In The Rush To Strengthen Antitrust Law, We Could Kill Useful Mergers And Acquisitions

from the be-careful-what-you-wish-for dept

Last week, Senator Amy Klobuchuar introduced a major antitrust reform bill, entitled the Competition and Antitrust Law Enforcement Reform Act. This isn't much of a surprise, as Democrats have made it quite clear that they seek to use antitrust much more aggressively than it's been used over the past few decades. I'm a big believer in the need for more competition, in general, but often worry that antitrust is not the best way to get there.

The bill will put more budget and power in the hands of the DOJ and the FTC, and also would change the legal standards for anticompetitive mergers, as well as put the burden on merging companies to prove that they are not violating antitrust, rather than as it stands now, with the burden being on the DOJ to show that the merger violates the law. Better funding the DOJ and the FTC on competition issues strikes me as a sensible move here (more the FTC than the DOJ, but no need to get that picky). However, a lot of the rest of the bill seems like it could have the opposite of the intended effect.

I get the thinking behind this, but as structured, it appears like it could have significant unintended consequences that actually decreases competition rather than increases it. In a lot of ways, the key thing this bill would do is to significantly reduce merger and acquisition activity. It has two main mechanism that would basically kill a significant number of deals:

• Update the legal standard for permissible mergers. The bill amends the Clayton Act to forbid mergers that “create an appreciable risk of materially lessening competition” rather than mergers that “substantially lessen competition,” where “materially” is defined as “more than a de minimus amount.” By adding a risk-based standard and clarifying the amount of likely harm the government must prove, enforcers can more effectively stop anticompetitive mergers that currently slip through the cracks. The bill also clarifies that mergers that create a monopsony (the power to unfairly lower the prices to a company it pays or wages it offers because of lack of competition among buyers or employers) violate the statute.
• Shift the burden to the merging parties to prove their merger will not violate the law. Certain categories of mergers pose significant risks to competition, but are still difficult and costly for the government to challenge in court. For those types of mergers, the bill shifts the legal burden from the government to the merging companies, which would have to prove that their mergers do not create an appreciable risk of materially lessening competition or tend to create a monopoly or monopsony. These categories include:
1. Mergers that significantly increase market concentration
2. Acquisitions of competitors or nascent competitors by a dominant firm (defined a 50% market share or possession of significant market power)
3. Mega-mergers valued at more than $5 billion

On that first one -- changing the standard to "create an appreciable risk of materially lessening competition" seems potentially insurmountable for nearly any merger. Any merger decreases competition in some form, because (definitionally) it's removing one competitor from the market. But that doesn't mean that it's necessarily damaging to the market, to innovation, or to consumers. Say, for example, there's a market with 10 firms, and one of them is struggling and likely to go under. A merger between it and one of its more successful competitors technically "lessens" competition, but it might mean that that same firm doesn't go out of business at all. Or, it might mean that by combining two of the companies in the market that they can better compete with some of the others.

I recognize this becomes a very different story when the market is down to just a few players -- and that's certainly true of a few too many industries these days. But that's why the standard is set at the current "substantially lessen competition" not "creating a risk" that it might "materially lessen competition."

The second one, on the burden shifting is perhaps equally problematic. And, here, the real risk is in killing off new startup creation. When VCs invest in a startup, their hope is that the startup is their unicorn or rocketship -- becoming a multi-billion dollar market leader. These are the deals where VCs make all their money -- on the huge success stories, the 100x return investments. But only a very small percentage of investments are such hits. The second best result for a VC is to have the startup acquired for a decent gain. A 10x gain is nothing for them to write home about, though it's nice. A 2 to 3x gain is a failure in the world of VC, but it's better than... nothing at all.

So, for an investor to fund startups, it helps to know that the backup plan for companies that don't become billion dollar unicorns is that they can sell out to someone else, and at least get some return. But under this bill, the deal flow for those kinds of deals will dry up. The big companies that startups and VCs rely on for decent (but nothing special) exits go away. As a result, it makes VCs less interested in investing. Because the expected returns drop significantly. That means it's likely that they'll invest in fewer startups, thereby diminishing innovation and competition.

This is the exact opposite of the intention of this bill, but it (tragically, again) suggests how little regulators understand how startups, investments, and competition actually work.

And, of course, none of this even touches on the fact that we just had a DOJ and Attorney General in place who, it was revealed, deliberately used antitrust as a weapon against companies the president disliked. It's kind of amazing that not even a year after that was revealed, Democrats are quick to make it even easier for a future Bill Barr to have even more power to do that.

