News insights

Ninth Circuit Drastically Expands State Jurisdiction Over Online Companies

Report from Reuters

In Brief – The Ninth US Circuit Court of Appeals has ruled that online commerce platform Shopify, based in Canada, could face a class action lawsuit in California for allegedly violating state privacy laws. An en banc panel overturned an earlier ruling that said the digital company could not be sued in the state because it did not specifically target its services to California-based online retailers. The consumer lawsuit claims that Shopify violated state law when its payments service used by online retailers downloaded tracking cookies to the phones of buyers, including those in California, and the data was later used by Shopify to bolster online advertising. The earlier courts had ruled that online retailers who made sales to state residents may be subject to state law, but Shopify was not because its payment service was offered online generally without targeting California shoppers. The en banc panel ruled 10-1 in the other direction, determining that Shopify “expressly aimed” its conduct toward Californians by “knowingly installing tracking software onto unsuspecting Californians’ phones so that it could later sell the data it obtained”. A spokesman for Shopify, which is based in Canada and operates from Delaware and New York as well, said the decision “attacks the basics of how the internet works,” and Circuit Judge Consuelo Callahan, the lone dissenter, criticizing the majority’s new “traveling cookie rule” because it “impermissibly manufactures jurisdiction wherever the plaintiff goes.”

Context – Expanding state “jurisdiction” over digital platforms selling third-party business services would likely be immensely disruptive. This case highlights the current difference in the standard for “jurisdiction” in state law liability cases between companies that sell physical products online that are then delivered into a state, which the Ninth Circuit has held does create jurisdiction for the company in the state, and the standard for third-party services that are offered on the internet, which has heretofore not established jurisdiction for a service provider if services are offered online without targeting the state. It is well understood that requiring legal and regulatory compliance in more places benefits larger businesses over smaller ones.

Google Shelves Privacy Sandbox Plan to End Third-Party Tracking Cookies

Report from The Verge

In Brief – After years of effort to end the use of third-party cookies for tracking and targeted advertising in its Chrome browser, Google is shelving the plan and maintaining its current treatment of the tracking technology. The announcement comes more than five years after Google first said they intended to replace the key ad targeting tech with other tools they claimed would better address user privacy interests while still supporting effective advertising, a move widely seen as a response to Apple’s aggressive privacy critiques of Google and other ad-financed digital services. However, right from the start, digital advertising industry competitors argued that Google would use the changes to undermine competition. And regulators took note. Google repeatedly promised to work with industry stakeholders and reached a novel agreement with the UK’s Competition and Markets Authority (CMA) for the agency to serve as a lead regulator certifying that the new ad targeting tools would not unfairly benefit Google. But the UK’s data privacy regulator later joined the review process and criticized the Google plan for falling short on user privacy. With the ad industry and privacy industry firmly opposed, the company is walking away.

Context – While most privacy advocates fervently hate effective digital ads, consumers are not of the same mind. Apple’s policy requiring apps to get up-front approval from users for ad tracking shows that most will reject tracking when it carries no cost, but most users prefer free online services funded by effective, meaning targeted, ads, rather than paying. Despite pursuing a policy like Apple’s, Google quickly ran into problems because their AdTech business dwarfs Apple’s, and Chrome is the top browser. Both are now tied up in Google antitrust losses to the US Department of Justice. Ironically, Apple’s ad-tracking “privacy” policy is itself running into antitrust problems in France, Germany, Italy and Poland. Meta, a chief foil of Apple due to its reliance on ad revenues, has had its targeted ad business model rejected by EU regulators who argue that the DMA requires free versions of their top platforms that only use less-targeted, less effective, ads.

Another Call for the EU to Regulate Google Search – Spam Filter Edition

Report from Reuters

In Brief – ActMeraki, a German media company, has complained to EU antitrust regulators that a Google anti-spam policy that penalizes websites that sell part of their websites to other companies to improve the search results for the third-party content is an anticompetitive abuse of their dominant search service. Major European publisher and media trade groups are also calling for regulatory action against Google’s “site reputation abuse policy”. The search giant claims that their policy targets a practice dubbed “parasite SEO” in search optimization circles where an established publisher website sells to third parties the ability to independently publish their own content on a branch of the publisher’s main site so that the third-party page does better in Google’s search algorithm by riding on the host site’s established search ranking. A Google spokesperson defended the anti-spam policy saying, “We’ve heard very clearly from users that site reputation abuse – commonly referred to as ‘parasite SEO’ – leads to a bad search experience for users, and this policy update helps to crack down on this behavior.” ActMeraki says Google “continues to unilaterally set the rules of doing business online in its own favor, preferencing its own commercial offerings and depriving competing service providers of any visibility.”

Context – The “fairness” of Google search results has been a morass plaguing the Internet ecosystem for more than 20 years. Every algorithm change benefits some websites while others feel aggrieved. The European Commission’s Digital Markets Act (DMA) regulators spent a year reviewing Google’s plans to change search to mollify specialized “vertical search” services such as for flights, hotels, and local services, hearing complaints from all sides in stakeholder meetings, as every change means some sites fall as others rise. Google’s plan was eventually rejected. Talks will continue. And throughout, Google argues that they make changes to the complex search black box to benefit users. The EU regulators appear set to get into the mix and resolve disputes over how Google’s search service should operate. Search as a regulated utility.

State Department Closes Its International Anti-Disinformation Office

Report from the Washington Post

In Brief – The State Department is closing an office designed to counter foreign online disinformation that was plagued by conservative criticism that it was part of US Government efforts to block conservative viewpoints online. The Counter Foreign Information Manipulation and Interference office, known as R/FIMI, was founded from the remnants of the Global Engagement Center (GEC), a larger office on the State Department that was established in 2011 to counter online ISIS radicalization and saw its remit expanded in 2016 amidst charges of Russian efforts to impact the 2016 elections. It became increasingly active in international anti-disinformation circles and supported organizations that many on the right believed were ideologically slanted. The GEC was closed late last year when congressional Republicans blocked its funding.

Context – Before R/FIMI there was the GEC, and before the GEC there was the DHS’s Disinformation Governance Board that flamed out when videos appeared of its proposed Executive Director singing progressive parody showtunes lampooning conservative viewpoints as disinformation. There are few digital policy issues that unite conservatives more solidly than the belief that online content moderation by Big Tech, at least before Elon Musk bought Twitter, had slanted rules and punished conservatives for challenging the ideological and cultural views of the largely-Bay Area corporate leaders. President Trump and several of his cabinet members claim to have been the target of anti-disinformation activists, and it is a top priority of the Administration’s tech regulators. The ideological conflict is infiltrating the AI ecosystem as well. The largest generative AI companies use “guardrails” that essentially police the tools by tailoring or blocking outputs on sensitive topics, with conservative commentators claiming that the guardrails skewed left, while other argue some are slanted rightward. Intentional online disinformation appears to have its AI branch as malign actors are reportedly using AI tools to create false content with the intent to manipulate how large language models operate and respond to user queries.

TikTok Announces Its Own Version of X-Style Community Notes

Report from TechCrunch

In Brief – TikTok has announced that it is testing a new feature dubbed “Footnotes” to allow users to add additional context and relevant information to videos to help others better understand certain content. It is clearly modeled on X’s “Community Notes” feature that is central to that platform’s efforts to address misinformation, making TikTok the second social media giant to adopt X’s methodology, following Meta in January. TikTok says that Footnotes, which will roll out in the United States first, will complement its current suite of measures designed to help people understand the reliability of content on the platform, such as labels and a fact-checking program that partners with “more than 20 IFCN-accredited fact-checking organizations”. The company says Footnotes will use a bridge-based ranking system like that used by X and Facebook that is designed to find agreement between people who usually have different opinions, with participants leaving commentary and voting on the helpfulness of a footnote. A Footnote will only become visible to the community once it’s rated as “helpful”.

