Digital Updates – September

On September 27, the Australian Competition and Consumer Commission (ACCC) published the long-awaited final report of its Digital Advertising Services Inquiry. The inquiry, focusing on online display advertising, began in February 2020 following a request from the Treasury and comes after the ACCC’s Digital Platforms Inquiry that concluded in 2019. The report aligns with many other investigations conducted by national competition regulators around the world in finding that Google has a dominant market position in the ad tech industry. The lack of competition has likely resulted in higher digital ad fees and lower publisher ad revenues, which leads to less and lower quality content. The report makes six recommendations to address the situation, including increasing transparency in the ad tech markets, authorizing the ACCC to promulgate rules to regulate the market, and addressing competition issues caused by data advantage. The report notes that these measures are necessary as enforcement under existing competition laws is not sufficient. The ACCC is expected to discuss how these recommendations should be given effect in another report to be published in September 2022. Read the full report here.

On September 17, the Alliance signed onto an amicus brief arguing that Google’s amended complaint in its antitrust lawsuit against Texas should be made publicly available. Judge Castel in the Southern District of New York asked the parties to show why the complaint should not be publicly filed without redaction. The brief argues that both the First Amendment and common law favor transparency and public access to the litigation filings. While Google claims large amounts of its complaint is “highly confidential,” the law shows a presumption against redaction in the public interest and requires any redactions to be narrowly tailored.

On September 15, several former top national security officials sent a letter asking Congress to delay antitrust bills, because it would harm the U.S. in its tech race with China. Axios published the letter, signed by 12 former intelligence officials. In essence, the letter asks that Congress focus on “protecting American innovation and developing a comprehensive strategy to counter the growing challenge posed by China and its authoritarian approach to digital governance.” They expressed great concern over breaking up any of the tech companies, as Chinese tech giants continue to grow. However, Tom Wheeler, visiting fellow in Governance Studies at The Brookings Institution, pointed out that China itself regulated digital platforms in order to foster competition and innovation, highlighting that enabling competition through regulations drives innovation whereas monopolies curb it.

Biden recently nominated “longtime privacy advocate” Alvaro Bedoya to the FTC on Monday. Axios reports this nomination “signals aggressive action” from the FTC against big tech. Bedoya has has worked at Georgetown University’s Center on Privacy & Technology as the founding director since 2014. He is known for a study about the need for regulation with police department’s use of facial recognition technology in 2016. Politico also reports that a top FTC aide to FTC Chair Lina Khan told an Israeli newspaper that both Google and Facebook were going to be broken up: “their judgment has been written.” Read more.

On September 14, the House Energy and Commerce Committee voted in favor of giving the Federal Trade Commission (FTC) $1 billion to start a bureau that focuses on data security, privacy, and fighting identity theft. The Bureau would be funded for 10 years under the proposal and would focus on “unfair or deceptive acts or practices relating to privacy, data security, identity theft, data abuses, and related matters.”

The Wall Street Journal has begun a series called The Facebook Files based on internal emails and files the outlet obtained. While Facebook claimed to be promoting “meaningful social interactions” (MSI) by demoting quality journalism it claimed was divisive, it was actually promoting misinformation. Documents show that Facebook employees warned in internal memos that the algorithmic change was not increasing MSI, instead “misinformation, toxicity, and violent content [were] inordinately prevalent among re-shares.” Internal reports even expressed concern about the “long term effects on democracy.” Facebook spokesman Andy Stone said Facebook’s ranking changes are not to blame for “the world’s divisions” and said divisions have “been growing for many decades, long before platforms like Facebook even existed.”

Today, the Northern District of California published its decision in the Epic Games v. Apple case. The court found that Apple violated California’s Unfair Competition Law and issued an injunction against Apple. The injunction prohibits Apple from requiring developers to use in-app purchasing or restricting in-app links. The court ruled in favor of Apple on all other counts. Read more.