Yes, competition is important -- and there are certainly many industries that have become too consolidated. Indeed, I've been coming around to the belief that almost every "problem" people describe when talking about the tech industry (and a bunch of other industries) simply comes down to a lack of viable competition. But assuming that the only tool to increase competition is via antitrust, you run the risk of having exactly the wrong result. It can lead to a world in which you get less investment in startups and new competitors, since the risk becomes much greater.

Filed Under: acquisitions, amy klobuchar, antitrust, competition, investment, mergers, startups

Senators Warner, Hirono, And Klobuchar Demand The End Of The Internet Economy

from the daft-drafting dept

Just because Senators Warner, Hirono, and Klobuchar are apparently oblivious to how their SAFE TECH bill would destroy the Internet doesn't mean everyone else should ignore how it does. These are Senators drafting legislation, and they should understand the effect the words they employ will have.

Mike has already summarized much of the awfulness they propose, and why it is so awful, but it's worth taking a closer look at some of the individually odious provisions. This post focuses in particular on how their bill obliterates the entire Internet economy.

In sum, and without exaggeration: this bill would require every Internet service be a self-funded, charitable venture always offered for free.

The offending language is here:

(iii) by inserting before the period at the end [subsection (c)(1)] the following: ‘‘, unless the provider or user has accepted payment to make the speech available or, in whole or in part, created or funded the creation of the speech…’’

Subsection (c)(1), for reference, is the "twenty-six words that created the Internet." It's the clause that does nearly all the heavy lifting to give Section 230 its meaning and value. And what these Senators propose is that any value that it could still somehow manage to provide, after all the other changes they propose turn it into swiss cheese, now be conditional. And that condition: that the site never, ever make any money.

It's the first part of that bill text that is most absurd, but even the second part is plenty destructive too. To the extent that the latter part is even necessary – because if a platform did create the offending content then Section 230 wouldn't apply anyway – it would still have a huge impact. For instance, could Patreon be liable for helping fund someone's expression? If these Senators have their way, quite possibly.

But it's the first part that nukes the entire Internet from orbit because it prohibits any site from in any way acquiring any money in any way to subsidize their existence as a platform others can use. That's what "accepted payment to make the speech available" means. It doesn't care if the platform actually earns a profit, or runs at a loss. It doesn't care if it's even a commercial venture out to make money in the first place. It doesn't care how big or small it is. It doesn't even care how the site acquired money so that it could exist to enable others' expression. Wikipedia, for instance, is subsidized by donors, who provide "payment" so that Wikipedia can exist to make its users' speech available. But if this bill should pass, then no more Section 230 protection for that site, or any other site that didn't have an infinite pot of money at the outset to fund it forever. Any site that wants to be economically sustainable, or even simply recoup even some of the costs of operation – let alone actually profit – would have to do so without the benefit of Section 230 if this bill were to pass.

It's possible, of course, that some of this effect is just the result of bad drafting, and the Senators really mean to tie payment to the specific speech in question that may be unlawful. But (A) if they can't even draft this part correctly to not have these enormously destructive collateral effects, then there's little reason to believe their other provisions won't be equally ruinous, carelessly if not deliberately.

And (B), it would still be a problem constitutionally because it would make platforms' own First Amendment rights contingent on financial arrangement, which has never before been the case. It is, after all, the First Amendment that allows a platform to choose to carry or refuse any particular content, and not actually Section 230. Section 230 only helps make that First Amendment protection meaningful.

That money might influence a platform's decision does not obviate its constitutional protection. Editorial discretion is editorial discretion, regardless of whether it is affected by financial interest. Because of course editorial discretion always is affected by it, and always has been: newspapers run articles they think people will read because it will sell more papers, and media outlets refuse ads they think will offend. The First Amendment has never been contingent on charitable altruism, and any bill that would try to now make it so deeply offends it.

The sad irony is that it was Trump who declared that he wanted to "open up" First Amendment law and weaken its protections. But with bills like these it's the Democrats who actually are.

