News & Insights 2 old
Meta Bows to Pressure and Steps Back From Plan to Expand End-to-End Encryption
Report from the BBC
In Brief – In the midst of the firestorm created by Frances Haugen’s document heist and withering global PR and lobbying campaign, Meta (Facebook) has stepped back from its plan to apply “end-to-end” encryption to messaging services on Facebook and Instagram. End-to-end encryption allows users to communicate with each other without the platform itself, law enforcement, or any third party capable of intercepting transmissions, to read or decipher the communications. Law enforcement officials and advocates have long argued that this protects sex abusers and other criminals and have called on Facebook to abandon their plans. Harms to younger Facebook users have been a major charge raised by the Whistleblower leaks and subsequent campaign. Facebook’s Global Head of Safety, Antigone Davis, who defended the efforts of the company to better serve teenage users in a recent US Senate hearing, is the executive who announced that the company’s plan to apply end-to-end encryption to messaging on Facebook and Instagram would be delayed until 2023 to ensure the company will “get this right”.
Context – The policy fight over encryption stretches back to the 1990’s pitting civil libertarians and technologists against law enforcement advocates. Facebook’s WhatsApp has used end-to-end encryption since 2014. The company has faced legal pressure in major markets, including India and Brazil, for years. Former US Attorney General William Barr was especially committed to pressuring large tech platforms to stop employing encryption that he said was protecting lawbreakers and undermining law enforcement. He was keenly focused on Apple, due to its encrypted phones, and Facebook, with its plan to extend its WhatsApp-style encryption to its other popular services. The UK and Australian governments have been equally engaged, with law enforcement leaders joining Barr on a 2019 letter calling on Mark Zuckerberg to abandon the encryption plan, claiming it would unleash more online sex abuse and other crimes.
Despite Progress for New FCC Chair Net Neutrality Remains Tied Up Over Sohn Nomination
Report from The Verge
In Brief – While the US Senate appears headed to approve current Federal Communication Commission (FCC) Commissioner Jessica Rosenworcel to become the agency’s first woman Chair with little controversy following an uneventful nomination hearing, the Senate Energy & Commerce Committee delayed consideration of Gigi Sohn’s nomination to be the FCC’s key fifth commissioner. Sohn, a long-time champion of Net Neutrality (NN) and other progressive telecommunications policies, served as a senior counsel to former FCC Chair Tom Wheeler during the Obama Administration. While her nomination is strongly supported by progressive groups, conservatives and telecommunications company advocates criticize her positions as overly regulatory. A hearing on Sohn’s nomination, who is expected to face strong Republican opposition, is reported to be coming in early December.
Context – The battles over NN stretch back to the mid-2000’s and now features a firm partisan divide between Democrats supporting “strong” NN and Republicans objecting to mandates. While there is much more to the FCC than just NN, it’s definitely the agency’s signature tech issue. It is also a high-profile political football. The Obama FCC under Wheeler enacted NN rules in 2015, which were overturned by the Trump FCC in 2017. Federal courts upheld both sets of rules. President Biden campaigned in support of NN in 2020 and another reversal in rules has been fully expected. However, while the FCC Chair during the Trump Administration stepped down in January, that alone did not hand an operating majority to the pro-NN Democrats because there remain just two commissioners from each party. Rosenworcel’s confirmation as Chair does not change that. Sohn’s confirmation would, providing a third NN vote. Hence the partisan rancor. While normally it would seem a formality for the Senate Democrats to approve a third pro-NN commissioner, in a 50-50 Senate it might be harder than anticipated with Sen. Krysten Sinema (D-AZ) a potential roadblock.
Future Retail Calls on Indian Competition Authority to Void Amazon’s 2019 Investment
Report from Reuters
In Brief – The legal standoff in India between Amazon and Reliance Industries, led by India’s richest man, Mukesh Ambani, continues with Future Retail’s independent board members asking the Competition Commission of India (CCI) to void Amazon’s 2019 investment in one of its subsidiaries based on the ecommerce giant not being transparent with the Indian retailer. Ambani’s Reliance is an Indian industrial conglomerate attempting to build an ecommerce business to challenge US-owned market-leaders Amazon and Flipkart. It attempted to acquire Future’s retail assets in 2020, but Amazon challenged the acquisition based on contract rights related to its comparatively small 2019 investment which it said included a contract provision listing entities it could block from buying Future’s retail business, including 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. The legal battled reached India’s Supreme Court, which sided with Amazon. Future Retail’s independent board members now claim that internal Amazon documents indicate that blocking the future sale of Future’s retail business, rather than growing the business, was the intent of the investment, which it claims is grounds to void the deal.
Context – India’s foreign direct investment (FDI) laws that prohibit foreign ownership of retail businesses but allow foreign-owned third-party ecommerce marketplaces have a huge effect on those markets. Amazon and Flipkart (owned by Walmart), dominate ecommerce as marketplaces. Each face years of allegations that they surreptitiously violate FDI laws and are under investigation by the CCI and the agency that enforces FDI laws. The Reliance v Amazon standoff is another avenue for that fight as the Indian businesses argue Amazon, as a foreign business, cannot legally control the operations of Future Retail.
Ohio AG Sues Facebook for Securities Fraud Based on Whistleblower Leaks
Report from the Washington Post
In Brief – Ohio’s Attorney General David Yost (R) is suing Meta Platforms (Facebook) in federal court for $100 billion in damages for allegedly deceiving investors about the negative impacts its platforms have on young users in order to boost its stock price. The complaint is the first from a US federal or state law enforcement or regulatory agency stemming from the massive heist of internal Facebook documents by Frances Haugen that detail company efforts to track, understand and sometimes address problems on its massive platforms globally. The documents taken by Haugen have supported a huge media campaign and led to her lengthy testimony in the US Senate, UK Parliament and European Parliament.
Context – This is the second high profile litigation from Republican AG Yost targeting a tech giant this year. In June he filed a novel lawsuit in state court asking for Google’s search engine to be declared a public utility or “common carrier” governed by state laws regulating railroads, electricity and telephones, and prohibited from preferencing its own products or discriminating against some users. Google has moved to dismiss the suit. A key thing to keep in mind on his Facebook suit is the focus the company’s conduct under securities law. First, the designation of Haugen as a “Whistleblower” rather than just an employee who took confidential documents hinges on Facebook committing fraud or breaking laws, which explains why she went to the SEC as well as the Wall Street Journal. Also, the call for a digital regulator from Haugen and progressives is not likely to bear fruit in the US anytime soon (unlike the EU and UK), so civil suits or enforcement action are the more likely route to rein in the company. But it won’t be surprising if the problems Facebook was studying internally were also noted as risk factors in their public SEC filings. In fact, if they weren’t, that would be a massive oversight as bad as letting employees see so many sensitive internal documents on topics they were not working on, a policy barn door that is reportedly now being closed at the company.
