Archive – 2019

A Google Acquisition of FitBit May Put Spotlight on New Acquisition Policies for Digital Giants

Report from Reuters

In Brief – It is reported that Google is engaged in talks to acquire FitBit, one of the largest players in the smart watch and digital fitness wearables market.  Along with manufacturing devices, FitBit operates a digital platform allowing users to track, store and analyze a range of activity and behavioral data such as sleep tracking and nutritional intake. The company has also been attempting to develop partnerships with health insurers and others in the healthcare market due to the potential value of the company’s ability to gather health-related data. Google is believed to eye Fitbit as an asset to better challenge Apple in the health and fitness space.

Context – Increased scrutiny of acquisitions by the largest digital platforms has become a component of digital competition policy reviews and reform plans globally, including in the United States, UK,  Japan, and Australia. Proposals include lowering acquisition value review thresholds, being more creative about risks related to adding to the data capabilities of the largest platforms, and taking a longer view on the potential impact on future competition when small platforms are snapped up.  For example, the UK Competition and Markets Authority (CMA) recently announced a formal merger inquiry of Amazon’s investment in food delivery service Deliveroo. It will be interesting to see how regulators respond if Google does move forward on a FitBit deal. Pushing back on the growing voices targeting acquisition rules as a tool to rein in tech giants are some who argue that foreclosing a route to monetize entrepreneurial activity will harm innovation and venture capital risk taking.  In addition, some see increased direct competition between the giant platforms such as Google and Apple as a positive leading to greater efficiency and welfare gains. 

Malaysian Government Committed to New Policies on Social Welfare Benefits for Gig Workers

Report from The Malaysian Reserve

In Brief – The Malaysian Government of Prime Minister Dr Mahathir Mohamad has engaged a special task force to develop new policies on the welfare aspect of the gig economy, including some form of safety net for workers such as insurance and savings under the Employees Provident Fund.  Gig economy platforms, rapidly expanding in the country with upwards of 200,000 e-hailing drivers and delivery personnel, are expected to be included as a growth sector in the 12^th Malaysian Plan, the government’s five-year economic plan covering 2021-25. Some have warned that applying traditional labor regulations to the gig economy could stifle innovation and growth, and Dr. Mahathir insisted that the task force will ensure the interests of both workers and employers are safeguarded.

Context – Proposals to apply some manner of employment regulation to gig work platforms are moving forward in markets globally. Two of the highest profile have been the enactment of AB 5 in the State of California, as well as the European Parliament’s April enactment of legislation setting minimum standards for national laws on gig worker rights. Commissioner Margrethe Vestager, slated to continue as head of the European Competition Authority as well as taking on a new digital policy portfolio, recently called for gig workers in Europe having the right to join labor unions.  Farther afield, the Indian State of Bengaluru is proceeding with talks to develop labor benefits regulations for gig drivers and delivery workers.  Finally, Colorado, under the leadership of Governor Jared Polis, former Member of Congress and tech entrepreneur, has a created a state task force on the Future of Work that appears to be looking to develop a balanced perspective on labor standards and innovation.

YouTube Faces Class-Action in California Charging Violations of Child Online Privacy

Report from MediaPost

In Brief – A mother in California has filed a class action suit in U.S. District Court in San Jose, California, against YouTube, and a range of YouTube channel operators including Hasbro, DreamWorks, the Cartoon Network and Mattel, charging them with illegally collecting and using data on children on the platform in violation of California state privacy and unfair competition laws. The lawsuit follows the high profile settlement reached by the FTC and the New York Attorney General with Alphabet’s YouTube at the end of August in which Google admitted to practices that resulted in violations of the federal Children’s Online Privacy Protection Act, agreed to pay a fine of $170 million and change data-related practices related to children’s programming on the site.

Context – The FTC settlement with YouTube faced significant criticism from privacy advocates, including dissents from the FTC’s two Democratic Commissioners, despite accounting for the largest COPPA fine in history and Google agreeing to develop, implement, and maintain a system that permits channel owners to identify their child-directed content on the YouTube platform in order to block behavioral advertising. Commissioner Slaughter’s dissent focused on the lack of a commitment from Google to employ persistent technical policing of compliance by smaller and foreign content creators on the platform she clearly does not trust. Earlier in the summer the FTC announced its intention to undertake a broad review of COPPA rules and held a public workshop on October 7, prompting public warnings against weakening COPPA, including a strongly-worded letter from a bipartisan group of four Senators, including Sen. Josh Hawley (R-MO) and Richard Blumenthal (D-CT).

Delhi High Court Adds Its Voice to the Legal Fight Over Cross-Border Internet Court Orders

Report from the Times of India

In Brief – The Delhi High Court in New Delhi has issued a global blocking order directed at Facebook, YouTube and Twitter to remove access to a video about a book, Godman to Tycoon, that the Indian courts have deemed to be defamatory towards Swami Ramdev, a well-known Indian yoga guru.  The High Court ruled that orders of the court are meant to be implemented fully and effectively and therefore implementing the blocking order on all company sites globally was consistent with that intention. The Court made a unique argument that the legal jurisdiction of the Indian courts over Internet content, even globally, was based on the geography of the initial uploading onto the Internet platforms, regardless of where else the content appeared. The companies had agreed to comply on their Indian sites as well as impose geo-blocking on users in India but the Court argued users could circumvent geo-blocking.

Context – The prospect of cross-border, global, legal obligations imposed on businesses operating on the Internet is one of the most important topics in Internet public policy. This decision follows two from the European Court of Justice (ECJ) earlier this month, both of which were cited by the Delhi High Court.  In the first, the ECJ ruled that while the European “Right to be Forgotten” law did not require Google to de-list content globally, European law did not explicitly prohibit national court orders from being imposed on Internet sites outside Europe. Consistent with that, the ECJ also ruled Facebook could be required to implement an Austrian national court order to remove illegal content from their services across Europe, and potentially globally, in a libel case involving an Austrian politician, content that would not be illegal in the United States.  Finally, the Indian court cited Google v. Equustek, in which the Canadian Supreme Court in 2017 supported an order calling for Google to de-list sites globally based on a British Columbia court order.

FTC Follows NY AG’s Lead Penalizing the Sale of Social Media Likes and Followers

Report from Tech Crunch

In Brief – The FTC reached a $2.5 million settlement with the owner and CEO of the now defunct firm Devumi, which made millions selling fake indicators of social media influence on platforms including Twitter, YouTube, Vine, LinkedIn, Pinterest and SoundCloud.  For example, the collection of businesses operated by Devumi reportedly could engage a collection of 3.5 million fake Twitter accounts.  The FTC action, which received support from all five Commissioners, follows on an investigation from the New York Attorney General that resulted in a $50,000 settlement and effectively shut down the firm.

Context – Where fake products reviews have been a recognized part of the Internet consumer experience for many years (read an interesting “Short History of Fake Reviews on Amazon”) the murky world of fake social media followers and influence efforts is a more recent phenomenon. This deep dive by the New York Times from January 2018 identified the role of Devumi, leading directly to the NY AG settlement, the shuttering of the firm and now the FTC settlement.  While law enforcement is engaged to a degree, platforms such as Twitter, Facebook and YouTube have engaged in their own efforts to combat the multinational problem, with numbers related to various forms of fake accounts and bots climbing into the billions globally.

Video Game Loot Box Policies Raised by a Presidential Candidate.  Really.

Report from the Washington Post

In Brief – Democratic presidential candidate Andrew Yang raised the issue of regulation of video game “loot boxes” in a recent interview with the Washington Post.  Loot boxes, a component of video and computer games for years, allow a player can gain something of value, such as characters, game lives, or abilities, by “winning” the loot box. As video game developers have explored new monetization models, the in-game purchase of loot boxes has spread. The combination of for sale loot boxes, uncertainty over what is contained in the “loot box”, uncertainty over the odds of winning valuable content, and the fact that a fair number of gamers are young people, have led to charges that selling loot boxes is a form of gambling and should be regulated in some form.

Context – Video games and their platforms are often not thought of in the same vein as the movie or video streaming industries, but the global revenue of video games reportedly exceeds both the global movie box office as well as video streaming revenues.  Senator Josh Hawley (R-MO), who is not shy about authoring technology legislation that is highly prescriptive, proposes banning the sale of loot boxes in games to minors under age 18. Internationally, Belgium has banned in-game loot boxes that are sold without clear odds for winning, and many games have been pulled from the market. Other countries are considering various regulatory models. Finally, following a request from Senator Maggie Hassan (D-NH), the FTC held a mid-September policy workshop on loot boxes. Given the importance of New Hampshire to Mr. Yang’s long-shot campaign, that might help explain his interest.

Divided FTC Settles Fake Review Case with Cosmetic Business Without Financial Penalty

Report from BBC

In Brief – Sunday Riley Modern Skincare is a cosmetics business that is reported to do between $50 – $100 million is annual sales. Based on a leak of internal emails it was learned that the company engaged in a program of manipulating and faking reviews on third party retail sites from 2015 to 2017.  Following an investigation the Federal Trade Commission (FTC) has reached a settlement with the company in which neither the company nor its CEO founder admitted wrongdoing, but did bar the company from misrepresenting the status of a person reviewing products and requires instructing its employees and agents to disclose their connections to the company in any endorsements.  The settlement was reached by a partisan 3-2 vote of the Commissioners, with Democrats Rohit Chopra and Rebecca Kelly Slaughter filing a dissent criticizing that there was “no redress, no disgorgement of ill-gotten gains, no notice to consumers, and no admission of wrongdoing,” and that “dishonest firms may come to conclude that posting fake reviews is a viable strategy.”  The lack of real penalties did result in some frustration from competitors.