Filed Under: amy klobuchar, business models, free speech, mark warner, mazie hirono, payments, safe tech, section 230, speech

Now It's The Democrats Turn To Destroy The Open Internet: Mark Warner's 230 Reform Bill Is A Dumpster Fire Of Cluelessness

from the what-the-fuck-is-this-I-don't-even... dept

For the past few months we've been seeing a ton of terrible/ridiculous/awful/unconstitutional bills coming from mostly Republicans to try to wipe out or undermine Section 230. Most of those were focused on trying to force websites to do less content moderation. Now that the Democrats are back in power, it appears we're going to be getting the opposite. Senator Mark Warner has introduced his new Section 230 reform bill, called the SAFE TECH Act ("Safeguarding Against Fraud, Exploitation, Threats, Extremism, and Consumer Harms Act" co-sponsored by Senators Mazie Hirono and Amy Klobuchar), and it is one of the worst Section 230 bills I've seen. It is difficult to explain just how bad this bill is concisely, because it has so many bad ideas crammed into one single bill. It's as if none of these three Senators or their staff spoke to anyone who actually understands how the internet works, or how content moderation/trust and safety works. It's stunning in the ignorance it displays.

About the only good thing I'll say about it, is that (unlike most bills) at least Warner released a redline version to show how it would actually (massively) change Section 230. He also put out an incredibly disingenuous FAQ that flat out lies about... nearly everything. We'll go through that in a bit.

Basically, this bill takes nearly every single idea that people who want there to be less speech online have had, and dumped it all into one bill. There's a lot in there, and nearly all of it is bad. Last week I wrote about a draft bill in the House that suggested carving out civil rights law from Section 230. In my analysis of that bill, I noted that it appeared to come from a well meaning place, but was simply misguided. This bill, which also includes a carveout for civil rights law, does not come from a well meaning place. The drafters of the bill are either malicious or ignorant. It's not a good look for Senators Warner, Hirono, and Klobuchar.

A key thing to recognize is that it's obvious that the drafters of this bill believe the myth that 230 protects "big" tech companies. The bill is written as if it is only talking about Facebook, YouTube, and Twitter. Warner handwaves away the idea that the bill would destroy smaller companies in his announcement by ridiculously (and against all evidence to the contrary) saying that startups are too small to sue, so it would only be used against larger companies.

The most devious and nefarious part of this is that the bill effectively wipes out Section 230 protections for the entire internet while pretending it's just a minor change. This bill is about as close to a full repeal of Section 230 as you can get realistically. In the press release about the bill, Warner claims that it's just a tweak to 230 because "these changes to Section 230 do not guarantee that platforms will be held liable in all, or even most, cases," but that would also be true with repeal. Because most things that people want to blame on internet websites are not actually violations of the law. And, assuming a form of distributor liability is what the courts decide on, that would mean websites wouldn't be liable for most things on their site anyway -- but would result in long and costly legal battles before they could prove that.

And this bill guarantees the same exact thing. The biggest, most consequential change, is that it takes the famous "26 words," which are Section (c)(1) of the current law, removes the protections entirely if money exchanges hands, and then changes it from an immunity to merely "an affirmative defense." That may not seem like much, but it basically wipes out all of the actual benefits of 230.

Saying that you don't get (c)(1) if money exchanges hands, basically wipes out Section 230 for many, many services. All web hosting would no longer be protected by Section 230. If, as many people have been demanding, social media offers up paid options (say, to remove ads), doing so would remove their 230 protections. Incredibly, this bill is coming from the same people who have been saying that Facebook and Twitter should offer a "paid version" without ads or tracking -- but, under this bill, if they do that, they'd lose 230! Incredibly, under this bill, the two cases that inspired Section 230 -- the CompuServe case and the Prodigy case -- would not be eligible for 230 protections, because both were paid services!

The switch from (c)(1) being an immunity to being "an affirmative defense" in which the website "has a burden of proving by a preponderance of the evidence" basically erases the key procedural benefits of Section 230 -- which is that it gets cases tossed right up front. This gets somewhat deep in the weeds of civil procedure, but having (c)(1) as an immunity allows companies to file a relatively straightforward motion to dismiss upfront, without having to do a lot of expensive legal work, and argue that, because of 230, there is no legitimate claim in the complaint, even if everything in that complaint is accurate. This is the key benefit of 230 in protecting websites.

But by making it an affirmative defense, which the website has to prove by a preponderance of evidence, you've just made everything a lot more expensive and it will take a lot longer to deal with. Not only are you going to have to pay a lot of expensive lawyers a lot more money to make a preponderance of the evidence claim, many courts find that such determinations are issues of fact, not law, meaning that they need to go to a jury. If a case goes to trial and has a jury, you're talking about it costing at least a million dollars for any company, and probably a lot more.

