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March 2024

Canadian Online Harms Act Aims to Protect Kids and Target Hate Speech

Report from the BBC

In Brief – Years after promising legislation to better address online harms in Canada, the Government of Prime Minister Justin Trudeau has unveiled the Online Harms Act targeting seven types of objectionable content on social media sites, live-streaming services, and adult content platforms. The bill targets content that sexually victimizes a child, bullies a child, induces a child to harm themselves, communicates intimate content without consent, foments hatred, incites violence, or incites violent extremism or terrorism. In addition to addressing online harms, the bill amends Canadian criminal law to make it a separate offence to carry out a crime motivated by hate, amends the Canadian Human Rights Act to classify hate speech as discrimination, and sharply raises the penalties for those found guilty of advocating or promoting genocide, increasing the maximum sentence to life in prison. The leader of the New Democratic Party indicated that the party would support the measure, while the Conservative Party leadership criticized the Liberal Prime Minister’s “woke authoritarian agenda” and effort to regulate so-called “hate speech” which they describe as speech he does not like.

Context – The EU is committed to being the global leader, at least among democracies, in regulating digital markets, platforms, and now, AI. Their DSA directs platforms on how to address objectionable content, their DMA reorients digital competition policy by replacing antitrust enforcement with regulation, and they are on the cusp of enacting their AI Act. The UK may criticize EU regulation, but they recently enacted their Online Safety Act, a take on the DSA, and the Sunak Government has proposed a DMA-like Digital Markets Competition and Consumers Bill. Canada is really playing catch-up with online harms regulation. They are in a similar place on Digital Services Taxes. Countries like France and the UK are collecting duties while Canada threatens to implement a DST in the face of US retaliation. At least they can learn from European experiences.

Another OpenAI Copyright Suit fom Media Companies

Report from the New York Times

In Brief – Three online-only media outlets have sued OpenAI in federal court in New York for copyright infringement in the training of their AI chatbot. The Intercept, Raw Story, and Alternet, add to the steady stream of lawsuits being filed by media companies, authors, artists, and musicians, accusing OpenAI, its primary corporate backer Microsoft, and other AI leaders with violating numerous provisions of federal copyright law. The lawsuits argue that OpenAI scraped huge volumes of copyrighted content off the internet without authorization from, or compensation for, the copyright owners, and used it to build commercial services for “Big Tech” to replicate the copyrighted works without attribution or compensation for the copyright holders. The progressive publishers are seeking damages of at least $2,500 per violation, as well as asking OpenAI to remove all their copyrighted articles from training sets. OpenAI says they are committed to building an AI ecosystem that works for copyright holders and argues that including copyrighted material in AI training data is permitted under fair use.

Context – As copyright holders keep filing AI suits filled with voluminous claims of infringement, federal judges are narrowing them down to what should be a battle royale over training and the “fair use” exception. If there is a second key consideration it involves whether an AI system produces actual copies in their outputs. These latest publishers do not make that claim, but the biggest publisher suing OpenAI, the New York Times, is. OpenAI’s response is that the Gray Lady intentionally misused the service in violation of the terms of use to cause it to create copies. Now, for something completely different on the OpenAI litigation front, multibillionaire Elon Musk, an initial founder, and funder, of OpenAI in 2015, has sued OpenAI and its CEO (and fellow founder) Sam Altman in California court for breach of contract by violating the startup’s founding mission of creating open-source AI technology for the benefit of humanity, instead turning OpenAI into a “closed-source de facto subsidiary of the largest technology company, Microsoft.”

European Commission Looking Into Meta’s Ad-Free Subscription Plans

Report from TechCrunch

In Brief – Regulatory scrutiny of Meta’s digital advertising business model now includes the European Commission requesting information on its “Subscription for no Ads” options for Facebook and Instagram. The inquiry comes under its authority as Meta’s regulator under the Digital Services Act (DSA), which is primarily focused on how platforms deal with objectionable content but also establishes transparency rules for digital ad systems and bans targeted advertising based on some special categories of personal data. Meta instituted paid, ad-free versions of Facebook and Instagram in Europe last fall to comply with a range of EU laws, including the General Data Protection Regulation (GDPR), the DSA, and the Digital Markets Act (DMA). Meta’s targeted ad business model has faced years of legal challenges under the GDPR from EU privacy advocates, and eight consumer organizations have filed new complaints with national privacy authorities arguing that the “pay or consent” plans violate GDPR principles of fair processing, data minimization, and purpose limitation, and that 9.99 euros per month is unfair to low-income users.

