News & Insights 2 old
Amazon Facing UK Gig Labor Classification Challenge for Delivery Partner Program
Report from Reuters
In Brief – The law firm that won the suit requiring Uber to classify its UK drivers as workers and provide them with benefits is turning their attention to Amazon and filing suit claiming that the company’s Delivery Service Partner (DSP) program misclassifies drivers as independent contractors. The suit is on behalf of over 3,000 drivers who work for UK DSPs and claims damages of 140 million pounds. The DSP program is fleet of small delivery companies that Amazon sponsors, outfits with trucks, and retains. Amazon has faced criticism for driver monitoring (including with AI-enabled cameras) and actively directing the drivers who work for those “independent” companies in a manner that results in health and safety problems. Amazon was recently sued by two DSP firms in Oregon claiming that their relationship was terminated by Amazon when they complained about safety issues.
Context – Amazon is likely the largest Gig platform business of all, mastering the use of digital platforms to provide services nominally through “independent” third parties but under tight control of Amazon. A key legal and policy question facing work platforms is the degree of control the platform exerts on the third-party providers. The issue is at the forefront of the Gig work platform debate in Europe. Look to the major CJEU decisions on AirBNB, where “hosts” were considered independent, and Uber, where drivers were not. Concepts like “algorithmic control” and “bogus self-employment” are major consideration as European policymakers move toward legislation on Digital Labor Platforms in a manner that strikes a balance between allowing platforms to expand work opportunities while addressing abuses that have emerged primarily through platforms for ridesharing, food and package delivery, and household work. Amazon’s has two Gig-style package delivery platforms, the DSP fleet, and Flex, their app-based platform for one-off drivers. Both face criticism for worker misclassification, lax safety and aggressive monitoring.
Media Payments Update – French Media Payments Scheme Coming to Facebook Too
Report from Euronews
In Brief – Facebook has announced that it has come to a tentative agreement with APIG, a trade group representing a number of large French daily newspapers, to provide payments to the publishers when their content appears on Facebook. The agreement proposes two types of licenses, one when articles are included in the curated Facebook News Service, which will soon be expanded to include France, and a second when news content appears on Facebook’s general platform. The specific terms for individual outlets have not been set and will be the product of bilateral negotiations.
Context – While the massive Facebook leak has highlighted how much has been disrupted by social media, traditional media have been aggressively complaining for years that the Internet ruined their business model. The result has been a steady campaign by the industry and champions in government to force Internet leaders, Google and Facebook in particular, to pay them for news content. It is a media-focused 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. After amending its copyright law to create “neighboring rights” that justified payments for snippets and links, France’s antitrust authority ordered Google to negotiate payments deals with French publishers, and in July, fined the search giant 500 million euros for not negotiating in good faith (even after Google had reached a deal with APIG, which now informs Facebook’s agreement). Even as deals are signed, the company payments schemes are bringing new legal challenges. The German competition authority has opened an investigation of Google’s News Showcase payments based on the concern that some German news media businesses might gain preferential treatment from Google search by signing on. In Australia, where Facebook signed deals with many publishers, those left out have complained to regulators.
Facebook “Whistleblower” Campaign’s International Tour Kicks Off in UK Parliament
Report from the New York Times
In Brief – Frances Haugen, the Facebook “Whistleblower”, is taking her call for government regulation of Facebook across the Atlantic where legislatures are primed to act. The first stop on her European Tour was a hearing in the UK Parliament. The MPs and Haugen were highly critical of Facebook for not effectively addressing many problems on the platforms and all agreed that Facebook can make the platform “safe” if they wanted to. The UK Government is in the final stages of drafting its Online Safety Bill to mandate how social media platforms police problematic user activity, including terrorist content, child sex abuse, hate speech, harassment, threats, disinformation, revenge porn, racism, financial scams, and promotion of suicide or eating disorders, and authorize a UK digital regulator to oversee and crack down on company failures. The UK effort is very much aligned with Haugen’s call for government oversight.
Context – The irony of the Facebook Whistleblower is too much. The largest platform for online sharing and communications, with all its messy, nasty, hateful and negative aspects, allowing its employees to post, save and read so much discordant internal corporate communications, and then having it stolen and shared by an extraordinarily eloquent former-employee arguing that the company could be run much better. Such open access to so many memos, decks and debates is not normal corporate practice. In the spirit of social media, Haugen has even explained in detail how she did it, including the professional rollout. Haugen belongs up there with Snowden and Manning among top leakers at least for thoroughness. Regulating social media was well underway in major markets like the EU and UK and Haugen will help it along. But an equally big impact will be on internal company communications policies. Imagine trying to defend a Facebook-style open internal communications system to foster more group learnings when someone can point to the downside of what an unhappy, motivated, capable and eloquent employee can do.
DST Transition Getting Clearer as US Drops European Tariffs in Exchange for Tax Credit Pledge
Report from Reuters
In Brief – The process of phasing out national digital services taxes (DSTs) targeting a few dozen large, mostly US-based, online companies, and replacing them with “Pillar One” of the two-part global corporate tax reform regime, is becoming clear. The US, which had plans in place to impose tariff sanctions on countries to retaliate for DSTs, has agreed to withdraw those tariffs now. In exchange, the US called for national DSTs to be withdrawn now as well, but they fell short. Instead, Austria, France, Italy, Spain and the UK will keep their DSTs operating until the Pillar One regime is implemented. But they have agreed to a tax credit system that will look at what is owed by a 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. The overall Pillar One proposal includes an agreement among all the signatories not to introduce new DSTs until the end of 2023, as well as an expectation that the final agreement will reject new DSTs going forward.
Context – The charge that Internet giants do not pay enough taxes in countries where they have large numbers of customers but don’t do their operations has been a major driver of the massive global corporate tax rewrite. Digital taxes from a number of countries, including the European ones covered here, were largely stymied by Trump Administration threats of trade sanctions. The debate was completely reframed by the Biden Administration. They shifted the US emphasis to stopping countries from being tax havens by negotiating a global minimum tax rate of 15 percent, 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 on Pillar One’s “tax reallocation”. It remains to be seen if Pillar One can get through Congress (Republican leaders are objecting), hence the Europeans keeping their DSTs in place. It’s leverage for the Administration with Congress as well.
