News & Insights 2 old
India’s CCI Sides with Future Retail (and Reliance) Suspending Key Deal with Amazon
Report from Reuters
In Brief – The legal battle royale between Amazon and Reliance Industries in India took another twist with the CCI, the country’s competition regulator, withdrawing approval for a critical 2019 investment Amazon made in a subsidiary of Future Retail that became the basis of Amazon legal maneuvers to block Reliance Industries from buying the bulk of the Future Retail business. Reliance, led by India’s richest man, has been building a digital services and ecommerce business capable of taking on US-owned Amazon and Flipkart (owned by Walmart). It attempted to acquire Future’s retail assets in 2020, but Amazon blocked the purchase based on contract rights related to its comparatively small 2019 investment that included a provision listing entities Amazon could block from buying Future’s retail business, including Reliance and owner Mukesh Ambani. 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 deal should be voided because the real intent was to block other sales. The CCI has agreed with that finding and says the investment must be reviewed in that light.
Context – To understand the ongoing legal and regulatory battle over ecommerce in India you need to understand the role of India’s unique FDI laws that prohibit foreign ownership of retail businesses but allow foreign-owned third-party ecommerce marketplaces. (Too many tech industry “experts” don’t.) Amazon is tops in Indian ecommerce and claims to be a marketplace but faces years of allegations that they violate FDI laws by engaging in retail activities. Ambani’s Reliance is an Indian business and can legally operate an ecommerce retail business. As much as the CCI is involved as a competition regulator, the parallel FDI investigation by the Indian Enforcement Directive is even more on point.
Canada Finally Releases a Digital Tax Plan Effective in 2024 (US Gets Mad Anyhow)
Report from Bloomberg
In Brief – More than a year since she announced that Canada intended to enact a Digital Services Tax (DST) similar to the levy’s passed by a number of European countries, Finance Minister Chrystia Freeland released draft legislation to establish a 3% tax on the revenues of large digital businesses. Consistent with their policy position last year, the Canadian Government supports a multilateral approach to digital taxes rather than a national DST, in particular the OECD’s “Two-Pillar” tax reform plan. The legislative proposal delays the effective date of the national DST until January 1, 2024. Despite the delayed effective date, the US Trade Representative, which regularly pushes back on national DSTs as discriminating against US-based companies and threatens trade retaliation, rose to the bait from Canada and promised to “examine all options, including under our trade agreements and domestic statutes” if Canada enacted a DST.
Context – While the Trump Administration largely stymied national DSTs by threatening trade sanctions, the debate was completely reframed by the Biden Administration shifting the US emphasis to stopping tax havens. The result was the landmark OECD agreement. “Pillar Two” deals with tax havens. Countries promise to impose a minimum tax of 15 percent on multinational companies. “Pillar One” once dealt with digital taxes. Now it is a complicated scheme to redistribute some taxes from about 100 highly profitable companies. (There is a good one-paragraph summary of Pillar One here.) The US has reached agreement with six countries, five from Europe and India, that already have DSTs. Each promised to rebate digital 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 whether tax changes the US needs to make to implement the OECD plan will get through Congress. The accruing digital tax payments probably help create corporate leverage for those changes.
Google Makes a New Offer to End Regulatory Standoff Over Media Payments in France
Report from Reuters
In Brief – In the latest in the more than two-year battle in France to force Google to pay media companies when their content appears in search results, Google has submitted a proposal to the French competition authority that commits to good faith negotiations with news publishers over payment terms, including agreeing to make a payment offer within three months from the start of a negotiation and turning impasses over to an arbitration court. The offer comes on the heels of a 500 million euro fine imposed on Google in July for failing to reach agreements with too many media companies. France amended its copyright law in 2019 creating new “neighboring rights” that require media companies be paid when snippets of their stories appeared in Internet search results. While Google has appealed the fine, it now affirms that it respects the neighboring rights, argues that it has reached agreements with a number of major French media enterprises including AFP, and says that its new proposal should open a new chapter in the dispute.
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. It is a media version of Digital Taxes. France and Australia have been the most aggressive to implement payments schemes. While Australia has pressed both giants equally, France has been more focused on Google, although Facebook is now cutting payments deals in France. Both Google and Facebook have created billion-dollar media payments programs to reduce legislative pressure globally, but risks remain. The German competition authority has opened an investigation of Google’s News Showcase payments scheme concerned that news media businesses that participate and get paid might then gain preferential treatment from Google search. In Australia, Facebook signed deals with many publishers, but not all, and some of those left out have complained to regulators.
Polish Competition Authority to Probe Apple’s Advertising “Privacy” Changes
Report from TechCrunch
In Brief – The Polish competition authority has announced that it will investigate the changes that Apple rolled out in its iPhone operating system earlier this year to limit the ability of third party apps to track users for the purpose of targeting ads. While Apple heralded the change to require all third-party apps to get direct opt-in permission from users to access their IDFA (ID For Advertising) as promoting user privacy, many developers whose apps earn revenue through advertising, as well competitors in the digital advertising business, have complained that Apple’s changes will harm their industry and unfairly benefit Apple’s own advertising business. Market results appear to be bearing out some of the claims, with major advertising platforms Facebook and Snap noting negative impact on their ad revenues this fall, while Apple tripled their digital advertising services market share this year.
Context – “Targeted advertising” is one of the most contentious topics in digital policy. On one hand, many privacy advocates claim to want to get rid of it altogether (less effective, more expensive “dumb” advertising is apparently better), while changes proposed by large platforms like Apple and Google in the name of “privacy” threaten industry participants who sense anticompetitive intent. Almost forgotten is the fact that highly targeted advertising clearly benefits small-budget, specialized businesses looking for customers online. Apple has faced similar industry complaints in France and Germany, but unlike in Poland, national regulators did not fully bite. Google’s proposed “Privacy Sandbox” changes to phase out third-party cookies in the Chrome browser, which it also defends as necessary to meet user privacy expectations, has faced very similar industry reactions. In what may herald a kind of regulator co-pilot role for design changes by large digital platforms, at least in Europe, Google has reached agreement with the UK CMA to have the regulator oversee the changes to Chrome to certify they do not preference Google or unfairly harm digital advertising competitors.
