platforms reach compensation agreements with media companies designated by the government or face a binding arbitration process led by the Canadian Radio-television and Telecommunications Commission (CRTC). The bill requires the payments to be used by the media companies to fund the creation of news content to protect the “sustainability of the Canadian news ecosystem.” According to government figures, more than 450 news outlets in Canada have closed since 2008, one third of Canadian journalism jobs have disappeared, and Google and Facebook have a combined 80 per cent share of all online ad revenue in Canada, an industry once dominated by traditional media.

Context – Traditional media has relentlessly complained for years that the Internet ruined the news industry and that Google and Facebook, who dominate digital advertising, should be forced to pay when news content appears on their services. The Canadian media has been no exception. The French and Australian governments have been the most aggressive in recent years, but like digital taxes, calls are proliferating globally. The battle lines have been drawn by Google over paying for basic search links, and Facebook paying for user posts. But both have created billion-dollar media payments programs to reduce pressure globally and illustrate that they will pay up to some degree. While mandatory arbitration is technically a feature of the Australian model, both digital giants have signed up to pay many sites and no arbitrations have yet occurred. In the US, Members of Congress want to make it clear that they support smaller media companies too, and reports are that novel forced arbitration legislation may appear soon.

Pinterest Bans Dissenting Views on Climate Change and Related Policies

Report from the Wall Street Journal

In Brief – Pinterest has announced that it will not allow “climate misinformation” to be posted on its massive platform. The ban applies to user content and advertising. Pinterest says that it worked with experts to develop the policy and will remove content that denies the existence of impacts of climate change, denies human influence on climate change, denies climate change is backed by scientific consensus, proposes climate change solutions that contradict scientific consensus, misrepresents scientific data, and misleading content about natural disasters and extreme weather events. The new community guidelines will be enforced by technical means and users, who can report content they believe violates the rules. Pinterest currently polices content on topics including vaccines, COVID 19 and election issues.

Context – Here at PEI, we’ve long believed platforms policing “climate change” is the best example of how “misinformation” rules are destined to veer into policing basic political speech. We think it also dooms congressional efforts to legislate on broad content moderation. Over the past two years, social media platforms ramped up their restrictions on speech related to COVID, vaccines, and the 2020 election. One can argue those were short-term issues that could lead to harm. Climate policy is a long-term public policy issue more like energy or tax policy. Take a moment to watch two exchanges from a US House hearing last March. Rep. Donald McEachin (D-VA) calls for restrictions at 3:49:45 and Rep. Dan Crenshaw (R-FL) pushes back hard at 5:26:10. Mark Zuckerberg attempts to distinguish short-term harms from long-term debate in his response to Rep. McEachin. It will be interesting to watch how EU and UK regulators try to address “misinformation” on public policy issues under the EU DSA and the UK Online Safety Bill, which regulate content moderation while also calling for protecting free speech and media independence. Also, will Twitter Board Member Elon Muck have something to say?

French Court Fines Google and Calls for App Developer Policies and Fees to Change

Report from Euractiv

In Brief – The Paris Commercial Court has ruled that Google acted abusively against app developers in 2015 and 2016, fined the company 2 million euros, and ordered the mobile operating system giant to change seven clauses governing app developers, including its 30% commission. The decision follows four years of court proceedings after Google and Apple were sued in 2018 by the French Government alleging that both companies unilaterally imposed prices and contract terms on developers without providing developers with the opportunity to negotiate in good faith. Google expressed disappointment with the decision and claimed that most of the disputed clauses are no longer part of developer contracts.

Context – While it’s been more than ten years since Google became the first Internet giant to face accusations of anticompetitive conduct in Europe, allegations that Google and Apple abused app developers were not top policy news until the past few years. Spotify filed its initial complaint against Apple in Europe in 2019 and Epic Games filed antitrust lawsuits against Apple and Google in US District Court in 2020. As with many aspects of digital regulation, France has been ahead of the curve. Significant attention has been paid to app “payments choice” recently, in particular in the major legislative and legal battles in South Korea, the Netherlands, and US Federal Court in California. However, the French complaint and court decision is a clear reminder that the real issue is about fees. Developers don’t want to pay 30 percent. After South Korea enacted app store payments legislation last year, Google announced a new payments plan that allows app developers to use alternative payments services, and if they do, while those services must collect Google fees, they will get a 4% discount (meaning 11% or 26%). Apple eventually offered something similar in the Netherlands, but with just 3% off, although they are expected to match Google’s 4% in South Korea. Shockingly, app developers appear unhappy and believe those fees are still too high.