Snap, TikTok and YouTube Face Senators in Follow-On to Facebook Whistleblower
Special Report from PEI
In Brief – Following in the wake of the Facebook “Whistleblower” hearing, the Senate Subcommittee on Consumer Protection called in social media giants Snap, TikTok and YouTube to discuss their impact on young users. (Video here) The panel is led by two of Capitol Hill’s most aggressive Big Tech critics, Chairman Richard Blumenthal (D-CT) and Ranking Member Marsha Blackburn (R-TN). Snap’s representative focused on the difference between its communication-focused platform and the video entertainment platforms, and faced pointed criticism on its media-like Discover service and drug sales on the platform. Chinese-owned TikTok was aggressively criticized by Sens. Blackburn and Ted Cruz (R-TX) over its connections to the Chinese Government. YouTube faced tough questions and attempted to focus answers on its special children’s platform rather than its major platform. Senators in the hearing were especially focused on asking the company representatives to support their pet legislative initiatives, including Sen. Markey (D-MA) on updating COPPA, Sen. Cantwell on privacy, Sen. Blumenthal on limiting Sec. 230, Sen. Klobuchar (D-MN) on antitrust, and Sen. Thune (R-SD) on platform transparency.
Context – Frances Haugen took such a massive and diverse set of internal Facebook documents that the drumbeat of criticism, in the media and from policymakers, is not dying down anytime soon. However, thinking beyond just criticism of Facebook, three relevant trends are coming into focus on potential legislative and regulatory outcomes: (1) Major social media regulation and legislation is far more likely in major markets outside the US. Haugen’s testimony this week in the UK Parliament, and upcoming in Brussels, is likely to help push deeply regulatory legislation across the finish line next year. (2) While Facebook’s ability to influence legislation is likely at an all-time low right now, legislation and regulation would impact social media broadly, and therefore other major platforms, such as the witnesses at this hearing, will need to carry the lobbying ball. (3) In the US Congress in particular, as opposed to comprehensive digital regulation, expanding regulation of online services to young users is the digital legislative reform most likely to succeed, such as raising the age for the Child Online Privacy Protection Act from below 13 to below 18.
European Labor Association Calls on Commission to Beef Up Amazon Investigation
Report from Reuters
In Brief – Following a Reuters expose based on leaks of internal Amazon documents from its business in India, which describes company efforts to identify successful products on its Indian marketplace platform and engineer versions that could be sold for less and generate more profit, UNI Europa, a federation of European service industry trade unions, has called on the European Commission to expand its investigations of Amazon’s potentially anticompetitive conduct in Europe to include the type of activity uncovered in India. The European Competition Authority (ECA) announced last November that it was moving forward on two cases targeting Amazon for anticompetitive conduct, one covering charges of anticompetitive use of data to harm third-party sellers and a second regarding preferencing of third-party sellers who purchase Amazon logistics services.
Context – Amazon responded to the India charges that the “claims are factually incorrect and unsubstantiated” and that its searches don’t favor its own brands. In India, that is almost certainly right. It is against foreign investment laws for Amazon to be a retailer on its own marketplace site. So, claims by UNI and critics like Sen. Elizabeth Warren (D-MA) that the story from India is further evidence that Amazon uses its marketplace to preference its retail business get tripped up by technicalities. But the real Amazon strategy is visible if you look. Amazon uses its marketplace data and algorithmic control over seller success to preference some sellers against others. That’s the real story, not Amazon trying to sell everything itself. This report shows how Amazon engages in the same practice in larger markets like the US, where Amazon Basics products are increasingly not actually owned by Amazon despite the name. Like in India, Amazon employees work to find partners to create new brands and products to sell on Amazon, preferencing them against other sellers. Using third party sellers is more profitable and less risky for Amazon.
Tragic Murder of Parliamentarian Leads to Calls for Faster Action on Online Safety Bill
Report from Politico
In Brief – Under questioning in the UK House of Commons in the wake of the tragic murder of Conservative Member of Parliament David Amess at the hands of an alleged Muslim extremist, Prime Minister Boris Johnson stated that his government intended to finalize the drafting of the Online Safety Bill by the end of the year and get it in front of Parliament. The statement came in response to a question from the opposition leader challenging the government for not having legislation ready to go more than two years after the government’s Online Harms White Paper was released calling for regulatory mandates and government oversight on a wide range of digital platforms. Terrorist content, along with combatting child sex abuse, have been the headline goals of the effort from the beginning. But the scope is much broader, covering a wide range of online ills including hate speech, harassment, threats, disinformation, revenge porn, racism, and promotion of suicide or eating disorders. Consumer champions have even recently called for adding online investment and romance scams to the regulated platform duties.
Context – Across the world, governments are moving to hold digital platforms responsible for bad online user content and setting up regulatory regimes to get a seat at the table to direct how platforms will address the problems. (See the EU, France, Germany, Australia, India and Turkey as examples). The UK’s Online Harms (Safety) Bill pushes the envelope on being most regulatory in terms of the scope of online ills it proposes to police. While regulatory regimes in Turkey and India are easy to criticize on political censorship grounds, defining misinformation, disinformation, hate speech and viewpoint censorship case-by-case will raise similar concerns everywhere. Meanwhile, civil libertarians and free speech advocates are raising concerns in the UK, including that the process is enabling repressive regimes to justify online speech controls for their own ends.
Apple’s Privacy Changes are Hurting Digital Advertising Platforms (Except Apple’s)
Report from the Wall Street Journal
In Brief – Changes that Apple rolled out in its iPhone operating system earlier this year to limit third party apps’ ability to track users for ads, heralded as promoting user privacy, are harming the ad business of some of the largest apps while Apple’s own ad business grows. Facebook was an early and vocal critic of Apple’s change requiring all third-party apps to get direct opt-in permission from users to access their IDFA (ID For Advertising), and noted the negative impact on their ad business in September. Snap has now also reported negative impacts and was quickly punished by equity markets. When Apple announced their plan, some ad industry critics argued it was an anticompetitive effort to benefit Apple’s emerging digital ad business and results are pointing in that direction, with Apple tripling their market share this year.
Context – “Targeted” advertising is one of the most contentious topics in digital policy. Many privacy advocates claim to want to get rid of it altogether. Dumber advertising is safer? Facebook, not the best positioned advocate right now, has been the one large company willing to defend targeted advertising as benefiting millions of small businesses who can now find customers despite very small ad budgets. The feud between Apple and Facebook appears personal at the CEO level, each essentially arguing that the other company’s business model is morally flawed. But as the Snap news shows, the issue is not limited to those two. Google’s so-called Privacy Sandbox plan to phase out third-party cookies on Chrome is facing similar criticism from ad industry players and is being investigated by competition enforcers in the UK, EU and the US. The company has announced a delay in their plans. Finally, like most digital issues, this is part of the EU’s DMA and DSA efforts, with Facebook indicating that Apple’s ad business aggression is an argument for DMA “gatekeeper” legislation while the EU parliamentarian leading the DSA is calling for that bill to effectively end behavioral advertising altogether.