Context – When Meta announced its major shift in content moderation in January, including abandoning “fact-checking” and adopting X-style Community Notes in the US, it was widely seen as an effort to appeal to the incoming Trump Administration on the President’s top digital issue, opposition to anti-conservative viewpoint discrimination, in hopes of bringing them onsides in dealing with foreign government penalties and regulation, especially in Europe. TikTok is even more reliant on the Trump Administration. Without the President’s backing of an eventual agreement to transfer control of the platform in some manner to owners who are not Chinese, their US platform will be shut down. But TikTok’s Footnotes plan does not go nearly as far as X’s or Meta’s. Likely, this is another reflection of the fact that TikTok’s survival hinges just as much on the Chinese Government, and they are not moved by arguments for free speech online. Also, China is wooing the Europeans in response to US tariffs, and the European Commission is not a fan of X’s Community Notes model.

Appeals Court Demands More Scrutiny of Social Media Law Challenge

Report from MediaPost

In Brief – A three-judge panel of US Fifth Circuit Court of Appeals has overturned a district court decision siding with NetChoice, a digital company trade group, that imposed a temporary injunction blocking a Mississippi law requiring “digital services” providers to verify all users’ ages and prohibit minors from creating social media accounts without parental permission. The panel ruled that Judge Halil Ozerden failed to appropriately carry out the level of review called for by the US Supreme Court in its Moody v NetChoice decision related to “facial challenges” of digital platform regulations. The panel said that the judge needed to determine all the platforms and services governed by the law and assess how many of the law’s applications violate the First Amendment, how many applications are legitimate, and grant the injunction if the law’s unconstitutional applications “substantially outweigh” its constitutional ones. In this case, they said that Ozerden needed to go back and consider “whether the Act applies to [digital service providers] like Uber, Google Maps, DraftKings, Microsoft Teams, Reddit, Pinterest, or X.”

Context – Twice in recent weeks, federal courts have sided with NetChoice and granted permanent injunctions blocking state laws in Ohio and Arkansas regulating social media platforms. The trend is unquestionably running against states attempting to shield teens from ills on social media. But the Fifth Circuit panel ruling is not the first time that judges have used the somewhat circular Moody decision to avoid speaking clearly about the First Amendment and social media. In Moody, a majority of the High Court said clearly that the operations of traditional social media platforms are clearly expressive activity protected by First Amendment, but much of the decision focused on the proper consideration of “facial challenges” to such laws at the injunction stage. Although no one, including at the High Court, has yet explained how applying laws intended to regulate social media to electronic payments platforms or ridesharing platforms might be First Amendment-friendly, nor whether that would change the implications for unconstitutional impacts on social media platforms.

EU Commission Announces DMA Penalties for Apple and Meta

Report from Politico

In Brief – After more than a year of investigations, the European Commission has announced that it has fined Apple €500 million and Meta €200 million for failing to comply with EU’s Digital Markets Act (DMA). Apple, Google, and Meta were the first “gatekeeper” companies investigated under the DMA. The regulator objected to Apple’s App Store rules and fees, arguing they do not allow app developers to freely steer consumers to alternative buying channels outside the Apple ecosystem. The commission argues that Meta’s ad-free subscription plans for Facebook and Instagram, dubbed “Pay or Consent” by critics, do not offer users adequate choice, demanding a free version with less-targeted ads. Although the DMA authorizes fines of up to 10% of a company’s global annual sales, meaning over €34 billion for Apple and €14 billion for Meta, the announced fines met the expectation that penalties would be relatively modest, and the Commission would focus on compliance. Regulators are currently reviewing Meta’s latest plan to offer free versions of their top platforms with less-targeted ads and has given Apple 60 days to meet its demands related to app rules and fees. Apple and Meta both publicly objected to the Commission decisions arguing that their business models were unfairly penalized, and users will be harmed. Both are expected to appeal.

Context – A trade war probably won’t be caused by EU tech regulation, but Big Tech’s treatment is intertwined with the current trade standoff. President Trump has often called EU tech regulation corporate taxes, the White House issued a Presidential Memorandum authorizing tariff retaliation for all manner of foreign digital business levies, and Meta specifically called this EU decision a “tariff”. But EU officials have repeatedly said they would not walk back their digital rules, and they couldn’t on multiple legal and political levels. Instead, they are trying to thread the needle with moderate fines and meaningful compliance demands. The EU’s Google Search decision is still months away. And the Trump Administration is in federal court trying to break up Google and Meta at the same time. Finally, Europe might have more capacity to give ground on digital company taxes.

Australian Minister Planned YouTube Age Limit Exemption Before Consultation

Report from Bloomberg

In Brief – Australia’s Communications Minister told the global head of Google’s YouTube service that it would be exempt from the country’s strict social-media age limit of 16 years old just days after the legislation was passed and well-before the government’s official consultation process on compliance and special carveouts. The pledge was revealed in documents obtained under Australian freedom-of-information laws. YouTube’s exclusion from Australia’s social media age rules has been criticized by other digital platforms with large numbers of teen users including Meta, TikTok, and Snap. Australia’s social media age limit, considered among the strictest in the world because it allows no form of parental exemption, is due to take effect the end of the year. YouTube, one of the digital platforms most widely used by teens around the world, including in Australia, was exempted from the law based on the government’s view that its primary purpose for younger users was addressing health and education needs, which was an exemption included in the law.

Context – Back in March, it was widely reported that Australia was harshly criticized by trade groups representing US digital giants in public comments filed with the US Trade Representative regarding unfair foreign trade practices. That was not a surprise. Former Prime Minister Scott Morrison was often harshly critical of US tech giants. One of his highest profile tech initiatives was forcing Google and Facebook to start paying millions to big Aussie media companies. Current PM Anthony Albanese has also been willing to go after US tech companies. Before his government pushed through its social media age limit, Meta announced that it planned to stop paying Australian media payments when users posted links on their platforms. Like in Canada, Meta would likely block media posts altogether. Google has not threatened to stop and is paying in other locales where Meta won’t. The Albanese Government responded by proposing a new tax on social media companies that won’t pay up, meaning Meta. Crazy coincidence that YouTube is treated better than Instagram under the age limit law.

EU Commission Continues Ramping Up Staffing for DSA Enforcement

Report from EuroNews

In Brief – The European Commission is hoping to hire 60 additional staff members for its Digital Services Act (DSA) enforcement unit, including legal and policy officers, data scientists, and researchers. In its latest report on DSA enforcement costs, the Commission said that it hired 51 staff in 2024, bringing DSA staff to 127. The DSA regulates how digital platforms address objectionable material, imposing the strictest duties on the largest platforms, which are designated as Very Large Online Platforms (VLOPs). DSA enforcement for the VLOPs, of which there are now 25, is led by the Commission. Oversight of the others is led by the member state Digital Services Coordinator where a platform is based. The Commission is currently engaged in DSA investigations of X, Meta’s Facebook and Instagram, TikTok, AliExpress and Temu.

Context – It costs money to regulate. So, when the EU enacted legislation creating permanent regulatory regimes for digital platforms in 2022, they established an ongoing regulatory funding mechanism for the DSA, dubbed it a supervisory fee and modeled it on fee regimes that fund bank regulators. The Commission calculates the fee based on each VLOP’s users and profits. Meta, Google and TikTok have each filed lawsuits in the EU General Court challenging the funding mechanism, with the US-based platforms arguing that basing the contribution on profits imposes disproportionate burdens on a handful of VLOPs while allowing others to avoid paying into the enforcement kitty despite bringing significant regulatory burdens. For example, Amazon, Snap, Pinterest, and X were not charged any fees in 2023 due to reporting no net profits, while Meta and Google reportedly paid almost three-quarters of the total 2023 fees. The EU also enacted the Digital Markets Act (DMA) in 2022. It imposes competition policy regulation on the seven largest digital “gatekeeper” platforms. Unlike the DSA, the DMA has no regulatory funding mechanism. DMA investigations of Apple, Meta, and Google have been underway for more than a year. The German Government has proposed creating a permanent DMA supervisory fee modeled after the DSA version.