Poland Delays the EU Plan to Implement the OECD Global Tax Reform Minimum Rate

Report from Politico

In Brief – The global corporate tax reform effort that resulted in a massive two-part deal negotiated at the OECD last year has hit a speedbump in Europe with Poland vetoing a change in EU tax law to establish the new 15% minimum tax rate on earnings of multinational corporations. One part of the OECD plan, creatively dubbed “Pillar 1”, was inspired by concerns that the largest digital companies did not pay enough in taxes. Some countries enacted Digital Services Taxes (DSTs) that nearly resulted in a trade war with the US. Resolving that standoff involved two changes. “Pillar 1” was reworked to cover approximately 100 highly profitable consumer-facing companies, including the initial DST company targets, but not exclusively a digital tax. The second part, “Pillar 2”, was the top Biden Administration priority. It aims to end corporate tax havens by having countries agree to set their corporate tax rate for multinational companies no lower than 15 percent. That second part offended some EU Member States who pursue lower-tax, investment-focused economic strategies. While objections from Estonia, Hungary, Malta and Sweden were resolved, Poland has maintained its opposition, claiming that it would not support Pillar 2 unless there was a legal guarantee that Pillar 1 would be enacted by the US Congress.

Context – The ability to get something as complex as global corporate tax reform across the finish line was always a very tough ask. The progress up to now has been quite remarkable. That said, legitimate questions remain about getting needed legislative changes through Congress. Keep in mind that a number of countries, including India, France, the UK, Italy and Spain have enacted DSTs and begun imposing new taxes on US digital giants. Those governments have agreed with the US on rebate plans contingent on the global deal going into effect. Those accruing tax payments will create some corporate leverage in Congress for the needed tax law changes. Then again, the tech giants impacted are not so popular these days.

ICYMI – Fulfilment Center Workers in Staten Island Create Amazon’s First US Labor Union

Report from the Wall Street Journal

In Brief – In the highest profile labor union victory in decades, a majority of employees at an Amazon fulfilment center in Staten Island, New York, voted to unionize under the auspices of a new labor organization, the Amazon Labor Union (ALU), created by a former worker from the facility. While Amazon fulfilment center workers are represented by unions in many countries, this is the first in the US. The company won a high-profile battle in Alabama last year, which was contested by union officials and is being re-run. The ALU is calling for a $30 minimum hourly wage and a range of improved health and safety standards.

Context – Of course you didn’t miss the fact that workers in one of Amazon’s US fulfilment centers voted to create a labor union. On the positive side, the media narrative after the win was Not about Big Labor finally organizing workers in Big Tech. That’s not the story with Amazon fulfilment centers. The many millions of hard-working Americans who work in its giant facilities are not tech workers. They are a blue-collar logistics workforce comparable to UPS (unionized), FedEx (not unionized) and the US Postal Service (unionized). The tech interns in Amazon’s many digital services divisions earn three times more than many of the company’s fulfilment center and distribution workers. The fact that a union succeeded in an Amazon fulfilment center, and the prospect of more to come, is more about how organized labor may finally see an uptick among private sector employers, such as is happening with Starbucks. So, while the ALU is not a sign that Big Labor is succeeding with Big Tech’s skilled workforce, there was a big development on that front recently. It also came from New York City, where 600+ high tech workers of the New York Times Company voting to create the largest true tech worker union in the country. That campaign included progressive activist investors publicly lobbying the generally pro-labor NY Times management to accept the union. Management never came around. But they lost.

US Department of Justice Probing Google for Anticompetitive Maps Practices

Report from Reuters

In Brief – The Department of Justice (DoJ) is reported to be accelerating activity on an antitrust probe into potentially anticompetitive practices of Google related to its Google Maps service. Maps is one of Google’s most widely used services, with the company reporting that more than a billion people use it every month and more than 5 million active apps and websites are using Google Maps Platform core products every week. The DoJ is reported to be focusing on how Google bundles Maps into its Google Automotive Services infotainment system service offered to automakers, using the “killer app” of Maps navigation to require taking other apps like Google Assistant, as well as the terms and conditions that Google imposes on app and web developers that use technical capabilities from Google Maps, such as location search, including prohibiting developers from also using maps or related technologies from rivals.

