FTC Action Against Meta/Facebook

The Federal Trade Commission (FTC) announced (May 3) that it is proposing to modify a prior privacy order on Meta/Facebook, to prohibit the company from profiting from the under-age-18 user data it collects, including through virtual reality products.

The revised privacy order also, among other things, prohibits the release of new or modified products, services, or features without written confirmation from the assessor that its privacy program is in full compliance with the order’s requirements and presents no material gaps or weaknesses; ensure compliance with the FTC order for any companies Meta/Facebook acquires or merges with, and to honor those companies’ prior privacy commitments; and to disclose and obtain users’ affirmative consent for any future uses of facial recognition technology.

The FTC suggests it is taking these actions because the company failed to fully comply with the current order including misleading parents "about their ability to control with whom their children communicated through its Messenger Kids app, and misrepresented the access it provided some app developers to private user data.”

The company will have an opportunity to respond to the order before final action on the proposal by the FTC.

(posted: 5-4-23)

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New Bipartisan Social Media Proposal

A bipartisan group of Senators introduced (April 26) a social media regulation proposal that would set a minimum age of 13 for use of social media applications along with a parental consent requirement for kids age 13-17. Sponsoring Senators include Brian Schatz (D-HI), Tom Cotton (R-AR), Chris Murphy (D-CT), and Katie Britt (R-AL).

Among other things, the proposed “ Protecting Kids on Social Media Act” will require social media companies to:

• Implement age verification measures.

• Prohibit children under the age of 13 from using social media.

• Prohibit social media companies from recommending content using algorithms to users under the age of 18.

• Require a guardian’s permission for users under 18 to create an account.

While there has been strong bipartisan support for some time now in support of reforms to social media practices affecting younger Americans, no action was taken in the last Congress. It is not clear if, or when, this proposal will be considered by the Senate.

(posted: 4-26-23)

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CFIUS May Recommend China’s Divestiture in TikTok

The Federal Committee for Foreign Investment in the United States (CFIUS), administered through the Treasury Department, has reportedly recommended China’s divestiture in TikTok’s current parent company––ByteDance––in order to permit TikTok to continue US operations. The Chinese Government is said to have partial ownership in ByteDance indirectly through the stakes of Chinese nationals.

Given, in part, the Chinese government's statutory data access requirements that could be executed on TikTok via Bytedance–data that could be used for nefarious purposes–agency leaders and policymakers believe there is enough potential risk to US citizens and national security. There is also concern that China has the ability to strategically control and manage content to TikTok users in ways that can undermine national security. As a result, TikTok is potentially facing a US operations ban via a CFIUS decision if ByteDance refuses to divest in TikTok.

The company reportedly confirmed that CFIUS reached out to the company and that discussions are ongoing. Publicly, TikTok has been adamant that user data is protected from the Chinese government via its own administrative processes, policies and procedures.

The CFIUS process reviews foreign ownership and investment matters that have potential national security implications. Treasury chairs the committee, and therefore the Secretary of Treasury has primary say over final CFIUS recommendations. Some CFIUS matters go to the President, and this one has that potential. 

It is not publicly known what stage the process is in with respect to its TikTok review, though it is likely near its final stage. CFIUS actions, however, can be challenged in Federal court.

(posted: 3-16-23)

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TikTok Legislative Proposals

A bipartisan group of Senators put forward a proposal that (March 7), while not directly targeting TikTok, could eventually affect its ability to operate in the United States.

The Restricting the Emergence of Security Threats that Risk Information and Communications Technology Act (”RESTRICT Act”) (S.686) will require the US Commerce Department to establish procedures to “identify, deter, disrupt, prevent, prohibit, and mitigate transactions involving information and communications technology products in which any foreign adversary has any interest and poses undue or unacceptable risk to national security.”

Commerce would have to prioritize assessing communications and technology important to critical infrastructure and national security, with TikTok presumably in the latter category given the perception that the Chinese government can potentially use app via its ownership stake in it’s parent company–ByteDance–to control the free flow of information, and use the personal data of TikTok users for nefarious purposes such as the monitoring and tracking US citizens. The Biden Administration has expressed strong support for the proposal.