Another Federal Judge Blocks a State Social Media Law – Ohio Edition

Report from Bloomberg

In Brief – Federal Judge Algenon Marbley has issued a permanent injunction blocking Ohio from enforcing its law requiring teens under 16 to get parental consent to use social media apps. Marbley deemed the state’s Parental Notification by Social Media Operators Act, which targets social media sites like YouTube, TikTok, and Instagram, and would require those digital platforms to verify whether users are 16 or older and get parental consent for younger teens to gain access, to violate the First Amendment. He ruled that the law had to satisfy strict scrutiny because it was a content-based speech restriction that favored some forms of engagement with certain topics at the exclusion of others. He also noted that while protecting children’s well-being is a laudable goal, “Ohio’s imperative is to achieve this goal through legislation that is constitutional,” and cited Supreme Court precedent that First Amendment protections “are no less applicable when government seeks to control the flow of information to minors”. Finally, the judge reiterated his view that nearly all the state’s evidence that social media was harmful to children was “based on correlation, not evidence of causation”.

Context – This is the second time in recent weeks that NetChoice, a digital company trade group that has led the legal challenges against state internet regulation laws, has won a permanent injunction blocking a state social media age limit law, prevailing against Arkansas’s effort to require teens under age 18 to get parental consent to create accounts. “Protecting” teenagers from online harms is a global phenomenon. The Supreme Court heard oral arguments in January on a Texas-law requiring age checks for porn sites, and their ruling will help clarify some aspects of age-based online regulations in the US. But online age-gating elsewhere is not constrained by the First Amendment. In Europe, it’s a major feature of the UK Online Safety Act, the EU Digital Services Act, and France is requiring age checks to view online porn. Many countries in Asia are actively considering online age limits, and Australia has set a firm minimum age of 16 for social media.

Minnesota Democrats Explore a State Tax on Social Media Companies

Report from CBS News

In Brief – Leading Democrats in the Minnesota state legislature are proposing to tax large social media platforms as part of an effort to close a state budget deficit estimated to reach $6 billion. Legislation approved by the Minnesota House and Senate tax committees would require social media platforms with more than 1 million users in the state to pay $165,000 per month plus $0.50 per person that uses their sites, while imposing lower tax rates on smaller digital platforms and fully exempting those with less than 100,000 users. The state’s revenue department predicts 15 social media companies would be impacted and the surcharge would bring in about $340 million in revenue over the next four years. Opponents of the tax proposal argue that it clearly violates the federal Permanent Internet Tax Freedom Act (PITFA) that prohibits any federal or state tax that discriminates against an internet-enabled business or service.

Context – Several US states have explored taxes that replicate the “digital services taxes” (DSTs) enacted by countries like France and India targeting large online platforms, including Google, Meta, and Amazon. Those foreign DSTs were strongly opposed by the first Trump Administration and are again a major point of friction. Maryland was the first US state mover, taxing large online advertising businesses in 2021. On its face, Maryland’s law appears to violate PITFA because offline advertising is not taxed the same way. Business groups quickly challenged the law and federal and state judges have both found the law in violation of PITFA, but a morass of jurisdictional challenges have moved the case to new venues, and the complaint is currently in the Maryland Tax Court, a state administrative body that hears tax assessment challenges. In recent years, states exploring various digital services taxes, often described as taxes on digital advertising, data processing, or more recently social media, include New York, California, Washington, and Rhode Island. Backers are calling for a more coordinated state campaign reminiscent of the decades-long effort to collect state sales taxes on cross-border internet-enabled retail.

Japanese FTC Orders Google to Stop Preferencing Its Android Apps

Report from Nikkei Asia

In Brief – The Japan Fair Trade Commission, the country’s antitrust regulator, has ordered Google to stop requiring mobile phone manufacturers to give its top apps, such as Google Search and the Chrome browser, preferential home screen placement on their phones as part of the Android operating license, as well as to halt search revenue sharing agreements in exchange for not pre-loading competing search apps. The regulator found that Google had engaged in these practices with at least six Android phone manufacturers since 2020 which accounted for around 80% of Android devices sold in Japan. The JFTC determined that these two types of Google app placement contracts have prevented competing app developers from engaging with device manufacturers. The action marks the first JFTC cease and desist order against a major US tech company. Google must appoint an independent third party that will report to the commission on its compliance status for five years.

Context – Japan has been more restrained in digital regulation than the EU or the UK, possibly because two of the five digital giants in Japan are domestic companies. However, they are beginning to pursue competition policy through digital regulation rather than traditional antitrust enforcement and have chosen mobile operating systems as the first market. That means only Google and Apple, no Japan-based digital giant. But regulating Android practices is long underway in other markets. Google’s complex set of contractual and licensing deals related to Android-branded phones (think Green Robot), which are at issue in this case, were the subject of one of Google’s first EU antitrust setbacks. South Korea and India, two jurisdictions with especially huge Android market shares, have also taken acted against similar Google practices in recent years. When asked about the JFTC order in the context of upcoming tariff talks with the US Trump Administration, JFTC Director General Masaru Ogo said, “We don’t think this will be a big problem. It’s not like Japan is the only country that’s targeted certain US companies.”

Google Loses Another Federal Antitrust Case – This Time AdTech Services

Report from the Wall Street Journal

In Brief – In the latest in a string of major antitrust setbacks, US District Judge Leonie Brinkema largely sided with the Department of Justice (DoJ) and ruled that Google violated federal monopoly law in the operation of their adtech businesses that serve display advertising to major publisher websites. In her opinion, the judge wrote, “this exclusionary conduct substantially harmed Google’s publisher customers, the competitive process, and, ultimately, consumers of information on the open web.” Brinkema did reject the DoJ claim that Google unlawfully monopolized the adtech services market for advertisers to place their display ads across the open web. Google’s vice-president for regulatory affairs backed the judge’s finding on advertiser tools, saying, “We won half of this case, and we will appeal the other half.” Like in its other recent antitrust court setbacks involving its massive general search service and the operation of its Android Play Store, Google was harshly criticized for internal document policies that led to its employees and executives frequently deleting internal chat records and mislabeling communications under attorney-client privilege, with Brinkema warning Google that she believed the company had probably destroyed evidence and that it could be a “very serious” problem for its credibility in the trial.

Context – Like in the Meta antitrust trial that will hinge on defining social media markets, determining relevant markets and the share and dominance of the alleged monopolist proved key in this case. eMarketer says Google tops the overall US digital ads space but with just a 23.9% share, while Meta holds 20.9% and Amazon 17.3 percent. Prosecutors instead successfully focused on various online advertising subsectors, including arguing that almost 90 percent of online publishers use Google to source their websites’ display ads. Like in the federal antitrust case challenging Google’s search dominance, where District Judge Amit Mehta will weigh DoJ’s request to break the Chrome browser out of Google, Brinkema will now preside over a trial to determine remedies, which could result in a restructuring of its immense ad business as well.

Digital Trade Group Sues to Block California Online Marketplace Law

Report from Courthouse News Service

In Brief – NetChoice, an increasingly prominent tech industry trade group representing 40 digital companies, has filed a federal lawsuit in California to block SB 1144, a 2024 state law imposing new duties on online platforms intended to reduce the sale of stolen goods. The trade group’s complaint argues that SB 1144 violates the Constitution’s Supremacy Clause by contradicting the Federal INFORM Consumers Act, which Congress enacted in late 2022 to establish a national framework for online marketplaces to support efforts to combat stolen goods, infringes the First Amendment rights of digital platforms as outlined by the US Supreme Court in Moody v NetChoice last year, and discriminates against online sales by imposing duties not applied to offline commerce. The new California law forces online companies to track transactions that occur off their platform, such as in-person cash exchanges initiated via online listings, collect user information they don’t normally collect, and imposes allegedly unlawful monitoring and censorship requirements. Finally, SB 1144 expands enforcement beyond the State Attorney General, allowing any district or city attorney in California to file civil suits with penalties of up to $10,000 per violation.