Context – Fights over “behavioral” advertising are highly ideological. Backers argue that efficient targeting helps small businesses and those with small budgets. Many opponents see effectiveness as a sign that unwary users are manipulated. One conundrum is that online users tell pollsters that they strongly support advertising “privacy”, but few will pay to avoid ads. GDPR challenges keep ending up in front of EU judges, and Meta’s subscription plan is based on a reading of court decisions that point to setting up paid services as a legally valid alternative to “free” ad-based options. At the same time, the Commission is now in the regulatory mix with its direct authority over Meta. Frustration with the Irish DPC and the GDPR One Stop Shop is a major reason the biggest platforms are regulated by the Commission under the DSA and DMA. Given the arguments around the price of Meta subscriptions, it will be interesting to see if the Commission steps in as old-school price regulators.

Promising Better, DeSantis Vetoes Bill Setting Strict Social Media Age Limit in Florida

Report from Politico

In Brief – Florida Governor Ron DeSantis vetoed legislation passed by the state legislature that would have set a strict 16-year-old age limit to have an account on a social media service in the state, promising that a “superior” bill would be enacted soon. The measure that overwhelmingly passed the State House and Senate did not follow the model of social media bills enacted by states like Utah, Texas, and Ohio, which each provided an option for parents to consent to their teens using social media services. Instead, it simply banned the services for those under age 16 and required the covered platforms to use a “reasonable age verification method” to ensure that new and existing users met the age standard. Governor DeSantis called for legislation to protect kids while also “supporting parents’ rights and maintaining the ability of adults to engage in anonymous speech.” Operating under a tight legislative schedule in the state’s 2024 legislative session, an amended version of the legislation is quickly advancing that allows parents to give consent for 14- and 15-year-olds to have social-media accounts, as well as doing away with the requirement that platforms adopt age-verification technology. Backers admitted that the revised bill was likely to be better positioned to withstand expected First Amendment court challenges.

Context – Data showing causality between teen mental health and social media use is thin. But efforts to cordon off parts of the internet from teens are only gathering steam. Congressional legislation has bipartisan backing and appears to be gaining steam although it may be running into new procedural challenges. US States under Republican leadership were quick off the mark, but California and New York are also engaged. As the backers of the Florida bill know, the First Amendment is proving a tough hurdle in US courts, including concerns with the seemingly selective nature of the platforms being implicated and judicial wariness with age verification. The design negligence class actions trying to circumvent Sec. 230 might still prove the most impactful efforts to change the social media platforms in the US.

Apple’s Huge EU Fine Sets the Stage as the DMA Comes Online

Report from the Wall Street Journal

In Brief – The European Commission (EC) has fined Apple over 1.8 billion euros for abusing its dominant position in the market for the distribution of music streaming apps to iPhone and iPad users through its App Store. The decision focused on Apple’s “anti-steering provisions” that prevented app developers from informing their users that there were cheaper ways to buy services. The case originated in 2019 with a complaint from Spotify. The eventual fine exceeded estimates, and Commissioner Margrethe Vestager noted that the penalty went far past what a traditional calculation would have arrived at, saying, “if you are a company who’s dominant, and you do something illegal, you will be punished.” Apple said that the Commission failed to “uncover any credible evidence of consumer harm” and it will appeal. The CEO of Epic Games, a notorious Apple critic, decried Apple’s “bitter griping.”

Context – Getting this decision out the door days just before the Digital Markets Acts (DMA) comes online is clearing the deck chairs and sending a message. The DMA is the big regulatory stick. It provides some specificity with 18 mandates but enforcement mechanisms are nebulous. The “gatekeepers” are charged with determining how they bring their covered platforms into compliance. Then a chorus of stakeholders critique and complain, with the Commission staff weighing in, trying to arrange changes, and potentially fining the giants. Key historical context includes the EU trying to avoid the decade-long pace of the Google antitrust cases and avoiding the anger of Big Tech critics who criticized the beloved GDPR for not quickly hitting tech giants with mega-fines. So, the DMA basically dispenses with the initial phase of Big Tech antitrust cases, creating a permanent “remedies phase”. But they won’t likely be fast or clear. Apple’s complex DMA plan is eliciting howls from giant app developers who just want far lower fees. Google’s plans to change search results pages are dividing potential winners and losers. Privacy advocates strongly oppose Meta offering ad-free paid subscriptions as part of its compliance plan.

