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Top 10 Digital Platform Policy Issues of 2121
A Platform Economy Insights Special Series
We’ve been tracking, researching, analyzing and reporting on hundreds of developments across the world of digital platform public policy throughout 2021. So you don’t have to. Wrapping up the year, we went back and categorized them all as best we could, coming up with over 75 topics. As the year comes to a close, we’ve compiled the Top 10 Digital Platform Public Policy Issues of 2021 based on the number of entries. We kick the review off with two honorable mentions.
Top 10 Issue of 2021 – Issue 2
The Epic App Developer Battle Against Apple and Google Fees
Legal and regulatory battles pitting large app developers against Apple and Google was a breakout story in 2020, reaching #4 last year. Epic Games filed federal lawsuits against Apple and Google and followed up with complaints in major markets globally, a few of the largest developers founded the Coalition for App Fairness to lobby for regulation, Spotify inspired an investigation of Apple by the European Commission, and Google came under fire in South Korea and India where Android is especially dominant. Things got hotter in 2021. The biggest story of the year was the federal court battle pitting Epic Games against Apple, with the trial, decision and appeals filling the news. Judge Yvonne Gonzalez Rogers made it clear that she’s no fan of Apple’s business model and suspects anticompetitive motivations, but her 185-page ruling rejected Epic’s complaint that Apple was an illegal monopolist and should be forced to allow apps to use alternative payments systems. This is important as far as US federal law goes on big tech antitrust, at least where market shares are not overwhelming. Epic appealed the main decision and Apple appealed a parallel one-page “anti-steering” order that may have forced Apple to allow app developers to link to outside payments services, and maybe avoid Apple fees. But Apple won a stay in federal appeals court. It all moves on to 2022. Google was front and center in the biggest secondary drama, South Korea enacting landmark legislation requiring the two OS giants to permit alternative payments systems for in-app payments. The chief takeaway is that Google announced that while they will allow payments alternatives, they will still collect their fees directly. Using non-Google payments will save 4% of the fee, but not remotely the full 30 percent. Developers were unhappy. And Apple eventually indicated that they would do something similar if they were forced to open up payments. The truth is, fighting over in-app “payments” is a phony debate. App developers want much lower fees. Dreams of fee regulation is the real fight for 2022 and beyond.
Top 10 Issue of 2021 – Issue 1
Social Media Content Moderation – Facebook’s Whistleblower and the Tide of Global Regulation
Digital platforms, especially social media companies, being blamed for spreading dangerous, illegal and otherwise objectionable content was the top PEI issue of 2021. It was global in every sense. The largest companies have global user bases. The issues of concern, especially as you drill down county-by-country, seem as limitless. And government interventions are expanding globally. Facebook was at the center of stories all year long. While it’s Oversight Board, Trump ban and pandemic policies were all newsworthy, the “Facebook Whistleblower”, Frances Haugen, blew up to an unprecedented scale. She was a mid-level employee who copied thousands of internal documents and left the company to front a global media and lobbying campaign excoriating Facebook and calling for global regulation. Facebook’s CEO played the chief villain, but all social media companies will end up facing any resulting regulations. On her road show before fawning panels in the US Senate, UK Parliament and European Parliament, Haugen called for powerful new digital regulators to review company data on algorithms and impacts, and to make the tough calls on content moderation. Don’t expect a US Digital Regulator anytime soon. “Misinformation” (vaccines, climate) quickly becomes partisan. However, in Europe, major regulation was on track well before she arrived. The UK will likely enact an Online Safety Bill that regulates platform policies on a very broad range of online ills, and the EU’s Digital Services Act, also setting content moderation standards, is almost certain in 2022 and may prove the most influential. While they were not stops on Haugen’s global tour, content moderation mandates were also on the march in Central Asia, Russia, Turkey, India, China and Africa. While it’s easy to criticize those regimes for censorship, defining misinformation, disinformation and hate speech raises similar concerns everywhere. Free speech advocates are pointing out that when Western governments regulate online speech it empowers repressive regimes.