European Parliament Parties Agree on Digital Markets Act Covering Big Platforms
Report from the Financial Times
In Brief – The European Parliament’s main political parties have reportedly reached agreement on the outlines of the Digital Markets Act (DMA), landmark legislation intended to address competition concerns with digital platform “gatekeepers”. Supporters believe the deal will allow the Parliament to vote next week. The DMA proposes unprecedented regulation and oversight of 18 behaviors by large digital platforms. On the key issue of the size and kind of companies to be covered, the deal appears to fall on the side of regulating more platforms beyond the GAFA giants, covering companies with a market cap of at least €80bn ($90 bn) that offer at least one Internet service, such as an online search or marketplace business. The proposal also boosts the power of national competition authorities to review tech company acquisitions of smaller firms than currently mandated. The European Council made up of the Member States is aiming to agree on a version of the bill in late November, and then the Parliament, Council and Commission will need to come to an agreement on a final text, a target that is set for next year.
Context – The DMA and the Digital Services Act (DSA), which sets new standards for platforms to moderate user content to police a wide range of objectionable activities, have both been the subject of intense negotiations in the European Parliament and the European Council. The DMA’s gatekeeper “Do’s and Don’ts” have appeared relatively set. (A handy table is available here.) The big open DMA question has been how many businesses will be covered. Leading parliamentarian Andreas Schwab has argued the effort was intended to corral only the four or five mega giants and pressed to raise the thresholds, in particular to require a business to have more than one major platform. The other side, those aiming to regulate conduct by more platforms, appears to have prevailed. Booking.com, the leading EU-based platform arguing against covering the merely big, will likely be disappointed.
Microsoft and Uber Leave the Internet Association in Sign of Digital Policy Fractures
Report from Axios
In Brief – It is reported that Microsoft and Uber, two of the largest digital platform companies in the world, will be leaving the Internet Association (IA), the DC-based trade group that describes itself as “the only trade association that exclusively represents leading global internet companies on matters of public policy”. If the IA web site is accurate, the association, which was created in 2012 by Google, Facebook, Amazon, eBay, Yahoo! and IAC to lobby on the issues of net neutrality and intellectual property rights, will still have 40 members, including all of founding companies except Yahoo!, who’s Internet businesses were sold off to Verizon in 2017. The group has undergone a significant amount of turnover among the staff and leadership in the past two years, most notably with its first CEO, Michael Beckerman, departing in February 2020 to head TikTok’s US government relations operation.
Context – All “tech” companies are not alike. The business models are often vastly different, leading to different perspectives on public policy issues. The Internet Association was created because the founding companies believed that Internet-based businesses were different than software, hardware (consumer and network), telecommunications and content companies, each of which had specialized trade groups lobbying government. For example, internet companies were confronting the software and movie industries on IP protection and liability, or the telecommunications industry on net neutrality. Microsoft leaving IA is not too surprising. It was not a member for years because it was perceived as a software company first. It also often clashed with Google, a division that reemerged this year. Apple, today an antagonist of Facebook and Microsoft, was never a member of IA due to its history as a hardware company. Uber’s departure is interesting due to the number of commerce and work platforms in IA and its activity on gig economy issues. Finally size differences between the few mega-giants and the rest only continue to grow, creating strains on competition policy but also on the group and industry reputation.
Note: PEI Executive Editor Brian Bieron was the first Vice Chair of the Board of the Internet Association
Portugal Enacts Remote Worker Protection Law to Promote Digital Nomads
Report from the New York Times
In Brief – Portugal has enacted comprehensive remote worker protection legislation to limit the times of day when employers can contact remote workers, prohibit monitoring at-home workers, require employers to help defray home Internet and utility costs, and allow remote workers to visit an office every other month to avoid excessive isolation. Portugal’s Socialist-led government has promoted Portugal as a great location for remote “digital nomad” workers from other countries who felt free to work from completely new locations during the pandemic, including by offering special temporary work visas, and described the new law as improving remote work for both domestic workers and the new digital workers. While the full set of mandates will clearly apply to companies physically in Portugal (those with fewer than 10 employees are exempt), it is less clear if the mandates will apply to companies with no presence in the country other than from remote workers who move there, and if they did, whether that would increase digital work immigration or instead cause companies to prohibit staff working from Portugal.
Context – Although Portugal’s Socialist-led government has run into coalition problems that are leading to an unexpected national election in January, legislating on digitally-enabled work has been a priority in recent weeks. Along with the new remote worker law, the government followed Spain’s lead and approved a bill to require “Gig” ridesharing and delivery drivers to be treated as employees of the digital platforms that they use, and share information about how their algorithms and artificial intelligence mechanisms operate. Monitoring remote workers and students through digital tools is a workplace reality that has dramatically increased during the pandemic. In the US, the State of New York has enacted a law to require all private employers to provide written notice to employees if the employer monitors or intercept telephone or email communications or internet usage by the employee.
Digital Stockholm/Sydney Syndrome? Google Announces Big Investment in Australia
Report from the Wall Street Journal
In Brief – Google has announced that it will invest AU $1 billion in Australia over the next five years, promising to build a research hub, increase cloud computing capacity and fund partnerships with academic and government science organizations. Google has a long history in Australia, opening its first office in 2002, and developers in the country created the highly popular Google Maps platform. The investment is the largest ever made by Google in the country and the plan to hire 6,000 employees would triple the number of in-country corporate staff from today. The announcement was made at an event that featured Prime Minister Scott Morrison, who plans to lead the Liberal Party in next year’s national election and described the investment as a vote of confidence in the nation’s economic prospects emerging from the pandemic as well as its positioning as a global technology business hub in line with his government’s digital economy strategy. The event also featured remarks from the second top official from the US Embassy, highlighting the geopolitical importance of the US-Australia relationship.
Context – Google’s billion-dollar investment in Australia cannot be viewed without remembering that earlier this year Google threatened to turn off its search engine in the country in the face of legislation that could have resulted in the company paying Australian media companies whenever links to their stories or videos showed up in Google search. (Facebook, the other target, did turn off services in-country for a couple of days.) The legislation was tweaked and both companies have since signed deals to pay Australian media companies to include content in curated media services. Morrison has aggressively challenged digital giants on other issues as well, including policing of online hate and cross-border taxation, and most recently attacked social media as a “coward’s palace”, pushed to end anonymous posting, and threatened legislation to shift user content liability to the platforms.
Facebook Announces Changes to Digital Ad Targeting Based on Sensitive Issues
Report from the New York Times
In Brief – Meta (Facebook) has announced new limits on the ability of advertisers to engage in detailed ad targeting based on user engagement with content on sensitive topics related to health, race, ethnicity, political affiliation, religion or sexual orientation. The company says that the change, which goes into effect on January 19, was made based on feedback from civil rights experts, policymakers and other stakeholders. While the new policy is not limited to political advertisers, many saw the move in the context of the ongoing controversies over political misinformation and disinformation that has plagued Facebook and other social media platforms for years. Facebook has been hammered by criticism since the massive release of company documents taken by Frances Haugen, including on Facebook’s policy of not aggressively policing political ads. Facebook continued to defend the value of targeted advertising, in particular to small businesses and causes, a position it takes in policy debates globally, especially in Europe where some policymakers call for a ban on behavioral advertising entirely. The four national Democratic Party campaign committees criticized the move arguing that the company should instead address the real problems, which they charge are disinformation and “an algorithm that incentivizes misinformation and hate.”