European Union Member States Step Back Slightly from Digital Regulation Timetable
Report from Bloomberg
In Brief – The Council of Europe, the EU’s legislative body made up of the bloc’s 27 Member States, has stepped back from the timetable for digital regulation, shifting from language committing to finalizing legislation by next spring to the more open-ended language “as soon as possible.” The Digital Services Act (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 Digital Markets Act (DMA) aims to address competition concerns in the digital economy that are attributed to the largest “gatekeeper” platforms. Unveiled last December by the Commission, the initiatives are under review in the European Parliament and in the Member States. (Links to legislative progress for DSA and DMA.) It was reported that France, aggressive on digital policy, taking over the Council leadership for six months next year, and holding a national election as well, were pushing to keep the tight time frame.
Context – Despite near consensus in Europe to dramatically step up regulation of digital platforms, there are meaningful disagreements on matters of substance and legislators are getting dug in. Given that the proposals would rewrite the rules of the entire digital economy, debate seems appropriate. A top issue on the DMA is the scope of the platform businesses covered by its many new rules. Lead parliamentarian Andreas Schwab argues for just the super-giant top four or five that operate multiple overlapping platforms, while others want much wider coverage applying new gatekeeper regulation to dozens of single-platform enterprises. The lead parliamentarian on the DSA, Christel Schaldemose, is pressing to essentially ban behavioral advertising drawing concern from industry and some small business advocates. And both initiatives face conflicting views on enforcement and the right balance between Brussels, Member States and the “country of origin” or “home state” concept.
Trump Announces Social Media and Non-Woke Entertainment Platform Plans
Report from the Washington Post
In Brief – Coming on the heels of filing motions with Federal District Court judges to overturn bans from Twitter and Facebook, former President Trump has announced a business effort to create a social media and entertainment platform alternative to “Big Tech”. The Trump Media & Technology Group (TMTG) aims to provide a social media platform called TRUTH Social, as well as a “non-woke” streaming service. TRUTH Social will reportedly soft launch for invited users in November and fully launch in 2022. In the announcement’s quote attributed to the former President, he says he will send out his “first TRUTH on TRUTH Social very soon”, so it looks like the platform intends to brand user posts as Truths (like “tweets” on Twitter or “parleys” on Parler).
Context – Following the legal and policy saga of former President Trump and social media is entertaining and educational. First, the chances that the Federal Courts overturn the Twitter, Facebook and YouTube bans are super low. And Republican-passed state social media laws are likely to be blocked. Florida’s already has. A Federal judge just dismissed a suit brought by QAnon advocates against YouTube for being banned, rejecting claims, including by Trump, that the platforms act on behalf of government censors. Paralleling the divide in Congress with Democrats claiming platforms don’t police well enough, a progressive activist is suing YouTube for not effectively enforcing its rules against animal cruelty in videos. Also remember Parler, which had (and has) a minimally moderated “free speech” social platform. It suffered from problems with non-political objectionable content like porn, then was shut down by Amazon’s AWS for not policing political content rejecting the 2020 election. It will be interesting to see if the Trump platform tries the failed “wild west” route, or actually moderates, but with a conservative slant. Finally, don’t forget stories of progressives on platforms like TikTok claiming to undermine Trump campaign digital efforts. Will they eventually flood TRUTH Social for sport? Think about those internal TMTG debates over user growth v online experience?
Senate Committee Follows Facebook Hearings by Calling In Snap, TikTok and YouTube
Report from CNet
In Brief – Following in the wake of the massive leak of internal documents by the Facebook “Whistleblower” and her three hours before the Senate Commerce Committee’s Subcommittee on Consumer Protection, that subcommittee has announced an October 26 hearing to explore how Snap, TikTok and YouTube treat and impact young users. It will feature witnesses from each firm. The charge from the Facebook documents that has resonated most with Senators has been that the company was aware that Instagram, which is very popular with teen users, often directed content to girls that compounded problems with negative body image. This was a major focus of the Subcommittee’s September hearing where Senators grilled Facebook’s Global Head of Safety. The panel is led by two of Capitol Hill’s most vocal Big Tech critics, Chairman Richard Blumenthal (D-CT) and Ranking Member Marsha Blackburn (R-TN), and both have been clear that they plan to expand their inquiry to other social media giants.
Context – Besides the Senators all agreeing at the previous hearings that Facebook is terrible, the need to protect young people from social media was the next closest thing to a consensus. Chairman Blumenthal regularly analogizes social media to cigarette use, claiming it is dangerous and addictive, plus that the companies know it and are committed to hooking kids so they become lifetime users. Expect the three witnesses to be asked if their companies have data or studies with findings like those leaked from Facebook, with the emphasis on being “under oath”. If the answer is yes, they will be asked to share them, and if no, “Why not?” Further regulating online services to young users is the legislative reform in the pole position, such as raising the age for the Child Online Privacy Protection Act from below 13 to below 18. But there are far more intrusive ideas floating around. For example, a Senator in one of the earlier hearings expressed support for a Chinese Government mandate on digital game companies to limit young users time online.
Australia Threatens Social Media Platform Liability for Anonymous User Posts
Report from Reuters
In Brief – In Australia, which is in the midst of implementing changes to its defamation laws, and also recently had its High Court rule that news media companies are liable for defamatory online user comments posted to a media company’s Facebook pages in the same manner as they are responsible for printing traditional Letters to the Editor, the Federal Government is threatening to make further changes to defamation laws to also hold social media platforms liable for defamatory user posts, as well as eliminate anonymity for some online users. Prime Minister Scott Morrison, who has publicly challenged the digital giants on issues including making payments to Australian media companies, taxation and policing of online hate, described social media as a “coward’s palace where people can just go on there, not say who they are, destroy people’s lives and say the most foul and offensive things,” and that pushing the platforms to identify commentators was an objective of his government.
