German Government Eying Huge Tax on US Digital Giants

Report from Bloomberg

In Brief – The Culture Minister of Friedrich Merz’s German Government has revealed that they are drafting legislation for a national digital services tax (DST) targeting the biggest internet companies operating in country, in particular US giants Google and Meta. It could be a 10% tax on the advertising revenues of the largest digital platforms, which would be double the rate in Austria, which has been cited as a model DST, more than three times the rate in France, which was the first DST in Europe, and five times that in the UK. During his first term, President Trump fought European digital taxes with tariff threats, pressuring countries to delay their implementation, but President Biden took a different tack. Many countries began to collect digital tax revenues pending implementation of a tax deal negotiated by the Biden Administration at the OECD. That deal was never approved by the US Congress, President Trump disavowed it when he reentered the White House, and eliminating national DSTs has been a trade policy demand of the Trump Administration’s linked to their reciprocal tariffs campaign.

Context – US Treasury Secretary Scott Bessent singled out eliminating DSTs, which he called “an unfair tax on one of America’s great industries,” as a priority for US-EU trade talks. Ironically, he mentioned differences between EU member states, for example France as a DST leader while Germany has not had one, as something for the EU to work out. He probably didn’t mean Germany should get their own DST. Preemptively imposing high tariffs on so many countries, irrespective of DST status, has somewhat undermined their usefulness to restrain the taxes. For example, while India, Brazil, and Italy have expressed a willingness to step back on DSTs, the UK did not address their tax in their US trade deal, and Poland, like Germany threatened more. However, the US is really upping the ante with a hugely threatening provision in the House-passed tax and budget bill that would increase US income taxes by up to 20% on business and passive income of non-US individuals, corporations and sovereign entities based in countries that impose an “unfair foreign tax” on US companies, including DSTs.

Washington Post Tech Workers Vote to Unionize

Report from the Hill Rag

In Brief – More than two hundred of the over three hundred tech workers at the Washington Post, including engineers, product designers, and data analysts, have voted to establish the Washington Post Tech Guild (WPTG). The final vote was announced as 171 for and 38 against. Washington Post tech workers first announced the formation of their union in April, and the effort earned support from staff at the Washington Baltimore News Guild, The NewsGuild-CWA and the Campaign to Organize Digital Employees. The Post Tech Guild, which claims they were subjected to aggressive union-busting tactics by Post management, said that they would immediately turn to planning to begin bargaining with the company for its first collective bargaining agreement.

Context – Reports of tech worker union organizing often generate media cheerleading. It’s important to first filter out efforts to organize non-professionals in tech companies. For example, Apple retail store employees, ongoing labor strife at Amazon fulfilment centers, Tesla “image analysts” who label video to help train the car company’s AI vision systems, and game-testers in game development studios, especially within Microsoft’s video game business. In each case, the workers were generally earning around $20 per hour, not highly skilled and highly paid programmers or developers. In fact, the largest union in the US of true digital professionals is in the media industry, at the New York Times Company. There, approximately 600 technology workers, including programmers, developers and data analysts, voted to create the New York Times Tech Guild in 2022. The content side the New York Times Company was already fully unionized, like at the Washington Post. Nevertheless, New York Times management, which was traditionally very pro-union on labor policy issues, strongly opposed the effort. And even after the union prevailed in its vote, the sides spent two years negotiating a collective bargaining agreement that was not settled until after a one-week strike around Election Day 2024.

European Hotels to Sue Booking for Retail Price Fixing Damages

Report from Reuters

In Brief – Hotel associations from 26 European markets plan to file a class-action lawsuit against Booking .com in the Netherlands over the platform’s long-time use of price parity contract clauses that prohibited hotels using the site from offering a lower price on other online sales channels including competing platforms and hotel’s own websites. The lawsuit follows a September ruling from the EU Court of Justice that questioned the legality of such clauses under EU antitrust law, stating that Booking failed to prove they were necessary or proportionate. The hotels hope to reclaim a significant portion of commissions paid to Booking between 2004 and 2024, potentially plus interest. Filing the lawsuit in the Netherlands, which is Booking’s country of establishment in the EU, allows all European hotels to consolidate their claims in a single jurisdiction through a single litigation. Booking responded to news of the pending suit by saying that the hotel trade groups are mistaken in their view of the ECJ ruling, claiming that the court only addressed a narrow legal question regarding contract clauses used in Germany between 2006 and 2016 and, even then, “did not conclude that Booking’s German parity price clauses were anti-competitive or had an effect on competition.” The online booking site added that it has already ended the use of such clauses in Europe to comply with the EU’s Digital Markets Act regardless.