Context – Fake reviews are a recognized problem plaguing ecommerce platforms. Amazon, which was an early innovator regarding online product reviews, has faced a wide range of fake review challenges, including the emergence of a shadow fake review industry, recent criticism from UK consumer group, and reports of new fraud schemes involving chatbots operating over Facebook messaging.  As noted by the dissent of the FTC Commissioners in the Sunday Riley case, other national consumer protection organizations are engaged as well, including the UK Competition and Markets Authority calling on eBay and Facebook to more effectively halt the sale of fake Amazon reviews, as well as review and endorsement standards from Australia’s Competition & Consumer Commission.

Senators Cotton and Schumer Call on Director of National Intelligence to Investigate TikTok

Report from the Washington Post

In Brief – Senator Tom Cotton (R-AK), a recognized national security hawk, and Senator Chuck Schumer (D-NY), the Senate Minority Leader, have jointly sent a letter to the Acting Director for National Intelligence raising a range of concerns with TikTok, the Chinese-owned video-based social media app business with the largest number of users outside China, including tens of millions of Americans.  The Senators raised issues including data privacy, potential exploitation by foreign agents, and content moderation policies that may be aligned with the censorship goals of the Chinese Government, and ask for the U.S. Intelligence Community to conduct an assessment of the national security risks posed by TikTok and other China-based content platforms operating in the U.S. and brief Congress on these findings. TikTok posted an apparent response on their website addressing data handling and content moderation, including the plan to create a committee of experts to help with content moderation which, as announced last week, will include two former Members of Congress.  

Context – TikTok, a Chinese-owned app business with a uniquely large number of U.S. users, has become the central figure in a debate over the prospect that content moderation guidelines aligned with Chinese Government interests are impacting political communications outside China. The almost complete lack of Hong Kong-related user content appearing on TikTok, as well as leaked TikTok content moderation guidelines that the company disavowed as old and outdated, spurred interest. Senator Marco Rubio (R-FL) recently called on the U.S. Government’s Committee on Foreign Investment in the United States (CFIUS) to review TikTok’s 2017 acquisition of popular U.S. app Music.ly for $1 billion.  While CFIUS has never rejected an Internet consumer app deal, their rejection of Alibaba-related firm Ant Financial’s proposed $1.2 billion purchase of MoneyGram, may be a harbinger new thinking on the scope of security concerns.

French Tech Exec Thierry Breton Nominated as Next EU Internal Market Commissioner

Report from Politico

In Brief – Following the European Parliament rejection and subsequent withdrawal of Sylvie Goulard as the French nominee for the post of Internal Market Commissioner in the incoming government of European President-elect Ursula von der Leyen, French President Emanuel Macron has nominated Thierry Breton for the position.  Breton has served as the CEO of French digital services company Atos since 2008, is a long-time executive in telecom and tech companies, and is a former Economy Minister of France from 2005-2007 under French President Jacques Chirac. The confirmation process begins with appearing before the Parliamentary Committee on Legal Affairs, which reviews potential conflicts of interest, followed by hearings in front of European Parliament committees with jurisdiction over the proposed, broad, substantive portfolio.

Context – Margrethe Vestager, who has served for five years as the European Commissioner for Competition and made a big mark for her unabashed willingness to challenge the largest U.S. digital firms, has gained considerable attention for her likely impact on digital policy in her coming second term as Competition Commissioner as well as a new policy-oriented Digital Economy portfolio.  However, the portfolio of the Internal Market Commissioner is seen by many as being potentially even more influential on digital policy.  As French President Macron said when Goulard’s nomination was rejected, “What matters to me is the portfolio! I fought for it,” and that remit, which includes tech-heavy issues such as regulation of Artificial Intelligence, self-driving vehicles, cybersecurity, a new Digital Services Act and 5G network standards, remains intact. On a non-public policy side note, Breton garnered some attention in management circles when, as CEO of Atos, he attempted to ban “internal email” at the company in 2011 and had a messaging-style internal digital communications system built instead.  Take that as you will.

Facebook’s Mark Zuckerberg Goes to the Hill on Libra and Gets Hammered for Everything

Report from the Washington Post

In Brief – Facebook Founder and CEO Mark Zuckerberg appeared before the House Committee on Financial Services for a hearing titled “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors”.  The main topics within the legislative jurisdiction of the committee, which includes authority over the banking, payments and financial services industries, as well as housing policies, included the Facebook cryptocurrency proposal often referred to as Libra, as well as issues related to housing discrimination in the context of advertising on Facebook. The memo prepared by the Majority Staff is available here.

Context – More than anything, Zuckerberg’s appearance (video of the 6 hr hearing here) should reinforce that Members of Congress will talk about pretty much whatever they are interested in and think is newsworthy, regardless of the stated agenda. He faced questions, and often criticism, on Libra and housing discrimination, but also on privacy, lack of diversity in hiring, Facebook impacts on minority communities, foreign election interference, child exploitation, Facebook’s role in magnifying global political conflicts, hate speech, and lots about Facebook’s policy of not submitting political candidate advertising to “fact checking”. (Or, as some say, Facebook permitting politicians “to lie”.)

Patrick McHenry (R-NC), the Committee’s Ranking Member, summed it up well, telling him, “There’s a lot of anger out there, and now, it’s being directed at the architects of the system. And maybe it’s not about Libra. It’s not just about some housing ads. And maybe it’s not even really about Facebook at all.”

“Fair or not fair, you’re here today to answer for the digital age.”

EU-US Privacy Shield Gets Approval in Annual European Commission Review Process

Report from the EU Observer

In Brief – The European Commission, which engages in an annual review of the EU-US Privacy Shield to judge the adequacy of compliance efforts by the U.S. Government, has reported that the United States ensures an adequate level of protection for personal data to be transferred under the agreement. Almost 5,000 U.S.-based companies have chosen to use the EU-US Privacy Shield as the legal basis to transfer data between the EU and United States. In its third such report, the Commission highlighted improved compliance efforts over the past year by both the U.S. Department of Commerce and the Federal Trade Commission, increased use of redress mechanisms by EU individuals, appointment of the permanent Privacy Shield Ombudsman and the filling of the final two vacancies on the Privacy and Civil Liberties Oversight Board.

Context – The EU-US Privacy Shield was established in 2016 following the 2015 rejection of the EU-US Safe Harbor agreement by the European Court of Justice in a case brought by Austrian privacy activist Maximilian Schrems following the Snowden disclosures that indicated that data held by some major U.S. Internet businesses might be accessed by U.S. law enforcement or intelligence agencies. Despite the negotiation of the Privacy Shield as a follow-on to the Safe Harbor, and three successive positive reports from the European Commission, the program, and the use of “Standard Contractual Clauses”, is currently subject to litigation brought by the same Mr. Schrems against Facebook. The European Court of Justice held a hearing on that case in July, will receive a non-binding (but generally very influential) opinion from Advocate General Henrik Saugmandsgaarde on December 12, and is expected to make a ruling on the legality of the overall program in early 2020.

Indian Supreme Court Allows Facebook to Consolidate Social Media and Encryption Cases

Report from The Hindu

In Brief – A two-judge panel of the Indian Supreme Court has agreed to a request from Facebook’s WhatsApp business to consolidate at the national Supreme Court a series of regional cases dealing with WhatsApp obligations to police user activity and share user data with law enforcement. A hearing on the case has been set for the end of January.  The justices reiterated the request they made in a late September hearing on the case for the national government to finalize rules on the content moderation and law enforcement obligations of social media services, this time setting a target date of January 15.

Context – The case reflects years of concerns from a wide range of Indian law enforcement and government regulators regarding negative social media and communications user behaviors, including sectarian violence, terrorism and pornography.  India is WhatsApp’s largest market, with over 400 million users, and the platform champions secure encrypted communications, a position applauded by free speech advocates in India. The Indian Ministry of Electronics and Information Technology (MEITY) released draft Information Technology Intermediaries Guidelines in 2018 and elicited a wide range of comments from across industry and societal stakeholders that were published in February 2019.  The new rules have been stalled since.  Globally, Facebook’s WhatsApp is under intense scrutiny and legal pressure in major markets besides India. For example, the UK and Australia are pressing for mandated access capabilities to all communications that exceeds the legal standard that exists in the United States, and the leading law enforcement officials of those countries joined U.S. Attorney General Barr on a letter calling on Facebook to shelve plans to extend WhatsApp-style encryption to all Facebook services.

Senate Digital Policy Activists Introduce Data Portability and Platform Interoperability Bill

Report from CNBC

In Brief – Senators Mark Warner (D-VA), Josh Hawley (R-MO) and Richard Blumenthal (D-CT), have introduced the ACCESS Act to allow users to transfer their data from very large digital platforms to other digital platforms to promote competition and user-based data control. The bill also establishes standards of platform interoperability and proposes something called a “Custodial Third Party Agent” which appears to be a business enterprise that would serve as an agent for users on privacy and data matters. The bill would preempt state laws but does not propose to replace any industry-specific federal privacy regimes such as in health care or financial services, and imposes its mandates on very large digital businesses, meaning those with over 100 million monthly users.