Digital Regulation Mega-Bills Relentlessly Moving Through The European Parliament
Report from the Washington Post
In Brief – The EU’s landmark Digital Services Act (DSA) and Digital Markets Act (DMA) have continued their steady progress through the European Parliament, with the full body clearing the DMA and the Internal Market and Consumer Protection Committee approving the DSA, with full Parliament approval expected early next year. The committee amended the DSA, which endeavors to direct better policing of harmful user content online, to include a ban on both deceptive “dark patterns” and targeted advertising to minors. The DMA, which aims to address competition concerns associated with large “gatekeeper” platforms, was expanded to apply its 18 company mandates (handy list here) to more services, adding web browsers, virtual assistants and connected TVs, adding to the original list of online markets, social networks, search engines, operating systems, digital advertising, cloud computing and video-sharing services. The Parliament’s DMA bill also requires platforms to make it easier for users to change default apps and setting, and expands interoperability requirements.
Context – The DMA and DSA are the most important digital policy initiatives in the world. The EU is the largest market moving relentlessly to rewrite the rules of the digital ecosystem. Three things to keep in mind… First, both the DMA and the DSA regulate many more platforms than just Amazon, Apple, Facebook, Google and Microsoft. The DMA is likely to impact as few dozen to start and grow over time, while the DSA impacts all platforms hosting user content. Second, both create a governance model that envisions regulators in a sort of co-pilot role with companies when it comes to design decisions. Think of the agreement between Google and the UK CMA to have the regulator oversee privacy changes to Google’s Chrome browser as a model. Third, harsh criticism of US Commerce Secretary Raimondo by US progressives after she questioned the DMA is a sign that they see the EU’s digital legislation as their best hope to accomplish major digital regulation goals that appear unlikely to get through Congress.
Google and New Mexico AG Settle G-Suite for Education Privacy Suit
Report from Axios
In Brief – Google and New Mexico Attorney General have agreed to settle claims that the digital giant’s G-Suite for Education services violated the Federal Children’s Online Privacy Protection Act (COPPA). AG Hector Balderas filed suit against Google in February 2020, just prior the pandemic massively expanding online education, alleging that its education platform violated federal and state laws by collecting data on children and their families that was used for advertising. Google argued that the complaint was “factually wrong” and that Google’s agreement with the school districts and officials that participated in the program complied with all relevant laws, with schools in control of account access and obtaining parental consent when necessary. Google did not admit to any wrongdoing but agreed to improve age screening of Play Store apps, transparency for parents regarding data practices, and contribute $3.85 million to create the “Google New Mexico Kids Initiative”.
Context – Allegations of harms to young Internet users are fueling digital regulations in many markets. In the UK, the campaign for the Online Safety Bill has been focused on child safety (and anti-terrorism), despite the bill being far broader. Australia is proposing a draft Online Privacy Bill that includes requiring social media platforms to verify each user’s age and obtain parental consent before collecting personal information of those under 16. The European Parliament recently expanded the Digital Services Act, which sets user content moderation standards, to also ban targeted advertising to minors. In the US Congress, where efforts to create broad digital regulation appears stalled, expanding regulation of online services to young users, such as by raising the age for COPPA from 13 to 18, may make headway. Finally, the US Federal Trade Commission has fined OpenX Technologies, a digital advertising platform, $2 million for COPPA violations when it knowingly allowed apps targeting kids to use its advertising platform.
The Internet Association is Shutting Down as Giants Decide to Go It Alone
Report from Politico
In Brief – The Internet Association (IA), the DC-based trade group that described itself as “the only trade association that exclusively represents leading global internet companies”, announced it will be shutting down after nine years of operation. Created in 2012 by Google, Facebook, Amazon, eBay, Yahoo! and IAC to lobby on issues such as net neutrality and intellectual property rights, it claimed over 40 member companies in 2021, including the founding companies (except Yahoo!), Microsoft and a number of the largest “Gig” work platform businesses. The group was shaken by significant staff and leadership turnover in recent years, as well as recent news that Microsoft and Uber were pulling out. It is reported that the largest platforms, subject to multiple antitrust investigations, were unwilling to provide major funding to a group that would not push back due to other members sharing antitrust concerns.
Context – All “tech” companies are not alike. Business models are often vastly different, leading to different perspectives on public policy issues. And trade association politics is complicated and often changing. IA was created because the few Internet firms lobbying in DC saw themselves as different from software, hardware (consumer and network), telecommunications and content companies, which each had trade groups to lobby government. It’s said that “Internet Time” moves faster, so it’s not surprising that the IA folded quickly. The trade groups on the other side of those issues have shifted too, with big cable, big telecom and video industries continuing on in various forms and names. Top takeaways of the IA news: The Internet giants have problems with each other (i.e. Microsoft v Google); Facebook seems far more willing to call for major regulation than the other platforms (supporting DMA and Sec. 230 reform); The Internet giants are so big that they seem to prefer to go it alone rather than find common ground with mid-size companies; Digital work platforms may need to create a more specialized industry group, and; The big regulatory changes are coming from Europe.
Progressives Hammer Commerce Secretary for Challenging EU Bills Targeting Digital Platforms
Report from the Washington Post
In Brief – Progressive Democrats and advocacy organizations, including Senator Elizabeth Warren (D-MA), have publicly rebuked Biden Administration Secretary of Commerce Gina Raimondo for raising concerns with the landmark European Commission legislative proposals that are on track to impose unprecedented regulatory burdens on digital companies. Raimondo has expressed “serious concerns” that the EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) would “disproportionately impact U.S.-based tech firms”. The comments followed reports that the US Government expressed concerns to EU officials that some provisions of the DMA undermined protections for intellectual property in European law and international trade agreements, as well as threatened cyber security and consumer protection. In separate letters, Warren and a coalition of 21 progressive organizations strongly criticized Raimondo and accused her of undermining the Biden Administration’s competition, technology and foreign policy goals.
Context – The DMA and DSA are the most important digital policy initiatives in the world. The EU is moving relentlessly to rewrite the rules governing the digital ecosystem. The DMA addresses competition concerns by imposing a major new regulatory regime on digital “gatekeepers”. The DSA aims to push all platforms to more directly police online content that governments find objectionable. The DMA parallels the anti-Big Tech antitrust bills passed by the House Judiciary Committee, although the DMA will regulate many more platforms than just Amazon, Apple, Facebook, Google and Microsoft. Likewise, the DSA proposes government direction of platform content moderation practices, something tied up by partisan disagreement in the Congress as well. It’s hard not to see the progressive attack on any Biden Administration questioning of the EU’s digital regulation as anything but them seeing EU-based regulation as the main hope to accomplish their policy goals that appear unlikely to get through the US Congress.