Context – Political ad policies were just one front in the debate over social media, misinformation, content moderation and ideological bias. During the 2020 election campaign, Twitter, TikTok and Spotify chose to ban political ads, Reddit and Snap applied “fact checking”, and Google allowed most political ads but restricted micro-targeting. Facebook interfered least, generally allowing political ads without “fact-checking” to avoid concerns with ideological censorship, a position roundly criticized by progressives but not conservatives wary of unbalanced content reviewers.
Department of Justice Sues Uber Over Wait Time Fees for Disabled Riders
Report from the Washington Post
In Brief – The US Department of Justice (DOJ) has sued Uber alleging that the company has overcharged passengers with disabilities by imposing “wait time” fees on passengers who need more time to enter a car due to their disability. Uber began charging passengers in some cities “wait time” fees in 2016 when a driver needed to wait more than two minutes for a passenger to arrive. The DOJ complaint argues that Uber’s wait time policy violates the Americans With Disabilities Act (ADA), as blind individuals, wheelchair users, and those with walkers often require more than two minutes to get into a car. Uber responded with disappointment claiming that it had been in talks with the DoJ to address the concerns, that the fee was never intended when the rider was present when the car arrived, were often refunded when a rider contacted to the company regarding a disability, and has recently been changed to exempt all disabled riders.
Context – Time for a quick update on the Biden Administration and two issues: (1) Gig work politics and (2) Applying the ADA to digital businesses. While President Biden was a supporter of California’s AB 5 law that attempted to overturn the Gig work platform business model by classifying most independent contractors as employees, his Administration hasn’t done much. Labor Secretary Walsh has expressed concerns with gig work businesses, and the Department of Labor withdrew rules enacted in January by the outgoing Trump Administration, but federal and state legislation is tied up, especially by opposition from creative freelancers who value their independence. Even less has happened on the ADA and website accessibility lawsuits, which increased after federal district courts in Florida and New York ruled that business websites failing to meet Web Content Accessibility Guidelines (WCAG) can violate Title III of the ADA. Legislation to direct the Justice Department to set clear standards for ADA website compliance is generally supported by business groups but criticized by some disabled group advocates and is not moving.
Travel Search Firms Call on European Commission to Quickly Build on Court Win Over Google
Report from Travel Weekly
In Brief – Following the EU General Court’s rejection of Google’s appeal of the antitrust determination and $2.8 billion fine from the European Competition Authority (ECA) for anticompetitive manipulation of its dominant search platform to harm comparison shopping competitors, a trade group representing online travel services has called on the European Commission to move quickly to apply the findings to similar conduct targeting travel-related search services. EU Travel Tech noted that it had raised “grave concerns” with the European Commission regarding Google’s abusive conduct in vertical search in the travel sector for over eight years and called on the ECA to now open a formal proceeding.
Context – Google has faced a range of distinct antitrust complaints for years. Three of the main threads involve its digital advertising businesses, its Android operating system practices, and its Internet search practices. One of the longest running complaints has been that Google manipulates their dominant search engine (in Europe, for example, it holds a 90% share of “general search”) to penalize specialized “vertical search” services, such as for travel, employment or local commerce, when they have a similar vertical search business of their own. Essentially, the charge is that when a user enters a search for something like travel information, Google’s search results page will prominently include results from Google’s travel service (now often called a “OneBox”) while at the same time the main Google search algorithm will downrank competitors’ vertical sites. The Comparison Shopping case was based on this type of complaint involving Google’s Shopping vertical and competitors a decade ago. Although the ECA won, comparison shopping is a relatively small online industry and other more robust sectors continue to look for relief. A big question now is whether the ECA will quickly move on to Google search cases involving larger “verticals” or will essentially wait for the expected Digital Markets Act gatekeeper bill to pass and rely on regulators to tame Google’s search practices.
US Government Beginning to Raise Concerns with the IP Impact of DMA Draft
Report from Reuters
In Brief – The US Government has shared a policy paper with EU officials laying out concerns with their Digital Markets Act (DMA) and the Digital Services Act (DSA) proposals. Headlining the paper were questions related to provisions of the DMA, the bill to address competition problems attributed to the largest digital platform “gatekeepers”, that threaten the intellectual property rights and trade secrets of impacted companies. The legislation, which lays out 18 potential obligations, includes granting competitors access to a range of aggregated and non-aggregated data, access to how algorithms evaluate and rank queries, and mandatory interoperability with operating systems and software features. (At issue are Section 6(f), (i) and (j) briefly outlined in a handy table available here.) The US warns that the DMA burdens may override existing protections for intellectual property in European law and international trade agreements, as well as threaten cyber security and consumer protection. The paper also recommends that cloud services providers be exempted from most duties of the DSA, which creates new user content moderation obligations for social media and marketplace platforms, arguing cloud providers are better understood as infrastructure providers.
Context – The DMA and DSA are the most important initiatives in the digital public policy world. Don’t underappreciate how much the EU plans to put regulators into a co-pilot role with digital platforms. The biggest issue facing the DMA from kick-off was determining which businesses would be covered by its regulatory mandates. It was powered by the desire to rein in Amazon, Apple, Facebook and Google and lead parliamentarian Andreas Schwab continues to argue that those mega giants are very different, but others legislators push back that abuses occur among many others. The Biden Administration is clearly torn, arguing that EU thresholds that only impact US giants are discriminatory but also championing similarly targeted antitrust law changes in the US Congress.
UK Supreme Court Rejects Privacy Class Action Targeting Google Absent Actual Harms
Report from Reuters
In Brief – In a decision impacting the evolution of class-action style civil suits in the UK, as well as data privacy litigation in the country, the UK Supreme Court has unanimously blocked a proposed 3.2 billion pound class action against Google over allegations the internet giant unlawfully tracked the personal information of millions of iPhone users in 2011 and 2012. The judges rejected the expansion of class-action type suits to cases of misuse of data when there is no obvious financial loss or distress, a position applauded by UK business advocacy groups. The decision also sets back similar suits targeting other digital giants including Facebook and TikTok.
Facebook Releases Latest Content Transparency Reports Amid Whistleblower Uproar
Report from the Washington Post
In Brief – In the midst of the firestorm created by Frances Haugen departing Facebook with thousands of internal documents detailing how the company studies, and sometimes addresses, many problems that emerge on its platforms, and then leading a global PR and lobbying effort lambasting the company, Meta (Facebook) released its latest set of quarterly “transparency” reports on content that violates the company’s rules. Among other details, the company claims that hate speech is now 0.03 percent of views, or 3 instances per 10,000 views of content, that the company removed the 20th most popular link for violating community standards, and that bullying and harassment, a new metric for the company, accounted for 0.14 to 0.15 percent on Facebook and 0.05 to 0.06 percent on Instagram.