Context – Various concepts described as data portability, as well as ideas related to the contention that users own, or should own, data about themselves, are often raised in the context of Internet, privacy and digital platform competition policy. The authors of this bill claim that portability, interoperability and delegatability will restore competition to markets dominated by digital giants, harkening back to phone number portability increasing competition in wireless and mandated interoperability imposed on Microsoft. Mozilla’s recent working paper on platform interoperability as the best tool to address platform competition concerns is outstanding and readable. Facebook’s recent white paper on data portability highlights the important issues related to the fact that much social network “data” involves other people besides the user with the account, namely their friends and family, and rules regarding that data being moved to another platform without their approval are not intuitively obvious, and this issue does not appear to be addressed in the ACCESS Act.  Finally, Facebook, Google, Microsoft, and Twitter have been working on open data portability technical standards through the Data Transfer Project.

Twitter Announces Plans to Develop Policies on Deepfakes and Manipulated Videos

Report from CNet

In Brief – Twitter Chief Legal Officer Vijaya Gadde announced that the company is going to develop policies regarding how it deals with manipulated videos such as deepfakes and will be engaging in a process to gather ideas from the public and other third parties.  Deepfakes use artificial intelligence and other technologies to create videos of people doing or saying something they didn’t. The social media company has asked users to submit feedback regarding their own experiences with “synthetic” media, including instances where such materials caused harm. Based on user feedback, Twitter says it will finalize policy guidelines for how it polices synthetic media.

Context – The potential impact of deepfakes on campaigns and elections has been a concern for years as the relevant video technology has advanced and the issue of foreign political activities over digital platforms came to the fore in 2016.  Senator Ben Sasse (R-NE) introduced legislation in December 2018, the issue gained national prominence when a doctored “cheapfake” video of Speaker Nancy Pelosi circulated on the Internet in May causing an uproar among Democrats, Rep. Yvette Clarke (D-NY) introduced a House bill in June, and Senator Macro Rubio (R-FL) highlighted the issue in a July national security policy address.  Some question the capacity of Congress to address a rapidly evolving technology challenge. Most recently, Senator Mark Warner (D-VA) joined Rubio in sending letters to major digital platforms posing questions about current policies on user-posted deepfakes, their technical abilities to detect and track doctored media, and the steps each platform would take to notify users when such content is later identified. Three of the largest digital companies, Facebook, Microsoft and Amazon Web Services, have joined with the Partnership on Artificial Intelligence to fund the Deepfake Detection Challenge to build tools to identify and address fake videos.

Sen. Wyden Sponsors “Mind Your Own Business” Privacy Bill

Report from CNet

In Brief – Sen. Ron Wyden (D-OR), one of the most knowledgeable and committed advocates for sensible Internet policy to ever serve in Congress, has introduced a new data privacy bill that would impose new and specific data handling standards on firms with revenues exceeding $50 million and back them up with steep penalties. Wyden’s “Mind Your Own Business” Act would grant the FTC the ability to establish minimum privacy standards and, for corporate offenders, impose fines of up to 4% of a company’s annual revenue, a level similar to the fines possible under European GDPR. The bill would also make it a crime for senior executives of tech companies to knowingly lie to the FTC, which could result in steep personal fines as well as potential jail time.

Context – Sen. Wyden’s entry into the federal privacy legislative debate has generated attention primarily due to the potential for senior corporate executives who lie to federal privacy regulators to receive jail time, which Wyden has called out in the context of Facebook CEO Mark Zuckerberg.  With the California Consumer Privacy Act going into effect on January 1st there has been new enthusiasm from business groups in support of federal privacy legislation that would set a national standard and preempt state laws. However meaningful substantive issues, including state law preemption and whether private lawsuits will be an enforcement mechanism, divide advocates and add to general difficulties created by election year politics.  The Wyden bill does not include state preemption but appears to limit enforcement to federal regulators and one state agency per state, which is likely to be State AGs.

UK CMA Reviewing the Amazon-Deliveroo Acquisition

Story from Reuters

In Brief – The UK Competition and Markets Authority (CMA) has begun a formal merger inquiry and placed a hold on Amazon’s investment in food delivery service Deliveroo, which was announced in May, and drew attention from the CMA in late June.  Deliveroo is one of Europe’s fastest growing tech companies and uses 60,000 riders dressed in black and teal jackets to deliver meals from more than 80,000 restaurants and “dark kitchens” in 13 countries.  The CMA appears to be questioning whether the Amazon “minority investment” is actually operating as an acquisition and that the two businesses are no longer operating as distinct entities.  The CMA case schedule indicates that a decision will be made by December 11 regarding whether it will open a Phase 2 investigation as to whether competition will be harmed in the UK by the proposed deal.

Context – More aggressive scrutiny of acquisitions by the largest digital platforms is increasingly a major component of digital policy reviews and competition reform plans globally, emerging in the United States, EU, Germany, Japan, Korea and Australia. One of the proposals consistently mentioned as a potential reform includes lowering the minimum financial threshold size of the acquisitions being reviewed, as well as taking a longer-term view on the potential impact on future competition. The CMA’s expert report, “Unlocking Digital Competition”, co-authored by Jason Furman, former Obama Administration Chairman of the Council of Economic Advisors, and released last March, includes the recommendation for more aggressive CMA action on digital industry mergers in the future.

DST News for France and Italy While G20 Moves Toward Multilateral Deal on OECD Plan

Report from France24 and the Wall Street Journal (pay)

In Brief – As countries creep forward on national Digital Services Taxes (DST) aimed at large tech companies, and the U.S. Government vigorously opposes them as transparently discriminatory, France and Italy, further along the DST path than most, made news. U.S. Treasury Secretary Mnuchin stated that there was not a deal in place between the U.S. and France to avoid trade sanctions in response to the French DST law, despite President Macron announcing a deal in late August. Italy enacted a national DST similar to France’s as part of its 2020 budget, likewise drawing a trade retaliation threat from the White House.  On the multilateral front, the G20 Finance Ministers met in Washington to give their support to the OECD’s multinational tax reform plan that appears to meet the revenue needs of DST champions but is a broad-based plan that addresses U.S. concerns by not only targeting Internet businesses. The global revenue threshold for the OECD’s proposed regime is 750 million Euros ($823 million) for consumer-facing businesses, which aligns with the French, Italian and 2018 draft EU plans.

Context – Countries around the world are considering various versions of digital services taxes.  Here is a helpful chart on the status of national DST laws in Europe and an article on the status of similar national DST initiatives in a number of Asian countries.  The OECD proposal appears the most likely path to multilateral agreement that would avert a string of national tax plans followed by U.S. trade retaliation.  They are planning a November-December consultation period and to finalize the proposal in June 2020.

Zuckerberg Gives Major DC Address Defending Commitment to Free Speech in Politics

Story from the New York Times

In Brief – In the midst of daily criticism of Facebook policies and practices, CEO Mark Zuckerberg came to Washington, DC and gave a major address at Georgetown University. The 35-minute speech focused on the Facebook views on free expression and censorship. It reads like a State of the Union of Facebook.  And like a State of the Union, it is long.  The text is here. It is a 20-minute read. I found it worth the time. Here is a link to the video if you prefer that. The speech, which I consider well-written, hits all the major Facebook content moderation issues. It does not get into competition policy.

Context – I think it was a strong speech. I am a strident opponent of censorship. As much as I found it a thoughtful read, the media reaction is just as interesting and thought-provoking.  Most of the media and expert analysis took a negative tone, especially among progressives. Here is an example from Salon. The subheading is “Progressive organizations called the speech a joke.”  Do your own Google News search of “Zuckerberg Georgetown speech”. The reaction from the libertarian Cato Institute was, not surprisingly, positive. The Heritage Foundation’s Daily Signal, a voice for mainstream conservative thinking, also applauded the free speech message. It is important to remember that conservative Facebook critics have generally claimed it and other platforms unfairly restricted their speech, ideological over-regulation. The fact that the traditional elite media were quite negative of Facebook’s position to be hands off on political speech will only reinforce conservative views that the media wants them silenced. Finally, this piece from Mother Jones is a progressive voice against censorship on platforms like Facebook.

Uber & Lyft Blow Off House Committee Hearing on Transportation Network Companies

Report from the Washington Post

In Brief – The House Transportation Committee’s hearing on Transportation Network Companies (TNCs), otherwise known as “Ridesharing Companies”, was most notable for the decision of Uber and Lyft to refuse to send witnesses to participate. This resulted in strong criticism from the committee and subcommittee chairs as well as many of the members. The committee leaders focused their attention on rider security issues, in particular on car signage and vehicle safety certification (see H.R. 3262 for a full list), as well as calling for TNCs to do finger-print background checks on all drivers.