On September 8, the High Court of Australia denied media companies’ appeal of the Supreme Court of New South Wales defamation decision last year. On June 1, 2020, the Supreme Court of New South Wales held that several media companies were liable under defamation law for comments by third parties on news posts on the media groups’ Facebook pages. In denying the appeal, the High Court used dated precedent to adopt a very broad definition of publisher and publication. The Court ultimately held that the news groups were “facilitating, encouraging and thereby assisting the posting of comments by the third-party Facebook users” and thus publishers of those comments and can be held liable for defamatory content. Read more.

Today, over 70 regional news publications represented by Country Press Australia reached a deal to join Google News Showcase. This deal will allow the publishers to be fairly compensated for their content by terms that they negotiated with the dominant tech platform. These small papers were able to have bargaining power to negotiate in good faith because of the ACCC’s News Media Bargaining Code, mandating that dominant platforms fairly negotiate with and compensate news publishers for use of their content. The ACCC authorized Country Press to negotiate collectively last month, with the looming threat of arbitration. This landmark deal—benefitting small, local publications—shows the Code is working for publishers who need it most. Read more here.

On August 31, the U.S. Copyright Office published its long-awaited study on state sovereign immunity in copyright cases. The report, requested last year by Senators Thom Tills (R-NC) and Patrick Leahy (D-VT), finds that although there are multiple documented cases of alleged infringement by state entities that undoubtedly hurt copyright owners, the Office is not certain whether the record would be found sufficient to support abrogation of sovereign immunity under Supreme Court precedent. However, the report notes that the Office supports congressional action on the issue and that there may be other ways to address the problem besides full abrogation. The report comes following the Supreme Court’s decision last year in Allen v. Cooper, where the Court found that the Copyright Remedy Clarification Act, passed in 1990 to abrogate sovereign immunity in copyright cases, was unconstitutional due in part to an insufficient record to support abrogation. Senators Tillis and Leahy requested the study in order to find out if there would be enough evidence to support new legislation on the issue. Read more about the study here.

On September 23, the DOJ submitted its proposed Section 230 changes to Congress. The legislation would make it more difficult for big tech to escape liability for content moderation, requiring an “objectively reasonable belief” that the content they remove falls into the new, explicitly-enumerated categories of allowable restrictions, replacing “otherwise objectionable” with “unlawful,” “promotes terrorism,” and “promotes self-harm.” The proposed changes would also allow platforms to remove content if its enforcement is in “good faith” and in compliance with its publicly available terms of service accompanied by a reasonable explanation. Additionally, the DOJ proposes carve-outs to incentivize platforms to address illicit content. This includes carve-outs for child abuse, terrorism, and cyber-stalking to allow victims to seek civil relief for their injuries. The DOJ also clarified that federal antitrust claims are not inhibited by Section 230. Read more here. 

On September 13, Google released its latest statement about its grievances with Australia’s newest proposed regulation to compensate news publishers. While Google again claims that they “simply help people find what they’re looking for on the internet,” their use and abuse of news publishers’ content is well documented. Google claims the Australian code is unworkable because of its data-sharing requirements and mandatory arbitration that it would be unable to appeal. Instead, Google suggests a negotiation model that is more favorable to them, despite the many checks the ACCC’s code has in place to ensure no disparity in treatment. This is not Google’s first attack on the code, and it continues to fight Australia’s attempt to correct the power imbalance between news publishers and big tech. Read more here.

On September 8, the ACCC announced that it is opening an investigation into “the extent of competition between Google and Apple’s app stores.” They will be informed by Australian consumers, developers, suppliers, and others’ experiences with the app stores. Because apps have become essential for many businesses and activities, the ACCC wants to ensure there is adequate competition and fairness for all parties. This inquiry will inform the ACCC’s final report in March 2021. The ACCC is accepting submissions until October 2nd. Read more here.