Context – Despite being the tech giant most willing to report on its efforts to address objectionable content, a core criticism leveled by Haugen has been that Facebook sits on significant research on a wide range of problems but only selectively uses it. Her document heist is filled with such research and views of staff critical of executives for not fully taking their advice. Among other things, she is encouraging governments to force the company to allow regulators, academics and outside experts to have ongoing access to unfiltered data. She also argues that the company’s AI tools to detect objectionable content are unreliable and targeted just to problems in their most valuable markets, so they miss a lot. Finally, Facebook also released a report on how it has responded to policy recommendations of the independent Facebook Oversight Board (OB) of eminent persons that it created to serve as a kind of Supreme Court of content moderation standards, an unprecedented attempt to balance censorship concerns with government making content moderation decisions while also injecting some independence from corporate leaders. Of 69 policy recommendations issued by the OB in the last two quarters, the company claims to have implemented 25 of them, to be working on 23, and studying how to address 17. Critics don’t seem to care.
Judge Rejects Apple Motion to Stay Her Order That They Allow In-App Payments Links
Report from CNBC
In Brief – US District Court Judge Yvonne Gonzalez Rogers heard and promptly dismissed Apple’s motion to stay her order that Apple end its anti-steering practices that prohibit app developers from informing consumers of alternative payments options by December 9. The current standoff follows the lengthy trial where Epic Games failed in its effort to have Apple deemed a monopolist and be forced to allow apps to use alternative payments systems. However, Judge Gonzalez Rogers paired her 185-page ruling rejecting Epic’s antitrust complaint with a one-page order requiring Apple to end its anti-steering practices. Apple is appealing that order, asking for a stay while the appeal proceeds, and are focusing on the requirement that it allow direct links inside apps to take users off the platform, which it claims are a security risk that undermines the Apple platform and all its users.
Context – It was clear throughout the trial that Apple’s strict “anti-steering” policies were a major problem for Judge Gonzalez Rogers. In addition, her language about Apple and its App Store indicates she is not a fan of their business. Her new ruling accuses Apple of “incipient antitrust conduct including supercompetitive commission rates resulting in extraordinarily high operating margins which have not been correlated to the value of its intellectual property.” Yes, she ruled against Epic because the law was not with them, but it seems ideologically she was. And more than once she has said that gaming was probably not the best app business for an Apple antitrust case. While Apple further appeals, watch what is going on with Google in Korea on app stores, payments and fees. Google has announced they will allow payments choice to comply with a new app payments law, but clarified that will not end their commission, which is basically the same as Apple’s. Their Google Play fee will be 4% less for apps using other payments services, not free. That move is sharpening the focus on how this fight is really about fees themselves, with “payments choice” basically a distraction. The real question is when a government moves to simply regulate fees.
European Court Rejects Google Appeal of Fine in Comparison Shopping Antitrust Case
Report from the Wall Street Journal
In Brief – The EU’s General Court in Luxembourg, the bloc’s second highest, largely upheld a $2.8 billion antitrust decision against Google that found the search giant broke antitrust laws by changing its search engine to penalize comparison-shopping sites while, at the same time, directing users toward its own comparison-shopping service. In a minor victory for Google, the court struck down one element of the EU’s case, saying that regulators hadn’t proven that Google had distorted competition among general search engines. Amazon, Apple, and Facebook have also become antitrust targets in Europe in recent years, but Google is a decade into major cases on Search, Advertising and Android. This “Comparison Shopping” case was the first decided, and the fact that it continues a decade later is a great disappointment to Big Tech critics. The length of the battle is one of the driving forces behind the EU’s Digital Markets Act legislation that aims to regulate the largest digital platforms. Google is right at the top of the list as the search “gatekeeper”, with advocates looking to force change without a decade-long competition law battle.
Context – The longest running antitrust criticism of Google is that they manipulate their dominant search engine, which has a market share exceeding 90% in Europe for “general search”, to penalize specialized “vertical search” services, while at the same time giving a highly advantageous position to their own “vertical” search results. In recent years, Google’s specialized vertical search results often appear in a prominent “OneBox” on its general search results page, arguing that users want answers more than just search result links. Specialized search-based businesses, such as for travel, employment, shopping and local, continue to see this as a discriminatory Google tactic. Travel vertical businesses, including Booking.com, Expedia, Trip Advisor and Trivago, have called on Commissioner Margrethe Vestager to open a case against Google for abuse in their vertical rather than wait for the Digital Markets Act. In the US, one of the State Attorney General complaints targeting Google also focuses on vertical search.
Frances Haugen’s European Whistleblower Tour Plays to Rave Reviews in Brussels
Report from Euractiv
In Brief – As expected, Frances Haugen, the Facebook “Whistleblower”, received a very warm reception during her three-hours testifying before the European Parliament. Her call for aggressive oversight and regulation of social media platforms, but especially Facebook, is very much in line with the European Commission’s Digital Services Act (DSA) currently under consideration in the European Parliament. She urged the parliamentarians to make the DSA the “global gold standard” for strongly regulating online content moderation and firmly enforcing rules, which she hoped would inspire similar legislation and regulation in the United States, India and elsewhere. Other issues raised included mandating data interoperability (opposed due to privacy and data security risks); requiring transparent user IDs (opposed due to ease of circumvention and threats to vulnerable people); banning behavioral advertising (opposed, prefers regulating); exempting news media from takedowns (opposed); and the new VR focus of Facebook/Meta (a mixed reaction but definitely does not trust company leadership).
Context – In the US, while Members of Congress all appear happy to criticize Facebook, below the surface Haugen’s policy recommendations are not bipartisan in Washington. She calls for a government regulator to make the tough decisions that face social media. That’s a pretty popular view among progressives, but not conservatives. Don’t expect a US Digital Regulator anytime soon. However, in Europe, strict regulation is coming. She appeared before the UK Parliament where they are wrapping up crafting the Online Safety Bill that pushes the envelope on the broad scope of online ills they propose to regulate. The EU’s Digital Services Act is in the midst of negotiations in the European Council and the Parliament and will prove hugely influential because the EU is such a huge market. The next stop on her whistleblower tour is reported to be Paris where she will again find very sympathetic ears.
Do Amazon Antitrust Settlement Overtures Point to Vulnerability on Logistics Charges?
Report from Reuters
In Brief – Amazon is reported to be engaged in preliminary discussions with the European Commission’s Competition Authority (ECA) to reach agreement on concessions that the company can make to address the concerns of the EU’s competition enforcer on two antitrust investigations. Last November, the agency made a preliminary finding that Amazon unfairly uses data from its marketplace to compete with third-party sellers and announced that it would continue with an investigation that is now three years running. At that time, the ECA also announced that it was beginning a new investigation of whether Amazon uses their Buy Box to preference products on their marketplace sold by sellers that purchase logistics services from Amazon’s FBA logistics business. Settlement talks, which can often run on for months, are not unusual in these kinds of cases, and in 2017 Amazon offered concessions to the ECA that allowed it to settle an investigation into its distribution deals with e-book publishers in Europe.