PEI Hearing Report – Watching the hearing revealed that Democrats on the committee are far more inclined to take an aggressive regulatory stance with ride sharing platform businesses than the Republicans.  Democratic Members called for imposing state and local taxi-industry regulatory requirements on the TNCs, as well as criticizing how Uber and Lyft classify drivers as independent contractors. The hearing witness from the AFL-CIO and a number of Democrats applauded AB 5, California’s state law on worker classification, and called for a similar federal law.  A number of Republican Members claimed that reducing driver flexibility and undermining TNCs business models would reduce transportation options in the less urban communities that a number of the Republicans represented. The partisan divide, in particular on worker classification, illuminated the hurdles to something passing both the Democrat-led House and then the Republican-led Senate.

Facing Calls to Ban Trump Twitter Provides Further Insights Into Their Policy Towards Elected Officials

Story from the New York Times

In Brief – In another story on the platform content moderation front, presidential candidate Sen. Kamala Harris (D-CA) has called on Twitter to ban the account of President Trump for violating Twitter rules, and made a point during this week’s Presidential Debate to call on emerging front-runner and vocal critic of the largest digital platforms, Sen. Elizabeth Warren (D-MA), to join her.  Warren did not support the Harris Twitter ban.  Twitter released a blog post to “provide clear insight into how we address content from world leaders on Twitter today” which are nuanced and that with public officials Twitter will “err on the side of leaving the content up if there is a clear public interest in doing so.”

Context – The key insight into the politicization of digital platform “content moderation” in the United States is that while it feels like everyone is upset, in nearly every real world case progressives believe that platforms are not being aggressive enough to block false, misleading and hateful content, while conservatives claim that platforms are ideologically slanted and actively discriminate against conservatives. Progressives and conservative critics are on opposite sides on political speech. Whether kicking President Trump off Twitter, or criticizing Facebook’s policy of not “fact-checking” political ads, the ideas gain traction on the Left but not on the Right. In fact, the review of the Twitter policy from the conservative Breitbart platform describes the proposal as permitting the platform to algorithmically bury tweets and Breitbart “will continue to follow Twitter’s actions against President Donald Trump and other conservatives in advance of the 2020 election.”

Italy Enacts 3% Digital Services Tax for 2020 and Draws Retaliation Threat from Trump

Report from Reuters

In Brief – With approval of its 2020 budget plan, the Italian Government is moving forward with a national 3% digital services tax (DST) similar to the DST enacted in France earlier this year.  A number of European governments have proposed national DST plans after an EU-wide DST plan failed to be enacted in 2018.  DST plans that target large Internet companies, most of which are U.S.-based, have resulted in bipartisan condemnation by U.S. officials and threats of trade retaliation by President Trump, a threat expected to be made when the President of Italy meets with Trump at the White House.  The Italian tax plan impacts companies with global revenues of at least 750 million Euros, and revenues in Italy of 5.5 million Euros or more.

Context – The U.S. has opposed narrow, national, Internet services tax plans, instead calling for a broad multilateral agreement covering a wider range of consumer industries.  A recently announced plan from the OECD appears to meet these demands by applying a new formula-based, market-by-market, profit and tax system to all manner of consumer-facing businesses with global revenues of at least 750 million Euros.  The OECD proposal should increase tax revenues for countries with large consumer markets, including France and Italy, while not solely impacting Internet businesses. The G20 Finance Ministers will be presented with the OECD plan on October 17-18, and a November – December consultation process is planned. France reportedly agreed to a rebate-type agreement with the U.S. in late August to forestall U.S. trade retaliation, which might be put on the table with Italian officials. 

Chinese-Owned TikTok Announces Hiring of Two Former Members of Congress as Advisers

Story from Politico

In Brief – TikTok, the Chinese-owned video-based social media app business with the largest number of users outside of China, including tens of millions of Americans, has announced the hiring of two former Members of Congress as advisers. The company has faced many of the same criticisms over objectionable user posts and lax content moderation as the other large social media platforms, but recently the company has faced questions regarding the prospect that TikTok’s content moderation guidelines are aligned with Chinese Government interests and are impacting communications outside China. The almost complete lack of user content related to Hong Kong demonstrations on the site, as well as leaked TikTok content moderation guidelines, have fueled censorship charges.

Context – TikTok is owned by Beijing-based ByteDance, considered by some to be the most valuable start-up in the world. TikTok is ByteDance’s international version of the company’s leading digital property, the Douyin video app that is very popular inside China. ByteDance hired lobbying help in Washington, DC mid-summer.  While the blog post by TikTok’s U.S. General Manager Vanessa Pappas announcing their plan to retain two former Members of Congress focused on their commitment to addressing child safety, hate speech, misinformation and bullying, the specter of Chinese-style censorship is clearly an evolving problem as reflected by Senator Marco Rubio (R-FL) calling for the U.S. Committee on Foreign Investment in the United States (CFIUS) to review TikTok’s 2017 acquisition of popular U.S. app Music.ly for $1 billion based on potential online censorship inspired by Chinese Government interests.

Facebook Political Advertising Content Moderation Draws Criticism From The Left

Report from the Washington Post

In Brief – Facebook has reiterated that it does not subject political advertising of candidates to the same fact-checking process applied to other advertising. In a blog post and speech, Nick Clegg, Facebook’s VP of Global Affairs, stated, “We don’t believe, however, that it’s an appropriate role for us to referee political debates and prevent a politician’s speech from reaching its audience and being subject to public debate and scrutiny.” The policy drew sharp criticism from Democrats and progressive allies charging that Trump Campaign advertising is filled with untruths. The criticism was highlighted by the posting of a video ad on Facebook by the campaign of Sen. Elizabeth Warren (D-MA), which included the claim that Facebook CEO Mark Zuckerberg supported President Trump, which Warren admitted was untrue and then called on Facebook to pull it and other ads with false claims.

Context – This controversy over Facebook’s policy on political advertising fits neatly into the platform content moderation debate on two main themes. First, while there is frustration on both sides of the partisan divide, the two sides generally see different content moderation failings, meaning it is unlikely they will agree on any remedies anytime soon.  Progressives generally charge platforms with not being aggressive enough taking fake/false content down, such as with the doctored Speaker Pelosi video this summer and now with a range of Trump ads. Conservatives often believe that their content is subject to ideologically-colored policing, as expressed in the mid-summer White House Social Media Summit. Second, on most partisan fights, the two sides rarely agree on what is true and what is not.

Boris Johnson’s UK Government Says It Will Legislate on Online Harms White Paper

Report from Huffington Post UK

In Brief – The Queen’s Speech and associated legislative plan for the Boris Johnson-led UK Conservative Government includes a section (see pages 61-63 here) on their plan for draft legislation to implement the Online Harms White Paper (OHWP), which imposes a new duty of care on social media companies, overseen by an independent regulator.  The OHWP process was initiated in 2018, the paper was released in April 2019, and a comment period was open through June. UK Government advocates have focused their rhetorical attention on child exploitation and terrorist support, but the paper covers a range of online conduct, including revenge porn, hate speech, harassment, promotion of self-harm, disinformation, trolling, and the sale of illegal goods.  A new independent regulator will create “codes of practice” detailing how platforms should deal with each of those harms.

Context – The UK Online Harms White Paper is one of the most aggressive online regulatory proposals, at least in terms of proposed scope and the intention to craft regulatory codes of conduct for platform companies to implement.  By extending beyond abhorrent content, such as the stated intent of Australian legislation enacted in the spring, and even the more vague “manifestly illegal” content that is the supposed target of the French Avia law passed by the country’s lower house this summer, the process of regulating maladies as ill-defined as disinformation and trolling will continue to raise concerns with free speech advocates in the UK and internationally.

Supreme Court Turns Down Opportunity to Address Question of Website Accessibility

Report from CNBC

In Brief – The U.S. Supreme Court denied a cert petition from pizza giant Domino’s challenging whether it can be brought to court over the question of whether the company has done what is needed to make its website accessible to the disabled, leaving in place a decision in the 9^th Circuit Court of Appeals against the company.  The decision not to hear the case of Domino’s Pizza v. Guillermo Robles, who is blind and claimed the company’s web site and app did not work with his screen-reading software, is a loss for the company, as well as the broader business community. Major trade groups including the US Chamber of Commerce filed amicus briefs encouraging the Court to take the case due to the growth of such lawsuits and uncertainty as to what is needed to comply with the Americans with Disability Act (ADA) online.  All the briefs and orders are available here.

Context – The case has not determined whether Domino’s satisfied what was required under the ADA. Instead, the litigation has focused on whether Domino’s Due Process rights would be violated because the U.S. Department of Justice has never issued specific regulatory guidance on how websites and apps should comply with Title III of the ADA. While a Federal Judge initially ruled that Domino’s web sites were covered by the ADA, he agreed with the Due Process argument and threw out the Robles’ suit. However, a panel of the 9^th Circuit Court of Appeals overturned that decision and restored the suit. With the Supreme Court deciding not to hear the appeal on the Due Process matter, the case will proceed to trial. The number of ADA-related lawsuits being brought against web and app-based services is on the rise and many expect that this decision will inspire more challenges.

California AG Releases Draft Regulations for the California Consumer Privacy Act (CCPA)

Report from cNet

In Brief – Since its enactment in mid-2018, the CCPA has been seen as the most stringent data privacy law in the United States, and absent a uniform federal privacy law, may operate as a de facto national privacy law for larger digital businesses.  The draft regulations provide initial proposals for topics such as how users will be able to request that data be deleted and opt out of having their information sold to a third party. The proposed regulations would require businesses to treat consumer choices made in privacy settings, such as through browsers, as valid opt-out requests. Larger companies, those that handle personal information for more than 4 million consumers in California, will be subject to additional requirements. The California Department of Justice will hold public hearings the first week of December and accept written comments through December 6.