UK CMA’s Initial Finding is Apple-Google Mobile Ecosystem Duopoloy Harms Competition
Report from the BBC
In Brief – The UK’s Competition and Markets Authority (CMA) has announced its provisional conclusion that the “effective duopoly” of the Apple and Google mobile ecosystems, including their operating systems, app stores and web browsers, has the capacity to stifle competition, reduce innovation and harm consumers across a range of digital markets, goods and services, including through higher online advertising rates. The CMA has been engaged in a study of the mobile ecosystems since last June and a final report is due June 14, 2022. The interim report discusses potential recommendations to address competition concerns, including making it easier for users to switch between iOS and Android phones when they replace their device, making it easier to install apps outside the two giants’ app stores, providing alternatives for in-app payments, and making it easier to choose alternatives for services like browsers.
Context – The UK, with the CMA stepping strongly into digital competition issues and its soon to be fully-empowered Digital Markets Unit (DMU) regulating digital platforms, is challenging the EU and Australia for the most regulatory western market on digital issues. The CMA’s thinking on the mobile ecosystem “duopoly” contrasts with the antitrust cases in the US that challenge Apple and Google as monopolies. Both Apple and Google argue they operate in competitive markets, largely pointing to the other. Apple largely prevailed in its US court showdown with Epic Games, with even a very unsympathetic judge ruling that Apple was not an anticompetitive monopolist under US federal law. Two things to expect: (1) “Payments choice” in apps is a phony issue. Advocates want much lower fees. Google and Apple can charge and collect fees outside their payments systems, and will if forced. (2) Regulation, whether the DMA and DSA in the EU, or the DMU, Ofcom and Online Safety Bill in the UK, is the more likely route to controlling the platforms. Which brings us back to fees and eventual calls for de facto rate regulation.
Twitter Moves to Dismiss Former President Trump’s Lawsuit to End Twitter Ban
Report from Bloomberg
In Brief – Twitter has asked a federal judge in California to dismiss the lawsuit brought by former President Donald Trump to end the ban imposed on the then-President following the January 6th riot at the US Capitol. Trump, who was also banned by YouTube and Facebook, has sued all three to have the bans overturned, arguing that the companies violated his 1st Amendment rights because they were serving as state actors working in league with government officials. The suits also ask the court to strike Sec. 230 as unconstitutional for encouraging platforms to engage in censorship. Twitter’s motion to dismiss makes a range of arguments, in particular that Trump fundamentally misapplies the 1st Amendment, which does not restrict Twitter, a private company, but does strongly protect Twitter’s editorial right to manage its platform. The US Department of Justice also made a filing on the Sec. 230 aspect of the suit, arguing that the Court could dismiss the case without addressing Sec. 230, but if they did, Sec. 230 is not unconstitutional and does not push or entice platforms to restrict speech, but instead leaves those decisions to the platform.
Context – It’s entertaining to follow the former President’s efforts to get back on the social media giants while trying to build a “non-woke” social media alternative, as well as arguing that Sec. 230 is unconstitutional while planning to use it to protect his new platform. First, his suits won’t succeed. Think about the 1st Amendment claim in particular, which is that the platforms were serving as government actors when they banned the Head of the US Government. The most recent court filings also have the Biden Administration’s Department of Justice defending Sec. 230 as empowering platforms to make content decisions. Of course, candidate Biden angrily called for ending Sec. 230 when platforms did not ban content he did not like, and vaccine misinformation has prompted similar outbursts. But in the end, it’s pretty clear that Democrats want more aggressive moderation without ending Sec. 230.
Acquisition Review Carousel Continues as CMA Accepts Comments on Microsoft-Nuance
Report from AP News
In Brief – The UK Competition and Markets Authority (CMA) has announced that it is opening a preliminary review of Microsoft’s $16 billion acquisition of Massachusetts-based speech recognition company Nuance and will accept stakeholder and industry comments through January 10, 2022. Nuance is a pioneer in voice-based artificial intelligence and a major provider of medical dictation and transcription tools to hospitals and other health care providers. While the US is Nuance’s largest market, serving over 70% of hospitals, it has customers globally, including the UK NHS, and more than half its 7100 employees are based internationally. The deal is the second largest in Microsoft history, bested only by its acquisition of LinkedIn. The US and Australia have cleared the purchase without conditions, and it is reported that the European Commission will do so this month.
Context – Concerns with big tech acquisitions have been growing for years, especially among those who want a total rethink of competition policy. Critics see a range of problems, from already too-big digital giants simply getting bigger, to “killer acquisitions” to buy up competitors (current or future), to “surveillance acquisitions” to identify other targets. 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, despite strong opposition from consumer and privacy advocates. But challenges to Facebook’s acquisitions of Giphy and Kustomer, two relatively small US-based startups, may signal a meaningful shift, in particular with companies, entrepreneurs, investors and regulators needing to deal with the prospect of multiple national regulators each sometimes stepping in. Facebook’s Kustomer deal is OK in the UK but maybe not in the EU. Giphy, the other way around. And while Nuance is no startup (and Microsoft is not Facebook), they likewise face a series of regulators with seemingly different standards.
Senators Reintroduce Dark Patterns Bill in Effort to Regulate Sneaky Website Features
Report from Media Post
In Brief – A bipartisan group of US Senators led by Mark Warner (D-VA) and Deb Fisher (R-NE) have reintroduced “dark patterns” legislation intended to prohibit large online platforms from using sneaky tactics, some say deceptive and underhanded, to spur users to take actions, including to buy things, share data and sign up for marketing and related programs. The Deceptive Experiences to Online Users Reduction (DETOUR) Act targets web companies with more than 100 million monthly users from designing interfaces in ways that thwart consumers’ “autonomy” or “decision-making”, including a range of relatively commonplace design tactics that appear in a wide range of iterations. Warner and Fisher sponsored a similar bill in 2019 and are joined this Congress by Sen. Amy Klobuchar (D-MN), who is leading the effort to dramatically strengthen regulation and antitrust oversight of the largest digital platforms, and Sen. John Thune (R-SD), former Chairman of the Senate Commerce Committee and second ranking member of the Senate Republican Leadership.
Context – A major challenge facing federal legislation on dark patterns is that the range of potentially manipulative coding and user interface practices is so varied that legislation soon looks like an effort to regulate the details of every website from font and button sizes and colors to grammar and double-negatives. The FTC held a public workshop on the issue last April, dedicating five hours across five panels of experts to discuss manipulative online interfaces (video here). California, through the California Privacy Rights Act , enacted by ballot initiative in November 2020, and Colorado’s new privacy law , invalidate consumer consent to data sharing when dark patterns are used. Finally, a Norwegian consumer rights group is leading a coalition of consumer advocates in Europe and the US to call on regulators to take action against Amazon over design features that they claim thwart consumers from cancelling their Prime memberships , which offers an enlightening example of some of the targeted practices.