Context – Charges that Amazon unfairly uses marketplace data to compete as a retailer against third-party sellers is a long-time critique. Amazon consistently responds that sales of their “house brands” are a smaller share than for many large retailers and that third-party sellers have been growing their share of sales on Amazon for years. ECA investigators have reportedly been having trouble building a case regarding Amazon abusing third parties to preference its own retail products. This should not be a great surprise as its own retail sales are not nearly as profitable as third-party sales that flow through FBA. So, it’s the FBA prong of the ECA investigation that should be the higher priority. News of Amazon settlement talks follows on the heels of the European General Court rejecting Amazon’s effort to disrupt the ECA’s logistics-based investigation and a parallel investigation by Italy’s competition agency. UK competition enforcers are also reportedly looking at a similar two paths related to Amazon. Astute regulators may be starting to grasp that dominance of logistics is at the heart of its model, not Amazon’s own brands.
Google News Return to Spain May Mark End of Years Long Standoff on Media Payments
Report from The Verge
In Brief – Google has announced that it will be restoring its Google News service in Spain “early next year” following the enactment of legislation that adopts reforms to the EU Copyright Directive that included creation of a “neighboring rights” regime that became the basis of a media payments standoff in France. Google shut down its Google News service in Spain in 2014 when the country enacted legislation requiring the search giant to pay media companies when short text snippets were placed in search results. Google’s response was to end Google News and snippets in Spain, only showing traditional search results to Spanish users. The company’s position is that the new legislation does not require payments to Spain’s entire media industry and instead allows for fee negotiations with individual publishers, and when agreements are not reached, Google can choose to exclude them from the service. Google also announced that its paid news curation service, Google News Showcase, will also add some Spanish media enterprises.
Context – The Google News standoff in Spain reminds us that the battle to squeeze media payments media out of Google (and now Facebook) goes back years because the Internet turned the media business model upside down early on. While France and Australia have been the most aggressive recently, Spain and Germany were unsuccessful early aggressors. Google’s experience with France, which was the first EU country to enact neighboring rights, illustrates that there are still pitfalls. France’s antitrust authority ordered Google to negotiate payments deals with French publishers, but in July, even after Google had reached some major publisher deals, fined the search giant 500 million euros for not negotiating in good faith. Facebook is now heading down the same path. In Germany, the competition authority has opened an investigation of Google’s News Showcase service based on the concern that some German news media businesses might gain preferential treatment on Google search by signing on to the paid system.
European Court Rejects Amazon Bid to Disrupt Antitrust Investigations of Preferencing FBA
Report from Bloomberg
In Brief – Amazon’s petition to the EU’s General Court, Europe’s second-highest, to consolidate two competition investigations that are targeting how the ecommerce giant links third-party seller success on its massive marketplace with the use of Amazon’s logistics services business, has been turned down. The Italian competition authority opened an investigation two years ago into whether Amazon illegally preferences third-party sellers who also purchase its logistics services over sellers who do not. Last November, the European Competition Authority (ECA) opened a similar investigation into marketplace and logistics tying allegations, focusing on the German and French markets, and explicitly exempted the Italian market due to the Italian investigation already underway. Amazon argued that European law says that when the European Commission decides to investigate a matter, national competition authorities cannot investigate the same topic, and that the ECA’s effort to exclude Italy should not override that rule.
Context – Amazon is unlike other ecommerce marketplaces. It also owns the largest network of ecommerce fulfilment centers. This Fulfilment by Amazon (FBA) service stocks and handles the goods for most of the top sellers on Amazon’s marketplace, much like a retailer handles products from wholesalers. In the United States, this unique retailer-like Amazon model is coming to the fore in a series of product liability cases. On the antitrust front, these European investigations into Amazon’s policy of linking Buy Box success to the use of the FBA logistics business are honing in on this unique aspect of Amazon. While charges have dogged Amazon for years that they unfairly use third-party seller marketplace data to develop their own competing retail products, Amazon-owned goods are generally not highly profitable. On the other hand, when third-party sellers buy inventory but pay Amazon to store and handle it, the revenue and profit margin from all the fees soars while Amazon still controls the customer experience. These sales are growing fastest on Amazon and are the ones Amazon preferences.
Google Korea “Payments Choice” Compliance Plan Means Charging New Play Store Fee
Report from The Verge
In Brief – In response to Korean legislation that prohibits Google and Apple from mandating that app developers use each company’s payments system, Google has announced that it will permit alternative payments but will impose a Google Play service fee that will be owed regardless. Choosing an alternative to Google payments will reduce that fee by 4 percent. App developer advocates who criticize the commissions charged by Apple and Google, which tend to be 15 or 30% based on the type of app and the revenues of the developer, have lauded the Korean legislation. Apple and Google commissions have been automatically collected by each phone giant’s payment system when users buy services. In the US, Apple’s payments system and fees were central to its legal battle with Epic Games, while Google has been the focus in Korea due to Android’s market share in the home of Samsung and LG.
Context – The important Google news out of Korea is NOT that the company will now allow alternative payments, but that Google will still collect a Google Play service fee regardless of the payments service used. This should help clarify that app developer campaigns about payments were always about Apple and Google commissions being too high. Did some large app developers actually think that if they could use other payments services that Google and Apple would not be able to collect fees? Controlling payments makes bill collecting much easier, but without it a company can still bill. Google’s new policy in Korea sets out a marker that using alternative payments will save 4%, but not remotely the entire fee. Google’s blog post is also worth reading to see a company argue that they should be able to make money for operating a successful platform. Radical. While Apple and Google have both made changes to offer a reduced rates for small developers, Google is the first to be up front that it can and will plan to bill developers regardless of payments. Now they can all simply fight over whether 26% is too high.
Uzbekistan’s Temporary Social Media Shutdown Highlights Online Regulation in Central Asia
Report from the Washington Post
In Brief – The Government of Uzbekistan recently blocked a range of social media platforms that are popular in the country, including Telegram, Facebook, Instagram and YouTube, over non-compliance with a new law requiring local storage of user data. However, following vocal complaints from social media users in the country, the government quickly backtracked and even posted on Telegram, the most popular social media platform in the country, that the regulatory move was “ill thought out”. However, the unmistakable trend in Uzbekistan and other Central Asian countries is to attempt to impose governmental controls on the digital platforms that are important forums for communication by citizens, taking clear cues from regional powers China, the world’s most dominant policer of online speech, and Russia, which ruled the region under the former USSR and is now actively engaged in a campaign to rein in digital platforms which are key tools for President Putin’s political opposition.