Context – California’s CCPA was widely seen as a possible trigger for U.S. Federal privacy legislation that would preempt state laws due to industry concerns that overlapping state privacy standards could become overly complex. However, federal legislation has not moved in Congress this year. The CCPA goes into effect on January 1, 2020, and the CA Attorney General can bring enforcement actions starting six months later. The law applies to enterprises that engage in businesses in the State of California and have annual gross revenue in excess of $25 million, use personal information of 50,000 or more in-state consumers, or derives 50 percent or more of its revenues from selling consumers’ personal information. In addition, the California businessman who began the process that led to the CCPA by initiative a state ballot initiative in early 2018 is now promising a new initiative in 2020.

The Under-Appreciated Uber and Platform Price-Fixing Arbitration Case

Transcript from Forbes

In Brief – This discussion between four labor & competition policy lawyers of the antitrust/price-fixing implications of the price-setting role of some platforms, in this case Uber, is super interesting.  While most of the platform labor-policy debate is focused on users being misclassified as independent contractors in order to save money on benefits, there is a legal fight underway over whether platforms setting the prices buyers pay, and the amount sellers charge, is impermissible price-fixing when the seller-users are, in fact, independent contractors.  Uber is involved in one that is currently in arbitration with a decision expected in late October.

Context – The Dynamex ABC Test sets out three questions to consider regarding the classification of independent contractors.  In most cases, the key question for digital work platforms will focus on the level of control exerted by the platform.  Whether “the worker is free from the control and direction of the hiring entity in connection with the performance of the work”.  Not only might fully setting prices for true independent contractors be itself an antitrust violation, but it is possible that courts will see price-setting as a type of “control”?

Uber & Lyft Driver Journal Counters Platforms as Employers

Story from Business Insider

In Brief – Today is Columbus Day, a holiday for some Americans, so today’s “reports” are more long-reads and less news. This account is from a Florida resident who drives on both Uber & Lyft for a few hours many days, depending on the rest of his work and personal schedule, to earn extra money. This personal account corresponds with data points that are regularly surfaced by platform-work studies, including that most participants work to earn supplement income, strongly value their ability to control when and how much they work, and usually enjoy the experience.

Context – People have been doing independent work since well before the Internet. Think of music teachers, painters, house cleaners or accountants helping prepare tax returns, and endlessly varied examples.  Flexibility and autonomy have always been highly valued in these endeavors. This fact was highlighted in a 2016 McKinsey Global Institute report, which also revealed how independent workers can be segmented based on whether they choose to do it or feel forced into it, and whether it is full-time or part-time.  Some have argued that the ability for “workers” to show up if they want, and when they want, this the article author, is alone the key differentiator between traditional work and work platforms.

Sen. Rubio Calls for Security Review of TikTok Acquisition Over China Concerns

Report from Reuters

In Brief – Senator Marco Rubio (R-FL) has called upon the U.S. Government’s Committee on Foreign Investment in the United States (CFIUS) to review Chinese-owned Internet app business TikTok’s $1 billion acquisition of popular U.S. app Music.ly in 2017 based on potential online censorship inspired by Chinese Government interests. CFIUS is an inter-agency Federal Government organization that has authority to reject foreign acquisitions based on national security impacts. Rubio joined a bipartisan chorus expressing concerns with Chinese efforts to stifle messages of support for Hong Kong demonstrators, as well as the acquiescence of U.S. businesses, which was highlighted by overwhelming criticism of the National Basketball Association and the Houston Rocket after a team executive tweeted on Hong Kong.

Context – Although CFIUS has never rejected an Internet consumer app deal like TikTok’s purchase of Music.ly, and online censorship has not been considered a national security issue by CFIUS, the 2018 CFIUS rejection of Chinese firm Ant Financial’s $1.2 billion purchase of MoneyGram is instructive of the scrutiny that Chinese acquisitions are engendering and potential new thinking on the scope of security concerns. The prospect that content moderation guidelines aligned with Chinese Government interests are impacting communications outside China has been speculated given the lack of Hong Kong-related user content appearing on TikTok, the Chinese digital service with tens of millions of U.S. users, as well as leaked TikTok content moderation guidelines that the company claims are outdated.

MEPs Reject France’s Goulard as EU Commissioner for Internal Market

Report from Politico

In Brief – Sylvie Goulard’s nomination as the Commissioner for Internal Market in Ursula von der Leyen’s government, a position with proposed leadership on tech-heavy issues including regulation of Artificial Intelligence and applications like self-driving vehicles, cybersecurity, a new Digital Services Act and 5G network standards, was rejected by a reported overwhelming 82-29 vote in the European Parliament’s Internal Market and Industry Committees.  Goulard’s candidacy was plagued by a range of concerns, including ethics questions related to political use of staff public resources as well as her relationship with U.S.-based think tank Berggruen Institute, potential political fighting between partisan factions in the Parliament, and concerns expressed with the wide range of duties proposed by Von der Leyen.

Context – Margrethe Vestager, who has served for the past five years as the European Commissioner for Competition making a very big mark for her unabashed willingness to challenge the largest U.S. digital firms, has been approved for both a second term heading the Competition Commission as well as a Digital Economy portfolio.  Despite Vestager’s high tech profile, some saw Internal Market-nominee Sylvie Goulard, an ally of French President Macron, as potentially an even more important tech policy regulator with her proposed Internal Market remit. While she will not be part of the new EC government, it is unclear if Von der Leyen will adjust the substantive Internal Market portfolio. The sense of overlapping responsibilities between commissioners was a concern raised by some observers, as was the wide scope of some Commissioner duties, including Vestager’s dual role.

OECD Head of Tax Policy Indicates That an International Corporate Tax Reform Deal is Close

Report from Reuters

In Brief – The Secretariat of the Organization for Economic Cooperation and Development has released a high-level proposal to resolve international corporate tax controversies often blamed on Internet businesses.  The proposal (a copy of the 21-page dopcument is here) focuses on the issues of “user participation”, “marketing intangibles”, and “significant economic presence” for consumer-facing businesses. Initial reports project the winners (governments to collect more revenue) will be the large consumer markets, such as the United States, Germany, UK & France, while losers (governments likely to benefit less or collect less revenues), are the smaller market, digital corporate investment hubs, including Ireland, Switzerland and Luxembourg (let alone smaller market tax havens). The proposed global revenue threshold for this new consumer-facing business tax regime is 750 million Euros ($823 million). The proposal will be formally presented to the G20 Finance Ministers on October 17-18, and a consultation process in November and December is planned.

Context – The Internet and digital services have increased the ability of companies to serve consumers remotely. Consumer-facing Internet businesses that had large numbers of users in big national markets, while doing most of their operations (and hence “earning” their profits) in the U.S. and smaller, lower-tax markets, has driven many larger-market countries to demand global tax changes and explore national “digital services taxes” targeting big Internet companies. The United States has pushed hard against Internet-focused tax plans and this OECD proposal appears to meet that requirement by applying a new formula-based, market-by-market, profit and tax system to all manner of consumer-facing businesses, many of whom use a range of IP-based profit shifting tactics.  Even if the United States, large EU countries, Japan and Korea support the plan, moving from concept to concrete rules and formulas, as well as national implementation, will take meaningful time.

Facebook’s AG Investigation Grows to 40 States as Leaders Meet with AG Barr

Report from Reuters

In Brief – The committee of State Attorneys General investigating Facebook for anti-competitive business practices, led by AGs from New York, Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia, has reportedly grown to include up to 40 states, a meaningful increase from the eight states announced in mid-September.  A small group of the States AGs, led by New York’s Letitia James, were in Washington, DC this week and reportedly met with U.S. Attorney General Bob Barr and the Department of Justice’s top anti-trust officials regarding the Facebook-related initiatives of both the AG committee and the Department of Justice.

Context – The 40-state AG investigation of Facebook now looks equally robust as the 50-state (and territory) AG investigation of Google, which is led by Texas AG Ken Paxton.  In addition, the State AG meeting with U.S. AG Barr and the senior Department of Justice team is further indication of the apparent breakdown of the mid-summer effort by the Department of Justice and the Federal Trade Commission to divide up leadership on federal antitrust investigations into each of the four biggest four digital platforms.  While Justice was initially reported to be taking the lead on Google and Apple, with the FTC taking the lead on Amazon and Facebook, it is increasingly clear that the division of labor has broken down, in particular with the Department of Justice initiating their own investigation of Facebook, with was raised in a September congressional hearing.  In parallel with the Department of Justice jumping into the Facebook investigation business, AG Barr has been raising his deep concerns with Facebook’s plans to extend end-to-end encryption to all of its user messaging services, which law enforcement officials believe will harm crime-fighting capabilities, most recently in a public letter to Facebook co-signed by the chief law enforcement officials of the UK and Australia asking the company to drop their current encryption plans.