JFTC Drops Investigation of Rakuten “Free Shipping” Mandate as Platform Drops Plan
Report from MarketWatch
In Brief – The Japan Fair Trade Commission (JFTC), the country’s competition authority, will be ending its antitrust investigation of the “free shipping” policy of Rakuten, one of the largest ecommerce platforms in Japan, with the ecommerce platform abandoning its mandatory program. The standoff began in early 2020 when Rakuten announced its intention to mandate that all customer orders of at least 3,980 yen ($35.28) on the site would receive free shipping, and that the third-party seller would be required to cover all related costs. Merchants were informed that failing to join the new shipping program would result in lower ranking on search results. Some sellers vociferously complained and the JFTC initiated an investigation that determined Rakuten had abused its superior bargaining position. Rakuten has announced an end the mandatory program, that it would not penalize sellers who choose not to participate, and had set up a process to accept and address seller concerns going forward.
Context – Japan, home to a robust digital economy with a unique mix of domestic and foreign-based platform giants, has been a leader in the effort to improve the terms and conditions that digital platforms provide to small business users. Its Ministry of Economy, Trade & Industry (METI) is putting in place a regulatory structure to oversee five digital giants – Amazon, Google, Apple, Rakuten and Yahoo Japan – under 2020 legislation to improve the transparency of platform policies and protect smaller businesses from unilateral changes in rules and fees. The European Parliament enacted so-called P2B (Platform-to-Business) legislation in 2019 and regulating how the largest platform treat small business users is an important component of the EU’s Digital Markets Act “gatekeeper” legislation . In the US Congress, the PACT Act from Sens. Brian Schatz (D-HI) and John Thune (R-SD) attempts to address platform policy transparency but the measure appears to have been sidetracked by the partisan Sec. 230 debate.
Senators Call for Mandatory Access to Social Media Company Data for Researchers
Report from the Wall Street Journal
In Brief – Applauding how Frances Haugen released thousands of pages of internal Facebook documents to public review and scrutiny, a bipartisan group of US Senators have announced plans to introduce legislation that would require all large social media platforms open their internal data to outside researchers. The draft bill would create a data access regime managed by the National Science Foundation (NSF) that would permit university-affiliated researchers to submit research proposals to the NSF, and if the agency approved to proposal, the companies with be required to comply by handing over all requested data. The measure also grants significant new authority to the Federal Trade Commission, including to require regular disclosure of specific information by social media platforms.
Context – One irony of the Facebook Whistleblower affair is that the company put such significant resources into studying objectionable content and testing efforts to address problems, and allowed so many employees to review findings in the spirit of group problem solving. Haugen copied that research and the contentious debate involving staff that was critical of company executives for not taking their advice. Facebook officials have argued that complicated research findings were selectively released and that company leaders sincerely tried to address problems while balancing many considerations . Haugen argues they were motivated by profit and therefore rejected solutions that cost too much or reduced revenues. She argues that regulators must step in . Odds remain long for a powerful US digital regulator, but the opposite is true in the EU and the UK. Major platform regulation is coming in both, and it includes proposals for data access and oversight that fit the Haugen model. Another irony is that the Biden Administration, which appears generally comfortable with EU and UK digital oversight, recently shared concerns with EU officials over Digital Markets Act provisions that threaten company IP rights and trade secrets by requiring sharing of data and access to how algorithms evaluate and rank queries.
Italy Finds Amazon’s Marketplace Preferences for FBA Logistics Violate Competition Law
Report from the New York Times
In Brief – Italy’s competition authority (AGCM), has ruled that Amazon engaged in anticompetitive conduct by leveraging its dominant position as the largest ecommerce marketplace in Italy to preference its large and growing logistics business, Fulfilment by Amazon (FBA), harming industry competitors. AGCM has been investigating the linkages between Amazon’s marketplace and logistics business since April 2019, and in November 2020 the European Competition Authority (ECA) began its own investigation of similar Amazon conduct in Germany and France. The Italian regulator has found that Amazon pushed third party merchants to also purchase its FBA logistics services by improving chances of success in selling on the marketplace for sellers that used FBA logistics, in particular by linking the important “Prime” label to products using FBA, as well as by exempting sellers who use FBA from stringent logistics performance standards imposed on sellers using non-FBA logistics providers. The ecommerce giant now faces a nearly $1.3 billion fine and has been ordered to treat all third-party sellers equally based on fair and non-discriminatory order fulfilment standards as overseen by an independent monitor.
Context – Of all the antitrust issues facing Amazon, charges that Amazon engages in anticompetitive conduct by linking its dominant marketplace to its giant logistics business are the most threatening and on point. The Italians have been ahead of the curve. In Italy, Amazon has been using its ecommerce marketplace dominance to grow its FBA business. In the US, Amazon is years ahead in building its FBA network, which is now as dominant in ecommerce fulfilment center services as the Amazon marketplace is in ecommerce. And Amazon engages in similar preferencing and Buy Box conduct identified by AGCM. The result is that nearly all the top sellers on Amazon in the US are ensconced into FBA . Amazon’s traditional first-party retail business is, like for most retailers, a low margin enterprise. But when third parties sell on Amazon using FBA, it is a very profitable, high fee, high-margin business.
India’s FDI Law Enforcement Authority Summoning Amazon and Future Retail Over 2019 Deal
Report from The Economic Times
In Brief – The Indian Enforcement Directorate (ED), the agency that enforces the country’s foreign direction investment (FDI) laws, has summoned the leadership of Amazon’s India business, and Future Retail, an Indian retail business at the center of the highly contentious controversy pitting the US-based ecommerce giant against Indian-based conglomerate Reliance Industries, for meetings to respond to claims that their 2019 business deal violated Indian FDI restrictions. The legal standoff between Amazon and Reliance, which is led by India’s richest man, has Reliance attempting to acquire the bulk of Future Retail’s business to build out its ecommerce capacity. However, Reliance has been blocked by Amazon enforcing contract terms related to a 2019 investment in one of Future’s subsidiaries. That Amazon-Future contract included a long list of businesses Future Retail could not sell itself to, including Reliance. Reliance and Future Retail first challenged the authority of a Singaporean tribunal to enforce that contract, but the Indian Supreme Court sided with Amazon. Afterwards, Future Retail’s independent board members asked both the Competition Commission of India (CCI) and the Enforcement Directorate to void Amazon’s 2019 investment as being a non-transparent attempt to undermine the retail business’s financial prospects.
