U.S. playing catch up in regulating Big Tech

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This week, members of Congress tacitly acknowledged the U.S. government’s hands-off approach to antitrust enforcement in the digital marketplace has failed. Now the challenge is trying to catch up to Europe, the U.K., Australia and even individual American states that have already gone much further in regulating Big Tech players.

U.S. lawmakers unveiled a set of sweeping proposals this week to reign in major online platforms like Amazon, Google and Facebook. The measures aren’t likely to become law anytime soon — if ever — and are sure to trigger a high-powered lobbying battle on Capitol HIll. But Federal Trade Commissioner Rohit Chopra — a Democrat who is mentioned as a possible chair for the agency should Vice President Joseph Biden win in November — said the latest policy roll-out is just another sign that the U.S. Congress and even state legislatures have tired of waiting for antitrust enforcement to check the growing power of tech companies.

“What I see is a real skepticism of status quo antitrust,” Chopra said during a conference Tuesday on antitrust and regulatory approaches to digital markets. “We no longer have a monopoly on [setting] policies here. We’ve seen more and more move to legislatures” for decisions about dealing with digital markets.

Overseas, the regulatory efforts are even more intense.

“Europe is in the throes of a major revolution right now,” said Cristina Caffara, a competition economist with Charles River Associates, who represents Amazon, Apple, Russian search engine Yandex and previously worked for News Corp. “These platforms are going to have to change everything.

By far the biggest regulatory overhaul under consideration — and the one causing the most concerns for Amazon, Google and Facebook — is the European Commission’s plan to regulate tech, a legislative package known as the Digital Services Act. Among the proposals under consideration in Brussels is one that would impose rules on “gatekeepers” — platforms indispensable for companies to reach consumers and access online markets. These gatekeepers would include large marketplaces, app stores, social networks, online search engines, operating systems and cloud services — likely impacting the U.S.’s five biggest tech giants, Apple, Amazon, Facebook, Google and Microsoft.

“When you have a free market economy, there has to be a market,” EU Vice President Margarethe Vestager said Thursday at a virtual conference hosted by Fordham University Law School, ”and the market has to be contestable.”

The commission plans to propose a “blacklist” of prohibited conduct and a “graylist” that suggests when regulators may want to intervene.

The banned practices would include preferential ranking in search results, pre-installing their own apps as defaults and restricting businesses from offering cheaper prices or better terms on other websites. Google, Facebook and Amazon have all drawn complaints for these practices.

The draft graylist would include practices like restricting third parties from being able to access their customers’ data or preventing rivals from accessing the same features the gatekeeper has. Apple is most often criticized for those restrictions.

Though it is in the process of departing the E.U. as part of Brexit, the U.K. is contemplating some similar regulation.The U.K. launched a market study in July 2019 into online platforms and the digital advertising market. The inquiry, conducted by the U.K.’s Competition and Markets Authority, focused mainly on Facebook and Google, who dominate the markets for digital advertising on search and social media. The CMA’s report, finalized this July, found that the pair’s control over the market leads to reduced innovation and choice for consumers, potentially raising costs for products and services largely sold online like hotels, flights, consumer electronics, e-books and insurance.

The UK agency recommended the government create a new digital markets regulator that would have the power to designate companies as having a “strategic market status.” That would then allow the authority to impose additional requirements on a company, such as ordering Google to share data from its search engine and requiring Facebook to allow users to share their information seamlessly with other social networks.

In the months since releasing its report, the U.K. has been seeking information on smartphone app stores, like those run by Google and Apple, and online marketplaces like Amazon, with an eye towards recommending other regulations or legislation to Parliament in December.

The U.K. study was similar to one conducted in Australia, which has emerged as an unlikely trailblazer in digital regulation. Unlike many antitrust agencies, the Australian Competition and Consumer Commission, known as the ACCC, oversees both competition and consumer protection issues like privacy, data security and misleading advertising. ACCC Chair Rod Sims has said that dual mission allowed the agency a broad look into how companies like Google and Facebook have impacted other companies in the news and advertising markets as well as the effects on consumers.

In its final report issued last summer, the ACCC recommended a host of changes to how the country approaches competition and privacy, and a code of conduct for bargaining between Google and Facebook and the news media. Discussions over a voluntary code failed, so in April Australia’s government ordered the ACCC to develop a mandatory one. The agency has prepared a draft and held a public comment period this summer. (Google and Facebook, perhaps unsurprisingly, aren’t fans.) The ACCC plans to submit draft legislation to Australia’s Parliament by the end of the year.

Within the EU, various countries are also looking at legal changes to address the power of tech companies. In Germany, the government has proposed a so-called Digitization Act to give the competition agency the power to intervene with interim measures if it finds a large company has abused its market position.

“We need to do more than we have in the past,” Andreas Mundt, who heads the German competition agency, said Tuesday speaking alongside Chopra. “We need some kind of regulation, regulation that is deeply rooted in competition law.”

GLOBAL TECH SNAPSHOTS

China goes all in on standard-setting: Emerging technologies like AI and facial recognition are the newest battlegrounds between the U.S. and China. Over the past several years, Beijing has made in-roads at the UN and other top global bodies that establish the rules over which technologies become the standard for software, telecommunications, mobile phones and other key products. Huawei and other Chinese tech firms are exporting their products — which use China’s standards — around the world for use in 5G, telecom and AI infrastructure.

Opposition to Google-Fitbit deal intensifies: Wearable manufacturers and cloud providers are pressuring the European Commission to block Google’s proposed acquisition of Fitbit over concerns the deal will give the search giant access to sensitive health data. The U.S. tech company has offered a range of concessions, including promising not to use the data for advertising purposes and to continue letting other devices access Fitbit’s information, in a bid to gain approval for the merger.

A soft approach to AI: Fourteen EU countries led by Denmark called on the European Commission to adopt a “soft-law” approach to regulating artificial intelligence focused on self-regulation and voluntary practices. The paper is a response to the Commission’s February white paper on AI regulation, which called for strict rules when AI is used in certain sectors like healthcare and policing.

Brexit complicates U.K.-European data sharing: The EU’s top court ruled this week that the U.K.’s bulk data collection runs afoul of European laws, calling into question the United Kingdom’s ability to transfer data to and from the bloc. The two sides have been negotiating on a deal since March that will allow for continued data-sharing once the U.K.’s transition out of Europe ends on December 31. The U.S. has fallen into similar troubles after the court invalidated a data-transfer deal known as the Privacy Shield in July.

Google versus the French press: Following in the footsteps of Australia, France has also pursued tech companies over their relationship to news publishers. In April, France’s competition agency ordered Google to negotiate with French publishers over payments for use of their content. Google appealed, but in a decision Thursday, a French appeals court said the search giant must negotiate with French press to pay for online content.

Canada’s ‘outdated’ privacy laws: The coronavirus pandemic has highlighted holes in Canada’s privacy regime, the country’s Privacy Commissioner Daniel Therrien said in his annual report Thursday. “Current federal laws are simply not up to protecting our rights in the digital environment,” Therrien said.

More sector inquiries on tech coming soon, Vestager says: Europe is likely to open market-wide inquiries into new technologies, EU Vice President and competition czar Margarethe Vestager said in a speech Thursday. In July, the commission opened a sector inquiry into the Internet of Things focused on wearables and home consumer devices; a preliminary report is expected in the spring. “With markets shifting and new technologies emerging, it is likely we will be doing more sector inquiries in the near future,” she said.

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