EU Commissioner Hearings – Jourova on Smart Regulation of Disinformation and Vestager on Taxes

Report from the EU Observer

In Brief – As commissioner candidates for the incoming government of European President Ursula von der Leyen go through their confirmation-style hearings, Commissioner for Values and Transparency, Vera Jourova of the Czech Republic, reiterated that she was committed to improving the transparency of online political advertising and fighting online disinformation, without developing some form of European “Ministry of Truth”.  Current Commissioner for Competition, Margrethe Vestager, who will continue in that role and add a broad digital policy portfolio, reiterated her call for Europe enacting a unified digital services tax by the end of 2020 if there is no international consensus, such as through the OECD.  Vestager also again noted her reticence to attempt to break up giant tech companies on competition grounds, calling for more measured tools such as fines and behavioral mandates.

Context – Stories to the effect that Commissioner Vestager is the most powerful technology regulator in the world (she is definitely one of them), sometimes miss the fact that a number of the European Commissioners slated for the Von der Leyen Government carry important digital platform industry policy responsibilities. Of course, Vestager’s competition portfolio will include looking directly at digital giants like Google, Amazon, Facebook and Apple, as well as issues such as the data policies of giant platforms. Jourova, who as Justice Commissioner has been active on digital policies and helped create the EU Code of Practice on Disinformation, will be engaged on the political aspects of social networks, digital communications and advertising. And Commissioner Sylvie Gouland of France, if she gets past some ethics questions, will have an issue portfolio as Internal Markets Commissioner that rivals Vestager in terms of digital impact, including standards for 5G Networks and AI, as well as drafting a new Digital Services Act.

Digital & Industry Groups Press for eCommerce Agreement as WTO Public Forum Kicks Off

Report from Multichannel News

In Brief – A collection of 27 business advocacy organizations from the United States, Europe, Asia, Africa and South Africa released a letter calling for concerted action to conclude a World Trade Organization (WTO) Agreement on E-Commerce.  The groups outlined thirteen policy positions aimed at an agreement that they described as “inclusive, high-standard and commercially meaningful”, including recommendation regarding internet taxes, customs and duties, technology disclosure mandates instances of what they see as digital protectionism.

Context – The World Trade Organization’s Public Forum is in its 19 iteration this week in Geneva, Switzerland, offering a range of corporate, civil society and academic stakeholders an opportunity to engage in discussions with WTO and government officials over the direction of trade policy.  Ecommerce and the potential for digital platforms to promote inclusive and small business economic opportunity has been a key part of the WTO Public Forum agenda for a number of years, and the current effort underway among over 70 countries to develop a new ecommerce agreement is an area of potential multinational trade progress. It is worth noting that the international group of trade associations called for “the adoption of non-IP intermediary liability protections”, which in the U.S. context can be thought of as Section 230 of the Communications Decency Act, an oft-misunderstood but fundamental Internet public policy provision. The inclusion of that standard in U.S. Government trade agreement goals was recently the subject of a critical letter from the leaders of the U.S. House Energy & Commerce Committee, who expressed concern that including adherence to Section 230 liability standards in trade agreements could inhibit in some manner congressional flexibility to change the law at some point in the future.

New State Sales Tax Regimes for Internet-Enabled Marketplaces and Retailers

Report from Forbes

In Brief – On October 1st, barely a year after the landmark United States Supreme Court South Dakota v. Wayfair decision authorizing U.S. States to impose sales tax collection and remittance obligations on remote retailers (generally considered Internet Sales Taxes), laws imposing sales tax collection duties on Internet marketplaces went into effect in 14 states (AZ, CA, CO, ME, MA, MD, MN, NV, ND, OH, OK, TX, UT & WI) and on remote retailers directly in 7 states (AZ, KS, MA, MD, MN, TE & TX).  The sales thresholds at which point the tax collection duties kick in for the marketplace platforms and retailers vary state-by-state, with the largest being the $500,000 threshold in California, Texas and Tennessee.  At this point, 43 of the 45 states with sales taxes have extended tax collection to Internet retail regardless of the seller or marketplace having in-state physical presence.

Context – Rather than attempt to enforce tax collection on large numbers of small enterprises on the Internet, many states are focusing on requiring ecommerce platform businesses to collect taxes on behalf of all sellers, even the smallest. These marketplace tax laws appear to have circumvented the Supreme Court’s small business economic nexus thresholds and eased state efforts to garner mass compliance. In an interesting Wayfair economic nexus corollary, Pennsylvania’s Department of Revenue has announced that they will apply the concept to state corporate income taxes starting in 2020, with companies earning $500,000 from business in the state being required to file Pennsylvania income taxes. Internet marketplace tax collection duties based on economic nexus are also spreading globally.

Reaction to South Park’s Band in China Shows Difference with Chinese “Internet”

Report from The Hollywood Reporter

In Brief – Following the airing of the most recent episode of the satirical comedy show South Park, titled Band in China, which offers a sharp critique of the human rights and censorship regimes in China, as well as how Hollywood shapes content to avoid offending Chinese government censors and policies, a range of media sources are reporting that all South Park content appears to have been stripped from the Internet and digital platforms in China.

Context – In another example of the difference between the comparatively decentralized nature of the operations of the Internet in most major markets globally compared to digital communications in China, the apparent ability of Chinese digital services providers to essentially block all South Park content from the major digital communications and entertainment platforms in short order is a testament to the influence of the government’s digital regime. The prospect that Chinese Government interests are impacting communications outside China was recently speculated given the lack of Hong Kong-related user content appearing on TikTok, the Chinese digital service with the most non-Chinese users, as well as leaked TikTok content moderation guidelines. As South Park hit out at U.S. companies for attempting to navigate the restrictive Chinese market, in particular Disney, similar tensions burst to the fore related to a pro-Hong Kong democracy tweet from an executive of the NBA’s Houston Rocket’s franchise, which garnered immediate and harsh criticism from a wide range of Chinese officials, rapid apologies from the League, team and players, and follow-up criticism for the NBA apologies from some pro-Hong Kong U.S. elected officials.

Facebook Pressed by US, UK and Australia to Drop End-to-End Encryption Plans

Report from the New York Times

In Brief – The top law enforcement officials of the United States, United Kingdom and Australia have joined together in a call for Facebook to abandon their end-to-end encryption plan for the communications capabilities of their four major services, Facebook, Messenger, Instagram and WhatsApp, unless the company provides for the ability to lawfully access the content of communications, which is directly contrary to the current Facebook plans.  WhatsApp, the Facebook service with the most users worldwide, is the only one of the four Facebook communication services that currently uses end-to-end encryption. The US-UK-AU letter highlights how government and Facebook efforts to combat child exploitation, terrorism and other crimes would be undermined by end-to-end encryption without a designed work-around.

Context – The legal and philosophical fight over encryption, with the interests of free speech and civil libertarians on one side, generally aligned with technology firms, and law enforcement and national security interests on the other, often aligned with crime victims rights organizations, stretches back decades. (The historically inclined might want to read about The Clipper Chip.) Nearly the entire U.S. technology industry rallied behind Apple in 2016 in a confrontation over forced “unlocking” of iPhones. The US-UK-AU letter is not itself an action-forcing-event but instead is the latest reminder that this remains a major confrontation point. Globally, Facebook’s WhatsApp is under intense scrutiny and legal pressure in major markets including India and Brazil, while the UK and Australia are pressing for mandated access capabilities to all communications that exceeds the legal standard that exists in the United States. We will see if the declining reputation of the digital giants undermines their stand on private communications.

Singapore Implements “Fake News” Law With a Temporary Exemption for the Largest U.S. and Chinese Platforms

Report from SPGlobal

In Brief – Singapore’s landmark “fake news” law, enacted in May, has gone into effect, but rather than apply to all digital communications platforms, the subsidiaries of the largest international communications platforms have been granted a temporary exemption apparently to apply the requirements in the context of their massive global networks. Google, Facebook, Twitter, Baidu and Tencent’s Wechat were named in a ministerial note as specifically receiving the exemption. The law applies stiff penalties, including fines and up to five years in jail, for the spread of what the government decides are false statements against the public interest. The law’s platform requirements include sending notices to users who have seen specific fake news and informing them that the content is false; blocking access to false content; and banning users who spread false news from using platform’s services.  It is not clear how long the major companies will be given to implement their compliance plans.

Context – Fake News, a concept that civil libertarians, free speech advocates and those challenging the political mainstream question is truly definable, is energizing governments worldwide.  The law in Singapore, which now is in force for local, smaller, digital firms, but is not initially being applied to the major International platforms, creates a two-tier dynamic that is similar to Korea where the Democratic Party of Korea is supporting an effort to expand fake news-type regulations imposed on Korean digital firms, such as Naver and Daum, to the international platform giants such as Google and Facebook.  In Korea, as in most democracies, government-driven anti-fake news initiatives are raising political censorship concerns.

ECJ Ruling on Facebook Global Take Down Obligations In Light of Last Week’s Google Ruling

Report from the BBC

In Brief – In the second major decision in two weeks on whether digital businesses must implement European legal and regulatory decisions globally, the European Court of Justice (ECJ) ruled that Facebook could be required to implement a national court order to remove illegal content, including “equivalent” copies, from their services across Europe and even globally.  The case of Eva Glawischnig-Piesczek v. Facebook involved highly critical user comments of Ms. Glawischnig-Piesczek, an Austrian politician, including links to a harsh story. Ms. Glawischnig-Piesczek prevailed in Austrian court that the content was illegal in Austria and ordered Facebook to delete the content, including copies posted by other users, on all Facebook platforms. The type of content involved in this case would not, for example, be illegal in the United States.