Context – Australia is pressing its case as the most aggressive Western regulator of online activity and digital platforms (although the UK, post-Brexit, and the European Union led by France would take issue) and no change in Internet policy should be dismissed as impossible. (Remember, online pornographic video is technically illegal in much of Australia.) Reaction to the recent High Court decision on liability for online user comments is instructive. Faced with the prospect of being liable for user comments, CNN recently shut down their Facebook pages in Australia claiming that they could neither police comments on every story nor expend the resources to manually turn off the comments boards for every story. Many public officials and government offices have turned off comments boards, illustrating how the concern is likely to spread beyond media. While civil libertarians argue that online anonymity is critical to vulnerable groups, Australia has enacted aggressive online security laws including on encryption.
Democrats Propose Stripping Sec. 230 When Platforms Use Recommendation Algorithms
Report from The Hill
In Brief – Democrats on the House Energy & Commerce Committee, led by the panel’s chairman, have introduced legislation that would strip the liability protection afforded to digital platforms by Sec. 230 of the Communications Decency Act for content posted on their platforms by third parties when that content is recommended to users by a “personalized algorithm”. The Justice Against Malicious Algorithms Act was energized, if not wholly inspired, by the call from the Facebook “Whistleblower” to hold platforms accountable when they employ algorithmic recommendation tools that surface content that ends up causing or contributing to bad outcomes. One of the highest profile charges raised by the documents she took from Facebook was that the company was aware that Instagram often directed content to teenage girls that compounded problems with negative body image. The bill exempts digital platforms with fewer than 5 million unique monthly visitors as well as technical and hosting businesses.
Context – There is nothing new about both Democrats and Republicans harshly criticizing the big tech companies, it’s been going on for a few years. The question is whether a specific “solution” is bipartisan? When it comes to carving up Sec. 230, which has been targeted from all sides, besides being a misinformed idea, the relatively simple but deep divide is generally between Democrats arguing that platforms allow too much harmful content to circulate, while Republicans argue that platforms are biased against content that is ideologically conservative. That divide has only gotten deeper over issues like the pandemic, election processes, vaccines, former President Trump and, most recently, climate change. Agreement on “recommendation” algorithms seems unlikely because they just lead to fights over underlying content policies. Instead, look to targeted antitrust action or expansion of the Child Online Privacy Protection Act as more likely common ground. However, the Europeans do appear more than happy to regulate algorithms through the DSA and DMA.
Report from the New York Times
In Brief – Apple has informed the Federal District Court for the Northern District of California that it intends to appeal the order handed down last month by District Court Judge Yvonne Gonzalez Rogers requiring it to end its anti-steering policies prohibiting app developers from communicating with customers about alternative ways to purchase digital content that circumvent the App Store and its fees. The judge gave Apple 90 days to change its rules and allow developers to start advertising alternative payment methods. Apple is requesting a stay of that order while it appeals to U.S. Court of Appeals for the Ninth Circuit, a process the company says could take a year or longer.
Context – Overall, the main ruling by Federal Judge Gonzalez Rogers was a big win for Apple. She ruled that Apple’s App Store was not a monopoly and it could mandate its payments system to collect its fees. It sets the bar for US Courts looking at antitrust claims that allege the mobile platform giants are monopolists on their own platforms (at least related to fees). Given their loss, Epic’s appeal was no surprise. The future of Apple’s “anti-steering” policies, an issue of concern for Gonzalez Rogers throughout the trial, is more complicated. Before her decision was announced, Apple had already started making changes. It 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 outside of Apple, which the company has said would be implemented globally. Apple also reached a class action suit settlement with small app developers that would allow them to communicate about payments options with users off their apps, such as through email. That settlement is also in front of Judge Gonzalez Rogers for approval. While regulators in the EU, Netherlands, Korea and elsewhere review App Store (and Play Store) policies overall, anti-steering is certain to continue to be an issue on the table.
US and Europeans Agree on Timing to Phase Out Digital Services Taxes
Report from the Wall Street Journal
In Brief – As the most significant change in global corporate tax policy in generations continues its march forward, the US and five European countries that have instituted Digital Services Tax (DST) are reported to have agreed to the process by which those countries would rescind their DSTs as the overall global tax deal is implemented. The national DSTs target approximately 30 large, mostly US-based digital platforms with new taxes on in-country revenues, generally at a rate of 2-to-3 percent. The US and France, Italy, the UK, Spain and Austria have agreed that the five countries will end their DSTs after the massive two-part global tax deal is fully in place. The European focus is on “Pillar 1” of the deal which reallocates some corporate taxes from countries where very large consumer-facing companies are based to countries where they have consumers. The complex new tax regimes are not expected to be in place until late 2023 or early 2024 so the European national DSTs will likely be in place until 2024 as well.
Context – The charge that digital services companies do not pay a responsible level of taxes in countries where they have customers became the primary driver for global corporate tax reform in 2019. A number of countries, especially France, Great Britain, Italy and Spain, moved to increase taxes on large digital platforms but were largely stymied by Trump Administration threats of trade sanctions. The Biden Administration changed the debate by putting the US emphasis on stopping countries from being tax havens by negotiating a global minimum tax rate of 15 percent, which is “Pillar 2” of the current deal. The Biden Administration also pressed to change Pillar 1 from a solely digital company tax to a complicated proposal that aims to redistribute taxes from about 100 highly profitable companies. Big questions remain, including whether the Biden Administration can get the Pillar 1 regime through the US Congress, as Republicans are objecting, and whether the European Commission will drop its digital levy plan.
Amazon’s India Problems Grow with Leak Exposing Copied Product Schemes
Report from Reuters
In Brief – While no leak of internal company materials can match the haul of the Facebook “Whistleblower”, Amazon has ongoing problems in India where documents describing its complex strategies to circumvent national laws limiting foreign companies from operating retail businesses have been repeatedly exposed by Reuters. The latest report claims that Amazon engaged in a campaign to identify successful products on its Indian marketplace platform and engineer copies that could be sold for less and generate more profit for Amazon. The digital giant is accused of unfairly using its marketplace data to develop the copies as well as preferencing the new products in search results in order to drive sales to the new offerings.
Context – Amazon is oft accused of using its marketplace data to advantage its own retail products. Regular critic Sen. Elizabeth Warren (D-MA) jumped on the India news and called for Amazon to be “broken up” to separate its retail business from its marketplace, while others question whether Amazon lied to Congress about using data for its own brands. Ironically, India is a place Amazon does not technically do that. India’s Foreign Direct Investment laws prohibit any foreign business from being a retailer but allows them to operate ecommerce marketplaces. If you read the Reuters story above, please know that the products in question are not technically owned by Amazon. They know the law. The ongoing legal and regulatory battles in India are all about Amazon using legal technicalities to work around the law. In this case, they are using their knowledge and control of the platform to preference copies technically sold by other “third party sellers”. Amazon has likely arranged to earn a greater profit margin from those sellers. And this Amazon strategy extends beyond India. This report shows how Amazon engages in the same practice in the US, where some Amazon Basics products are not actually owned by Amazon despite the name. Like in India, Amazon employees work to find partners to create new brands and products to sell on Amazon. Using third parties is profitable and certainly less risky.