Top 10 Issue of 2021 – Issue 4
Antitrust Regulation of Big Digital Digital Platforms – The Digital Markets Act is Coming
While high-profile Big Tech antitrust suits were filed in 2020, the issue really heated up in 2021. The focus is now legislation aimed at protecting competition through regulation without needing to win antitrust lawsuits. The top story was the ponderous but seemingly inevitable march of the EU’s Digital Market Act. It will impose a broad set of unprecedented regulatory mandates on “digital gatekeepers”. (You can find a handy chart with the DMA’s 18 “Do’s and Don’ts” here.) The European Commission released its draft last December, it was debated in the Parliament and the Council all year, and both bodies have arrived at positions where three-way agreement seems certain in 2022. The biggest substantive disagreement in the Parliament was the size threshold where digital platforms are “gatekeepers” covered by the new regulatory scheme. While some argued that the DMA should only capture the very largest (basically the GAFA and Microsoft), casting a wider net won out. Expect the regime to cover 20-to-30 platforms to start. And it will grow. There was also much talk of new antitrust standards in the US for digital giants, but results are far less likely. The House Judiciary Committee passed four major Big Tech antitrust bills in June to rewrite the rules for the GAFA (and arguably Microsoft), but they remained bogged down by a breakdown with Republicans who appear to want to punish the social media giants for ideological censorship but are wary of broad digital regulation for fear it will push more government-inspired ideological bias. Finally, the issue cracked the top four because it was truly global. The German Competition Authority is moving aggressively forward on its own proactive regulatory regime targeting the digital big four, the UK CMA is being empowered with a Digital Markets Unit, and Japan’s Ministry of Industry and Trade is now regulating the country’s five largest platforms, including two domestic firms, Yahoo Japan and Rakuten. Expect an even bigger 2022, especially with the DMA.
Top 10 Issue of 2021 – Issue 3
Republican Complaints of Social Media Censorship Lead to (Unconstitutional) State LawsWhile long-simmering Republican accusations of anti-conservative censorship emerged full bore in 2020 with social media’s treatment of the pandemic, racial justice demonstrations and election processes, 2021 kicked off with the Capitol Riot and President Trump being banned by Twitter, Facebook and YouTube. Conservative charges of bias never cooled down. The issue unites nearly all Republicans. By late 2020 Pew found that 90% suspected ideology behind social media content moderation decisions (and so do 60% of Democrats). In Congress, Republicans and Democrats take diametrically opposing views. Democrats want more control over “misinformation” and hate speech, not less, so the issue is stymied in the closely divided Congress. But states controlled by Republicans are another matter. Utah was the first to act, but concerns over constitutional flaws led to its bill being abandoned at the finish line. Florida, led by Gov. DeSantis, and Texas, led by Gov. Abbott, waved off constitutional concerns and enacted major social media legislation. Without much surprise, both bills were blocked by federal judges, largely on First Amendment grounds, ruling that the US Constitution does not prohibit the companies from regulating speech on their services, but is clear on prohibiting the government from regulating how a media platform moderates speech. Besides dozens of stories on Republican social media censorship complaints and bills, the Trump Bans were major news all year as well, including when the former President filed federal lawsuits against the three giant platforms. He argues that they violated the First Amendment by acting as agents of the government when they banned him. This, despite the fact that he was the Head of the US Government at the time. He has not been prevailing and looks destined to lose, hamstrung by the same First Amendment legal shortcomings of the state censorship bills. He is also claiming to build a “non-woke” social media rival that, not surprisingly, claims the right to moderate user content.