Context – One of the digital policy battles that is nearly as old as the Internet involves traditional retailers accusing Internet marketplaces of facilitating the sale of stolen goods. Following two decades of lobbying for federal and state laws to make online marketplaces liable for the actions of independent sellers, a handful of states, including California, enacted legislation in 2021 and 2022 requiring online marketplaces to collect information from “high-volume third-party sellers”. Congress then enacted its bipartisan INFORM bill at the end of 2022 to set a national standard that was supported by both online companies and traditional retailers, many of whom were increasingly operating marketplaces as well. NetChoice’s challenge to the California law overturning that federal consensus on marketplace seller information reporting adds to their legal challenges of two California laws regulating how social media platforms serve teen users.

Google Settles Android Auto Dispute with German Antitrust Regulator

Report from Reuters

In Brief – The German Federal Cartel Office (FCO) has announced the end of its antitrust probe of Google’s automotive services and maps platform with the company agreeing to changes addressing the regulator’s concerns. “I am delighted that we have been able to reach an agreement,” said FCO President Andreas Mundt. “Google’s commitments have the potential to bring about far-reaching changes in the market.” Under the settlement, automakers will be able to include non-Google services in in-vehicle infotainment systems that use Google Automotive Services, which consist of Google Maps, Google Play and Google Assistant. The company has also agreed to allow its map services to be combined in part or in whole into navigation services offered by other providers, such as HERE, Mapbox or TomTom. Google is expected to apply the terms of the agreement across the European Economic Area.

Context – The FCO investigation of Google’s auto services was undertaken under Section 19(a) of the German Competition Act. That law, enacted in 2021, allows the FCO to regulate the largest digital giants rather than rely on traditional antitrust investigations and enforcement actions. Following the FCO designation of Google as a digital company “of paramount significance on competition across markets”, the antitrust regulator was able to address company conduct it believed was anticompetitive, opening an investigation of its auto services in 2022. The German law was a harbinger of the EU Digital Markets Act. Some German officials have questioned the DMA for being too limited in the conduct it can address. While there are seven DMA “gatekeepers”, only 24 of their designated “core platform services” are covered by the law. Germany’s Section 19(a) authority allows the FCO to regulate any service of the five designated digital giants — Amazon, Apple, Google, Meta and Microsoft. For example, the FCO is challenging Apple’s in-app ad tracking rules. Allegations that Microsoft uses Office 365 to benefit products like Teams and its cloud services are not in scope for the DMA, but they are for the FCO.

European Commission Rolls Out New “AI Continent Action Plan”

Report from CNBC

In Brief – The European Commission has announced a set of actions it dubbed “The AI Continent Action Plan” to boost the EU’s artificial intelligence industry to compete more aggressively with the US and China in developing the groundbreaking technology. The effort appears to be a direct reaction to criticism from Europe’s technology firms and investors that the bloc’s regulatory and tax environment is too cumbersome and is slowing AI development. Included in the plan outlined by the Commission are a commitment to build a network of AI “gigafactories”, which are giant datacenters optimized to develop and train the most advanced AI models, as well as to create specialized labs to give startups better access to high-quality training data. In rolling out the plan, the Commission reiterated support for its landmark AI Act, saying the legal regime, “raises citizens’ trust in technology and provides investors and entrepreneurs with the legal certainty they need to scale up and deploy AI throughout Europe,” while also announcing that the action plan includes creating a new AI Act Service Desk to be “the central point of contact and hub for information and guidance” on the rules.

Context – Backers of the AI Act sincerely believe that guardrails benefit AI development by easing user uncertainty with AI-enabled service. The initial framework was a tiered, risk-based regulatory regime for applications using AI, not an effort to regulate the underlying AI technology itself. However, after the emergence of Chat-GPT, the EU Parliament moved beyond regulating specific AI applications and imposed rules on core “foundation models”. This shift was divisive among EU-based AI innovators. When the law went into force in 2024, the EU had planted the flag globally for AI regulation. That was not without risk. The US, UK, and Japan have each shifted their AI policies in a deregulatory way since last year. Some European leaders are joining in, with French President Macron calling for the EU to “resynchronize with the rest of the world” and Commissioner Henna Virkkunen saying that the Commission will be business-friendly in implementing its new rules.

Apple and Google Face Regulation Under Japan’s New Digital Regime

Report from the Japan Times

In Brief – The Japanese Fair Trade Commission has formally designated three companies as being subject to the new law regulating major information technology companies in the smartphone application market, the American mobile ecosystem giants Google and Apple, and iTunes K.K., an Apple subsidiary in based in Tokyo that manages iTunes for Apple in the market. The law regulates app stores, operating systems, browsers and search engines, and prohibits the two giants from blocking the entry of other companies into their app mobile market or giving preferential treatment to their own services. Google is subject to regulation in all four areas, while Apple will face restrictions in three areas excluding search engines. For iTunes, restrictions will apply to the app store it operates with Apple. Last December, the JFTC determined that the new law would apply to mobile companies with an average monthly user base of 40 million or more. The law goes fully into effect in December.

Context – Japan has pursued more moderate digital regulation than the EU and the UK. There are five digital giants in Japan – Amazon, Apple, Google, Rakuten and Yahoo Japan. Two are Japan-based. None of the original six digital “gatekeeper” companies regulated by the EU’s Digital Markets Act (DMA) is European. And it’s unlikely any UK-based companies will be designated as having “Strategic Market Status” under the Digital Markets Competition and Consumers Act (DMCCA). If Japan’s app store regulation reflects the country joining the European trend of regulating digital markets rather than sticking to traditional antitrust enforcement, it’s noteworthy that they have narrowly chosen a market with just two digital giants, both not Japanese. And they picked a digital market where the regulatory tide is well underway elsewhere. In the EU, the Commission has rejected both Google’s and Apple’s app store rules for not meeting the DMA’s rules on “steering”, meaning giving users easy access to low fee alternatives. In the US, federal judges are covering much the same ground in the federal antitrust cases filed by Epic. And both will soon be regulated under the DMCCA.

UK “Drip-Pricing” and Fake Review Rules Come Online

Report from The Verge

In Brief – The UK Competition and Markets Authority (CMA) has announced that rules to implement the consumer protection sections of the Digital Markets, Competition and Consumers Act (DMCCA) have come into force. The 2024 law, which notably authorizes the CMA to regulate the digital platform giants, also empowers the agency to enforce consumer protection laws directly. The DMCCA bans the posting and commissioning of fake reviews, and prohibits ‘drip pricing’, where shoppers are shown an initial price for a product, but more fees are added as they proceed with their purchase. The pricing rules apply to services like food delivery apps and ticket booking platforms, requiring that obligatory fees are clearly displayed at the start of the checkout process, although truly optional fees, such as for upgraded airline seats, are not affected. The review rules ban businesses from using or commissioning fake reviews and requires website providers to take “reasonable and proportionate steps” to prevent and remove them.

Context – Consumer reviews, widely used by nearly everyone online to gather valuable information on all manner of goods and services, have proven to be one of the top benefits of the commercial internet. At the same time, frauds and deceits, often powered by an international fake review industry, have been a chronic problem. Regulators and leading online companies are engaged. The DMCCA rules come online just months after FTC rules on fake reviews went into effect in the US. In addition, a collection of the leading review platforms has formed the Coalition for Trusted Reviews to further encourage and cooperate with government efforts. In keeping with the CMA’s recent focus on promoting a pro-growth business environment, Sarah Cardell, its chief executive, noted that the agency understands that businesses, especially small businesses, face compliance challenges and said, “We’re working hard to support them with that and keep burdens to a minimum – through accessible guidance and communications, as well as direct engagement – alongside listening and responding to feedback.”