Given the bipartisan nature of the Senate proposal, the way forward on a House proposal on this issue is not currently clear. The House reportedly may consider a more direct approach, giving the President executive authority to ban technology like TikTok for US users pursuant to the International Emergency Economic Powers Act (IEEPA). IEEPA provides authority to Presidents to control economic transactions during national emergencies, and has been used 67 times since the law’s enactment in 1977.

If the Senate acts first and passes its proposal, however, the House could decide to only consider the Senate proposal.

(updated: 3-8-23)

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Report Recommends Mobile App Competition

The US Commerce Department issued a report (February 1) on the mobile app ecosystem that calls for legislation and antitrust enforcement actions to increase competition.

The report identifies two key competition issues:

• That consumers cannot access apps outside of the app store model controlled by Apple and Google, which limits “innovators” from reaching consumers; and,

• Apple and Google create developer hurdles to compete for consumers by imposing technical limits, such as defining how apps can function and “slow and opaque” review process requirements.

Recommendations include:

• Enable consumers to choose their own apps as mobile app defaults, use alternative mobile app stores, and delete/hide pre-installed apps.

• Do not permitting app store operators to “self-preference” their apps in an anticompetitive manner, such as favoring their own apps in search results or discriminating against apps similar to their own.

• Require operators to lift restrictions on alternative ways for consumers to download and install apps via sideloading, alternative app stores, and web apps, while also preserving “appropriate latitude for privacy and security safeguards.”

• Ban requirements that developers use app store operator in-app payment systems.

(posted: 2-2-23)

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Federal Antitrust Lawsuit Against Google

The Justice Department (DOJ), along with a group of states, filed an antitrust lawsuit against Google (January 24), concerning its monopolistic dominance of digital advertising.

The Department says that its lawsuit alleges that Google uses anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising, including a “pervasive and systemic pattern of misconduct.”

The anticompetitive conducted identified by Justice includes:

• Acquiring Competitors: Engaging in a pattern of acquisitions to obtain control over key digital advertising tools used by website publishers to sell advertising space;

• Forcing Adoption of Google’s Tools: Locking in website publishers to its newly-acquired tools by restricting its unique, must-have advertiser demand to its ad exchange, and in turn, conditioning effective real-time access to its ad exchange on the use of its publisher ad server;

• Distorting Auction Competition: Limiting real-time bidding on publisher inventory to its ad exchange, and impeding rival ad exchanges’ ability to compete on the same terms as Google’s ad exchange; and,

• Auction Manipulation: Manipulating auction mechanics across several of its products to insulate Google from competition, deprive rivals of scale, and halt the rise of rival technologies.

Google disagrees with the claims of the lawsuit claims, and believes that company actually operates in a “highly competitive advertising technology sector.”

A lawsuit of this nature could take years to adjudicate in the courts. Sometimes in antitrust cases the parties eventually come to a negotiated solution, but this could also take a considerable period of time.

(posted: 1-25-23)

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Google SCOTUS Brief on Section 230

Google filed a brief with the Supreme Court (January 12) on a case against the company (Gonzalez v. Google) that will be heard by the Supreme Court in oral arguments on February 21, with a decision expected by the summer. The case concerns the extent of Section 230 liability protections for Google and, by extension, other related technology companies.

The case at hand concerns liability protection against third-party content, where the claimant believes section 230 protection does not extend to algorithmically created content recommendations. The claimant believes that YouTube’s (owned by Google) algorithmic-driven, third-party content led viewers to become ISIS terrorists; that, YouTube did not do enough to prevent ISIS from using its platform to spread its message including adequately monitoring the platform or blocking ISIS from using it.

Google argues in its brief that because the internet is “unimaginably vast,” algorithmic tools are vitally important to a “functioning internet.” Google argues that if it was driven to drop targeting because of third-party content lawsuits, services such as Google Search “would display an unordered, spam-filled list of every website,” Gmail would could not filter spam, and YouTube would have to “play every video ever posted in one infinite sequence—the world’s worst TV channel.”