This wipes out the entire benefit of Section 230 by itself. Most companies, of course, will then try to avoid just having to face this by quickly taking down anything even remotely questionable or anything that people complain about. And they'll still get sued. This bill would absolutely destroy most of the open web.

The second massive change, is that it would exclude Section 230 entirely from "injunctive relief" claims for failing to remove "harmful" content. In other words, this would allow a bevy of lawsuits from people who just want something taken offline (and aren't asking for monetary damages), that they will claim creates "harm" to them, and the websites can no longer respond with 230. While supporters of this bill might argue that filing such a lawsuit alone would be expensive, so this wouldn't be abused, that ignores how frequently we've seen especially the rich and powerful try to use any legal means possible to remove content they dislike from the internet. This clause is like a free shot for the rich and powerful to silence criticism. It's like a pro-SLAPP clause!

The bill then adds a bunch of other carveouts from 230: civil rights law, antitrust, harassment, stalking, human rights law and wrongful death. As we already discussed, while it may sound good to say this can't be used to block civil rights cases, in actual practice a bunch of recent "civil rights" cases have involved white supremacists, out-and-out misogynists, and other terrible people claiming that their civil rights were violated by being kicked off of platforms. Enabling such lawsuits seems incredibly short sighted.

This bill is dangerous.

And what's truly obnoxious about it is that in the FAQ about it, Mark Warner pretends otherwise.

Q: Won’t removing Section 230 immunity bring back the perverse incentive structure Section 230 was meant to address and actually lead to less content moderation?

A: No. Section 230 effectively cut off the development of case law for the past 25 years based on the flawed reasoning of a single state court judge. By peeling back Section 230 immunity for particularly serious harms—such as civil rights violations, stalking, and harassment—internet platforms will be incentivized to ramp up their address problems in these areas, problems that have otherwise been allowed to fester and grow without exposure to potential liability. These reforms do not render ICS providers liable for all – or even most – third-party content, including where they engage in moderation activity. Nor do these reforms alter the already-steep hill plaintiffs must already climb. Rather, these reforms allow victims an opportunity to seek redress where they can potentially show that a platform has directly contributed to their injury.

This is magic wand thinking. Oh, if we just make websites potentially liable for what people do on them, won't the websites magically fix these societal level problems? No, that's not what happens. Instead, smaller websites decide it's not worth the hassle at all and stop accepting 3rd party content, and larger companies just get more aggressive in policing all sorts of protected speech. Would a "#MeToo" situation ever be allowed to happen if this law was in place? No fucking way. Harvey Weinstein and all sorts of powerful rich men would sue the shit out of Facebook and Twitter to stop that.

The final sentence above is the most pernicious of all. Section 230 already does not apply if the platform contributed to the injury. It already doesn't apply if the platform helped to create the injurious content. What this bill does is not allow for that which is already allowed. It completely wipes most 230 protections off the map.

Q: Will making internet platforms liable for third-party content lead internet platforms to overreach in their content moderation efforts thereby chilling speech from the very groups you’re looking to protect?

A: No. The SAFE TECH Act was developed in partnership with, and has the strong support of, a wide array of civil rights groups. We need to recognize that threats, harassment, and targeted intimidation silence the voices of far too many racial minorities, women, and other marginalized groups by driving them from social media and other online platforms. Under the status quo, platforms have been able to ignore these harms – even where their continued inaction, and even their product design, contributes to these injustices. As these online harms spread to the real world—in places like Charlottesville, Kenosha, and at the U.S. Capitol—their negative impact has only become more unmistakable. The SAFE TECH Act simply allows victims an opportunity to hold platforms accountable when their deliberate inaction or product design decisions produce real-world harm, making the online world a more open and welcoming environment for all to participate.

What?!? Note that they don't say that the bill was developed with actual content moderation experts. To say that this wouldn't be used to stifle and chill speech from vulnerable groups and people is ludicrous. Of course it will. Everything about the bill is designed in a way that opens it up to abuse by the rich, powerful and privileged. Everything about the bill allows them to file costly lawsuits (or threaten to do so) and pressure websites to pull down all sorts of criticism.

That Warner and his co-sponsors deny this suggests that they have absolutely no understanding about how any of this works.

Q: Will exposing small tech companies and startups to liability and increased litigation costs drive them out of business and simply entrench the dominant player (e.g., Google, Facebook)?