Context – India’s FDI laws prohibit foreign ownership of retail businesses but allow foreign-owned third-party ecommerce marketplaces. That distinction has had a huge effect on the development of both industries in India. Amazon and Flipkart (owned by Walmart), dominate ecommerce as marketplaces. Each face years of allegations that they surreptitiously violate FDI laws by engaging in retail-like activities. The CCI has been very public with its concerns and has opened a series of investigations, but the ED has been less public. The ED ramping up its activities is noteworthy because the core arguments in the Reliance v Amazon standoff are really about FDI law violations rather than antitrust.
European Commission Releases Landmark Digital Labor Platform Proposals
Report from AP News
In Brief – The European Commission has released a package of proposals to establish a legal framework of standards and worker rights to apply to the growing number and type of “Digital Labor Platforms” and the millions of Europeans who work using them. Improving conditions for platform workers has been a key part of European Commission President von der Leyen’s digital policy program and the European Parliament overwhelmingly adopted a resolution in September calling for a framework to guarantee that people using digital labor platforms to have the same level of social protection as non-platform workers of the same type. The new draft proposes five criteria to determine if a worker should be considered an employee or an independent worker: effectively fixed remuneration, binding performance rules, quality checks by the platform, schedule control, and anticompetitive restrictions. If any two of them apply, it would trigger a rebuttable presumption that workers on the platform are employees, with the right to benefits like minimum wage, paid vacation, pensions and unemployment and sickness benefits. The draft rules, which still need approval by the European Parliament and Council, would also require implementing legislation in the Member States, a process that could take years.
Context – “Digital Labor Platforms” and this landmark proposal go far beyond ridesharing and food delivery, although those platforms have been at the center of most legal and regulatory battles and will suck up most of the media attention now. Regardless, both the Commission and Parliament have noted the wide range of platforms, jobs and workers involved in platform work. Of great importance is ensuring that “Online Labor Platforms” that enable skilled freelancers to pursue independent work and entrepreneurship, as well as serve small businesses, are not harmed. Concepts like “algorithmic control” and “bogus self-employment” will be central to this and other platform debates over how to balance expanded economic opportunity while addressing abusive business models.
Federal Appeals Court Sides with Apple, Imposes a Stay on In-App Payments Order
Report from the New York Times
In Brief – A panel of the Federal Ninth Circuit Court of Appeals has granted Apple’s motion to stay part of an order from Federal Judge Yvonne Gonzalez Rogers from the Epic Games v. Apple antitrust trial requiring Apple to allow app developers to include in-app links and “buttons” to off-platform payments services. While Gonzalez Rogers’ 185-page ruling rejected Epic’s federal antitrust complaint that Apple was illegal monopolist and should be forced to allow apps to use alternative payments systems, she paired it with a one-page order based on California consumer protection law that required Apple to end a range of “anti-steering” practices designed to keep iPhone app users from buying digital content outside of their apps using payments services that did not automatically collect its often 30% commissions. Apple appealed that order, argued that mandating in-app links to off-platform services were a security risk and would require a major re-engineering of their operating system, and asked for a stay while they appealed. While Gonzalez Rogers dismissed Apple’s motion, the appeals court granted Apple the right to delay changes on in-app links while the case proceeds. Apple is still required to end a range of other anti-steering practices that the company has largely agreed to eliminate.
Context – Gonzalez Roger’s rulings and language show that while she found federal law was with Apple, not Epic, she is no fan of Apple’s business. When she rejected the motion to stay, she pulled no punches, accusing Apple of “incipient antitrust conduct including supercompetitive commission rates resulting in extraordinarily high operating margins.” Ouch. And they won! The truth is, fighting over “payments” is a phony debate. The issue is fees and margins. In Korea, where new legislation now mandates in-app payments options, Google has announced they will still collect their fees, but charge them directly, with a 4% lower fee when other payments services are used. Epic Games is not happy. Not surprisingly, Apple has indicated they will do something similar if they must. Dreams of rate and fee regulation is the real fight.
UK High Court Demands Further Changes to Ridesharing Platform Business Model
Report from the Financial Times
In Brief – In a follow-on to February’s landmark decision of the UK High Court that ordered Uber to reclassify drivers as workers rather than independent contractors, the same court has ruled that Uber’s business model must further change. In the latest ruling, the judges have determined that ridesharing platforms in London must enter into a direct contract with passengers using the app and therefore will take on more responsibility for each trip booked. This ruling rejects the common practice in the rideshare platform industry in which the platform claims it acts as an agent in passenger bookings but that any contract for transportation services is made between drivers and passengers. That model has been accepted by London’s transportation regulator since the industry’s beginning. Among other impacts, the decision is likely to result in ridesharing platforms applying 20% VAT to rides in London, and will further reinforce that rideshare drivers be classified as workers rather than independent contractors, including for ridesharing platform competitors to Uber. In addition, the ruling is expected to eventually be applied throughout the UK.
Context – Ridesharing and food delivery platforms have become ground zero for work platform regulation. It seems increasingly clear that fundamental change is coming to those platforms in the UK. In the EU, Portugal recently adopted national legislation on ridesharing and delivery that is similar to a Spanish law that has gone into effect with mixed reviews from workers. The European Commission is proposing draft legislation to update labor regulations and standards for “Digital Labor Platforms” (DLPs), differentiating between “On-Location Labor Platforms” that intermediate services performed in the physical world, including ridesharing, food and package delivery, and “Online Labor Platforms” that enable often highly skilled freelancers to pursue independent work and entrepreneurship. Key concepts include platform “algorithmic control” and how it leads to “bogus self-employment” which parallels these UK court rulings.
Sense of Anti-Big Tech Bipartisanship Breaking Down Over Regulatory Agencies
Report from Reuters
In Brief – If the Democrats and Republicans were ever on the same page to increase regulatory oversight of digital companies, that alignment is fraying. The Federal Trade Commission (FTC), which has appeared to have a more partisan and divisive tone under antitrust activist Chair Lina Khan, currently has just four of its usual contingent of five Commissioners, with Democratic Commissioner Rohit Chopra departing the agency on October 8th to take over as Director of the Consumer Financial Protection Bureau (CFPB). Alvaro Bedoya, a founding director of Georgetown Law’s Center on Privacy & Technology, and former chief counsel of the Senate Judiciary subcommittee on privacy, technology and the law, has been nominated to serve as an FTC Commissioner, and his confirmation would restore the Democrats’ majority of three commissioners on the panel. The Senate Energy and Commerce Committee tied on a 14-14 vote to report Bedoya’s nomination to the full Senate, with all Republicans opposing. Under the current Senate rules with the body equally divided between Democrats and Republicans, the nomination does proceed to the full Senate where a tie vote would be broken in Bedoya’s favor by Vice President Harris.