The US Department of Justice filed its own brief on the case in December, arguing against a blanket protection for Google under section 230. Justice said that while section 230 affords protections against the underlying content produced by third parties, the question of liability tied to algorithm-driven content delivery should be looked at by the Court uniquely.

(posted: 1-13-23)

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Biden Call for Tech Accountability Legislation

The Wall Street Journal published (January 11) an editorial by President Biden calling for legislation from Congress that will “hold Big Tech accountable.”

Presumably, this is the White House’s initial effort with a Republican-led House of Representatives to find bipartisan consensus on tech reform legislation that did not pass during the final days of the 117th Congress. While there was significant bipartisan support for legislation covering both privacy and competition, negotiated compromises between the House and Senate could not be secured. New legislation will have to be developed and passed in the current 118th Congress.

Though policy details in the editorial were not provided, the President is calling for measures on privacy tied to advertising directed at children, reform of Section 230 legal protections for technology companies,  and more fair “rules of the road” with respect to tech competition.

(posted: 1-11-23)

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Texas Social Media Law - Temporarily Blocked

A Federal Appeals Court blocked (October 12) the implementation of a 2021 Texas law (HB 20) that prevents large social media companies from removing, moderating, or labeling social media “viewpoint” posts of persons in Texas unless illegal under Federal law or subject to an exemption under the law. 

In general, some believe that conservative political views are being inappropriately and/or unfairly censored by large social media companies like Twitter and Facebook. A similar law enacted in Florida is also on hold via a separate Federal Appeals Court decision.

The social media industry petitioned the Supreme Court (October 24) for the Court to consider the Florida case (NetChoice v. Moody). If the Court takes the case, then its decision will likely affect the outcome of the case against the Texas law.

If the Supreme Court agrees to consider the Florida case, it would potentially be considered during the current Court session, though later in the spring of 2023 in late summer. 

(updated: 10-25-22)

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Gig Workers as Employees - Proposed Rule

The Department of Labor (DOL) announced (October 11) a proposed rule to enable a broader set of factors for determining the employment status of so-called “gig workers” that is likely to undermine the ability of some companies to treat such workers as independent contractors instead of employees.

Under the proposal, groups of gig workers could be considered employees of a company after a “totality of circumstances analysis,” that the Department says is consistent with “longstanding judicial precedent” relied upon for determining the classification of workers under the Fair Labor Standards Act. The classification of a worker as an employee of a business means that he/she could receive within current Federal and state laws guarantees on minimum wages and overtime, among other types of employee protections.

This proposed rule would formally replace one that was put into place during the final days of the Trump Administration. That prior rule was intended to minimize the factors considered for determining employee status by elevating certain factors above others: i.e., the nature and degree of control that a worker exercised over key aspects of the performance of the work and the worker’s opportunity for profit or loss based on the exercise of initiative and/or management of investment. The prior rule, if enforced, would have had the effect of permitting most gig workers to remain as independent contractors.

If the new rule is finalized in its current form, DOL will be able to make employee classification determinations based on a multitude of factors, some of which could include the extent to which services rendered are an integral part of the principal's business, the permanency of the employment relationship, and the nature and degree of employee control by the company, among other things.

The proposed rule will undergo a comment period for most of the rest of 2022. Any final rule would likely not be completed by DOL, and implemented, until later in 2023 at the earliest. 

A process within DOL for making each individual employee group determination, and administratively adjudicating each decision, could take years.

(updated: 10-11-22)

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EU Common Charger Rule

The European Union formally adopted (October 4) a plan to establish a common charging standard for most electronic devices. The standard would be USB Type-C, and would apply to devices such as mobile phones, tablets, digital cameras, headphones and headsets, handheld video game consoles and portable speakers. The intent of the proposal is to significantly reduce wire-generated e-waste, as well as reduce costs and improve simplicity for consumers.

Under the agreement, by the end of 2024 all battery-powered portable devices sold in the EU must have a USB-C port or rely entirely on wireless charging. Makers of laptops will have until 2026 to implement the standard.