Context – Price parity (or “MFN”) clauses of dominant digital platforms have been a regulatory concern for years, especially when used to limit lower-priced sales on competing digital platforms that charge sellers lower fees. Their use by hotel booking platforms has brought regulatory action in many global markets. Online food delivery platforms have also faced scrutiny. Amazon has an aggressive price parity track record as well. Booking, long the top hotel reservation intermediation platform, and a platform that has had many run-ins with antitrust regulators over their price parity policies, was the first DMA “gatekeeper” company added by the European Commission to the original six – Amazon, Apple, Google, Meta, Microsoft, and ByteDance.

European Commission Opens DSA Investigations of Porn VLOPs

Report from Euractiv

In Brief – The European Commission has announced that it has launched a formal investigation of four major pornographic websites over concerns that they are violating the Digital Services Act (DSA) by failing to provide adequate protection for minors, especially falling short regarding age verification. According to the Commission, all four sites, designated as Very Large Online Platforms under the DSA, currently use simple click-through age checks, which the Commission suspects fail to meet the law’s requirements. Authorities will primarily focus on assessing whether the platforms have conducted proper risk assessments and implemented safeguards to protect children’s mental and physical health. The Commission added that the concern is a priority that extends beyond the largest pornography sites and that it will collaborate with the Digital Services Coordinators in the EU member states to monitor how smaller adult sites, that fall under the DSA’s threshold for Very Large Online Platforms, address the issue. The Commission also reiterated plans to roll out a standardized EU-wide age verification system by the end of next year.

Context – Efforts to regulate online platforms to “protect” teenagers is a growing global phenomenon. Each is a step towards widespread online age verification. Porn is consistently a top target. France is requiring age verification for porn sites. And this DSA action looks to be doing the same. In the US, Texas has done it as well. A challenge to Texas’s law requiring age verification for online porn is under review by the US Supreme Court. But social media is increasingly facing similar demands. France and Texas are both considering age limits. The UK digital platform regulator has announced a “Children’s Code” of rules for “risky” online sites including social media platforms. It calls for “highly effective” age checks to identify users under age 18. Countries across Asia are actively considering online age limits, and Australia has set a firm social media minimum age of 16 for sites besides YouTube. Privacy advocates oppose this trend.

Texas Law Will Put Online Age Verification Duties on App Stores

Report from the New York Times

In Brief – Texas is the second state to require app store operators to verify all users’ ages and then block minors from downloading apps without the permission of a parent or legal guardian. SB 2420, the App Store Accountability Act, also requires parental consent before minors can make in-app purchases, mandates app developers create appropriate age ratings for their apps and introduces secure age verification tools. Today, Apple and Google operate the largest US app stores, but the number could grow, especially as antitrust cases target the two giants. Meta has been the most vocal app developer arguing that Apple and Google, who play central roles in the mobile ecosystems, are best positioned to manage age verification by confirming each user’s age at account set-up, telling app developers that a user is old enough for any single app download, and managing parental consent regimes through linked devices and accounts. Apple, Google, and many tech policy advocacy groups have objected to mandates requiring age verification for all online users and it was reported that Apple’s CEO unsuccessfully appealed directly to Texas Governor Greg Abbott encouraging him to veto the bill.

Context – Governments worldwide, including Australia, the EU, UK, and a growing number of US states, are introducing measures that aim to protect teens from various online harms, especially involving social media and pornography. They will all operationally require age verification. Singapore’s digital and media regulator recently announced that very large app stores in that market, which includes Apple, Google and a few China-based companies, will need be take on system-level age verification measures. In March, US Senator Mike Lee (R-UT) and Representative John James (R-MI) introduced a federal version of the App Store Accountability Act in Congress, drawing support from more than 100 national advocacy organizations.  The US Supreme Court heard oral arguments in January regarding the privacy and free speech implications of online age verification requirements, and their upcoming ruling is likely to heavily impact this development in the US.

Indonesian Antitrust Regulator Rules on TikTok Shopping Acquisition

Report from Reuters

In Brief – Indonesia’s antitrust authority has determined that TikTok’s acquisition of leading local ecommerce platform Tokopedia could lead to monopolistic practices and is imposing two years of behavioral remedies to protect competition. TikTok acquired Tokopedia in 2023 to continue ecommerce operations in the country after the Trade Ministry banned social media companies from facilitating ecommerce transactions directly on their platforms. The antitrust investigators said that while the acquisition did not raise concerns with market foreclosure or significant entry barriers for new business players, there are strong network effect that could be used in sales strategies involving tying or bundling practices. Therefore, they are proposing several conditions for the merged parties to ensure competition and choice in payment methods and logistics services, and that TikTok account holders have the freedom to promote products from ecommerce platforms other than Tokopedia. The investigators are asking for quarterly compliance reports over two years.