Top 10 Issue of 2021 – Issue 6
Digital Services Taxes – The Biden Administration Drives Global Corporate Tax Reform
Governments around the world argue that digital services companies do not pay a responsible level of taxes. A number of countries led by France, Great Britain, Italy and Spain, moved to increase taxes on large digital platforms by instituting Digital Services Taxes (DST) in 2020, but were largely stymied by Trump Administration threats of trade sanctions. DSTs were the #1 issue on PEI’s Top 10 List for 2020. The Biden Administration dramatically changed the debate by focusing on stopping countries from being tax havens. The change boosted global tax reform efforts and resulted in a massive two-part deal negotiated at OECD. It moved relentlessly forward in 2021 and seems destined to cross the finish line in 2022. “Pillar One”, initially focused on just on digital taxes, was reworked to cover approximately 100 highly profitable companies and aims to reallocate some of their tax payments to countries based on the location of customers. (There is a good one-paragraph summary of the Pillar One “reallocation” plan here.) “Pillar Two” deals with the Biden Administration priority of tax havens. Countries promise to impose a minimum tax of 15 percent on multinational companies. As 2021 comes to a close, the US has reached agreement with six countries, five from Europe, and India, that already have DSTs in place. Each promised to rebate companies the difference between their annual DST tax payments and their first-year payment under the new Pillar One, once the new regime is in place. In exchange, the US dropped tariff threats. Questions still remain on whether tax changes the US needs to make to implement the OECD plan will get through Congress. The accruing digital tax payments of US Internet companies will likely help create corporate leverage for those tax changes in 2022. Finally, the State of Maryland was the vanguard of US States looking to enact their own DSTs, and their state digital advertising services tax goes into effect in 2022 unless a federal court puts it on hold to address a range of legal challenges.
Top 10 Issue of 2021 – Issue 5
Gig Work Platforms – Concerns in Markets Globally But Change Is Coming in Europe
Gig work platform regulation and worker classification was issue #3 on the 2020 Top 10 List. The focus was on the US with California’s AB 5 overturned at year’s end by voters through Prop. 22. In 2021, most of the action was in Europe. In February, the UK High Court ordered Uber to reclassify drivers as workers rather than independent contractors, and it followed up in December rejecting the model that ride contracts were between drivers and passengers. The platform served the rider. In the EU, Spain adopted national legislation on ridesharing and delivery requiring platforms workers to be employees. It went into effect mid-summer. While many couriers complain that things are now worse, Portugal enacted a similar law in October. Elsewhere in Europe, a Court of Appeals in the Netherlands ruled that Deliveroo couriers qualify as employees, and an Italian court ruled that Deliveroo’s reputational-ranking algorithm breached local labor law. The most significant action long-term is likely to stem from the European Commission’s draft legislation to update labor regulations for “Digital Labor Platforms”. The goal is to address abuses from “On-Location Labor Platforms” for services like ridesharing and delivery while enabling “Online Labor Platforms” to service skilled freelancers. Watch for concepts like a platform’s “algorithmic control” and concerns with “bogus self-employment”. In the United States, no state followed California’s lead on AB 5, the issue is stalled in Congress, and while the Biden Administration supports reclassifying platform workers as employees in theory, no new regulations were enacted. The biggest hurdle is that most skilled freelancers value their independence and oppose new mandates. The one major exception to legislative gridlock in the US was food delivery platform regulation in major cities. Led by New York and San Francisco, a number of cities are responding to complaints by restaurants over fee levels and terms of service, as well the tough conditions faced by bike couriers.