Samsung already uses USB-C charging ports on its iPads and laptops, but Apple currently does not.

(updated: 10-4-22)

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Antitrust Legislation Movement in Congress

The House of Representatives passed (September 29) the Merger Filing Fee Modernization Act (H.R.3843). The House vote was 242-184, with 39 Republicans voting for the legislation and 16 Democrats voting against the bill.

Principally, the legislation raises filing fees on large merger transactions; requires merging entities to notify antitrust agencies if they are subsidized by countries/entities that are either strategic or economic threats to the United States; and, enables state antitrust agencies to choose their Federal District Court venue for their antitrust enforcement action.

Some opponents are concerned that a provision to permit States to choose their enforcement venue would actually help conservative-leaning state efforts to target online companies for retribution purposes, including those company efforts to prevent hate speech, violence incitement, and other problematic content.

It is not clear that this legislation will be considered in the Senate during the current (117th) Congress. If it is considered, it is likely that some Senators will try to expand the antitrust elements of the House bill to include more significant online competition and privacy matters that have some bipartisan support but which have had strong industry opposition, and have been debated over the last year.

(updated: 10-4-22)

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Section 230 SCOTUS Review

The Supreme Court of the United States (SCOTUS) will review a case that could impact the current immunity of online technology companies under Section 230 of communications law. Section 230 generally precludes online content providers and users liability tied to information provided by third parties. There have been calls by public interest groups, and some in Congress through proposed legislation, to either repeal Section 230 outright, or revise the law.

In Gonzalez v. Google, SCOTUS is considering whether Section 230 immunizes tech companies when they make targeted recommendations based on information of third parties, in this case recommendations of terrorism-related videos from Google’s YouTube. A key potential outcome of the case could be that online platforms may no longer be permitted to use algorithms to recommend content to users.

(updated: 10-3--22)

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Online Privacy Proposals - Potential Consensus

A bipartisan, bicameral draft of online privacy legislation was released (June 3rd) that is  currently circulating within the Congress. The draft was produced by Senate Committee on Commerce, Science, and Transportation Ranking Member Roger Wicker (R-MS) and House Committee on Energy and Commerce Chairman Frank Pallone (D-N.J.) and Ranking Member Cathy McMorris Rodgers (R-WA). The key missing person in this group is Senate Commerce Chair Maria Cantwell (D-WA), who has a similar proposal but who has not signed onto this consensus version.

Among other things, the group’s proposal includes provisions that would minimizes the amount of data collected from users and bans the transferring of data of users age 13 to 17 to third parties without consent; enables consumers to turn off targeted advertisements as well as ban targeted advertising for minors; and grants protections for Americans against the discriminatory use of their data.

Potential significant sticking points on a consensus bill within Congress includes the extent that a Federal bill will preempt individual State online privacy laws, and the extent to which persons can pursue legal challenges to perceived violations of the new law in courts.

With respect to legal challenge, the group’s bill will not permit court cases to be considered until four years after enactment. It would also require persons seeking legal claims to first notify the Federal Trade Commission (FTC) and the attorney general in their State of residence of their intent to bring an action. Federal and State agencies would then have 60 days to make a determination on the individual’s claim.

Senator Cantwell has promised that the Senate Commerce Committee will meet to consider the proposal, and potentially markup a Committee bill. It is not certain, however, that at this point a bill will have sufficient support for consideration in the current 117th Congress.

(updated: 6-7-22)

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European Union Digital Markets Act

The European Union (EU) announced an agreement (March 24, 2022) on significant regulatory actions on digital services, particularly as related to competition and “gatekeeper” companies – i.e., the largest technology companies such as Google, Amazon, Meta, and Apple. Failure to comply with elements of the rules could result in staggering fines – up to 10% of global revenues, increased to 20% for repeat offenders. 

This action by the EU could have significant implication for simliar proposals currently under consideration in the United States. Among the key EU actions to address competition:

• Prevent gatekeepers from treating their own services and products more favorably with ranking over similar services or products offered by third parties.

• Requiring the ability of third parties to inter-operate with a gatekeeper’s own services in some situations.