Context – Across the world, governments are blaming platforms for user content they object to, and are setting up regulatory regimes to direct how platforms will address the content. (See the EU, France, Germany, Australia, India and Turkey as more examples). The UK’s Online Safety Bill pushes the envelope on being most regulatory in terms of the scope of online ills it proposes to police. The EU’s Digital Services Act may prove the most important because the EU is such a huge market. These laws are coming, with the Facebook Whistleblower’s revelations and testimony to the UK and EU parliaments adding to strong momentum. Social media regulation in Central Asia, Russia, Turkey, India and China is easy to criticize on censorship grounds. But defining misinformation, disinformation, hate speech and viewpoint censorship case-by-case raises similar concerns everywhere. And free speech advocates are right to point out that when Western governments regulate speech it empowers more repressive regimes.
Apple Argues Digital Markets Act Mandate to Allow Sideloading Apps Will Harm Consumers
Report from CNBC
In Brief – Craig Federighi, Apple’s senior vice president of Software Engineering, strongly criticized the expected provision of the EU’s Digital Markets Act (DMA) that would require Apple to allow alternative app stores and “side loading” of apps. The DMA aims to regulate the largest digital platforms to address competition concerns in the digital economy. It’s one of two major EU legislative initiatives, along with the Digital Services Act (DSA), aiming to rewrite the rules underpinning the digital economy. The DMA legislation released by the European Commission last December sets out 18 obligations that could be imposed on digital “gatekeepers”, including Article 6 (c) which is aimed at ending Apple’s “walled garden” control of the iPhone app ecosystem, a hallmark of its devices from the beginning. Apple leaders continue to argue that its policies allow for a curated experience that promotes privacy and security, as well as giving consumers a smart phone option to the more open Android system.
Context – The DMA and DSA are both the subject of negotiations in the European Parliament and the European Council, with the Member States aiming to have the Council position in place by the end of November. As opposed to gatekeeper “Do’s and Don’ts”, which seem pretty set, big open questions include how many businesses will be covered, how big are the thresholds, and the criteria behind them. The battle lines have been pretty open, with leading parliamentarian Andreas Schwab arguing the whole effort should aim to corral only the four or five mega giants, while others push back that abuse occurs among many others, and it should capture 20 or more firms straight away. A coalition of European-based ecommerce marketplaces argue for criteria focusing on true giants. And while Apple argues against regulation overturning its business model, Microsoft’s top executive on policy issues, Brad Smith, who supports regulating Apple’s App Store, argues for Big Tech to just accept regulation and work to craft it in a way that works best.
Australian Information Commissioner Determines Clearview AI Violated the Privacy Act
Report from the Sydney Morning Herald
In Brief – Following a similar determination by the Canadian Privacy Commissioner in February, Australia’s Information Commissioner (AIC) has determined that controversial facial recognition technology firm Clearview AI violated the Australian Privacy Act by collecting and processing photos of Australians from social network web sites without their knowledge or consent. Between October 2019 and March 2020, Clearview AI provided trials of the facial recognition tool to some Australian police forces. At the time, the company claimed a photo database of 3 billion images scraped from public social media sites, which it has since claimed to have expanded to 10 billion. Clearview AI argued that the information it handled was not personal information, that as a US-based company it does not fall under the Australian Privacy Act, and that it stopped offering its services to Australian law enforcement shortly after the AIC’s investigation began. The AIC has ordered the company to cease collecting facial images and biometric templates from individuals in Australia and to destroy existing images and templates. In Canada, the company quit its sales but has not acknowledged destroying pictures of Canadians.
Context – Facial recognition is one of the most controversial “AI” technologies because it is rapidly becoming commonplace, and despite questionable accuracy, is increasingly used by law enforcement. It is a central feature of the oft-criticized Chinese Government surveillance regime. In the EU, an AI legislative package considers it a “high-risk” application but allows some law enforcement use. In the US, IBM, Microsoft and Amazon halted sales to law enforcement, although Amazon’s new CEO is reported to be a major champion. And while privacy advocates press the Biden Administration to freeze its use, a GAO report found that Clearview AI was being used by the Justice Department, ICE and the Air Force, while other agencies admitted to asking state and local law enforcement colleagues to scan photos on the service.
FTC Distributing $60 Million from Amazon to Repay Delivery Drivers for Withheld Tips
Report from Reuters
In Brief – The Federal Trade Commission (FTC) has announced that it will be distributing $60 million in tips to over 140,000 drivers that were illegally withheld by Amazon between 2016 and 2019 as part of the logistics giant’s “Gig” style Flex delivery program. The payments follow Amazon settling an FTC complaint alleging that company used customer tips to subsidize the promised hourly wages of Amazon Flex delivery drivers who were promised $18 to $25 in hourly pay plus all customer tips. The FTC claimed that Amazon surreptitiously changed its payment practices in late 2016 and began withholding some customer tips to offset the company’s hourly wage bill, all the while deceiving the drivers, many of whom questioned what they suspected were changes in payment practices. The company reportedly returned to its stated wage and tip policy in 2019. The entire settlement will be distributed to the drivers, with compensation averaging $422 but more than $28,000 being owed the most aggrieved driver.
Context – Amazon may be the largest Gig platform business of all, mastering the use of digital platforms to provide services through nominally “independent” third parties under tight Amazon control. The logistics giant’s package delivery service is built on two Gig-style platforms, Flex and the Delivery Service Partner (DSP) fleet. Flex is an Uber-style app for one-off drivers, while the DSP program is a fleet of small delivery companies that Amazon sponsors, outfits, and retains. Both have been the subject of complaints on worker misclassification, lax safety and aggressive monitoring. Two DSP firms in Oregon recently sued Amazon claiming that their businesses were terminated when they complained about safety issues. Concepts like “algorithmic control” and “bogus self-employment” are major considerations as European policymakers move toward legislation on Digital Labor Platforms to address abuses that have plagued platforms for ridesharing, food and package delivery, and household work.
Trump’s Twitter Ban Lawsuit Gets Moved From Florida to California (Where It Will Die)
Report from Bloomberg
In Brief – Donald Trump’s legal team has continued its losing streaks in federal court in their effort to overturn the bans imposed on the former President by social media platforms Twitter, Facebook and YouTube. The latest setback was the decision by US District Court Judge Robert Scola to grant Twitter’s request to transfer their case to federal court in the Northern District of California, citing the terms of the company’s user agreement. The judge rejected the Trump argument that Twitter’s terms of service didn’t apply to him when he was President. Another federal judge in Florida has similarly granted YouTube’s request to transfer its case to California. The Trump-led suits claim that content moderation actions by the platforms violate the plaintiffs’ 1st Amendment rights because the platforms were serving as state actors working in league with government officials. The suits also ask the court to rule Sec. 230 of the CDA unconstitutional for encouraging this censorious link between platforms as the government.