Trial Finally Begins in Meta Antitrust Lawsuit Filed by Trump FTC in 2020

Report from the Washington Post

In Brief – The bench trial pitting the FTC against Meta before US District Judge James Boasberg is finally underway in a lawsuit initiated in 2020 by the first Trump Administration. The regulator’s antitrust complaint alleges that Meta’s acquisitions of Instagram in 2012 and WhatsApp in 2014 were used to illegally monopolize the social media market and that Meta should be forced to sell those platforms. Back in 2021, Judge Boasberg dismissed the original FTC complaint, but he gave the regulators an opportunity to improve their case and refile. They did, and the amended complaint has proceeded relentlessly since. However, Boasberg continues to express skepticism with the FTC’s case, noting in his decision to reject Meta’s motion for summary judgement that while the regulator met the “forgiving” standard to proceed to trial, “time and technological change pose serious challenges” to the FTC’s market definition.

Context – Defining markets is key in antitrust litigation. That is very much the case here. The FTC argues that Meta is the dominant “personal social networking” company whose top competitor is Snapchat. Their narrow platform market excludes social media giants like TikTok, YouTube, Reddit and LinkedIn. Meta has argued throughout that their business is as a digital advertising platform and that they compete with all those giant platforms for user attention and advertiser dollars. Meta’s continued transformation of Facebook and Instagram into platforms that operate more like TikTok, with its massive and disruptive growth, is the kind of change the judge was likely referring to. Whether the Trump Administration will accept the entreaties from Meta to settle the case short of a breakup will be a big milestone in judging how they will treat “Big Tech”. Meta has been among the most public in aligning with the new regime’s digital policies, especially on content moderation, but there is a very aggressive anti-Big Tech wing within the Trump Administration. A decision from Boasberg will likely take months and the Administration may believe their leverage in settlement talks will still grow for a while.

France Begins Requiring Age Verification for Online Pornography

Report from Politico

In Brief – France has begun implementing legislation enacted in 2024 that requires all websites displaying adult content to use technical age verification methods. The SREN law initially applies to pornography websites registered in France, such as Dorcel, along with those registered outside of the EU, like OnlyFans. As of June 7, the age verification rules will be extended to sites based in other EU countries, including the sector giants like Pornhub, YouPorn and Redtube, owned by the Aylo group and based in Cyprus. The regulation aims to address privacy concerns by requiring that porn sites offer multiple age verification options, including at least one using a “double-blind” system in which the adult site does not learn of the user’s identity and the age verification service provider does not know the site being accessed.

Context – “Protecting” teenagers from various online harms is a global phenomenon. Porn sites are a popular target, but so are social media platforms. As France begins age verification for adult sites, they are simultaneously working to implement legislation to impose age-based requirements on social media, including requiring parental approval for users under age 15. The EU’s Digital Services Act regulates how digital platforms address a wide range of objectionable online content, including harm to young people, and TikTok and Meta are both being investigated by the European Commission for failing to protect young users. Ofcom, the lead UK digital regulator, is implementing the Online Safety Act, including requiring that adult sites available in the UK use approved age verification technology as of this July. They are also requiring social media sites to “consistently enforce their age limits” and protect children from inappropriate content. Many countries in Asia are actively considering online age limits, and Australia has set a firm minimum age of 16 for social media. Finally, the US Supreme Court heard oral arguments in January on a Texas-law requiring age checks for online porn sites. Their decision will further inform US courts scrutinizing the flood of state laws regulating social media.

Trump “Reciprocal” Tariff Pause Leads EU to Reciprocate on Retaliation

Report from the Washington Post

In Brief – Following an announcement from US President Donald Trump that new “reciprocal” tariffs would be paused for 90 days for all countries other than China, the EU announced a similar delay in the 25% tariffs it had announced in response to the US steel and aluminum tariffs imposed in March. That set of US tariffs was expected to impact over $25 billion in EU exports and the EU retaliation list hit a collection of US exports including agriculture products, steel, tobacco, and yachts, valued around $23 billion. European Commission President Ursula von der Leyen had responded to the additional US tariff rounds, both against auto exports and then the 20% across-the-board duties announced on April 2, by emphasizing diplomacy over escalation, including delaying until the end of April additional retaliation besides the counterpunch to the steel and aluminum tariffs, and hoping negative public and market reaction in the US could lead Trump to step back. He did.

Context – A trade war between the US and EU probably won’t be caused by tech regulation, but Big Tech’s treatment in Europe is intertwined with the trade standoff. The EU runs a major surplus with the US in goods, while the US has a big, although smaller, surplus with Europe in services. Retaliation against those services exports, including digital services, is on the table if the trade conflict escalates. Top US officials also argue that EU “gatekeeper” regulation and digital taxation discriminates against American businesses. Penalties for Apple and Meta in the first DMA investigations are expected soon, but may be delayed while the tariff battle plays out more, and fines may be modest with a focus on conduct remedies to avoid tariff antagonism. But EU officials repeatedly say they will not walk back their digital rules, and they almost certainly won’t. The first big US target under the DSA is X, with lightning rod Elon Musk’s platform in line for a big fine and a rejection of its speech moderation policies, which could prove especially explosive with the Trump Administration and even European populist conservatives.

Utah Governor Cox Signs Bill Requiring App Stores to Confirm User Age

Report from Engadget

In Brief – Utah Governor Gov. Spencer Cox (R) has signed the App Store Accountability Act into law, making it the first state to require app stores to verify users’ ages and facilitate getting parental consent for minors to download apps to their devices. The law, which is scheduled to go into effect on May 7, requires companies that operate app stores to confirm the age of each person creating an app store account. Today, Apple and Google are dominant, but the number could grow as app store antitrust trust cases target the two giants, If a new app store account holder is determined to be 18 or younger, the account would also need to be linked to the account of a parent or guardian. App developers distributing age-restricted apps through the app store are required to confirm from the app store operator that the user requesting the download is above the necessary age, and if the user is under age 18, gain consent for the app download from the affiliated parent account. Meta has regularly argued that Apple and Google, playing central roles in the app ecosystem, are best positioned to manage age verification by confirming a user’s age one time at set-up and then simply telling app developers that a user is old enough for any single app download, as well as managing parental consent regimes. Meta, X and Snap applauded Governor Cox’s decision to sign the bill, while Apple and Google object to mandates that require them to collect and manage age-related data for all users.

Context – Governments worldwide, including Australia, the EU, UK, and a growing number of US states, are introducing measures that are intended to protect children and teens from so-called online harms, especially involving social media and pornography. They operationally require age verification. Singapore’s digital and media regulator recently announced that large app stores will need be take on system-level age verification measures in that country. The US Supreme Court heard oral arguments in January regarding the privacy and free speech implications of a Texas law imposing age verification duties on pornography websites, which is certain to impact the proliferation of online teen protection laws.

Google Offers Play Store In-App Payments Alternative in the UK

Report from TechCrunch

In Brief – Google has announced that it is offering app developers in the UK the ability to use other billing services for in-app payments in their Android apps besides Google’s own payments system. The company’s “user choice billing” program allows developers to add approved payments processor alternatives alongside Google’s service, and gives the app developer a 4% discount on Google’s fees when a payment is made through a non-Google alternative. The plan was designed in response to the many legal and regulatory challenges directed at Google (and Apple) for allegedly controlling in-app payments processing to extract large fees on purchases made on Android devices (and iPhones). The UK Competition and Markets Authority (CMA) began its antitrust investigation in 2021, and in 2023 Google proposed offering user choice billing to settle the probe. Although the CMA opened a consultation on Google’s proposal, the regulator eventually closed the matter and announced that it would instead address the app store rules and policies of Google and Apple, including in-app payments and fees, though the agency’s new regulatory authority under the Digital Markets, Competition and Consumers Act (DMCC). As the CMA continues developing its DMCC regulations for Google, the UK joins the US, EU, Japan, South Korea, India, and others in Google’s expanded payments program.