Context – Former Commissioner Chopra’s move from the FTC to the CFPB has added to partisan divisions appearing on multiple fronts. On his final day at the FTC, Chopra is reported to have proposed a series of 20 motions on a range of topics and actions and cast his vote on the motions. The current FTC leadership argues that these “zombie” votes are valid and comply with FTC practice established in 1984, and using them, Khan has a three-vote Democratic majority on an undisclosed range of issues. Senate Republicans have objected to this practice and propose to end it. From his new perch leading the CFPB, Chopra has announced plans to increase scrutiny of large tech company initiatives on payments and finance, including their data practices, a move that promises to add to Republican charges of regulatory overreach.
Uber Shutdown in Brussels Prompts Agreement to Enact Long-Delayed Taxi Reform
Report from The Brussels Times
In Brief – A long-running legal, regulatory and policy battle pitting Uber and thousands of local rideshare drivers against the traditional taxi industry and advocates in the Brussels local government has finally resulted in an agreement on taxi sector reform following a threatened Uber shutdown in the European Union capital city. The Brussels government said that the agreement would focus on four main objectives: A common legal framework for the sector; improving quality of service for customers; regulating booking platforms; and protecting the local economy. Uber welcomed the agreement after promising to shut down the service on November 26, blocking over 2,000 local rideshare drivers from using the platform to work, following a final ruling of the Brussels Court of Appeals in a case stretching back to 2015. Government officials, who scrambled to reach a long-delayed agreement before the shutdown came into effect, criticized Uber for allowing its service to develop in a manner outside the directives of the court’s rulings. Taxi industry representatives criticized the government for caving to Uber pressure. Uber had engaged in a campaign to mobilize drivers and riders, which included drivers blocking tunnels near on the capital district, and after the agreement was announced traditional taxi drivers engaged in similar tunnel-blocking.
Context – The European Commission is coming forward with a legislative proposal to update labor regulations and standards in the context of the wide range of platforms, jobs and workers participating in what are broadly considered “Digital Labor Platforms” (DLPs). Like in the US with California’s AB 5, a major challenge is certain to be addressing concerns with food delivery, ride sharing and other “On-Location Labor Platforms” without undermining valuable independent work opportunities for skilled freelancers, such as writers and developers, and traditional small businesses, via “Online Labor Platforms”.
DST News – India Agrees with US to Phase Out Digital Taxes After Global Tax Reform
Report from The Indian Express
In Brief – The Indian Government, which enacted its version of a Digital Services Tax (DST) in 2020 with the creation of its 2% equalization levy on the revenues of digital companies that do not have a physical presence in the country, has announced an agreement with the United States Government to phase out the tax when “Pillar One” of the two-part global corporate tax reform agreement goes into effect. The deal parallels a recent agreement between the US and five European countries. The US has agreed not to impose tariff sanctions against India in retaliation for the equalization levy that it argues discriminates against US-based companies. In exchange, India, like the European countries, will implement a tax credit rebate system to square up payments after the new regime goes into effort. Under the agreement, a digital company’s payments in each year under the current equalization levy will be compared to what is owed by the company in the first year of the new system, and if the company paid more in a year under the DST, the difference will be given as a tax credit.
Context – While the Trump Administration largely stymied national digital taxes by threatening tariff retaliation, the debate was completely reframed by the Biden Administration. It shifted the US emphasis to stopping tax havens, reaching agreement that countries would impose a minimum tax of 15 percent on multinational companies, which is “Pillar Two” of the current deal. They also expanded Pillar One from just taxing “digital” companies to a complicated proposal that aims to redistribute taxes from about 100 highly profitable companies. This article has a good one-paragraph summary of Pillar One’s “tax reallocation” scheme. It remains to be seen if Pillar One can get through Congress (Republican leaders are objecting), hence India and the Europeans keeping their DSTs in place. In fact, while the Biden Administration publicly called for the national taxes to be dropped, the accruing digital tax payments will create corporate leverage for the Administration to push Congress to implement Pillar One.
Federal Judge Rejects Texas Social Media Censorship Law on 1st Amendment Grounds
Report from NBC News
In Brief – A federal district court judge has blocked Texas’s state law that regulates the content moderation practices of large social media companies. The measure, pushed by Republicans to combat what they argue is ideologically-biased censorship of conservative viewpoints, prohibits large social media companies from blocking, banning, demonetizing or discriminating against a user based on their viewpoint, requires them to disclose their moderation policies and actions, and create an appeals process for users to challenge decisions. Like a similar law enacted in Florida earlier this year, which was also blocked by a federal judge, critics argued that state laws regulating content moderation by social media platforms were unconstitutional, both for violating the First Amendment rights of the platforms, as well as being preempted by federal law, in particular Sec. 230 of the Communications Decency Act. In this case, Judge Robert Pitman’s order focused in thorough detail on the First Amendment flaws of the Texas statute, arguing that the platforms were clearly private businesses with protected editorial functions and that the Texas law violated their constitutionally-protected prerogatives on multiple grounds.
Context – It’s not a surprise that the Texas statute was blocked, but there are some points to keep in mind. Judge Pitman based his ruling almost exclusively on the First Amendment rights of the platforms, barely raising arguments based on Sec. 230 which are occupying so much attention in Congress. The judge also took the first federal court swipe at the emerging argument, floated by Justice Clarence Thomas, that the largest social media platforms are “common carriers”, dismissing that contention in Texas’s legislation (which was not in the Florida Republicans’ bill), and which is also driving a novel lawsuit filed by Ohio AG Robert Yost (R) against Google. The legal setbacks are not likely to change the politics at the state or federal level as the issue of Big Tech bias has become a top tier Republican concern that unites many party factions.
European Telecom CEOs Looking for More Money From Large Platforms
Report from Reuters
In Brief – The CEOs of thirteen large European telecommunications and broadband network companies have released a public letter to EU policymakers calling on them to “rebalance the relationship between global technology giants and the European digital ecosystem” in order to achieve the digital economy ambitions of EU leaders. A top priority is to convince European governments to require the largest digital platform and streaming companies such as Google, Meta (Facebook), Amazon and Netflix to pay more money to the telecommunications firms which the network companies claim is needed to keep upgrading digital networks. Other industry priorities include preferential treatment from competition regulators and stepping back from plans to scrap surcharges on intra-EU cross-border calls worth billion in revenue.