Context – Indonesia was the first and largest market for TikTok Shop, a live-streaming and video-based ecommerce marketplace integrated into the core TikTok app. It was launched in 2021 and quickly grew into that country’s fifth-largest ecommerce platform, disrupting Indonesian retail both online and from traditional small shops. In response to retail industry pressure, the Indonesian Government imposed a crash regulatory change in October 2023 aimed at TikTok, prohibiting ecommerce transactions from occurring over social media platforms. TikTok, a wholly owned subsidiary of Chinese-based ByteDance, duly committed to complying with local laws and regulations and shut down TikTok Shop Indonesia. However, the Chinese digital giant soon announced that it was acquiring Tokopedia, the second largest ecommerce platform in the country, and planned to jointly develop a new online shopping service in the country. Malaysia’s Communications Minister has said that the country considering some regulation of TikTok Shop as well.

German Court Clears Meta to Train AI with Some EU User Data

Report from The Decoder

In Brief – A German regional court has cleared Meta to use public data from Facebook and Instagram users to train its AI systems, dismissing an emergency lawsuit from a consumer protection group. Back in April, Meta announced that it would start using publicly available information from adult users, including names, profile photos, comments, and likes, to train its AI large language models. The court ruled that Meta’s AI training plans fits within the framework of the General Data Protection Act (GDPR) as a legitimate corporate interest, as well as leaning on a 2024 determination of the European Data Protection Board (EDPB), which says companies can use publicly available adult data under data protection rules. The company swore to the court that sensitive details like account information, home addresses, or license plate numbers won’t make it into the training data. In addition, users can opt out of the use of their data for AI training. The decision of the German court aligns with the recent decision of the Irish Data Protection Commission (DPC), Meta’s lead privacy regulator, to approve the plan.

Context – Last fall, Meta spearheaded an open letter joined by over 50 companies, including EU tech leaders SAP, Spotify, and Ericsson, calling for “clear rules, consistently applied, enabling the use of European data” to build AI services for European citizens. Even with its comprehensive AI Act legislation and specialty EU AI Office, overlapping regulatory authorities, especially GDPR-enforcers, have created regulatory uncertainty in Europe. The EDPB’s report on Chat-GPT raised numerous questions about the valid legal basis for all stages of personal data processing, as well as raising the concern that hallucinations that are produced by all chatbots could violate the GDPR’s “principle of data accuracy”. The Irish DPC, often criticized for being too lenient on top US tech firms, has taken aggressive positions on AI training, leading Meta and X to stop training on data from European users as well as opening an investigation of Google practices.

Florida’s Online Content Moderation Law has Problems in Court (Again)

Report from the Miami Times

In Brief – Federal District Judge Robert Hinkle has rejected the State of Florida’s motion to dismiss a lawsuit challenging its 2021 law that regulates how social media companies engage in content moderation. Hinkle has overseen First Amendment-based challenges brought by tech company trade associations for nearly four years, siding with them in his original ruling, and having that decision upheld by the 11th Circuit Court of Appeals. However, the US Supreme Court found Hinkle’s review of the challenge to the Florida law, and a case from the 5th Circuit dealing with a similar Texas law, to insufficiently consider the full range of digital platforms that might be implicated, directing both courts to dive deeper. In rejecting Florida’s latest effort to dismiss the tech group’s complaint, Hinkle wrote, “The defendants have not attempted to explain what these provisions really mean or how they would be applied. Nor have the defendants offered any theory under which a state can preclude this kind of curating without violating the First Amendment.” He also noted that while the law may not be unconstitutional on its face in all possible applications, many of its provisions likely violate constitutional protections when applied to specific companies.

Context – Republican-led Florida and Texas were the first states to try to regulate social media content moderation based on arguments that progressive Big Tech companies were stifling conservatives. New York and California followed with laws pushing platforms to better police hate speech and harassment. Although the Supreme Court ordered another review of Florida’s law, a majority of the justices said that the law likely violated the First Amendment when applied to traditional social media platforms. Earlier this year, California settled a challenge to its content moderation law brough by X agreeing that the Moody decision precluded directing content moderation by traditional social media platforms, and Hinkle’s latest ruling reiterates that once past procedural questions there are major problems with regulating social media content moderation under current First Amendment jurisprudence.