Context – The manner in which the digital giants use their largest, most successful platforms to preference their ever-growing collection of products and services is one of the top criticisms of Big Tech. The EU’s Digital Markets Act, with its new regulatory mandates on very large digital platform “gatekeeper” companies, including non-discrimination and anti-preferencing, will soon change the digital landscape in Europe. While Big Tech regulation faces a far more uncertain prospects in the US Congress, legislation targeting preferencing by the very largest platforms has passed the Senate and House Judiciary Committees. The Biden Administration has expressed support for the Senate bill. The DoJ’s Google Maps inquiry is only the latest reminder that the mega giants each have number of massive platforms that will likely be impacted by new regimes. With Google, besides search and advertising, the Italian competition authority has already fined them for anticompetitive practices on their auto services platform, and a Danish bikeshare company has complained that Google Maps preferences the Lime App because it is partially owned by Google.

Washington State Sets Minimum Pay for Independent Contractor Rideshare Drivers

Report from The Hill

In Brief – Washington state has enacted the first US state law creating minimum pay standards and benefits for drivers using ride-hailing platforms like Uber and Lyft. The landmark legislation establishes baseline pay levels when drivers are ferrying riders, including per-mile and time minimums, as well as benefits including paid sick leave, family-medical leave, eligibility for workers’ compensation, and an appeal process if they are removed from the apps. Key to the legislation’s support from the large ride-hailing platforms was the fact that the legislation does not change the classification of the drivers, who will remain independent contractors, a status that the companies claim is supported by most drivers due to the unprecedented flexibility in the model that allows them to work or not work when they want. Major labor organizations were split on the legislation, with the local Teamsters in support, while the Massachusetts AFL-CIO, engaged in a similar fight, was among those opposed. Seattle and New York City are the two US cities that have set city-level ride-sharing minimum pay levels, and while the state bill permits Seattle to maintain its level, other cities in the state are not permitted to set their own.

Context – This is the biggest US development in ridesharing “Gig” work regulation since the California legislature enacted AB 5 in 2019, classifying rideshare drivers as platform employees, only to have state voters overturn it through Prop. 22 in 2020. Although Uber and Lyft talked a lot about building on their Prop. 22 success in other states, little happened in 2021. Instead, Europe was the hub of activity, including the UK courts requiring Uber to bring on platform drivers as workers, Spain and Portugal enacting Gig driver and food delivery worker laws, and the European Commission moving forward on legislation governing digital work platforms. If no US states follow up with similar ride sharing legislation this year, a November Prop. 22-style voter initiative battle in Massachusetts may be the next big US policy milestone.

European Competition Authority Asking Questions About Microsoft and Cloud Services

Report from Reuters

In Brief – The European Commission Competition Authority is preliminarily investigating charges that Microsoft leverages its popular business software applications and services to benefit its cloud services business, circulating questionnaires among cloud business rivals and customers. Small European cloud services rivals, including France-based OVHcloud and Germany-based Nextcloud, have filed complaints with European regulators alleging that Microsoft uses its popular Windows 10 & 11 software and MS Office Suite to dissuade customers from choosing alternative cloud vendors. The early investigatory work comes at a time when Microsoft is seen as a digital super giant who has avoided much of the regulatory scrutiny aimed at Apple, Amazon, Google and Meta despite facing similar charges of tying and preferencing and engaging in the largest acquisitions among the digital elites.

Context – Cloud services are being brought into the European digital competition debate from two directions. On one hand, the largest providers of cloud services are three of the largest digital firms — Amazon, Microsoft and Google. However, EU Commissioner Margrethe Vestager, the head of competition policy, recently said that she was not concerned with that market, citing the European Gaia-X cloud initiative as an example of multiple cloud providers. However, the other angle is that dominant providers of other digital services could unfairly link those platforms to their cloud business to create unfair preferencing. This is the charge dogging Microsoft. The Digital Markets Act (DMA), which will impose 18 new regulatory mandates on very large digital platforms, is the most important development in digital competition policy, and a coalition of small European cloud providers have called for business software giants Microsoft, Oracle and SAP to be brought under the DMA to stop them from using their software services to benefit their cloud businesses.