A: This concern is gravely exaggerated. As an initial matter, smaller players do not have the reach of the Googles and Facebooks of the world and, as a result, are less likely to cause significant harm. Moreover, potential plaintiffs are unlikely to bring an action against a small tech company or startups out of fear being able to collect sufficient damages to make the effort and cost of litigation worthwhile. Indeed, in many cases plaintiffs’ attorneys would not even take these cases given the low likelihood of meaningful damages. In addition, a string of judicial decisions on standing requirements over the last 10 years, along with a range of tort reforms enacted by state legislatures (including anti-SLAPP laws to penalize frivolous or bad faith lawsuits), have significantly altered the legal landscape since Section 230 was enacted in 1996.

More importantly, things like protecting civil rights and preventing harassment should be built into internet platforms by design. Today’s online giants claim that their massive scale makes it too difficult to effectively moderate content – a social cost borne by users and vulnerable communities. Had these companies been exposed to potential liability from their inception, in many cases they would have designed their platforms

This is... again... completely disconnected from reality. There are so many stories of smaller platforms being sued for 3rd party speech. Hell, I was sued for third party speech and protected by 230. Under this bill, that case would have been a lot more expensive and almost certainly would have bankrupted us. Many of these lawsuits are not about "collecting sufficient damages" but about forcing the small tech company or startup to have to waste all their money on the lawsuit. How disconnected from reality are these Senators?

And, sure, it might not be as bad if there were strong anti-SLAPP laws in every state and a strong federal anti-SLAPP law, but we don't have that. In fact, many courts won't even apply state anti-SLAPP laws in federal court. At best, I'd say maybe 20% of cases that should be protected by anti-SLAPP laws have access to them. So to say "oh, no big deal, anti-SLAPP will cover it" is again nonsense.

That final paragraph is also completely disconnected from reality. This country has spent decades trying to solve for systemic racism and civil rights violations, and we're still failing. The government has failed in so many ways on this, and now Warner's saying "oh, tech companies can magically solve this if only they could be sued." This is fantasy land thinking.

Q: What is the scope of the carve-out for paid content? Does it cover anything beyond paid advertisements?

A: The SAFE TECH Act makes clear that Section 230 immunity does not apply to any paid content. This would include advertisements as well as things like marketplace listings.

Uh, no. From the language of the bill itself, it says:

"... except to the extent the provider or user has accepted payment to make the speech available..."

That certainly looks like it applies to all paid content. And, even worse, to things like web hosting. Or if Facebook or Twitter ever offered accounts where you pay to remove ads. Or, hell, to us on Techdirt, where some of our community have paid to support us, and we provide them extra features. Based on this, if any of our financial supporters (a key source of revenue for us) says anything that we get sued over, we can no longer claim 230 protections against it. That's ludicrous. Not only would we have to shut down our comments, we'd likely be unable to let people support us directly any more (meaning we'd likely shut down entirely).

Q: Will the SAFE TECH Act break the internet?

A: No! The internet was a far different place when Section 230 was passed. The scope, influence, and impact of modern internet platforms were unimaginable in 1996. Like all regulation, Section 230 must be updated to address the current state of affairs – including the unintended consequences of the law. The SAFE TECH Act brings Section 230 into the modern age by addressing those areas in which the law has been abused by platforms—such as civil rights, stalking, and harassment—in a targeted way. It is also important to remember, that even with the changes proposed in the SAFE TECH Act, Section 230 does not impose liability on anyone. There must still be a violation of some law and plaintiffs must still prove causation, harm, and damages. And the application of that law to an internet platform still cannot run afoul of the First Amendment.

To say this after misunderstanding (1) how content moderation works, (2) how civil liability works, and (3) the nature of vexatious lawsuits works... is just astounding. This bill would absolutely gut much of the internet. Smaller websites would likely have to shut down key services (and may have to shut down entirely). A massive wave of ambulance chasing, SLAPP suits would come next. Trolls and racists would flip the law on its head to sue companies. This would be an utter disaster.

And tragically, reporters are falling for Warner's framing. The Washington Post's article on this claims that the bill "preserves the thrust of Section 230." It absolutely does no such thing. It guts every bit of 230 to its core.

Filed Under: affirmative defense, amy klobuchar, antitrust, civil rights, mark warner, mazie hirono, preponderance of the evidence, section 230

Senator Klobuchar Thinks We Need To Start Fining Social Media Companies For Not Removing Bots Fast Enough

from the nothing-more-automated-than-a-knee-jerk dept

Cool. Let's just throw more legislation at the problem.

Social media giants Facebook Inc. and Twitter Inc. should be fined if they don't weed out automated accounts, or bots, trying to influence U.S. public opinion, said Democratic Senator Amy Klobuchar.