Context – This Facebook-related decision seemed to contradict last week’s ECJ decision that appeared to determine that a search engine (Google) could not be required to de-list content globally based on the European “Right to be Forgotten”.  It now appears that the Court in both cases is saying that current Europe-wide law neither mandates, nor explicitly prohibits, enforcement of European regulatory and legal decisions on the Internet outside Europe, and that national courts are currently empowered to make those decisions without providing clarity on the standards. From the ECJ Facebook opinion, “the Directive on electronic commerce… does not preclude a court of a Member State from ordering a host provider to remove information covered by the injunction within the framework of the relevant international law, and it is up to Member States to take that law into account.”  In the ECJ Google opinion, “EU law does not currently require a de-referencing to be carried out on all versions of the search engine, it also does not prohibit such a practice. Accordingly, the authorities of the Member States remain competent to weigh up, in the light of national standards of protection of fundamental rights… (and) to order, where appropriate, the operator of that search engine to carry out a de-referencing concerning all versions of that search engine.”  At this point there is no clear answer to the cross-border enforcement question.

Digital & Competition Commissioner Vestager Supports EU Digital Tax by End of 2020

Story from Reuters

In Brief – Margarethe Vestager, European Commissioner-designate for Competition and Digital Policy, and Paolo Gentiloni, European Commissioner-designate for Taxation, each called for the European Union to enact a Europe-wide Digital Services Tax (DST) if multilateral efforts are not successful in 2020.  Vestager and Gentiloni expressed these views in written responses to questions from the European Parliament as part of the vetting process for proposed commissioners in the government of incoming EU President Ursula von der Leyen. A robust effort in 2018 to enact a European DST amounting to 3% of select digital services revenue of large digital enterprises failed due to public opposition from Ireland, Sweden and Denmark, as well as reported concerns of Germany with U.S. threats of trade retaliation.

Context – Increased digitization of the economy challenges traditional tax models on a number of levels. The DST effort in Europe is focused on the issue of profit “attribution” to the country markets where large digital firms have large numbers of users. DST advocates believe new rules are needed so digital services firms pay more taxes in large user-market countries. Absent meaningfully more taxes paid by the firms in question, smaller market countries that are home to digital firms could be disadvantaged, hence the roster of countries that objected in 2018. Following that failed EU effort, a number of European countries pursued national DST initiatives. (Here is a helpful chart on the status of national DST laws in Europe.  And also a link to the status of similar national DST initiatives in a number of Asian countries.) France’s DST was enacted earlier this year and led to a high-profile stand-off with the U.S. Government, which strongly advocates a multilateral approach, such as at the OECD, which would apply to a much wider range of multinational businesses rather than just “Internet” companies. It was reported in late August that a rebate-type compromise deal was reached between France and the United States.

Federal Court Upholds FCC Ending Obama-Era Net Neutrality But Leaves Open State Fights

Report from the New York Times

In Brief – The Federal Appeals Court of the District of Columbia has issued a decision that largely upholds the Federal Communications Commission’s (FCC) partisan decision in 2017 to overturn the FCC net neutrality rules from 2015 which were also enacted by a partisan vote. Trade groups representing Internet businesses largely supported the legal challenge to the FCC’s 2017 rule. Net neutrality advocates expressed disappointment with the ruling but focused attention on the court’s decision to overturn the component of the FCC’s 2017 rule that imposed a blanket preemption on state-level net neutrality laws, leaving the door open to state net neutrality laws that will likely be challenged by the FCC when the agency is led by Republicans.

Context – The legislative, legal and regulatory battles over net neutrality stretch back to the mid-2000’s. (Here is a moderate length history.)  It is now marked by a partisan and ideological divide with most Democrats supporting “strong” net neutrality and nearly all Republicans objecting to strict mandates, in particular on the key issue of “paid prioritization”.  States where Democrats hold sway may follow the lead of California and enact a strong state net neutrality law, leading to case-by-case federal court challenges. Initial reactions from Democratic and Republican issue leaders on Capitol Hill illustrated the ongoing policy disagreements. And if the next President is a Democrat, expect the FCC to take action that moves back toward the 2015 policy.

Top European Court Rules that User Consent to Cookie Tracking Must Be Transparent and Explicit

Report from TechCrunch

In Brief – The European Court of Justice has made a ruling that clarifies and tightens the law in Europe regarding the use of web site cookies and the need for clear consent by users. In particular, the court ruled that pre-checked consent boxes for dropping cookies are not legally valid and that consent must be obtained prior to storing or accessing non-essential cookies, such as tracking cookies for targeted advertising.  The case was initiated in 2013, meaningfully pre-dating the General Data Protection Regulation (GDPR) that has garnered so much attention globally, but adds clarity to how European courts will interpret online user consent policies going forward.

Context – In the U.S., with the California Consumer Protection Act (CCPA) going into effect on January 1, this legal decision in Europe is likely to push forward an effort to provide greater clarity on what the CCPA’s cookie provision means in practice. In addition, further strengthening of the California law will potentially be on the ballot in 2020. Finally, the European Commission has proposed a regulation strengthening of the ePrivacy Directive that would, like the GDPR, set a single consistent standard across Europe on digital privacy and related policies, including on cookies, which like the GDPR would extend to non-European companies with European users.  The clear decision of the top European Court on user consent is likely to encourage efforts to press for clear, understandable and meaningful user control over data and tracking policies.

Canadian Liberal Party National Election Platform Proposes New Digital Tax

Story from The Star

In Brief – The Canadian Liberal Party, led by Prime Minister Justin Trudeau and locked in a tight national campaign with an election set for October 21, released its national party platform and for the first time called for enactment of a digital services tax that would mostly impact large U.S. enterprises. They propose a 3 percent value-added tax on targeted advertising services and digital services of businesses with worldwide revenues of at least C$1 billion and Canadian revenues of more than C$40 million. In May, Trudeau’s Liberal Government released a set of initiatives they labeled a Digital Charter, covering a range of Internet privacy, content moderation and competition policy proposals.

Context – The list of national governments lining up to impose new corporate taxes on very large digital companies continues to grow. Probably the highest profile digital tax confrontation has been between France and United States, and an agreement was reported by French PM Macron in August where France would implement its new 3% digital levy and then refund taxes in excess of what is due in the event of an eventual multilateral agreement. The U.S. Government is pressing for broad, multilateral, corporate tax reform at the Organization for Economic Cooperation & Development that would apply to all corporations rather than just Internet businesses. In other North American digital tax news, the Mexican Government recently released a Tax 2020 proposal including a similar type of digital services tax, and Costa Rica is moving forward on new digital platform tax collection.

Singapore Targets Deceptive Pricing Tactics in the Online Travel Industry

Report from Channel News Asia

In Brief – Singapore’s competition authority, the Competition and Consumer Commission of Singapore (CCCS), has released a study on price transparency and deceptive practices in the online travel booking industry.  The CCCS reviewed four common online pricing and marketing practices: drip pricing; pre-ticked boxes for additional products or services that require opting out; strikethrough pricing, where one price is crossed out next to a “sale” price; and various pressure selling tools to push a consumer to make the purchase. They are calling for firms to abandon these online practices.

Context – The term “dark patterns” is often used to describe these types of website marketing tactics and is the topic of legislation in the United States Senate from Sens. Warner and Fischer. “Drip pricing”, the practice of presenting an advertised price at the beginning of an online purchasing process, and then disclosing fees and charges incrementally as the process moves forward, is a tactic the online event ticketing and hotel bookings industries have faced particularly severe criticism from consumer protection advocates, including internationally in Australia and the EU, and recently in the U.S. at the FTC, including at a mid-summer hearing on the event tickets market, in attorney general suits, and most recently with the recent introduction of H.R. 4489, the “Hotel Advertising Transparency Act of 2019.”

Banned Australian App Developer Fails to Win Federal Court Injunction Against Facebook

Story from The National Law Review

In Brief – Stackla, an Australian-based start-up technology firm that provides analytical insights based on what they claimed was public Facebook and Instagram data that the firm accessed through APIs as a Facebook business partner in good standing, saw their motion for a temporary restraining order (TRO) on Facebook to block the social network giant from banning it from accessing data rejected. Facebook’s banning of Stackla was part of their recent action banning hundreds of developers and thousands of apps that they claim were violating the privacy and data access rules of the platform, which was seen by many as a reaction to the Cambridge Analytical scandal.  Stackla based their action on a recent Ninth Circuit decision granting a temporary injunction to app firm hiQ allowing it to continue to access LinkedIn public profile data, which LinkedIn had acted to block, because the data was critical to hiQ’s operations. 

Context – Content moderation decisions invariably have two sides and can heighten concerns with the impact of the largest platforms when other meaningful user options are not available. Unlike the oft-reported issues related to free speech versus hate speech and other objectionable user content, there is a business user corollary when a dominant platform like Facebook makes a moderation decision and the penalized user is a small businesses that claims to be wronged and has no meaningful recourse. For example, the Massachusetts AG subpoenaed information from Facebook on this privacy review to investigate whether the company acted aggressively enough, Stackla’s comes from the other direction, claiming that its business is being unfairly terminated.  Unlike Korean-firm hiQ, Stackla will not be able to press forward under their current business model as they pursue litigation, and their TRO request claims the ban will likely shut them down.