India’s CCI Rules Google’s App Payments Policies are Unfair and Discriminatory

Report from Bloomberg

In Brief – The Competition Commission of India (CCI), the country’s antitrust regulator, has made an initial finding that Google’s app store payments rules and policies are “unfair and discriminatory” against app developers. The investigation followed Google announcing plans in September 2020 to require app developers to use its payments service in apps distributed through its Play Store. This policy was designed to improve Google’s ability to collect its fees, as Google, like Apple, uses its payments service to automatically collect commissions on in-app digital purchases. Those fees often reach 30 percent. The Android mobile operating system has a huge share of the mobile OS market in India and Indian app developers reacted very negatively to the Google plans. Google soon announced a delay in the effective date of the plan in India, then Korea, then globally. While the Play Store payments policy finally went into effect in most markets on March 31, 2022, the effective date in India is currently October 31, 2022.

Context – The current front lines in the app payments and fee battle pitting Apple and Google against app developers are in South Korea, the Netherlands, and US Federal Court in California. Critics talk about payments and choice, but the fight is really about fees. Apple has been slightly more in focus in the US and Europe because its “walled garden” iPhone ecosystem is much more restrictive, but Google has been the lead antagonist in South Korea and India due to Android’s dominance in both markets. South Korea enacted app store payments legislation last year, pushing Google to develop a new payments plan allowing app developers to use alternative payments services. But Google will still collect its fees. Google will provide a 4% break when payments alternatives are chosen. In the Netherlands, Apple eventually proposed something similar, but offered just 3% off. Expect Google to offer its new 4% solution in India. And expect app developers to be unhappy there and pretty much everywhere else.

Federal Judge Dismisses Lawsuit Challenging FOSTA on First Amendment Grounds

Report from Bloomberg

In Brief – The Fight Online Sex Trafficking Act of 2018 (FOSTA), landmark Internet policy legislation expressly limiting Sec. 230 of the Communications Decency Act, has survived a key legal challenge as US District Court Judge Richard J. Leon granted summary judgement dismissing the First Amendment-based suit brought by the Woodhull Freedom Foundation, Human Rights Watch and the Internet Archive. Judge Leon ruled that that the law doesn’t discriminate against speech based on its content or viewpoint and is neither overly broad nor unduly vague. FOSTA imposes liability on websites that intend to “promote and facilitate prostitution” of sex trafficking victims, in particular limiting Section 230, the critical and controversial federal law that protects digital platforms from civil liability for the content posted on their websites by online users. Plaintiffs argued that FOSTA was vague and overly broad, targeting the online promotion or facilitation of sex work, but the judge defended the statute as “quite clear” in narrowly targeting promotion and facilitation only of specific instances of prostitution involving another person.

Context – Whether Sec. 230 is truly at risk remains a popular digital public policy question. Democrats and Republicans have been harshly criticizing big tech companies for years, and Sec. 230 has been a popular target of misinformation, threats, and blame. Many argued FOSTA was the canary in the coal mine presaging major changes to 230 as leaders on both sides of the aisle called for eliminating it, at least for platforms they did not like. But it hasn’t happened. And it is becoming less likely, not more. Democrats threaten Sec. 230 when platforms allow too much harmful content to circulate. Republicans do it when accusing the largest platforms of intervening in an ideologically biased manner. They are moving apart, not together. FOSTA does illustrate that narrow changes on politically charged issues might succeed, even with clear negative outcomes to marginalized people. Child sexual material might be next. But that’s not “getting rid of Sec. 230.”

Senate Finally Acts to Confirm Alvaro Bedoya and Give Democrats an FTC Majority

Report from the Wall Street Journal

In Brief – Nearly six months after Alvaro Bedoya was nominated by President Joe Boden to serve as a commissioner on the Federal Trade Commission (FTC), the Senate voted 51 to 50 along party lines to set up his confirmation. Final approval will restore a majority of three Democratic commissioners to the FTC for the first time since Rohit Chopra left the agency in October 2021. FTC Chair Lina Khan, a proponent of activist antitrust, legal, and regulatory policies to counter large companies, especially digital giants, has been hamstrung since by a two-to-two partisan split among the commissioners. Bedoya, a champion of online privacy policy and a former chief counsel of the Senate Judiciary subcommittee on technology, was criticized by Republicans for being an aggressively partisan progressive who would add to frictions at an agency already accused of having a more partisan tone under Khan.