• Allow business users to promote offers and conclude contracts outside the gatekeeper’s platform, and do not prevent consumers from linking up to businesses outside a gatekeeper’s platform.

• Allow business users to access the data that they generate in the use of the gatekeeper’s platform.

• Require gatekeepers to permit users to uninstall any pre-installed software or app.

Other key actions in the Act include measures to counter illegal goods, services or content online; obligations on traceability to help identify sellers of illegal goods; requirements on dispute resolution; transparency on algorithms used for recommendations including access of researchers to data; the ability to opt out of content based on profiling; and codes of conduct and technical standards to help ensure compliance.

Assuming final passage of the Act by the European Parliament and Member countries, the law is expected to go into effect later this year. Detailed implementing rules, which will likely be considerable, may take some time to develop.

(updated: 3-25-22)

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Child Protection Online 

The Senate Judiciary Committee approved (Feb 3, 2022) the Eliminating Abusive and Rampant Neglect of Interactive Technologies (EARN IT) Act (S.3538). The bill would drop liability protections for online platforms that have child sexual abuse content. Current law provides liability protection with good faith content moderation. According to the Congressional Research Service, "courts have interpreted Section 230 to foreclose a wide variety of lawsuits and to preempt laws that would make providers and users liable for third-party content." While online tech companies have opposed Section 230 reform generally, at least Facebook/Meta has in the past stated that it supports "thoughtful" reforms to section 230. 

Separately, Senators Marsha Blackburn (R-TN) and Richard Blumnenthal (D-CT) introduced (February 16, 2022) legislation (S.3663) to address child online safety. The Kids Online Safety Act would require social media online platforms (e.g., Instagram, TikTok, etc.) to provide parents and minors younger than age 16 with certain tools intended to keep them safe, limit screen time, and protect data. Among the provisions:

• Requires social media platforms provide options to protect their information, disable addictive product features, and opt out of algorithmic recommendations.

• Gives parents controls to help identify harmful behaviors, and provides parents and children with a dedicated channel to report harms to the platform.

• Creates a responsibility for social media platforms to prevent and mitigate harms to minors, such as promotion of self-harm, suicide, eating disorders, substance abuse, sexual exploitation, and unlawful products for minors.

• Requires social media platforms to perform an annual independent audit assessing risks to minors, compliance with the law, and whether the platform is taking meaningful steps to prevent harms.

• Provides academic and public interest organizations with access to online datasets to foster research regarding harms to the safety and well-being of minors.

A large coalition of child welfare organizations signed a letter to Congress (March 22, 2022), calling for the passage of legislation providing a "safer online environment" for children, to include legislation that:

• Protects children and teens wherever they are online, not just on “child-directed” sites; 

• Expands privacy protections to all minors; 

• Bans targeted (surveillance) advertising to young people; 

• Prohibits algorithmic discrimination of children and teens;

• Establishes a duty of care that requires digital service providers to both make the best interests of children a primary design consideration, and to prevent and mitigate harms to minors;

• Requires platform to turn on the most protective settings for minors by default; and,

• Provides greater resources for enforcement by the Federal Trade Commission.

(updated: 3-23-22)

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Preventing the Sale of Online Counterfeit Goods

The U.S. House of Representatives approved a comprehensive competition bill (February 4, 2022) (HR 4521) that includes a provision (Sec. 80103) addressing counterfeit goods sold via online marketplaces. The provision would effectively open up online marketplaces to trademark lawsuits over the sale of counterfeit goods if the companies do not comply with new regulations requiring them to identify and remove the counterfeit products.

Proponents argue that the proposal addresses “dangerous” counterfeit goods, posing health and safety risks and damaging the reputations of legitimate brands. Online companies argue they do not have the ability to find and address the sale of counterfeit products, and that companies could be forced to shut down.

A Senate version of competition legislation does not include this provision. The House and Senate are expected to negotiate a compromise version of a competition bill which may, or may not, include a provision on this matter.