Context – Epic Games’ 2020 lawsuits against Apple and Google in US federal court kicked off a now nearly five-year global campaign by large app developers to regulate Apple and Google. While initial complaints focused on in-app payments, that was never the real point. It was always about fee levels. So, when Google and Apple eventually offered payments options, complaints continued. In the EU, the Commission has objected to both companies’ app store rules for not meeting the DMA’s rules on “steering”, meaning giving users easy enough access to lower fee alternatives. In the US, federal judges are covering much the same ground in the cases filed by Epic. Japan is regulating the two giants’ app stores. And now so is the UK.

EU’s FB Marketplace Antitrust Decision Proposed Breaking Out the Platform

Report from Bloomberg

In Brief – When the European Commission presented their antitrust decision to Meta in November finding that the company unfairly operated its Facebook Marketplace classifieds-type ecommerce service, the EU regulators pressed the company to create a separate version of its marketplace site outside the Facebook app. The commission’s then-confidential decision, now made public, shows that Meta was hit with a €798 million ($861 million) fine, told to offer its users a way to access rival services, and directed to not use all the non-public data it had collected from the ads placed on its social media sites by marketplace competitors to improve Facebook Marketplace’s own products. Meta has appealed the fine and is attempting to address the regulator’s concerns by allowing other classified ad platforms in Europe to place their listings on the Facebook Marketplace. While the potential remedies outlined in the decision are technically only suggestions from the EU regulators, they provide insights into how the antitrust authority thinks the alleged infringements could be ended.

Context – Meta launched Facebook Marketplace in 2016, quickly integrated it into its core platform, and grew it into one of the top classifieds ad platforms in many European markets. The commission claims that tying Marketplace to Facebook gave it an unfair advantage over competitors, and also that Facebook imposed unfair terms on those competing ecommerce businesses when they advertised on Facebook, often requiring them to share user data that was then used to benefit FB Marketplace. Competition regulators in the EU and the UK launched parallel investigations in 2021. Meta reached a settlement with the UK CMA in 2023. Meta has since been designated as “gatekeeper” under the EU’s Digital Markets Act and its Marketplace is a “core platform service”, meaning that the company must comply with the law’s 18 requirements on FB Marketplace without specific antitrust enforcement action. In the US, Meta faces regulatory pressure to break up the company as well, with the latest iteration of the Trump Administration’s FTC continuing the antitrust effort to break out Instagram and WhatsApp.

Arkansas Social Media Age Limit Fully Blocked by Federal Judge

Report from the Arkansas Advocate

In Brief – A federal judge has blocked Arkansas from enforcing its 2023 law that requires teenagers under age 18 to have parental consent to create accounts on social media platforms such as Facebook, Instagram, TikTok, and Snapchat. District Judge Timothy Brooks said in his order that Act 689 violates the First Amendment because it is a “content-based restriction on speech that is not narrowly tailored to serve a compelling government interest,” as well as the due process rights of the social media companies. Arkansas was one of the first states to enact an age limit for social media platforms and its law had the earliest effective data. NetChoice, a trade association of large digital platforms, has sued to block each of the state social media regulation and age-limit laws, including Arkansas’ measure, consistently winning temporary injunctions, including from Judge Brooks in August of 2023. NetChoice applauded the latest decision by Brooks, their first permanent injunction. Although he noted that the state has a compelling interest to protect minors from harms caused by “unfettered social media access”, the judge criticized the law as overly broad, by erecting barriers to entire social media platforms, unconstitutionally vague, for failing to adequately define which entities are subject to its requirements, and engaging in content-based regulation by exempting specific platforms including YouTube and LinkedIn.

Context – “Protecting” teenagers from various online harms is a global phenomenon. In the US, federal judges have identified First Amendment problems with state laws and raised privacy concerns with online age verification regimes. The US Supreme Court heard oral arguments in January on a Texas-law requiring age checks for porn sites. Age-gating online activity outside the US is not constrained by the First Amendment. In Europe, it is a major feature of the UK Online Safety Act, the EU Digital Services Act, and France is requiring age checks for online porn. Many countries in Asia are actively considering online age limits, and Australia has set a firm minimum age of 16 for social media.

President Trump Extends TikTok Spin-Off Negotiating Period into June

Report from the New York Times

In Brief – President Trump has announced that he would again extend the deadline for ByteDance to divest ownership of TikTok’s US operations by 75 days to provide time finalize a deal that the President said would “SAVE TIKTOK”. Sources involved in the deal, which was reportedly nearly final with an expected sign off by the President just prior the April 5 deadline created by his first 75-day reprieve, would have kicked off a new 120-day period to finish the deal’s financing and paperwork. However, negotiations came to a stop when the Chinese Government raised objections as part of their response to the latest round of tariffs initiated by President Trump. The TikTok spinoff deal reportedly would have several venture capital firms, private equity funds, and tech giants invest in a company that would control TikTok’s operations. ByteDance would have retained a 20% stake in the spinoff company, the maximum amount allowed by the law enacted last year, and the new TikTok would not be permitted to coordinate with ByteDance on the app’s algorithm or share its user data.

Context – There is no legal clarity surrounding the unprecedented TikTok matter. The federal law forcing the sale of the platform went into effect on January 19 after the Supreme Court rejected the First Amendment-based challenges of the company and a group of content creators. While the law gave the President the authority to extend for 90 days the provisions that prohibit app stores and hosting providers from supporting TikTok’s US services, it required him to certify that the time was needed to wrap up a qualified deal to divest the company. Conservative Republican “China Hawks” condemned the initial 75-day extension order, which they said exceeded the law’s provisions. The President has recently said that he might grant China somewhat lower tariff rates if they approve the deal, leading to criticism from Democratic backers of the law. Questions continue regarding how the app could operate without the current TikTok algorithm engineered by ByteDance, as well as the implications of the worsening US-China trade relationship.

Meta’s Zuckerberg Lobbying President Trump to Settle FTC Antitrust Case

Report from the Wall Street Journal

In Brief – Meta CEO Mark Zuckerberg recently met with President Trump in the White House and discussed settling the federal antitrust lawsuit that aims to break up the company by forcing Meta to spin out Instagram and WhatsApp. The bench trial is set to begin on April 14. The Federal Trade Commission’s complaint, originally filed during the final weeks of the first Trump Administration, alleges that Meta’s acquired Instagram in 2012 and WhatsApp in 2014 to illegally monopolize the “personal social media market” and the deals should be unwound. Back in 2021, Judge James Boasberg fully dismissed the original FTC effort. Refiled in 2021 by President Biden’s FTC Chair Lina Khan, the complaint then proceeded relentlessly. When Boasberg rejected most of Meta’s motion for summary judgement last fall, he struck a skeptical tone in his order, saying “time and technological change pose serious challenges” to the FTC’s market definition that rejects competition from TikTok. LinkedIn and other social media platforms.

Context – Whether Meta will be broken up is another scene involving the mystery box of how “Big Tech” will be treated by the second Trump Administration. The embrace of the President in the final months of the campaign and at his inauguration were much noted. Meta has been among the most public, including changing content moderation policies and naming a Republican to lead global public policy. The President and Vice President have since criticized foreign tech regulation and taxes and threatened tariff retaliation. However, the Trump DoJ continues to call for breaking up Google by forcing a spin out of Chrome in that antitrust trial. There is a very aggressive anti-Big Tech wing within the Trump Administration, seemingly led by VP Vance and MAGA thought leader Steve Bannon. Big Tech hoped that tariff threats would help protect them from foreign penalties, taxes, and policies that the prior Administration often seemed to cheer. However, it is also pulling them more tightly into the Trade War fueled by new Trump tariffs, with the EU considering services tariffs and tech company retaliation.