US Threat to Withdraw from the Universal Postal Union and Global Postal Rate Regime Diffused

Report from the New York Times

In Brief – An ecommerce-related front in the broader U.S.-China trade conflict, which could have resulted in the Trump Administration pulling the United States out of the Universal Postal Union (UPU), the international organization that governs the cross-border rates used for international mail and package delivery, appears to have been defused by a UPU agreement allowing the U.S. to adjust upwards the rates they can charge foreign postal services starting next July.  Cross-border postage rates involve “terminal dues”, which essentially is the fee that the destination-country postal service receives for the delivery half of the mail service. For decades, the UPU terminal dues regime based the fees on a five-tier ranking of the level of development of the sending country, so that senders from poorer countries could send mail for lower rates. China’s status as a third tier developing country with preferential rates was a highlight of disagreement that threatened to undermine the entire system.

Context – Small businesses using ecommerce platforms engage in significant exporting, and postal services often provide the shipping with very competitive rates, especially for smaller, lighter, and lower-value shipments.  The large and growing volume of ecommerce shipments from China to U.S. consumers, being mailed at meaningfully lower postal rates than similar ecommerce shipments from one location in the United States to another, had created a range of angry stakeholders including many U.S.-based small business sellers, large retailers, manufacturers and private shippers, each believing that the UPU terminal dues formula unfairly subsidized exports from the giant and mature Chinese economy.  These stakeholders found voice in the Trump Administration willing to engage in high stakes economic conflict over China and trade.

Leaked TikTok Content Moderation Guidelines Give Insight Into Platform’s Potential Censorship

Story from The Guardian

In Brief –  Documents outlining the content moderation policies of TikTok, the popular Chinese-owned social network that was the most-downloaded iOS app in 2018 worldwide, are reported to explain how the service blocks a wide range of topics in non-Chinese markets considered controversial by the Chinese Government.  The leaked materials instruct content moderators to censor videos that mention topics such as Tiananmen Square, Tibetan independence, the banned religious group Falun Gong, and other sensitive political and social topics under categories such as “hate speech and religion” and “criticism/attack towards policies, social rules of any country”.  Restricted material can be deleted from the site as well as result in a user being banned from the service, while lesser categories of problematic content are left up on the sight but with limits on its distribution through TikTok’s algorithmically-curated feed. TikTok officials responded to the report claiming that the documents and policies were outdated and no longer operative.

Context – TikTok is a social media phenomenon that has exploded in popularity in recent years and is the most-used Chinese-owned digital service outside of China, in particular in the United States. If you are not familiar with the service, this article from The New Yorker is an interesting user-experience deep dive. Given the widely recognized active role the Chinese Government plays in regulating digital content and communication inside China, questions have been raised regarding whether Chinese-based Internet businesses would in some manner engage in government-encouraged content moderation outside China, including in the United States, something that some believe is happening in the context of the Hong Kong democracy demonstrations.

Social Media Law Enforcement Obligations Get Push from Indian Supreme Court in WhatsApp Case

Report from the Economic Times

In Brief – As the Indian Supreme Court considers a request from Facebook’s WhatsApp business to consolidate at the national Supreme Court a series of regional cases dealing with WhatsApp obligations to police user activity and share user data with law enforcement, the justices have called on the national government to finalize within three weeks stalled rules on the content moderation and law enforcement obligations of social media services.  The case reflects years of concerns from law enforcement and government regulators regarding negative social media and communications user behaviors, including sectarian violence, terrorism and pornography.  India is WhatsApp’s largest market, with over 400 million users, and the platform champions secure encrypted communications. The Indian Ministry of Electronics and Information Technology (MEITY) released draft Information Technology Intermediaries Guidelines in 2018 and elicited a wide range of comments from across industry and societal stakeholders that were published in February.  The new rules have been stalled since.

Context – India is reportedly the largest market, based on user numbers, for both Facebook and its WhatsApp service, as well as Chinese-owned social media service TikTok.  WhatsApp has been committed to defending encryption and private communications, a position applauded by free speech advocates in India. TikTok usage in the country has exploded in just two years and problematic content, including videos inciting violence, has reportedly made is it the social media service’s market with the most pressing content issues, leading to calls by Indian politicians to completely ban the service and TikTok to respond to direct questioning from MEITY.

Expansion of California Privacy Law May Be a California Ballot Initiative in 2020

Report from the Los Angeles Times

In Brief – The businessman who qualified a data privacy California ballot initiative for the November 2018 election, and withdrew the initiative when the state legislature enacted the California Consumer Privacy Act (CCPA) that summer, has announced plans for a new digital privacy state ballot initiative, this time aiming for November 2020.  The initiative is expected to establish a stand-alone state privacy regulatory and enforcement agency, provide additional consumer control over various classes of personal information including race, health, and recent locations using GPS technology, enact stiffer rules around data pertaining to children 16-and-under, and require transparency related to algorithms used to determine employment prospects, or the ability to obtain housing, credit cards, loans or other key services.

Context – California’s CCPA, enacted soon after the EU’s General Data Protection Regulation (GDPR) went into effect, was widely seen as a possible trigger for federal privacy legislation due to industry concerns that overlapping state privacy standards could become unmanageably complicated. That has not yet happened. However, for example, Nevada’s new state privacy law goes into effect on October 1, and other states are expected to watch developments in California.  The implementing regulations for the CCPA are expected in October, the law goes into effect on January 1, and the CA Attorney General can bring enforcement actions starting six months later. In addition, while often paired with the GDPR in peoples’ minds, the CCPA is meaningfully different. The new initiative would address some of the differences and go further in some ways.

ASEAN Governments Cooperating on Digital Content Regulation and Taxation

Report from Reuters

In Brief – Ad hoc coalitions of governmental agencies in Southeast Asia are coming together to address concerns with digital platform businesses, especially the largest international enterprises heavily used by the large and growing online populations in many of the countries. The new initiatives include an effort by Indonesia to join forces with Thailand, Vietnam and the Philippines in demanding action from Google, Facebook and other companies on tax policy and content regulation (“fake news”).  Indonesia has been pressing forward with legislation to require digital firms, regardless of physical presence in the country, to collect VAT on digital services, an effort that has engendered interest in other countries.  Thailand’s Telecommunications Commissioner unveiled a proposal this summer for digital platforms to support the creation and operation of “fake news centers” in ASEAN countries where the platforms would cooperate with national governments to address problematic content, which was received positively regulators in other ASEAN countries.

Context – Speaking of “fake news”, the desire for more aggressive content moderation by digital platforms, especially Facebook and Google, is expanding globally, and not just in developing countries where concerns over the potential for repressive uses are widespread. The head of Japan’s Fair Trade Commission, the country’s competition authority, which is actively reviewing the largest digital platforms, recently called on digital platforms to do more to fight fake news.  The topic is also prominently addressed in Australia’s ACCC Digital Platform Inquiry. Finally, Singapore enacted a national law targeting Internet-enabled fake news earlier this year, raising significant free speech concerns.

Australian Traditional TV Lobby Group Harshly Critical of Digital Platforms

Report from The Sidney Morning Herald

In Brief – Free TV Australia, a trade association representing the country’s broadcast television industry, has submitted comments to the Treasury Department of Australia’s public consultation on the Australian Competition and Consumer Commission (ACCC) final report on digital platforms.  The ACCC report focused on the impacts of mega-platforms Facebook and Google, in particular on the advertising and traditional media markets in Australia, and included 23 recommendations that will be considered by the Australian Parliament and Government.  Free TV Australia strongly backed a recommendation for a new code of conduct dictating the rules around negotiations between social media and search companies and content creators, including news publishers and TV networks, a recommendation opposed by a trade group representing Google and Facebook.

Context – The Australian Government’s regulatory efforts aimed at the largest digital platforms is moving steadily forward and driven by government leaders who are highly critical of the tech giants.  Australia’s traditional media industry has been a key champion of the regulatory campaign and the inclusion of a range of proposals to improve the business prospects of media firms is a unique focus of the ACCC package compared to a number of other digital competition reviews.

Canadian Competition Bureau Announces Consultation on Digital Competition

Report from the Financial Post

In Brief – The Canadian Competition Bureau has requested information from digital market participants regarding conduct related to network effects on competition and advantages related to economies of scale and scope, including access to very large volumes of data.  The Bureau’s list of such strategies includes protecting core markets, capturing adjacent markets, refusals to deal, self-preferencing, margin squeezing and acquisitions intended to undermine future competition.

Context – If you are keeping track at home, the Canadian Competition Authority’s stepped up review of the largest digital platforms joins active efforts in Japan, Korea, Australia, the EU, Italy, UK, and Germany among other. Along with these more advanced digital markets, the Brazilian Competition Authority (CADE) recently released a major report on competition policy and digital platforms in the BRICS at a Moscow conference on the topic. Google, with a 97% market share in Brazil, is the subject of three antitrust reviews in Brazil – alleged abuse of dominant position in the news and search markets; abuse of dominant position in general search to favor its own local search service; alleged use of Android operating system to dominate the local mobile device market.  The report also notes CADE concerns with Amazon’s relationship with third party suppliers and MFN and exclusivity clauses.