Context – While big media successes in Australia and France in getting governments to force Google and Facebook to pay them has been getting attention recently, telecom companies have been accusing Internet platforms of “free-riding” for decades (despite the companies and their consumer users all paying for Internet access) and calling for special digital platform company fees. It’s an offshoot of the Net Neutrality fight. South Korea is the large market where telecom companies have been most successful in imposing mandatory data usage fees on Internet-based businesses to subsidize the data usage of consumers. Korean digital services and broadband companies both argue that some large platforms like Facebook and Netflix do not pay their fair share. It’s ironic that Korea has often been praised by US-based consumer advocates for high speed, low cost broadband when the ability of broadband companies to charge content companies for consumer bandwidth raises such serious Net Neutrality concerns. While European policymakers and courts have strongly defended Net Neutrality and rejected schemes to allow digital companies to pay for better service to consumers, EU telecom companies clearly want to leverage rampant anti-Big Tech sentiments to achieve long running revenue goals.
Long House Energy & Commerce Committee Hearing on Proposals to Change Sec. 230
Report from the Wall Street Journal
In Brief – Democrats in the House Energy & Commerce Committee used a hearing to reiterate that they believe modifying Section 230 of the Communications Decency Act, the federal law granting digital platforms blanket protection against civil liability for content created by their users, as well as the authority to engage in content moderation as they see fit, either to leave up or take down user content, is coming this Congress. Billed as the first of two sessions building bipartisan legislative consensus, it featured two panels, ten experts and six hours of talk. Democrats were focused on Sec. 230 changes to prompt platforms to more effectively police online harms, including misinformation, especially by stripping liability relief when platform algorithms direct harmful content to users, while Republicans focused on changing Sec. 230 to prohibit platforms from restricting “constitutionally protected” speech.
Context – PEI spent six hours watching this hearing (video available here) to get insight into whether Democrats and Republicans are actually coming together on changing Sec. 230. The answer is that they are not. If you want five good minutes, click through to the video and watch Rep. Dan Crenshaw (R-FL) starting at the 3:48 mark. This hearing was a clear example that the two sides are now moving further apart. Republicans were far more focused than ever on social media platforms policing the “Wuhan Lab Leak” theory and the “Hunter Biden email story”, while Democrats continue to focus on vaccine misinformation and racist speech. That’s not the stuff of bipartisan agreement. The top takeaway of hearing reports should be that positions are hardening, belying claims of compromise. For fundamental change to the Internet, focus instead on the EU Digital Service Act and UK Online Safety Bill efforts. In Congress, something narrow expanding regulation of web sites and young users, like expanding COPPA, might have a chance.
Russia “Slowing” Twitter as It Continues Pressuring Social Media on Content Policies
Report from Reuters
In Brief – Russia’s state communications regulator has indicated that it will continue slowing down the speed of Twitter on mobile devices until the social media platform removes all content deemed illegal in the country. Twitter has been subjected to a mobile device slowdown in Russia since March, with the regulator charging the platform with hosting harmful posts including child pornography, drug abuse information or calls for minors to commit suicide. Twitter has consistently denied that it allows the platform to be used to promote illegal behavior and that it has a zero-tolerance policy for child sexual exploitation and prohibits the promotion of suicide or self-harm. There were reports in the initial phase of the slowdown efforts, which mostly effects picture and video downloads on the generally text-based service, that a number of Russian Government web sites went down, which some attributed to an error in the implementation of new download slowdown tools while others suspected was cyber retaliation of some form.
Context – Slowing down Twitter is one component of a broader conflict between the Russian Government and the platforms. YouTube, Facebook and Twitter have emerged as key alternative communications hubs for political opposition to President Putin and the state controlled traditional media. On the eve of the recent national elections in September, Google and Apple buckled under the most aggressive Russian Government pressure when they removed apps used by Russian opposition parties from their app stores after in-country executives for Google and Apple were threatened with arrest and criminal charges. The Russian competition authority charged YouTube with “opaque, biased and unpredictable” content moderation this spring and recently opened an antitrust case against Apple for failing to allow app developers to tell customers about alternative payment options when using its App Store platform.
European Commission Expected to Release Platform Worker Legislation in December
Report from the Financial Times
In Brief – The European Commission is expected to propose legislation on December 8 to establish a legal framework of standards and worker rights to apply to the growing number and type of “platform workers”. European Commission President von der Leyen has called for action to improve working conditions for platform workers, the Commission has been engaged in a series of stakeholder consultations, and the European Parliament in September overwhelmingly adopted a resolution calling for a European framework to guarantee people using digital labor platforms to have the same level of social protection as non-platform workers of the same category, including social security contributions, responsibility for health and safety, and the right to engage in collective bargaining to negotiate fair terms and conditions.
Context – Both the Commission and Parliament have noted the wide range of platforms, jobs and workers participating in what are broadly considered “Digital Labor Platforms” (DLPs). The framework being discussed differentiates between “On-Location Labor Platforms” that intermediate services performed in the physical world, typically tasks such as ride-hailing, food and package delivery, and a wide range of domestic and household work, and “Online Labor Platforms” enabling often highly skilled freelancers to pursue independent work and entrepreneurship. In all cases, issues regarding “algorithmic control” and concepts like “bogus self-employment” will be central to the debate over how to balance the ability of platforms to expand economic opportunity while addressing disruptions and recognized abuses. Like in the US with California’s AB 5, a major challenge in Europe is certain to be keeping concerns with food delivery and ride sharing from undermining valuable independent work opportunities for skilled freelancers, such as writers and developers, as well as traditional small businesses.
Australia Proposing Legal Regime to Undermine Anonymous Online Speech
Report from ABC News Australia
In Brief – Australian Prime Minister Scott Morrison has announced legislative plans to reduce online anonymity to allow victims of defamatory comments online to win damages in court. The legislation would require social media companies to collect personal details of all users, which is expected to include name, phone number and email address, and establish a process to have the user’s identity revealed to facilitate defamation suits. Platforms will be required to create a complaint system for people who feel that they are a victim of defamation. When a complaint is received the person who posted the content will be asked to take it down, and if the poster refuses, or if the complainant is interested in pursuing legal action regardless, the platform can ask the poster for permission to reveal their contact information. If the speaker refuses, the platform itself can go to a court to get an “end-user information disclosure order” giving the tech company the ability to reveal the user’s identity without permission. Finally, if the platform can’t identify the user, or if the platform chooses not to release the identity, the platform itself will face liability in the defamation case.
Context – Australia is pressing its case as the most aggressive Western regulator of online activity and digital platforms (although the post-Brexit UK and the European Union, in particular France, are highly competitive as well). PM Morrison has aggressively challenged digital giants on a range of issues, including policing online hate, requiring social media and search giants to pay domestic media companies, and cross-border taxation. Nasty and critical comments on social media, which he called a “coward’s palace”, is the latest cause. The idea that platforms will fight to protect user anonymity is questionable at best. Liability for user content is just as likely to justify companies piercing user anonymity or, as has been seen in Australia when the High Court shifted defamation liability for user comments to media companies, to restrict comments and other questionable online speech to avoid liability.