Top 10 Issue of 2021 – Issue 8
Acquisition Reviews Show Signs of Shifting Standards and Good Cop – Bad Cop World
Concerns with big tech acquisitions have been growing for years, especially among those who want a total rethink of competition policy. However, clear evidence of changing standards has been slow in coming. Just a year ago Google’s FitBit acquisition was signed off by the EU playing the role of lead reviewer and the deal closed in January 2021 despite strong opposition from consumer and privacy advocates. But the mix of reactions by other national regulators was a sign of things to come. The top Big Tech acquisition story of 2021, which vaulted the issue onto this list, was Facebook’s purchase of GIF platform Giphy and the ongoing opposition of the UK CMA. In fact, it was a pair of Facebook acquisitions, both of Giphy and Kustomer (a messaging-based customer relationship software business), that are most instructive. Both are relatively small, not profitable, US-based startups. Neither have any physical operations in Europe, including the UK. The experience is illustrating the potential for Good Cop – Bad Cop scenarios on deals for small online businesses when regulators claim jurisdiction because Internet users are everywhere and, theoretically, even small digital platforms could grow into large competitors someday. The CMA signed off on the Kustomer deal, but is pushing hard for Facebook to completely undo the Giphy acquisition, claiming the GIF platform could emerge as an advertising platform. The EU signed off on the Giphy acquisition, but is still reviewing Facebook’s Kustomer bid. Finally, acquisition reviews are emerging as an area where US progressives, including in the Biden Administration, who call for major Big Tech regulation that is stalled in Congress, might accomplish some goals by supporting more aggressive action in Europe. Expect this topic higher on the list next year.
Top 10 Issue of 2021 – Issue 7
Forcing the Largest Platforms to Pay Media Companies When Content Appears Online
Traditional media companies have complained for years that the Internet ruined the news industry. They want digital advertising giants Google and Facebook to pay them when news content appears on their services. It’s a media-only version of Digital Services Taxes. France and Australia have been the most aggressive. Australia was the top media payments story of 2021. (There were 21 PEI entries on media payments in 2021, and 11 were news from Australia.) The Australian Government proposed legislation that at one point appeared for require Google to pay media companies when content came up in basic search, while Facebook would have to pay when users, including media companies themselves, posted stories. Both giants threatened to shut down key services in Australia, and when Facebook did block media links for a few days, it was global news. A compromise was reached, legislation passed, and payments talks ensued. Google and Facebook are trying to draw a line in the sand between curated media services and basic links. They each have billion-dollar media payments programs built on curated media offerings to reduce legislative pressure globally, but risks remain. France, the second front in this global war, has been more focused on Google, including slapping a 500 million euro fine on the search giant for not reaching payments deals fast enough. Facebook is now also making payments deals in France. Even as the two giants dole out money, problems pop up. For example, the German competition authority is investigating Google’s News Showcase payments scheme concerned that media businesses that reach payment deals might also get preferential treatment from Google search. In Australia, Facebook eventually signed deals with many publishers, but not all, and some of those left out have complained to regulators. While the payments phenomenon is certain to metastasize in 2022, the news value might fall as payments become common practice.
Top 10 Issue of 2021 – Issue 10
TikTok, WeChat, Data Security and China “Decoupling”
Here at PEI, we don’t track, analyze and try to share insights into what’s happening inside China. China’s digital ecosystem is not part of the still largely global Internet (although that is fraying, which is its own story). And governance inside China? We’ll leave that to the China “experts” who theoretically know how Xi and the CCP leaders are feeling that day. However, PEI does cover issues where Chinese digital companies and policies impact digital platform public policy outside China. In 2020, the Trump Administration’s efforts to ban WeChat and drive ByteDance to sell off the US operations of super-popular TikTok, and India banning dozens of major Chinese-owned apps, were unprecedented efforts and created news, as did an increasing bipartisan willingness in the US Congress to press for economic disengagement. China issues ranked #6 on PEI last year. In 2021, the Biden Administration slowed things down, especially on TikTok and WeChat, ending the legal battles and embarking on an effort to create a new system to judge the security implications of Chinese-owned apps and digital equipment. Outside the US, the data security implications of digital businesses sharing data with businesses inside China was a growing issue, especially in Japan. And TikTok’s continued rise led to news on the privacy front. Finally, while the Chinese Government crackdown on its domestic digital giants and their billionaire leaders was a big story, and some technology critics seemed to laud top-down dictates and mandates as more efficient than legislation and independent courts, the Chinese crackdown didn’t score PEI entries.