Context – If Democrats and Republicans were ever on the same page to regulate digital companies, that alignment has quickly frayed. Senate Republicans have stonewalled nominations to key regulatory positions, arguing that the nominees were progressive partisans outside the policy mainstream. While Khan is one of a trio of high-profile Big Tech critics placed in key antitrust roles by President Biden, she was recently forced to pass on the FTC challenging the Amazon acquisition of MGM due to no Republican support. Bedoya’s confirmation may give her the ability to try to challenge the next major tech merger or press new privacy rules. Unlike Bedoya, who eventually won the support of all Senate Democrats, three Senate Democrats joined all Republicans in rejecting the nomination of David Weil, a strong critic of independent contractor-based Gig work platforms, to a top spot in the Department of Labor. Finally, it appears that Gigi Sohn, a widely respected champion of net neutrality, will be confirmed as an FCC Commissioner giving Democrats their first FCC majority under Biden.

Apple’s App Store Payment Travails in the Netherlands Now Includes Class Action Suit

Report from Bloomberg

In Brief – The Consumer Competition Claims Foundation, a Dutch non-profit consumer advocacy organization, has filed a multi-billion-euro class action lawsuit against Apple in Netherlands court alleging that the phone giant engaged in anticompetitive practices and harmed Dutch and other European consumers through higher prices for services offered through iPhone apps stretching back to 2009. The class action suit follows a ten-week standoff between Apple and the Dutch competition authority that ordered the company to allow iPhone dating apps to use alternatives payments services. Apple was fined 5 million euros per week despite offering a handful of compliance plans. Fines were capped at 50 million euros, and by the end of the process Apple offered a proposal that appeared to address the regulator demand that app developers not be required to offer a new app for the Dutch market to avail itself of alternative payments. It is unclear if the latest Apple proposal will be judged acceptable, with the regulator threatening more and higher fines if not.

Context – The front lines in the battle pitting Apple and Google against app developers led by giants like Epic Games, Spotify and Match are in South Korea, the Netherlands, and US Federal Court in California. Keep in mind that the fight is not really about “payments choice”. It’s about fees. App developers object to Apple and Google fee levels that often reach 30 percent. In response to South Korean app store payments legislation, Google rolled out a plan to allow payments choice but still collect fees, providing a 4% break when payments alternatives were chosen. In the Netherlands, Apple eventually did something similar, but offered just 3% off. There is an app store regulation bill moving in the US Senate while Apple and Epic Games fight an antitrust battle in US federal court. In Round 1, Apple was not ruled a monopoly, but appeals are underway. In the EU, the Digital Markets Act has been finalized and is likely to eventually have European Commission regulators intervening on app store payments and fees.

Price Parity Ping-Pong, Judge Rules Food Delivery App Class Action Can Proceed

Report from Reuters

In Brief – US District Court Judge Lewis Kaplan has rejected efforts by GrubHub, Uber Eats and Postmates to dismiss a consumer class action lawsuit filed in April 2020 accusing the companies of driving up restaurant menu prices when consumers ordered meals through methods that did not use the apps, such as when a consumer called in a take-order over the phone or used a restaurant’s website. The contract terms of the delivery apps prohibited restaurants from charging higher prices for menu items ordered over their apps, despite the apps charging commissions that often exceeded 30 percent. The practice of not allowing suppliers to offer lower prices on alternative venues is often referred to as a “price parity”, “MFN” or “no-price competition” clause. Some argue that those policies can drive up consumer prices when the offending business is dominant because third parties won’t pass lower fees along to consumers through lower prices on other venues for fear of losing sales on the dominant platform.

Context – This is the third in a recent string of ping-pong-like court decisions regarding allegedly anticompetitive online platform price parity policies. The first two involved Amazon. They are accused of using price parity policies to similar effect as the food delivery apps, pushing online sellers to raise prices off Amazon, on venues with lower costs and fees, to maintain parity with prices on Amazon, where fees are high, and not lose sales on Amazon. Early in March, US District Court Judge Richard A. Jones rejected Amazon’s motions to dismiss a similar consumer class action to the food delivery app complaint, agreeing that it was possible that Amazon’s “fair pricing” agreements pushed sellers to raise their prices on other ecommerce platforms. However, just a week later, District of Columbia Superior Court Judge Hiram Puig-Lugo granted Amazon’s motion to dismiss a nearly identical complaint filed DC Attorney General Karl Racine (D), rejecting the premise of price increases on other venues.