Germany Believes the DMA Needs a Supervisory Fee Like the DSA

Report from Reuters

In Brief – Germany is proposing that a funding mechanism be created to provide the European Commission with the resources needed to engage in the ongoing enforcement activities related to Digital Markets Act (DMA), which is set to regulate the 22 largest platforms of six Big Tech companies – Amazon, Apple, ByteDance, Google, Meta, and Microsoft. The law directs the companies to bring their covered platforms into compliance and the European Commission is assigned the task of determining the adequacy of the plans. A team of Commission officials from across several bureaus are said to be engaged. The German Government is proposing the creation of a DMA supervisory fee modeled after the one already in place to fund the Commission’s compliance activities under the Digital Services Act (DSA). The DSA requires the Very Large Online Platforms (VLOPs) regulated by the Commission to pay 0.05% of their annual worldwide net income to fund compliance.

Context – Both the DMA and the DSA create ongoing regulatory regimes to govern digital platform businesses. With both, regulating the largest platforms is assigned to the European Commission, avoiding the GDPR’s One Stop Shop model. Leave it to the Germans to speak plainly. It was always odd that the DSA had a regulatory funding mechanism while the DMA did not, as if overseeing how large platforms deal with objectionable material is a meaningfully more arduous task than determining if mega-giants comply with non-discrimination and fair competition mandates on their complicated platforms. Not that the DSA fee has been without controversy. Meta has challenged the DSA funding mechanism because it is based on company profits, and a number of the DSA VLOPs, including Amazon and X, show minimal if any profits. So, they barely contribute, or not at all. The DMA gatekeepers are a more profitable lot, although Amazon is there again. Also, the pool of gatekeepers might be growing, as Booking and X have reportedly notified the Commission that they may have hit the DMA’s size thresholds.

Australian Media Companies Concerned Meta Will Drop News Payments

Report from The Australian Financial Review

In Brief – As Australian news media leaders look toward negotiating a second round of agreements with Google and Meta over payments under the once-novel Australian News Media Bargaining Code, there is increasing concern that Meta might walk away from the regime that currently has them paying $70 million AUD to the country’s media companies. Although both Google and Meta (then called Facebook) threatened to block news-related services during the tense legislative negotiations in 2021, and Facebook did block news for a few days, the measure was eventually enacted, and both firms negotiated enough media payments deals to avoid the arbitration process. In aggregate, those confidential payment agreements amount to $200 million AUD, with Meta carrying $70 million. They are set to be renegotiated in 2024, but despite outreach from the media companies, Meta is reportedly not engaging in a meaningful way, and recently announced that they are ending the Facebook News service in the country. There are growing concerns that the company will choose to follow their playbook from Canada, where Meta blocked news content on their platforms after the country enacted similar legislation. Another possible change is to push TikTok into the regime. Although the law was enacted under the prior government, the Albanese Government has said that they are committed to supporting the news media sector.

Context – The Australian media companies should be concerned that Meta will drop news from their platforms. Facebook’s move in 2021 did not go well technically. Their tools blocked more than news. But they appear to have improved the process in Canada. News media company content has been blocked for months and it does not appear to have harmed their usage. They now consistently take the position that they will not pay when third parties, including media companies, post the content. They will only pay fees when they do the posting. They argue that the media companies undervalue Meta’s distribution platforms and overvalue their content. In Canada, Google eventually agreed to pay $100 million CAD rather than excise media content from search results. If TikTok is brought into the Australian regime it will be a first.

DMA Compliance Team Looking at Apple Plan to Ax Progressive Web Apps

Report from the Financial Times

In Brief – The European Commission has begun preliminary work that could lead to a formal investigation of Apple’s decision to end the use of Progressive Web Apps (PWAs) as part of their massive Digital Markets Act (DMA) compliance plan. PWAs allow companies to develop applications accessible as webpages, featuring an icon on a mobile user’s home screen, thus bypassing traditional app stores. Apple has allowed some PWAs in the past, but they are disabling them as part of their DMA changes claiming that the unrelated DMA requirement to allow alternative web browsers can result in privacy and security risks from malicious PWAs operating over third-party browsers. They said that building the technical capabilities to deal with PWAs over multiple browsers is too complex an undertaking at this stage. The company said that they regretted any negative impact on PWA developers and “a small number of users”, and that EU users would still be able to access websites directly from their Home Screen through a bookmark “with minimal impact to their functionality”. Open Web Advocacy, a not-for-profit advocacy group, has been engineering opposition to Apple’s policy claiming that its true intent is to undermine a potentially popular alternative to App Store downloads that bring Apple significant fees.