Top 10 Issue of 2021 – Issue 9
Amazon Battles Reliance in India While Facing Charges of Violating Ecommerce Law
The legal and regulatory battle between Amazon and Reliance Industries over supremacy in the Indian ecommerce market produced news throughout 2021. To reprise, Reliance Industries, an emerging digital conglomerate led by India’s richest man, attempted to acquire Indian business Future Retail in 2020. Amazon blocked the purchase based on a contract provision included as part of its comparatively small 2019 investment in a Future Group subsidiary that listed entities Amazon could block from buying Future’s retail business. That list included Ambani and Reliance. A Singaporean arbitration panel upheld Amazon’s challenge. Reliance and Future fought back in Indian courts challenging that venue and the ability of US-based Amazon to block a retail industry transaction given India’s restrictions on foreign firms operating retail businesses. While the Indian Supreme Court sided with Amazon in the venue question, Future Retail’s independent board members then claimed that the original Amazon investment should be voided because the real intent was to block other sales. As the year closes, India’s competition regulator has agreed to review the 2019 investment in that light, which may tip the balance to Ambani. But Amazon’s regulatory battles in India go much further back and are grounded in the country’s unique Foreign Direct Investment (FDI) laws that prohibit foreign ownership of retail businesses but allow foreign-owned third-party ecommerce marketplaces. Amazon is tops in Indian ecommerce and claims to be a marketplace, but has faced years of allegations that they violate FDI laws by engaging in retail activities and was the subject of a major Reuters expose in 2021 based on leaked Amazon documents that purport to confirm those charges.
Second Honorable Mention
Australia – More Than Just Forcing Google and Facebook to Pay Media Companies
Led by Prime Minister Scott Morrison, Australia pressed its case in 2021 as the most aggressive Western regulator of online activity and digital platforms. The post-Brexit UK and the European Union, in particular France, were highly competitive as well, but Australia wins kudos for regulatory and legislative interventions relative to size. The top “Australia” issue in 2021 was the standoff over legislation to require search and social media giants Google and Facebook to pay media companies when their content appears in search results and news feeds. (Spoiler Alert – We’ll see that pop up in the Top 10.) But they were active on other issues including Big Tech investigations of digital advertising, marketplaces, mobile operating systems, the Epic v. Apple antitrust suit, and a recent proposal to require social media platforms to release contact information for people who post comments that are accused of defamation. In classic Morrison style, he leads with public comments calling social media “a coward’s palace” and wants to end online anonymity, sometimes. The Australian High Court also ruled that media enterprises are liable for defamation on Internet comments boards just as they are in traditional “letters to the editor” or printed opinion pieces. Australia’s regulation of digital platforms is not new to 2021, with past efforts including aggressive actions to police online hate, including threatening criminal action against platform execs, and expanding cross-border taxation of online commerce.
First Honorable Mention
Amazon… Filling the Stat Sheet With So Many Different Issues
All the largest digital platform companies – Apple, Google, Meta (Facebook) and Amazon – filled PEI reports in 2021, but Amazon stands out for the breadth of issues and concerns. Apple’s big issue was the conflict with app developers over App Store control and fees, especially the epic battle with Epic Games. With Facebook, “content moderation” challenges, highlighted by the unprecedented Facebook Whistleblower affair, was the big issue. Google showed more breadth, enjoyed second-billing to Apple in the standoff with app developers, including its own Epic suits, but also had big issues related to privacy and advertising, and other major antitrust issues, especially concerns with search results self-preferencing. But Amazon is unmatched in its ability to “fill the stat sheet” with the number and range of major issues. Combined, Amazon outdid them all. Top Amazon issues included a range of antitrust concerns (logistics, self-preferencing, the MGM acquisition), product liability legal challenges, and numerous issues with their “Gig” package delivery platforms plagued by worker abuse charges. But the Amazon issue that led the way in 2021 was their legal and regulatory battle in India where they face ongoing accusations that they violate retail and ecommerce FDI laws and their conflict with Indian conglomerate Reliance Industries. (Teaser – This issue alone makes the Top 10 for 2021 in our next email.)