(updated: 2-10-22)

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Anti-Trust Legislation

The Senate Judiciary Committee approved (Jan-Feb 2022) bills intended to address anticompetitive conduct by technology companies. The American Innovation and Choice Online Act (S.2292) limits the ability of large tech companies from prioritizing their products over the products of rival companies. Among other things, the legislation:

• Prohibits actions that would materially harm competition on their platform;

• Prohibits specific forms of conduct that are harmful to small businesses, entrepreneurs, and consumers, including: preventing another's product or service from interoperating with the dominant platform or another business; requiring the purchase of a dominant platform’s goods or services for preferred placement on its platform; misusing data to compete; and, biasing search results in favor of the dominant firm.

• Gives antitrust enforcers tools to deter violations and hold dominant platforms accountable when they cross the line into illegal behavior, including civil penalties, authority to seek broad injunctions, emergency interim relief, and potential forfeiture of executive compensation.

Both support and opposition has been strong. Forty companies released a letter to Senate sponsors of the bill expressing support, while another group -- The Chamber of Progress -- claims that the proposal will negatively impact tech products, calling out Amazon Prime as likely to be "significantly degraded."  Google expressed strong concerns against antitrust legislation in a blogpost, while Apple articulated its concerns in an an unreleased letter to Senators. 

A related approved bill, the Open App Markets Act (S.2710) would prevent app stores from requiring developers to use their payment system and would ensure users can download apps from third-party stores. Apple had previously released a whitepaper on so-called "sideloading" that details what the company believes are the problems with doing so. Apple claims that user security and privacy risk would increase significantly if it was compelled to permit the downloading of applications outside of its App Store. The Coalition for App Fairness expressed its support for such proposals.

Microsoft announced (February 9, 2022) that it was preemptively addressing antitrust concerns by adopting a set of "Open App Store Principles," which, among other things, provide that third party apps will not have to use Microsoft's payment system and will not provide a ranking preference to Microsoft products, and that users can use alternative app stores.

It is not known if, or when, anti-trust bills will be considered by the full Senate. The Justice Department reportedly sent letters the week of March 27, 2022, to House and Senate Judicary Committees expressing support for elements of the bills under consideration by the Senate.

(updated: 3-30-22)

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Broadband Nutrition Label

The Federal Communications Commissions (FCC) agreed to move forward (January 27, 2022) on a proposal would require broadband providers to display, at the point of sale, labels that show prices, including introductory rates, as well as speeds, data allowances, network management practices, and other critical broadband service information. The labels would be modeled after easy-to-read-and-understand nutrition labels required by the Food and Drug Administration. The FCC is taking public comments on the proposal during February 2022.

(updated: 2-2-22)

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Anti-Trust Lawsuits

The Federal Trade Commission currently has a case before the courts against Facebook/Meta (December 2020) alleging that the company is illegally maintaining its personal social networking monopoly through anticompetitive conduct. On January 11, 2022,  the judge in the case denied a motion by Meta to throw the case out, ruling that the FTC has "a plausible claim for relief." The FTC is seeking relief that could include, for example, the divestiture assets such as Instagram and WhatsApp; a prohibition on Meta from imposing anticompetitive conditions on software developers; and requiring Meta to seek prior notice and approval for future mergers and acquisitions.

The Department of Justice filed an anti-trust lawsuit against Google (October 2020) alleging that Google maintains monopolies through "anticompetitive and exclusionary practices in the search and search advertising markets." The case is not expected to go to trial until September, 2023.

(updated: 2-2-22)

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Facebook/Instagram Whistleblower

One or more whistleblowers have filed complaints with SEC concerning alleged material omissions and misrepresentations by Facebook to current and future investors, to include whistleblower Frances Haugen, who testified about her complaint at an appearance before the Senate Committee on Commerce, Science, and Transportation (October 5, 2021) 

Among other things, Ms. Haugen claimed at the hearing that Facebook is misleading the public about the findings of research conducted internally by Facebook which found negative effects of Instagram on teens; that, Facebook systematically targets young girls while at the same time knowing that the app is causing them harm. Facebook disagrees with such claims, and publicly released select information about the research.

 

(updated: 2-2-22)

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