Bipartisan Senate Bill to Target Largest Platforms “Preferencing” Their Own Services
Report from the Washington Post
In Brief – Senators Amy Klobuchar (D-MN), chair of the Senate Judiciary Committee’s antitrust subcommittee, and Chuck Grassley (R-IA), the top Republican on the full Judiciary Committee, are introducing legislation with support from a bipartisan group of nine Senators that they describe as prohibiting the largest tech platforms from preferencing their own products and services and discriminating against rivals.
Context – One huge digital policy question is whether Democrats and Republicans in Congress will come together on “antitrust” legislation aiming to regulate the largest platforms. Major antitrust reform is a core policy plank of the ascendant progressive Democrats who see anticompetitive failings hampering wide swaths of the economy. Many Republicans are objecting to wholesale change in competition policy or empowering regulators to direct digital companies. However, the platform giants are vilified by many conservatives who see them dominating public discourse, penalizing conservative perspectives, and generally immune from market discipline. In the US House, Rep. Ken Buck (R-CO) is leading Republicans willing to support highly regulatory bills targeting Amazon, Apple, Facebook, Google (and maybe Microsoft) developed under the leadership of Rep. David Cicilline (D-RI). The House Judiciary Committee has passed four bills but the progress is stalled by opposition from Republican Leadership and some Democrats. While the full set of bills has not been replicated in the Senate, the Klobuchar-Grassley bill on preferencing is seen as aligned with the American Innovation and Choice Online Act. The complexity of what it means to “preference their own products and services” should not be underestimated, as the recent news regarding Amazon promoting “their own brands” in India shows, the products in question were not technically owned by Amazon, but instead the company arranges for some manufacturers to develop certain products under Amazon direction, and then preferences those “third party” products. Tricky.
Irish Data Commission Proposes Facebook Fine and Takes More Privacy Advocte Heat
Report from Reuters
Context – Many privacy advocates blame the GDPR “One Stop Shop” policy for a lack of major penalties hitting big tech companies under the GDPR. With Ireland home to so many big tech EU headquarters, the IDPC has come under especially harsh criticism on a range of issues, including being slow to resolve complaints and proposing generously low fines. Earlier this year, EU Commissioner Vera Jourova called on other European privacy regulators to stop publicly criticizing the IDPC and work cooperatively. The “One Stop Shop” policy took a legal hit in June from the EU’s top court which ruled that the Belgian Data Protection Authority could initiate judicial proceedings against Facebook in Belgium when the IDPC chose not to pursue a complaint in Ireland. Finally, member states led by France, Germany and the Netherlands are leading efforts to strengthen all member states in regulating big tech in the Digital Markets Act.
Japanese Fair Trade Commission Opens Investigation of Mobile Operating Systems
Report from Nikkei Asia
In Brief – The Japan Fair Trade Commission (JFTC) has opened a new antitrust investigation into Apple and Google related to dominance of mobile operating systems. The investigation will cover systems for smart phones, smartwatches and other wearable devices. The JFTC recently settled a dispute with Apple regarding its mobile payments rules. Apple, which has a 70% market share in Japan, agreed to allow “reader apps”, services that provide content such as e-books, video and music, to communicate with users about alternative payment systems. A similar change was later ordered by Federal Judge Yvonne Gonzalez Rogers in her ruling that otherwise gave Apple a major antitrust win over Epic Games.
Context – The ruling by Federal Judge Gonzalez Rogers that Apple’s App Store was not a monopoly and it could mandate its payments system to collect its fees has been the biggest news in app store policy this year. It sets the bar for US Courts looking at antitrust claims that allege the mobile platform giants are monopolists dominating their own platforms (at least related to fees). While Epic is appealing in US Federal Court and litigating in Europe, the UK and Australia, other regulators and legislatures are taking on the same questions. For example, South Korea has enacted legislation requiring large mobile operating system companies (Google and Apple, but the focus in Korea is Google) to accept alternate payment systems. Similarly, the Dutch competition authority is reported to have concluded that Apple’s rules on in-app payments violates its competition law and ordered a change, basically the opposite of the US Court ruling. And the European Commission competition authority is investigating a similar question. All the conflicts and contradictions are raising the issue of whether the platform giants will need to offer tailored services market-by-market, withdraw from some markets, or, as hinted at by Google in Korea, simply find a new method to charge large developers to access to the platforms.
Trump Follows Up Motion to Get Back on Twitter With One to Get Back on Facebook
Report from Newsweek
In Brief – Following up on a similar move a week earlier to convince a federal judge to order Twitter to restore his account while his court fight continues, former President Donald Trump has filed a motion asking a US District Court judge to impose a preliminary injunction on Facebook to reactivate his Facebook and Instagram accounts. Along with the First Amendment arguments in his initial suits, the new filings also cite Florida’s social media law, enacted by state Republicans charging social media platforms with anti-conservative bias, which was blocked by a federal judge in July. In related news, his anti-censorship suit against Google over his banishment from YouTube was transferred out of Florida to federal court in California.
Context – On one hand, tracking the Trump lawsuits to get back on the big social media platforms brings a bit of levity to the day. In a nutshell, the First Amendment prohibits government from censoring private citizens. He is trying to make the case that the platforms were serving as government actors when they banned him… at a time he was literally the head of the US Government. That is funny, as is this blog post from TechDirt’s Mark Masnick. And the suits will fail. Federal Sec. 230 is very clear in granting platforms flexibility in moderating user content and the First Amendment rights of platforms to manage content on their sites are also clear. But think about this in the context of the huge Facebook “Whistleblower” news and her charges that Facebook consistently got content moderation wrong by going too easy on bad things. She called for a federal regulator to set the standards. Will Republicans agree to anything like that? Look past the Trump bans (many Republicans won’t) and remember that just last week Google announced it would be deciding what amounts to “climate change denial” and would demonetize those sites, posts and video. I wonder if Republicans would trust federal regulators to do better than Google?