Context – Yes, it’s time to be updated on the former President’s legal efforts to get back on the social media platforms while he attempts 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’s content moderation policies. First, his suits won’t succeed. The First Amendment and Sec. 230 are two very robust legal barriers protecting the platforms. Think about the First Amendment claim in particular, which is that the platforms were serving as government actors when they banned the Head of the US Government. But the politics of conservative social media grievances are not going away. Most Americans believe ideology influences platform decisions. More states run by Republicans will likely follow the leads of Florida and Texas in passing laws against platform “censorship” despite seeing them being blocked by federal courts. And Sec. 230 changes will be similarly hung up in Congress over partisan divisions.
UK Competition Regulator Details Facebook Fine for Non-Compliance on Giphy Bid
Report from Politico
In Brief – The UK Competition and Markets Authority (CMA) has released detailed findings backing the late October fine of £50.5 million imposed on Facebook for failing to comply with the regulator’s initial enforcement order (IEO) that challenged the social media giant’s 2020 acquisition of GIF website Giphy. Calling Facebook’s actions following the IEO “a high risk strategy”, the CMA penalty notice says that Facebook failed to submit regular compliance updates, notify the CMA of an outage, and changed its chief compliance officer twice without asking for consent. The CMA has since provisionally found that the merger would substantially lessen competition in markets for social media services and online display advertising, two markets in which the CMA has determined Facebook has significant market power, and indicated that it believed unwinding the acquisition is the appropriate remedy. Facebook is reported to be engaged in talks to arrive at a settlement short of calling off the acquisition, and may return to the UK courts which rejected its initial claims that the CMA was overstepping its authority.
Context – Clear evidence of changing standards for acquisitions by Big Tech 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. However, Facebook’s acquisitions of Giphy and Kustomer, two relatively small startups that are not yet profitable, may signal a meaningful shift. We are seeing the impact of acquisition reviews by multiple national regulators, where any one can play bad cop and try to stop a deal. The Kustomer deal is OK to the UK but maybe not to the EU, despite the startup having no meaningful business in either jurisdiction. Then the reverse goes for Giphy, with the EU approving but the UK blocking. And toss in the other large markets, as countries’ lower review thresholds and claim that deals for unprofitable startups is a sign of long-term anticompetitive prospects.
Apple Challenges “Anti-Steering” Order Requiring Direct Links to Outside Payments
Report from Reuters
In Brief – In preparation for a November 9 hearing in US District Court to address Apple’s motion to stay an order by Federal Judge Yvonne Gonzalez Rogers to end its anti-steering practices that prohibit app developers from informing consumers of alternative payments options, Apple has focused its objections on the prospect that app developers would be allowed to link directly to third-party payment options from inside apps. The standoff follows the lengthy trial where Epic Games failed in its effort to have Apple deemed a monopolist. However, Judge Gonzalez Rogers paired her 185-ruling siding with Apple, which Epic Games is appealing, with a one-page order requiring Apple to end its “anti-steering” practices prohibiting developers from communicating with users about payments options outside the Apple ecosystem. Apple is appealing that order, asking for a stay, and arguing that allowing direct links inside apps to take users off the platform are a security risk that undermines the Apple platform.
Context – It was clear throughout that Apple’s strict “anti-steering” policies blocking app developers from communicating with users about non-Apple payments options were a major problem for Judge Gonzalez Rogers. Likely with that in mind, Apple began proposing changes before her decision was announced. The company reached a settlement with the Japan Fair Trade Commission allowing “reader apps”, such as music and video subscription services, to communicate with users about payments alternatives, and announced it would be implemented globally. Apple also proposed to allow all app developers to communicate with users about payments, such as through emails, as part of a class action suit settlement that also happens to be in front of Gonzalez Rogers. However, in-app links and buttons are more than Apple is willing to accept, likely seeing it effectively swallowing the overall antitrust decision that permits its current monetization model. The same issue is playing out globally, with the EU, Netherlands, Korea and Russia engaged in regulatory and legal forums.
Portuguese Government Advances Bill to Make Food Delivery Couriers Platform Employees
Report from Reuters
In Brief – The Portuguese government has approved a bill to require “Gig” ridesharing and delivery drivers to be treated as employees of the digital platforms that they use, and share information about how their algorithms and artificial intelligence mechanisms operate, with the National Bureau of Working Conditions. Approval of the legislation by the parliament was expected to be a formality, but the Socialist-led government, which does not hold a majority in the parliament and governs with a handful of other left-wing parties, ran into budget difficulties as the Gig work law was announced and may see action in parliament halt running up an election in early 2022.
Context – Food delivery platforms are emerging as ground zero in Gig work platform regulation. Portugal’s legislation follows a similar framework going into effect in Spain in August. That law has faced mixed reviews, with the large platforms largely reacting by outsourcing delivery to independent small businesses that deal with delivery workers but limit hours to stay below employment thresholds. Many couriers complain that things are now worse. Elsewhere in Europe, a Court of Appeals in the Netherlands has ruled that Deliveroo couriers qualify as employees, and an Italian court ruled that Deliveroo reputational-ranking algorithm breached local labor law. In the United States, no state has followed California’s lead from 2019 to try to broadly mandate that independent workers be treated as employees after voters overturned its AB 5. And the law was unpopular with skilled freelancers from the beginning. Instead, major cities, led by New York and San Francisco, are regulating food delivery, generally done by bike couriers facing tough conditions. The European Commission is farthest along in attempting to broadly regulate “Digital Labor Platforms” and the EU Parliament has called for a directive that establishes a presumption that platform workers were employees but leaves open that some, especially for skilled workers, enable truly independent work.
European Consumer Groups Criticize TikTok and Irish Regulator for Failing Children
Report from the Irish Times
In Brief – BEUC, an influential consortium of 45 consumer organizations from 32 European countries, has criticized the Irish Government, and the Broadcast Authority of Ireland in particular, with failing to implement the EU’s 2020 directive on audiovisual media services, leaving children across Europe vulnerable to inappropriate content when using video streaming giant TikTok. The directive is intended to govern all audiovisual media, including traditional TV broadcasts, on-demand services, and video-sharing platforms, extending rules regarding hate speech to video-sharing platforms that were previously not covered. However, Member State governments are required to enact implementing legislation, which has not proceeded in many states, leading the Commission to file legal charges against 19 of them in September. The broadcast regulator in the country of a digital platform’s European headquarters is the lead authority for covered digital platforms, which for TikTok is Ireland.
Context – Ireland, the European home to Google, Facebook, Apple, Microsoft, Twitter and TikTok, is the target of widespread criticism for lax regulation of Big Tech platforms. The Irish Data Protection Commission (IDPC), the lead regulatory authority for those platforms under the General Data Protection Regulation (GDPR), is the usual target. Privacy advocates accuse the IDPC of failing to stop digital platform privacy abuses, citing hundreds of GDPR complaints that remain unresolved, in many cases years after they were initially filed. Earlier this year, EU Commissioner Vera Jourova publicly called on Member State privacy regulators to stop criticizing the IDPC and work cooperatively. TikTok’s rapid emergence as a social media giant has led to a flood of lawsuits and regulatory complaints, mainly focused on young users, including in the Netherlands, Italy, France, the UK, South Korea and the United States, and the company has established US and EU safety advisory councils to help address privacy and child safety concerns.