Following Facebook’s recent retaliation against the ACCC’s news media bargaining code, Australian Treasurer Josh Frydenberg refuses to back down, saying, “Australia makes laws that advance our national interest, and we won’t be responding to coercion or heavy-handed tactics, wherever they come from.” After the ACCC released its bargaining code, Facebook released a statement saying it would remove all news content from its platform if the code was signed into law. Google has also retaliated in the form of a misinformation campaign. Frydenberg sees the critical value in journalism and wants to support it by creating “a sustainable media environment” and “payment for original journalistic content.” Read more here.

According to news reports, Google and French news publishers failed to reach an agreement on compensation for the use of news content under the new Publishers’ Right adopted by the European Union last year. France is the first EU member country to have transposed the Publishers’ Right in national law. Following Google’s refusal to negotiate with the French publishers in late-2019, the French competition authority handed down an interim decision in April requiring Google to engage in good-faith negotiations and to reach a deal on compensation with the news publishers within three months. Google has appealed the interim decision, and a ruling on the appeal is expected in September. An organization of French publishers reportedly filed another complaint with the competition authority following the failure to reach a deal, claiming that Google had failed to negotiate in good faith. Read more about the situation here (subscription required).

On September 2, the News Media Alliance filed comments with the U.S. Copyright Office regarding state sovereign immunity in copyright suits. The Copyright Office is conducting a study into instances of state infringement of copyrights, in response to a request by Senators Thom Tillis (R-NC) and Patrick Leahy (D-VT). The Senators asked the Copyright Office to conduct a study on the issue following a ruling by the Supreme Court in Allen v. Cooper earlier this year. The case concerned a North Carolina creator whose works had been used by the state without authorization. The Supreme Court found that the Copyright Remedy Clarification Act of 1990 did not validly abrogate state sovereign immunity in copyright suits, meaning that copyright owners cannot sue unwilling state entities for infringement. The Alliance comments focused on the systematic infringement of news articles by the California Public Employees’ Retirement System between 2009 and 2017, and the importance of Congress passing legislation that validly abrogates state sovereign immunity in copyright suits. Read the comments here.

On September 3, the News Media Alliance submitted comments in response to the European Commission’s public consultation on the proposed Digital Services Act package. The consultation is aimed at collecting views from stakeholders regarding the future of digital services in the European Union, including on issues related to online safety, freedom of expression, and competition in the digital marketplace. The Alliance shared with the Commission the White Paper on Google’s use of news content, released by the Alliance in June. The White Paper focuses on the ways in which Google abuses its dominant position to strong-arm news publishers and hurt high-quality journalism. The EU’s Digital Services Act will be aimed at updating the region’s legal framework for digital services, which has remained largely unchanged since the e-Commerce Directive was adopted in 2001. Read more about the Digital Services Act here and the Alliance’s White Paper here.

Facebook recently alleged that Apple’s new privacy policy will cripple efforts to offer personalized ads. These changes would require that app developers obtain users’ consent before they are able to track information used to deliver personalized ads. This policy is expected to roll out this fall with iOS14. If these privacy changes are put into effect, Facebook claims that many users will disallow tracking, and app owners will struggle financially because of the inability to effectively advertise. These changes could have ripple effects for news publishers’ ad revenue if a multitude of users opt out of personalized ads. Read more here.

On August 31, Facebook issued a press release saying that if the ACCC’s draft code becomes law, they will no longer allow publishers or consumers to share any news on Facebook and Instagram. Facebook alleges that the regulation “misunderstands” the bargaining imbalance and ignores important facts. The ACCC released a statement the next day condemning Facebook’s threat to ban all news content. The ACCC reiterates that the Code is designed “to bring fairness and transparency” to the relationship between news publishers and Facebook. They further cited the University of Canberra’s 2020 Digital News Report, saying that 39 percent of Australians use Facebook for general news, and 49 percent use the platform for news about COVID-19. Read more here.