Facebook “Whistleblower” Gets Rockstar Reception from EU Policymakers Targeting Tech
Report from the New York Times
In Brief – While Facebook “Whistleblower” Frances Haugen received uniformly positive feedback from the Senators during her three hours of testimony before the Commerce Committee’s Consumer Protection Subcommittee, she has also reached out to policymakers in the UK, France and the European Commission who are already moving forward on landmark digital regulations. As has been detailed through Wall Street Journal reports and an appearance on 60 Minutes, the former Facebook employee downloaded thousands of internal Facebook documents on a huge number of controversial topics, and is publicly criticizing Facebook’s business model, operations, global reach and leaders. She is calling for government regulations to address algorithms, privacy and access for outside researchers to internal company data. Many of her recommendations align with the European Union’s legislative plans to regulate content moderation through the Digital Services Act (DSA) and police the largest platforms for anticompetitive conduct through the Digital Markets Act (DMA). European Commissioners Thierry Bretton and Vera Jourova have each spoken directly to Haugen and claim her findings confirm their regulatory plans, while the European Parliament and British Parliament are both inviting her to testify before their panels.
Context – While US Senators may all agree that Facebook is terrible, below the surface Haugen’s policy recommendations are not bipartisan in Washington. She argues that only government regulators can be trusted with the tough decisions that face social media and other companies using algorithms. As we said last week, don’t expect a US Digital Regulator anytime soon. But Haugen’s messages resonate loud and clear with advocates for the DSA and DMA in Europe. Regulation is coming there. As Google moves to demonetize online content that their algorithms determine is climate change “denial”, watch to see if Republicans appear any more comfortable with government regulators stepping in to set the standards.
German Towns and Cities Call for Online Package Tax to Fund City Revitalization
Report from DW
In Brief – The German Association of Towns and Municipalities (DStGB) is calling for a new tax on packages delivered by large online retailers to raise 1.5 billion euros help fund economic revitalization and development in town and city centers. They argue that traditional storefront retailers and restaurants suffered through the pandemic and shutdowns while online retail grew, and claim that the online retailers benefit from local infrastructure such as roads while often paying little or no local business taxes. The association proposes that the package tax be linked to sales volume so that larger online retailers such as Amazon carry the heaviest burden to fund projects to “keep our city and town centers from dying out.”
Context – Claims that online commerce harm local small businesses are as old as the Internet. In the United States, it was the theme of the decades-long fight over “Internet Sales Taxes” (and before that, mail order catalogues) that ended with the US Supreme Court’s landmark Wayfair decision. One line of argument was fairness, the claim that local small businesses pay certain taxes, so it is unfair if remote businesses using the Internet don’t pay the same taxes. The reality is that the largest retail businesses, including Amazon, have facilities in jurisdictions across America and around the world and would pay all the local taxes if they did not receive special tax deals, but smaller businesses using the Internet have no presence in local markets and face challenges selling across state and national borders. A newer phenomenon is taxes imposed on digital companies because digital companies are successful. An example is the Digital Services Tax (DST) ideas that emerged in Europe. They may be tamped down by the emerging global tax deal that includes a global minimum corporate tax rate, but don’t count on them disappearing. The German online retail package tax idea, or efforts by US states like Maryland to create their own state DSTs, illustrates that Internet-based businesses will remain attractive targets for revenue collection.
Google Bans Sites Promoting “Climate Denial” From Using Its Digital Ad Systems
Report from the Wall Street Journal
In Brief – Google has announced that it will not allow its digital ads service to place ads on sites if the associated content is adjudged to be climate change denial. The ban will apply to web sites that use the Google display advertising systems to earn money, as well as YouTube. The ban targets “content that contradicts the well-established scientific consensus around the existence and causes of climate change” including denying that human activity or greenhouse gas emissions contribute to climate change. Google is the largest digital advertising service by revenue and a main revenue source for many content creators.
Context – The major social media platforms ramped up their content moderation in 2020 regarding COVID and election governance, and in 2021 on vaccines. For months, PEI has been pointing to policing “climate change” misinformation as the trip wire into policing a top tier, long-term, substantive public policy debate. Back in March, in a US House hearing on social media misinformation, Google’s and Facebook’s CEOs were asked about climate misinformation by Rep. Donald McEachin (D-VA), calling for restrictions, and Rep. Dan Crenshaw (R-FL) pushed back hard. (Seriously, watch McEachin at 3:49:45 and Crenshaw at 5:26:10 of the hearing video. By the way, Mark Zuckerberg’s response to McEachin attempting to explain how COVID and Election content was different that Climate Change is interesting in the context of the “Facebook Whistleblower”.) While there was little immediate conservative reaction to Google’s announcement, likely because of confusion over social media moderation in the wake of the “Whistleblower” charges, Google flexing its ad system power against The Federalist, a conservative opinion site, in mid-2020, created major blowback. Look for this Google policy to create even more furor unless Google is clear that it will only target the most egregious, fringe sites. But on this emotional and ideological topic, that will be very hard.
Global Corporate Tax Changes Get Big Bump With Ireland Sign Off Clearing Way for EU
Report from the New York Times
In Brief – The most significant change in global corporate tax policy in generations continued its march forward with the Irish Government agreeing to support the deal. Ireland has become the European base for large global companies, including digital giants Microsoft, Apple, Google and Facebook, in part through business-friendly tax policies. “Pillar 2” of the two-part global tax deal involves countries agreeing to set their corporate tax no lower than 15%, which is above Ireland’s current 12.5 percent. While the EU has strongly supported the global tax agreement, it was focused on “Pillar 1”, which allows countries to increase taxes on very large companies that sell to domestic consumers but have most of their operations in other countries, a modified version of Digital Services Taxes (DST). The EU requires unanimity among member states for tax policy changes, and Ireland had threatened to oppose the deal due to Pillar 2. However, pressure from the US and the largest EU countries, and an agreement that the corporate minimum rate would be 15%, not “at least” 15%, brought Ireland on board.
Context – A number of countries, especially France, Great Britain, Italy and Spain, moved aggressively to increase taxes on large digital platforms in 2019 and 2020, but were largely stymied by Trump Administration opposition and threats of trade sanctions. The Biden Administration changed the debate and appears on the way to a major global tax deal, first shifting the US focus away from stopping DSTs over to getting a global minimum corporate tax rate (Pillar 2) and also shifting the DST-related agreement (Pillar 1) to cover more than just digital companies, although all the largest digital platforms are expected to be impacted. As the OECD agreement continues forward, questions remain on the substance, whether the Biden Administration can get its provisions through the US Congress, and whether European countries and the EU will drop their DST plans anytime soon.