Much of New York Times Copyright Suit Against OpenAI Will Proceed

Report from NPR

In Brief – US District Judge Sidney Stein is allowing the core copyright infringement claims to proceed in the lawsuit filed by the New York Times alleging that OpenAI engaged in mass copyright violations by copying content without consent or compensation and using it to train its AI systems. Microsoft, a major financial and technical backer of OpenAI is also named in the suit. The case is one of several major lawsuits brought by copyright holders against developers of Generative Artificial Intelligence (GAI) services, including chatbots and image generators. The judge is allowing the Times’ claims for copyright infringement, contributory copyright infringement, and trademark dilution to proceed. He dismissed claims of unfair competition and violations of the Digital Millennium Copyright Act. The case, along with the other major AI copyright lawsuits in US federal courts, will likely hinge on the application of the fair use doctrine, which could mean much AI training using copyrighted material would be allowed without compensation, or could result in huge penalties for illegal copyright infringement.

Context – Questions around the legality of “training” the neural networks of major GAI models with non-licensed copyrighted material are one of the most contentious legal and regulatory issue surrounding AI. Copyright lawsuits are taking center stage in the US where legislation on the question is unlikely, at least before judges’ rule. In the EU, with its AI Act, regulators and AI expert groups will play key roles setting the rules, or at least guidelines. US District Judge William Orrick, who is overseeing cases involving GAI image generating services, recently issued a ruling in which he explained that he is trying to ascertain how the GAI systems actually work. He will learn that they are not traditional databases and do not store and retrieve copies. But even the developers don’t know exactly why a system produces a particular output, hence the nagging existence of our favorite GAI concept, “hallucinations”. Expect governments, even in big markets like the UK and Japan, to continue to deliberate while waiting for legal developments in the US.

Brazil Steps Back from Digital Services Tax in Face of Trump Tariff Threats

Report from Reuters

In Brief – The Brazilian government has shelved the plan it announced last September to enact a new tax on big tech firms in 2025. The measure, which was expected to mostly impact US-based digital giants like Amazon, Google, and Meta, was expected to be a Brazilian Digital Services Tax (DST). The decision was reportedly taken to avoid exacerbating trade frictions with the US as the Trump Administration plans to raise tariffs on countries that impose trade barriers on US companies. As part of the President’s “America First” trade policy, he has threatened tariff retaliation against countries that impose digital taxes that disproportionately impact US businesses. The Brazilian government is reportedly going to instead focus its technology policy efforts on advancing digital competition legislation that went to public consultation in January 2024 and targets practices such as “killer acquisitions” and the privileging of a company’s own products or services in search results.

Context – During the first Trump Administration, France created the first DST to increase taxes on the biggest internet businesses. Most were US companies. Other countries followed suit. President Trump responded with tariff threats, the DSTs were delayed, and talks moved to the OECD. The second Trump Administration came out of the gate with executive orders on January 20 opposing the OECD plan led by President Biden and signaling that he would again fight DSTs with tariffs. India, like Brazil, is signaling a willingness to step back on its DST, while Poland is moving forward. If the Brazilian Government does shift its focus to ratcheting up regulation of the same US giants that it had planned to tax, the move may still be used as justification for new US tariffs in line with a further White House directive in March that broadly threatens trade retaliation against any tax or regulatory actions that are “discriminatory, disproportionate, or designed to transfer significant funds or intellectual property from American companies to the foreign government or the foreign government’s favored domestic entities.”

Virginia Governor Vetoes Bill Regulating “High Risk” AI Systems

Report from Stateline

In Brief – Virginia Governor Glenn Youngkin (R) vetoed a bill to regulate AI, including both AI developers and companies using AI systems. Largely modeled after legislation enacted by Colorado last year, the measure imposed mandates on so-called “high-risk” AI system, including steps intended to protect consumers from discrimination. HB 2094, which passed the Democratic-controlled legislature, would have made Virginia the second state to place special duties on AI developers to discover and address bias in their systems when used for hiring, housing and health care decisions. In his veto message, Youngkin said, “There are many laws currently in place that protect consumers and place responsibilities on companies relating to discriminatory practices, privacy, data use, libel, and more,” adding that the bill, “fails to account for the rapidly evolving and fast-moving nature of the AI industry and puts an especially onerous burden on smaller firms and startups that lack large legal compliance departments.”

Context – The big question in AI public policy remains whether governments are moving toward direct regulation. Some believe regulatory guardrails will benefit AI development by easing user uncertainty. Others argue the burdens will breed uncertainty, slow innovation, and drive entrepreneurs and investment elsewhere. In early 2024, the regulatory camp was notching wins, with the EU pushing its AI Act across the finish line as the global standard for AI rules, the UK Government was focused on AI safety and pressure was building in Japan to enact AI rules as well. When Colorado legislated it signaled that US states might also become active. But now, the Trump Administration has revoked the Biden AI executive order and is clearly in the investment-focused camp joined by the latest UK and Japanese governments. No states have followed Colorado’s lead. Even in Europe, French President Macron has called for the EU to “resynchronize with the rest of the world” and Commissioner Henna Virkkunen has said that the Commission will be business-friendly in implementing its new rules.

EU Parliamentarians Tell Commission Not to Water Down AI Act Duties

Report from the Financial Times

In Brief – European Members of Parliament (MEPs) who played leading roles crafting the EU’s AI Act are urging the European Commission to reject attempts to reduce the mandates imposed on the developers of the largest general AI systems. The warning letter to Commission digital chief Henna Virkkunen comes as the Code of Practice for General-Purpose AI is being developed in a process guided by the EU AI Office that includes expert group drafting committees and officials from member state governments and the commission. The MEPs argue that the latest draft code proposes that some regulatory requirements for the largest general AI system providers would be voluntary rather than mandatory, including on important measures addressing risks such as the spread of violent and false content, and interference in democratic processes. The lawmakers say that such changes were “never the intention of the trilogue agreement” and that narrowing a legal text through a Code of Practice is “dangerous, undemocratic and creates legal uncertainty.”

Context – The AI Act was initially designed as a tiered risk-based regulatory regime for applications using AI technology, not an attempt to regulate AI technology itself. But the EU Parliament changed course in response to the emergence of Chat-GPT and chose to regulate large “foundation models” such as the biggest chatbots. This shift was divisive and EU-based AI innovators pushed for lesser mandates. The compromise applied fewer mandates to developers of smaller models, which included the EU-based leaders, but more on larger developers. Yes, the EU planted the flag globally for AI regulation, but that is not without risk. The US, UK, and Japan have each shifted their AI policies in a deregulatory direction since last year. At the recent Paris AI summit, French President Macron called for the EU to “resynchronize with the rest of the world” and Virkkunen said that the Commission will be business-friendly in implementing its new rules. Don’t get distracted by talk of a US v EU standoff. It is an intra-EU disagreement over how best to incentivize investment and innovation to achieve both growth and safety.

Top German Court Rejects Apple’s Effort to Escape Big Tech Regulation

Report from Bloomberg

In Brief – Apple’s legal challenge to the German Federal Cartel Office (FCO) designation that they are a digital company “of paramount significance on competition across markets” has been rejected by the Federal Court of Justice in Karlsruhe, the country’s top civil court. Apple therefore joins Google, Meta, Amazon, and Microsoft under the regulatory scheme in Section 19(a) of the German Competition Act. The law allows the FCO to regulate digital companies that are determined to have paramount significant across markets, including prohibiting preferential treatment for their own services or hindering interoperability. The iPhone giant challenged the FCO’s April 2023 designation under Section 19(A), arguing that the regulator did not accurately account for the level of competition in the German hardware market. However, the judges sided with the FCO, citing the company’s financial power, market shares, and the fact that it bundles its hardware and software products into what the company calls the “Apple ecosystem”. Andreas Mundt, head of the FCO, lauded the decision and said it buttresses the agency’s ongoing review of Apple’s tracking rules for third-party apps. Last year, the Federal Court of Justice likewise rejected Amazon’s challenge to being designated under Section 19(a) by the FCO.