Australia Proposes New Privacy Standards for Social Media and Users Under Age 16
Report from the Washington Post
In Brief – The Australian Government has announced the release of a draft Online Privacy Bill that would require social media enterprises to verify each user’s age, obtain parental consent before collecting personal information of children under 16, and act in the best interests of children in their approach to handling data. While the overall effort to expand digital privacy also covers “large online platforms” and data brokers, social media platforms come in for special regulation based on the contention that they pose a special risk to young people. Along with obvious targets such as Facebook, “social media’ includes dating apps, content distribution services such as OnlyFans, forum sites such as Reddit, messaging, videoconferencing and gaming platforms that enable user chat. Beyond the special set of requirements for social media, the proposed privacy code requires all covered organizations to allow individuals to request for their personal information to not be used or disclosed, but it is not a “right to erasure” of data. The comment period for the draft runs through December 6 and a bill is expected to be introduced in parliament early next year.
Context – Australia, the UK and the EU, led by France, are competing to most aggressively regulate digital platforms, and each jumping on the revelations of the Facebook leaks. In the UK, advocates for the Online Safety Bill always claimed the effort was about child safety (and anti-terrorism) although it is actually much broader. Australia, which already has strict content moderation and encryption regulation in place, is implementing a mandatory media payments scheme, and may impose liability on social media companies for defamatory user comments, could now break ground on some form of online user age verification and parental sign-off. Some manner of new privacy standards for older teens might also prove the most bipartisan digital regulation in the US Congress, such as expanding COPPA to cover teens under age 18.
Russian Competition Authority Gets In Line on Apple App Store Payments Anti-Steering
Report from Reuters
In Brief – The Russian Federal Antimonopoly Service (FAS) has announced an antitrust case against Apple for failing to allow app developers to tell customers about alternative payment options when using its App Store platform. The FAS informed Apple on August 30 that it was abusing its dominant position in the iOS app distribution market and directed the company to change its policies by September 30. The changes have not been made so the regulator has opened a formal case. This is not the first run-in with the Russian regulator on its app policies. Last April, the FAS fined Apple $12 million on similar grounds of abuse of dominance, in that case for using its operating system to advantage its own proprietary apps.
Context – This move brings two trends to mind. First, Apple’s strict “anti-steering” policies, a major issue of concern for Judge Yvonne Gonzalez Rogers throughout the massive Epic v Apple trial, has more turns ahead. Before her ruling rejecting Epic’s antitrust claims, it was clear that she had big problems with Apple’s restrictions on developers communicating with users. In response, Apple started proposing changes before the decision was announced, reaching a settlement with the Japan Fair Trade Commission allowing “reader apps”, such as music and video subscription services, to communicate with users about payments alternatives. Apple also proposed a class action suit settlement with small app developers to open up user communications. However, the Gonzalez Rogers ruling appears to call for more opening than Apple is willing to accept and the company is appealing the anti-steering order. Globally, the Russians are getting in line with the EU, Netherlands and Korea on app store payments. Beyondpayments, it’s hard not to see the standoff in the context of the Russian Government attempting to sanction the US-based platforms that have emerged as key communications hubs for opposition to President Putin. The FAS charged YouTube with “opaque, biased and unpredictable” content moderation this spring and forced Google and Apple to take down opposition election apps.
Large EU-Based Ecommerce Platforms Concerned with Broad DMA Gatekeeper Law
Report from Euractiv
In Brief – Eight European-based ecommerce platform businesses including Booking.com, Allegra and Zolando, have sent a letter to EU Member State economic ministers, who are negotiating the landmark Digital Markets Act (DMA) to regulate digital “gatekeeper” platforms, arguing the formula to determine which businesses are covered threatens to inappropriately capture their businesses. DMA legislation, released by the European Commission last December, is in negotiations in the European Parliament and the European Council. Using “objective criteria” to determine gatekeepers has been a major goal. The Council is reported to be focusing on the number of users and turnover. The ecommerce platforms are concerned that certain details, including the treatment of ‘active end users’ and ‘visitors’, may be unfair to ecommerce platforms where simple user visits are less representative of scale.
Context – The EU’s twin digital legislative initiatives, the DSA and the DMA, are the most important happenings underway in an active digital public policy world. The biggest issue facing the DMA from kick-off was determining which businesses would be covered by the new regulatory mandates. The initiative was powered by the desire to rein in the very largest platforms, namely Amazon, Apple, Facebook and Google. But drawing the line is very hard, whether technically, substantively or politically. The battle lines have been pretty open, with leading parliamentarian Andreas Schwab arguing the whole effort should aim to corral only the four or five mega giants, while others push back that abuse occurs among many others, and it should capture 20 or more firms straight away. Netherlands-based Booking.com has been most vocal that regulating any but the very largest will harm European-based platforms looking to grow. And this is not just an EU challenge. Look to the debate in the US Congress over whether Microsoft should be, or would be, covered by the anti-Big Tech bills.
FTC Sends Notices to Gig Platforms on Deceptive Earnings in Consumer Protection Push
Report from MarketWatch
In Brief – The U.S. Federal Trade Commission (FTC) has issued a Notice of Penalty Offenses letter to more than 1,100 businesses offering money-making ventures warning them not to deceive or mislead consumers about potential earnings. While the Notice makes clear that the recipients are not alleged to have engaged in any wrongdoing, they also remind the recipients that a range of claims are considered unfair or deceptive practices, including misrepresenting the level or likelihood of profits or earnings that may be anticipated by a person engaging in the business or activity. Major digital work platforms, including ride-sharing, delivery and household work platforms such as Uber, Lyft, Amazon, Instacart and Task Rabbit, as well as skilled freelancer platforms like Upwork and Fiverr, received letters. Recipients were also provided copies of a similar FTC letter regarding endorsements and advertisements, putting companies on notice that it is unlawful to use testimonials that mislead consumers. The letters, which are part of an effort by the FTC to review the Business Opportunity Rule, cites the potential for civil monetary fines up to $43,792 per violation, which is the FTC’s response to an April Supreme Court decision that prohibited the agency from imposing monetary fines in consumer protection cases under Sec. 13(b) authority.
Context – While the digital work platforms were a major target of the FTC notices on deceptive potential earnings, the FTC notices on deceptive online endorsements and reviews went to the largest online platforms, such as Google, Facebook, Amazon, Apple and Microsoft, along with hundreds of retailers and consumer brands. The FTC has been working to provide truth-in-advertising direction to the burgeoning digital “influencer” industry since 2017, including a “Disclosures 101 for Social Media Influencers” guide in 2019. The FTC is attempting to make it clear that it requires disclosure when an “influencer” has any “financial, employment, personal, or family relationship with a brand,” or receives anything of value, including direct payment, free products or discounts.