Google Agrees to UK Government Oversight of “Privacy Sandbox” Changes to Chrome
Report from TechCrunch
In Brief – The UK Competition and Markets Authority (CMA) and Google have agreed that the digital giant will develop their global “privacy sandbox” plans to block certain user-tracking technologies on the Chrome browser in a manner that does not preference Google or unfairly harm digital advertising competitors, and will do so with ongoing oversight by the CMA. Google announced plans in 2019 to phase out third-party tracking cookies used for advertising on the Chrome browser due to changing privacy expectations of users. Many ad industry participants raised concerns that the changes would likely harm competitors and further reinforce Google’s dominant position in the digital advertising market due to the digital giant’s unprecedented range of alternative user data. The CMA initiated an investigation of the plans last January. Google’s blog post states that “the Privacy Sandbox APIs will be designed, developed and implemented with regulatory oversight and input from the CMA [Competition and Markets Authority] and the ICO [Information Commissioner’s Office]” and that “the changes we make in Chrome will apply in the same way to Google’s ad tech products as to any third party.”
Nextcloud Follows-Up EU Antitrust Complaint Against Microsoft with German Filing
Report from Politico
In Brief – German-based opensource cloud services provider Nextcloud, which filed an antitrust complaint against Microsoft at the European Commission earlier this year, has followed up by filing a separate complaint with the German antitrust authority, and also announced that it intends to raise its concerns with the French authorities as well. Nextcloud leads a group that calls itself the “Coalition for a level playing field” and argues that Microsoft anticompetitively bundles its OneDrive cloud offering with its dominant Windows 10 and 11 software suites, drawing a direct parallel to the bundling of software such as its early Internet Explorer web browser with Windows over 20 years ago that resulted in landmark antitrust challenges in the US and Europe. The cloud company’s CEO has said that the initial enthusiasm of European Commission antitrust enforcers when Nextcloud filed its complaint earlier this year seems to have waned in recent months, which is why the coalition has decided to raise the issue national competition authorities.
Context – While Microsoft has largely avoided the antitrust backlash confronting Amazon, Apple, Facebook and Google, and has even stepped forward calling for regulation of Apple’s App Store in Europe and Google and Facebook on media payments in Australia, the trillion-dollar software, cloud, gaming and business services giant is unlikely to escape the regulatory dragnet. In a foreshadowing of Nextcloud’s complaint, Slack filed an antitrust complaint with the European Commission in mid-2020 accusing Microsoft of preferencing its Teams service. The German competition regulator now has the authority to designate digital companies “of paramount significance on competition across markets” in order to preemptively regulate them and is pursuing cases against the other four mega giants. Nextcloud is clearly hoping its complaint will be used to pursue the same finding for Microsoft. Finally, the Digital Markets Act gatekeeper legislation is coming and its key provisions will cover Microsoft as well.
European Council Agrees on DMA and DSA Plans and Vestager Presses Forward
Report from the Financial Times
In Brief – The Council of Europe, the EU’s legislative body made up of the bloc’s 27 Member States, has agreed on draft language for the Digital Services Act (DSA) and the Digital Markets Act (DMA), two landmark bills rewriting the rules of the digital economy. The DSA is a comprehensive update of the EU’s eCommerce Directive that provides the legal framework for digital platforms in Europe and aims to regulate better policing of harmful content by platforms. The DMA aims to address competition concerns in the digital economy that are attributed to the largest “gatekeeper” platforms. The European Commission unveiled drafts of both last December and they have been under review in the European Parliament and in the Member States, who meet in the Council. (Links to legislative schedules for DSA and DMA.) Commissioner Margrethe Vestager, a leader on digital policy on the European Commission as well as the bloc’s top antitrust official, followed up the recent Council actions that largely backed the Commission’s DSA and DMA drafts by calling for the Parliament to also conclude work quickly, counseling those who are concerned with digital platforms that “Perfect not be the enemy of very, very good.”
Context – The DMA has been approved in the lead EU Parliament committee and the full body is expected to follow on in mid-December. Similar action on the DSA is expected soon. The DMA’s gatekeeper “Do’s and Don’ts” appear relatively set. The big question was how many businesses will be covered, just the top four or five mega-platforms or dozens, and “more” appears to have won out in both the Council and the Parliament. On the DSA, a key question has been the role of national regulators as enforcers, with many critics of Big Tech claiming the GDPR’s “One Stop Shop” experience argued against giving a special role to home country regulators. The Council’s proposal uses home country regulators for smaller platforms but an EU regulator for the largest platforms. Other questions include how to regulate behavioral advertising, whether media firms should be protected from platform policing, and platform obligations to stop IP law violations.
UK’s CMA Rejects Facebook’s Acquisition Giphy and Orders Sale of NY-Based Digital Startup
Report from the Wall Street Journal
In Brief – The UK Competition and Markets Authority (CMA) has rejected the acquisition of GIF website Giphy by Meta (Facebook), completed in 2020 for $315 million. The regulator argues that Facebook buying Giphy, a New York-based startup that while not profitable is the largest marketplace for GIFs and had become a nascent digital advertising services provider, will prevent the small platform from emerging as a meaningful display advertising competitor to the digital giant. The CMA also determined that Facebook could restrict access to Giphy’s GIF inventory to undermine rival social media competitors such as Twitter and Snap. As outlined in the decision, the CMA rejected a range of behavioral remedies offered by Facebook. The company has argued throughout the regulatory process that the CMA has overstepped its authority reviewing a relatively small deal involving a business with no presence in the UK and may further appeal the order to unwind the acquisition and argue that using such an expansive view of potential future competitors will cut off the route many entrepreneurs use to monetize their work.
Context – The contention that digital giants use acquisitions to undermine competition has been a staple of Big Tech criticism for years, but meaningful change has been slow in coming. But Facebook is now at the center of two potentially landmark cases with challenges to bids for startups Giphy and Kustomer (a US-based provider of messaging-based customer relationship services) illustrating the potential implications when numerous competition authorities all claim global reach. Facebook’s Kustomer deal is OK to the UK but is being scrutinized by the EU. Then the reverse impacts Giphy, with the EU approving but the UK blocking. Neither startup has business operations in Europe. Traditionally, competition regulators have claimed the right to review deals that meet a certain size for price and revenues, but the German regulator now argues that paying a few hundred million for an unprofitable, small revenue enterprise is actually a sign of anti-competitive prospects.