Context – When Germany enacted Big Tech regulation through Section 19(a) in 2021 it was a harbinger of the EU’s Digital Markets Act (DMA) for “gatekeepers” and added scrutiny of Very Large Online Platforms (VLOPs) under the Digital Services Act (DSA). A few companies, including Amazon (DSA) and ByteDance (DMA) have challenged their designations, but EU judges, like German judges, have not been sympathetic. Germany-based fashion marketplace Zalando is attempting to overturn its VLOP designation, with its CEO saying that VLOPs are “talked about as bad actors” and “this is bad for our brand.” With so few EU-based companies meeting the thresholds set by any of the European Big Tech laws, and the Trump Administration arguing the laws are discriminatory, how EU judges respond to Zalando’s challenge will be most interesting.

European Tech Groups Call for “Buy European” Digital Procurement Policy

Report from CNBC

In Brief – Nearly 100 European companies and lobbying groups, many representing smaller EU-based tech firms, have signed an open letter to European Commission President Ursula von der Leyen and digital chief Henna Virkkunen calling for “radical action” for Europe to “become more technologically independent across all layers of its critical digital infrastructure.” The group says that dramatic changes in US policies in the first months of the second Trump Administration highlight how Europe needs to rapidly reduce its reliance on foreign technology companies, especially from the United States and China, to ensure strategic autonomy, long-term security, and economic resilience. Citing the Eurostack Initiative, they call for policies to strengthen EU-based capabilities across all levels of the digital ecosystem, including chips, computing, connectivity, applications, and artificial intelligence. In line with last fall’s Draghi report on European Competitiveness, the letter advocates for an investment-driven approach rather than more regulations. Specific suggestions include a sovereign wealth fund for public investments in “capital-intensive” priorities such as quantum computing and chips, adding a “Buy European” requirement to public sector tech services procurement to grow demand for EU-based tech suppliers, and new policies to incentivize private sector businesses in the EU to buy more EU-tech services as well.

Context – The massive disruptions in US-EU relations in the opening months of the second Trump presidency obviously go well beyond tech regulation. But accusations that European regulation of Big Tech “gatekeepers” is de facto discrimination against American businesses, that fines are discriminatory taxes, and that content moderation regulation is anti-conservative speech control, are adding to tensions and some would argue that the largest US tech companies are aligning with the US Government. And EU-based companies, whether industrial giants like Airbus or small tech firms like Proton email, appear ready to push for EU spending preferences and industrial policies intended to erode the current dominance of US-based digital giants.

Amazon Continues To Battle Consumer Product Safety Commission

Report from the AP

In Brief – Amazon has filed a suit in federal court challenging the January decision and order from the US Consumer Product Safety Commission (CPSC) that the company must abide by retailer-like recall duties for products that are stored and distributed through the company’s massive logistics network and are also listed and sold on its marketplace. The lawsuit, which pushes along the company’s four-year legal battle with the regulatory agency, continues to argue that Amazon’s FBA logistics operations are a stand-alone distribution operation like FedEx and UPS, and now also argues that the CPSC itself is unconstitutional in its structure and authority. The company is likewise challenging the constitutionality of the National Labor Relations Board, as has Space-X. The CPSC’s recall demands do not apply to Amazon when products from third-party sellers are sold on the Amazon marketplace but are not held by FBA, nor when a product handled by FBA is sold on another company’s marketplace or the seller’s own website. The ruling applies to more than 400,000 defective items sold on Amazon and handled through FBA. New Amazon duties include notifying purchasers and the public about the product hazards and providing refunds or replacements.

Context – Amazon’s biggest ecommerce innovation was to reimagine the model of retail product wholesalers. Businesses that traditionally supplied products to major retailers, with the products then housed and sold off the retailer’s store shelves, have become “third-party sellers” who pay Amazon to have their products housed and sold off Amazon’s FBA shelves. By 2019, their sales reached 60% of the total on its marketplace and the model is highly profitable for Amazon, with “seller” fees often exceeding 50%. Amazon fully controls the customer experience like a retailer, and when their Marketplace and FBA are legally considered unrelated businesses, there are benefits involving liability and recalls. The FDA and several product liability lawsuits are also slowly pushing the ecommerce giant on this point.

Trade War May Hit Big Tech as EU Considers Services Retaliation

Report from DW

In Brief – Facing an increasingly aggressive and sizeable collection of tariff increases being imposed by the Trump Administration and searching for the right mix of retaliatory responses, the European Commission is considering trade penalties against US services companies, including so-called Big Tech. The Trump Administration has imposed significant new tariffs on steel and aluminum, as well as autos and auto parts, which are major EU exports. And Trump is promising a further large round of country-by-country increases described as “reciprocal tariffs” linked to the barriers imposed by trading partners on US exports. In developing their retaliatory response to the US tariffs, the Commission and EU member states are reportedly considering extending retaliation to services industries because US services exports to Europe are so sizeable, outstripping US goods exports and therefore providing more options to choose targets that make the most sense for Europe. In developing their trade retaliation, the EU may use new trade retaliation authority enacted in 2023 with Chinese threats in mind. Referred to as their “trade bazooka”, the EU can impose a range of penalties on digital and services companies, including tariff-like levies but also restrictions on government contracting and even limits on company IP rights.

Context – Whether Willie Sutton really said, “I robbed banks because that’s where the money is,” that’s what’s going on here. The EU runs a big trade surplus with the US on goods. But services are the opposite story, including digital services. If the EU wants to match US trade barriers dollar for dollar, adding penalties on services drastically increases the EU’s ability to pick ways to impose more political pain on the US and reduce economic self-harm in Europe. President Trump’s willingness to threaten trade retaliation for all kinds of foreign taxes and regulatory penalties might be appealing to some US tech companies who thought the prior administration did not stand up for them, but a full-scale trade war that pulls them directly in is likely to be a different matter. EU tech sovereignty backers may smartly tie trade retaliation with domestic tech development initiatives.

French Regulator Dings Apple 150 million Euros for App Tracking Policy

Report from Reuters

In Brief – After years of review, France’s antitrust agency announced that it has fined Apple 150 million euros for the discriminatory implementation of their App Tracking Transparency (ATT) policy that requires all third-party apps to get explicit approval from iPhone users to collect online browsing data for use in digital advertising. The regulator has determined that while the goal of the policy is not itself objectionable, it was implemented in a manner that imposes undue user burdens third-party app developers that are not imposed on Apple’s own apps. Apple billed their ATT policy, first announced in 2020, as a major step forward for user privacy, but the move was quickly challenged by many in the digital ad industry as a way for Apple to harm competitors and grow its own ad business. A coalition of French trade groups filed an antitrust complaint asking the Autorité de la Concurrence to block its rollout. The regulator rejected the request but opened an investigation. In 2023, the regulator filed an initial objection alleging that Apple did abuse its dominant position by imposing discriminatory conditions on app developers, and its latest decision notes that Apple’s policy “particularly penalized smaller publishers” who “depend largely on the collection of third-party data to finance their activity.” Apple expressed disappointment with the decision and noted the regulator did not order that it make any specific policy changes to the policy.

Context – Similar antitrust investigations have also been initiated in Germany, Italy, and Poland. In February, Germany’s FCO announced that it too suspects that Apple’s ATT policy does not treat third-party app developers as is required by the country’s special antitrust regime for the largest digital platforms, which includes Apple. The German regulator believes that Apple applies rules to data processing for advertising by third-parties that do not apply to Apple’s own data practices, the users of third-party apps face more consent boxes than apply to Apple’s own apps, and the language Apple uses in the consent boxes for third-party apps is more negative than the language Apple uses for their own consent boxes.