Facebook Files Motion to Dismiss FTC Complaint Arguing Market Definition Is A Fiction
Report from the Washington Post
In Brief – Facebook has again filed a motion to dismiss the antitrust complaint of the Federal Trade Commission (FTC), arguing that the agency’s attempt to address the deficiencies noted by Judge James Boasberg in dismissing the FTC’s original lawsuit again fell short with “no valid factual basis” that the social media and advertising company is an illegal monopolist. Boasberg created a stir in June by unexpectedly granting Facebook motions to dismiss against both the FTC and State AG antitrust complaints, each of which accused the digital giant of being a monopoly that illegally acquired Instagram and WhatsApp and sought to unwind the acquisitions. The judge fully rejected the State AGs authority to challenge the acquisitions so many years later (they are appealing) but granted the FTC the opportunity to amend its complaint. The agency’s amended complaint dug in on defining Facebook as a “personal social networking” company distinct from giant platforms like TikTok, YouTube, LinkedIn, Twitter and Pinterest, claiming it only faces direct competition from much smaller Snap and has held at least 80% of user attention for personal social networking services since 2012. Facebook calls that narrow market “a litigation-driven fiction at odds with the commercial reality of intense competition” from those giant social media and advertising platforms.
Context – “Defining the market” is often key to an antitrust complaint, and this one could turn on that as well. However, as with the Epic Games v Apple case, there are other aspects to proving an illegal monopoly, including concepts like the ability to foreclose competition. In what was a bad week for Facebook, with its “Whistleblower” on Capitol Hill to great acclaim, a technical problem knocked Facebook’s services offline for hours. While progressive maven Rep. Alexandria Ocasio-Cortez (D-NY) used the blackout to justify breaking the company up for being a monopoly that consolidated online communications in one business, other reports indicated a spurt of downloads of alternatives like Signal and Telegram.
Singapore Enacts Legislation Aiming to Block Foreign Online Political Interference
Report from the Wall Street Journal
In Brief – Singapore’s parliament has passed the Foreign Interference Countermeasures Act that it defends as a response to foreign financed online political information campaigns. The legislation allows government authorities to designate groups and individuals as “politically significant persons” which will authorize a range of responses including requiring the deemed entities to disclose foreign funding sources, as well as compelling internet service providers and social media platforms to turn user information over to the government, block content and remove applications used to spread content the government deems hostile. Bill proponents argue that foreign disinformation campaigns are a growing threat globally and the measures will stop foreigners and their local proxies from using social media and messaging apps to interfere in Singapore’s affairs. The political opposition in Singapore, where one party had been in power since the city-state gained independence in 1965, as well as advocates for free speech and political pluralism, contend that the measures will likely feed authoritarian impulses, undermine independent criticism of the government, as well as tracking critics and cutting off their funding.
Context – Misinformation and disinformation, in particular charges that foreign state actors can aim to influence political or social conditions in other countries through online and social media activities, is a global bugaboo. These threats are being used to justify government influence over online content moderation practices from the UK and EU to India and Turkey. While countries like Turkey and India, and now Singapore, are easy to criticize on political censorship grounds, defining misinformation, disinformation, hate speech and viewpoint censorship case-by-case raises similar concerns everywhere. For example, civil libertarians and free speech advocates are raising concerns with the UK Online Safety Bill for enabling repressive and authoritarian regimes to justify online speech controls for their own ends.
Former President Trump Asks Federal Court to Order Twitter to Restore His Account
Report from the Washington Post
In Brief – Former President Donald Trump has filed a motion asking a US District Court Judge to impose a preliminary injunction on Twitter that would force the platform to restore his personal Twitter account as his legal case against the platform proceeds. The motion largely restates the case made in the former President’s initial lawsuit that Twitter (and Facebook and Google) were engaged in censoring him as directed by government officials and political opponents, violating his First Amendment rights. The new filing also cites Florida’s social media law, enacted by state Republicans that charge social media platforms with anti-conservative bias, which was blocked by a federal judge in July before it could go into effect.
Context – Twitter officials may take some satisfaction that while the former President has sued all three social media giants, he only filed the most recent motion to get back on Twitter. That said, there is nothing new to the underlying arguments. He is trying to make the case that the platforms were serving as government actors when they banned the head of the government. What the original suits, and the most recent filing, will accomplish is to stoke partisan outrage over social media bias that is held by most Republicans. In addition, as talk of the former President running again grows, the fact that he is absent from the platform that was central to his previous campaigns is likely personally frustrating and also noticeable to his followers. Regardless, two huge legal barriers stand in the way of efforts to stop platforms from moderating “political” content, whether through state laws or federal lawsuits. Sec. 230 is very clear in granting platforms flexibility in moderating user content and the chances that Democrats will agree to changes that stop them from policing figures like former President Trump is… unlikely. And the 1st Amendment rights of platforms to manage content on their sites is also clear. That said, criticism from legal minds like Justice Clarence Thomas will continue to prompt innovative legal and regulatory theories.
“Whistleblower” Testifies to Senate Committee About Facebook’s Failures to Stop Bad Things
Report from the Wall Street Journal
In Brief – After Sunday appearances on 60 Minutes and an expose in the Wall Street Journal, Frances Haugen, the Facebook “Whistleblower”, appeared as the solo witness in a three-hour hearing of the Senate’s Consumer Protection Subcommittee. The former Facebook employee, who previously worked for Google, Pinterest and Yelp, downloaded thousands of internal documents on a wide range of controversial topics and shared them with the Journal, Securities and Exchange Commission and the Senate Subcommittee. Haugen detailed her views on the problems with Facebook’s business model, operations and leaders, and her support for government regulations and interventions to address the failings, including the role of algorithms, the nature of social media platforms, privacy, the global reach of Facebook, and mandating government and academic researcher access to Facebook data.
Context – The Senators did not add much. They all said Facebook is terrible. If there was agreement beyond that, it was on the issue of further regulating online services and kids, although the main idea on the table is to expand “kids” from the current age of below 13 up to those below 18. So, regulating teens online. Haugen was supportive. Haugen’s comments, overall, were lengthy, detailed and interesting. In short, she believes Facebook leaders cannot make the innumerable very hard choices that its platforms create. She argued only government regulators can be trusted. She even mentioned people like her, experts with experience inside the company, would serve in those entities. Tough questions that were not explored included whether her proposed rules and regulations would cover all social media, or even all companies using algorithms, and how that would work. Also, while there is bipartisan agreement that Facebook is awful, don’t expect a US Federal Digital Regulator soon. But in Europe, Haugen’s messages with resonate with advocates for the DSA and DMA.