Context – Among the DMA’s 18 mandates are non-discrimination and interoperability requirements forcing Apple to open its “walled garden”. Apple has never been shy about how they control the ecosystem, telling users in clear terms that they design the system to promote privacy, security, and controlled user experiences. The headline DMA issue for Apple has been allowing alternative app stores and “sideloading”. Apple claims their DMA plan meets that demand, but they include new fees and safety standards, and will vet apps taking advantage of the new openness. Apple’s critics, including many of the largest app developers, are denouncing the plan. Apple’s plan will be a high-profile test of the nebulous DMA enforcement processes. With PWAs, we’ll be watching if Commission staff will tell Apple technicians that their security concerns are off base.

KCC Tells Twitch “Don’t Let the Door Hit You on the Way Out”

Report from Yonhap News Agency

In Brief – Twitch, a popular live video streaming service owned by Amazon that is widely used by gamers, has been fined 435 million won ($327,067) by the Korean Communications Commission (KCC) for changes the service said it made to deal with increased bandwidth costs the company attributed to high “network usage” payments mandated by South Korean law. The country has a unique telecom payments regime requiring online services providers to pay local network companies based on the bandwidth that their customers use on the online services. As those costs rose, Twitch reduced video quality from 1080p to 720p in 2022 and terminated its Video on Demand (VOD) offering in early 2023. In December, the company announced that it was leaving the market entirely due to the fees. As the service prepares to shut down, the regulator imposed fines for ending the VOD service, reducing video streaming quality without proper justification, and failing to implement a system to block the distribution of illegal content. The KCC also ordered Twitch to prepare various user protection measures, including refunds, to accompany the ending of its operations in Korea.

Context – Twitch executive Dan Clancy said that operating in South Korea was “prohibitively expensive” with network usage fees 10 times greater than in other countries, and that the company saw “no pathway forward for our business to run more sustainably”. Nevertheless, the decision to exit South Korea, a major video game and competitive “esports” market, was a surprise to many. Digital giants have rarely walked away from a meaningful market due to costs imposed by legislation or regulators. Amazon may be more willing than most. They recently abandoned their offer to buy robot vacuum company iRobot rather than make marketplace changes to appease EU officials. The highest profile recent example is undoubtedly Meta’s willingness to stop the circulation of news on Facebook and Instagram when a government mandates payments to news media companies, as they’ve done in Canada and are threatening elsewhere.

Meta Sets Up Disinformation Office to Protect This Year’s EU Elections

Report from Reuters

In Brief – Meta has announced that it is ramping up its effort to address disinformation and other risks related to the upcoming European Parliament elections, including setting up an EU Elections Operations Center. The company’s efforts are guided by the Digital Services Act (DSA) and commitments under the EU Code of Practice on Disinformation. Combatting misinformation will include banning ads that contain “debunked content” as well as those that discourage people from voting or question the legitimacy of the elections, priorities that align with the EU law on political advertising. Meta currently works with 26 fact-checking organizations across the EU and will add three new partners. Many see election security risks increasing with the recent growth of AI services available to the public and Meta said that it plans to reduce the ranking of fake or manipulated audio, videos or photos in social media feeds so fewer people see them. The company’s own AI services label the photorealistic images they create, and Meta working in a coalition with 19 other tech companies, including OpenAI, Microsoft, Adobe, TikTok, and X, to combat deceptive AI-generated content from interfering with elections globally.

Context – The DSA went into effect in late August 2023 for the official Very Large Online Platforms (VLOPs). Currently numbering 23, they are regulated centrally by the European Commission with Thierry Breton serving as lead regulatory stick wielder. Within days of the brutal Hamas attack on Israel and the corresponding Israeli military response, he publicly accused X, Meta, and TikTok of falling short of their duties under new law to control illegal content and disinformation, raising legitimate concerns that the DSA was already a tool to censor controversial views. He has since opened a formal investigation of X for their content moderation practices. Breton’s public letter to Meta CEO Mark Zuckerberg in October also included a lengthy exposition on Meta’s responsibilities to deal with disinformation and so-called deep fakes in the context of elections. Fortunately, nobody questions the objectivity of fact-checkers.

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