Russia Threatens YouTube Over Takedown of Russian State Media’s German Language Channels
Report from Euractiv
In Brief – Russia has threatened to restrict YouTube operations in Russia and fine Google if two German-language YouTube channels operated by RT, Russia’s state media company, that have been taken down by YouTube for violating the platform’s rules against COVID and vaccine misinformation, are not restored. Russian state media has been sanctioned in the past by YouTube and other major platforms for vaccine disinformation, including a week-long YouTube suspension of RT that the outlet attempted to circumvent by shifting content to another channel. The Russian Foreign Ministry accuses the German Government with engineering the ban and has also threatened to block German media in Russia.
Context – This standoff between the Russian Government and YouTube highlights three trends to be watching. First, it comes as YouTube has announced further moves to address vaccine misinformation broadly, with a particular focus on COVID. Those topics are increasingly at the center of battles over supposed “viewpoint censorship”, whether in the US, Brazil or Europe. Second, while governments often demand the platforms do more to take down objectionable content (too many example to cite) or criticize them for unfair restriction in their home market (US, Brazil, India), it is highly unusual to see a government threatening to retaliate against a platform for content moderation in another country. Finally, this is another ratcheting up 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. The Russian competition authority charged YouTube with “opaque, biased and unpredictable” content moderation this spring and, on the eve of the recent national elections, Google and Apple removed apps used by Russian opposition parties that were banned by the government when in-country executives were threatened with arrest and criminal charges.
CNN Blocks Its Facebook Pages in Australia After Court Ruling on Comment Board Liability
Report from the Wall Street Journal
In Brief – CNN has blocked access by Australians to its Facebook pages following a recent ruling by Australia’s highest court that media businesses are legally liable for defamatory comments posted by users on the comment boards on the media company’s Facebook pages. The court ruled that user comments posted on news media social media pages are legally equivalent to traditional Letters to the Editor, forums where the media enterprise can exercise editorial control and therefore can be held responsible for defamation as the comment publisher. CNN reported that it asked Facebook to provide a tool for media sites to close comments across the board on their pages when viewed from Australia, but claims the request was rejected by Facebook, who directed the company to utilize existing tools to turn off comments story-by-story. While CNN criticized Facebook for again rejecting sincere cooperation with news media and claimed shutting down comments story-by-story was too difficult to pursue, Facebook stated it supported reform of the Australian defamation laws, journalism in Australia, including through its Facebook News service, and that existing tools can address CNN’s concerns.
Context – In the wake of Facebook’s controversial decision earlier this year to shut off all news media content in Australia in the midst of negotiations over highly contentious legislation to force it (and Google) to pay licensing fees to Australian media businesses whenever their content appears on Facebook, a decision unwound following changes to the News Media Bargaining Code, everything touching on Facebook and media in Australia is news. However, while the specific legal case regarding liability for comments was about news media Facebook pages, many argue that this ruling will soon extend to all Australian web sites with comments, leading to a drastic reduction of user speech. Liability protection for online platforms, including news media sites, to allow users to post comments has been a justification for Sec. 230 in the US.
Google and European Commission Battle It Out Over 2018 Android Antitrust Decision
In Brief – Google and the European Commission’s Competition Authority spent a week battling in front of the European General Court over the Commission’s 2018 ruling that Google abused the dominance of its Android operating system and imposed an antitrust record 4.3 billion euro fine. The Commission determined that Android enjoyed market power and that the company used a range of unfair contractual tactics to force phone makers to preference Google’s Search and Chrome apps in order to protect those dominant services, as well as to block phone makers from supporting alternative versions of Android. Google challenged the Commission across the board, including arguing that it faces meaningful competition from Apple, that Google Search and Chrome are popular due to their capabilities, that the Android system is meaningfully more open than Apple’s iOS, that fostering a successful Android brand to compete with Apple when phones were built by multiple manufacturers demanded strict compatibility rules, and that the fine was improper. The General Court panel is expected to rule next year and the case could be appealed to the top tier European Court of Justice.
Context – In a week when top Biden and von der Leyen Administration officials met to discuss trade and tech policies, and agreed that regulating Big Tech was a joint priority, remember that the EC is a decade into major Google competition cases regarding search practices, its advertising business, and Android. As we saw in the recent Epic v. Apple ruling in US District Court, the question of Android (or Apple) dominance is unsettled. However, Google’s contractual Android policies, where the underlying software is open source but the Android brand is controlled, are at issue in this EU case as well as recent rulings in Korea and India where Android phones carry far greater market share than in the US or Europe. A big question facing the industry and policymakers is how to proceed if the legal rulings go in opposite directions.
Federal Court of Appeals Rules Sec. 230 Does Not Protect Platforms from State IP Claims
Report from The Hollywood Reporter
In Brief – In a 2-1 decision, a panel of the US Court of Appeals for the Third Circuit has ruled in Hepp v Facebook that state intellectual property (IP) claims, like claims based on federal IP law, are exempt from Sec. 230 of the Communications Decency Act (CDA). The case involves a media personality seeking damages from Facebook based on third party ads that featured an unauthorized picture of her taken from a store security camera. The majority ruled that when Congress exempted IP-based claims from Sec. 230’s grant of liability protection to digital platforms it did not exclude state law-based IP claims. The dissenting judge highlighted the split created with the Ninth Circuit’s Perfect 10 decision and noted the vagaries of state IP law, including the “right of publicity” in this case, which is not a federally-recognized IP right. Facebook is expected to appeal to the full Third Circuit.
Context – Sec. 230 protects platforms from civil liability for most content moderation decisions when they restrict users (many conservatives charge “censorship”) and choose not to restrict content (many progressives charge “misinformation”). This case, Hepp v Facebook, hones in on the fact that IP-based liability claims are exempted from Sec. 230. A little history… In the early years of the commercial Internet, when the CDA was enacted, powerful US IP- based industries, including movies, music and software, were deeply concerned with the threat of online piracy. They pushed for IP law, protecting their industries, to be exempted from Sec. 230 in order to hold platform accountable for piracy. Separate federal legislation was enacted two years later to deal with liability for online digital piracy, the Digital Millennium Copyright Act (DMCA). It set up a different platform liability regime for IP called “notice and takedown” requiring platforms to set up a system to accept notices that user content violates the IP of the rights holder and takes down offending content. That model has been under attack by IP industries from pretty much the get go.