“I think that would be a great idea,” Klobuchar, of Minnesota, said on NBC’s “Meet the Press” on Sunday when asked whether the companies should face fines if they fail to act after the government discovers the bots.

First, let's stop giving politicians bad ideas. Whoever prompted this response from Klobuchar has bits on their hands if this ever becomes law. Klobuchar can come up with her own bad ideas. There's absolutely no reason journalists should be floating ideas containing First Amendment collateral damage. Let Klobuchar come up with her own terrible legislation. It's not like she hasn't done it before.

Second, what the hell does this even mean? Weeding out all bots is impossible. Weeding out those the government has noticed might be doable, but they'll likely be replaced with new ones as soon as they're deleted. On top of that, forcing large platforms to cull anything that resembles automation is going to do damage to legitimate accounts that schedule posts in advance and it might result in the removal of truly useful bots, like Brad Heath's Big Cases bot -- one that trawls federal court RSS feeds for cases of interest and posts publicly-available copies of filings locked behind the government's PACER paywall.

Such a task is unfeasible. Legislation like this would only serve as a platform for political grandstanding. Fining tech companies for violations of terms of service by users is ridiculous. It's not as though we don't have enough ongoing threats to service provider immunity. Twitter and Facebook are already trying to wrestle with bot problems, but criminalizing the mere existence of bots doesn't solve the problem. It just makes it easier for the government to monetize the very behavior reps are claiming they want to stamp out. It's an incentive with a government perversion attached.

And Klobuchar, of course, has no idea how platforms with hundreds of millions of users will implement the No Bots Allowed law. All she knows is it's their problem and they're smart enough to figure it out on their own.

“These are the most sophisticated companies in America,” Klobuchar said. “They have brilliant people working there. I believe that they’ve got to put more resources -- maybe it means they make less profits off of ads and other things -- but they’ve got to put the resources into Facebook and Twitter to stop these bots from dominating the accounts.”

Of course! The nerds will do it! They'll take all of the blame and receive none of the credit while the federal government gets into the business of running social media platforms. If a company doesn't have the money to do it (smaller startups), then they just don't get to play. And if platforms struggle financially attempting to please the government while shedding users, so be it. If destroying American companies (and damaging the internet) is what it takes to take down the Russian bot menace, no price (paid by others) is too high.

Finally, there's a good chance the implementation of a law like this would push social media platforms to demand even more personal information from users, eliminating truly anonymous speech and possibly endangering lives/livelihoods of pseudonymous users. Fortunately, these seem to be off-the-cuff response based on a bad set of improv prompts from Meet the Press hosts. But Klobuchar has pushed bad legislation in the past and there's no time like the present to pretend the US government can somehow legislate away foreign influence in US politics.

Filed Under: amy klobuchar, bots, first amendment, free speech, social media

The Senate Summoned The Wrong Time Warner To Talk About AT&T Merger

from the really-guys? dept

The big news earlier this week, of course, was AT&T's announced plans to purchase Time Warner. As we, and plenty of others, were careful to point out, Time Warner is a different and totally separate company from Time Warner Cable (which Comcast famously tried to takeover not that long ago). Yes, at one time they were the same company, but that was a long, long time ago. They've been separate since 2009. And yet, lots of people still get them confused. In fact, soon after the announcement of the deal, AT&T had to do a special filing with the SEC to clarify which Time Warner it was buying. Really. Apparently, the Senate didn't get the memo (literally). The Senate Judiciary Committee's top four members (from both parties) put out a press release from the antitrust subcomittee, saying that it was going to hold hearings on the merger, and that the CEOs of both companies would be testifying. But they named the CEO of Time Warner Cable, not Time Warner.

Despite striking an $85.4 billion deal with AT&T Inc. over the weekend, [Time Warner CEO Jeff] Bewkes was unceremoniously left out of a release from the Senate Judiciary Antitrust Subcommittee, which said the CEOs of both companies would testify at a hearing on the proposed deal.

The reason? The four top Republicans and Democrats leading the Senate Judiciary Committee and its antitrust subcommittee accidentally invited Time Warner Cable’s former CEO Rob Marcus instead.

“Both Randall Stephenson, the CEO of AT&T, and Robert Marcus, the CEO of Time Warner, will testify,” the release said. The hearing announcement was sent by Sen. Chuck Grassley, Sen. Patrick Leahy, Sen. Mike Lee and Sen. Amy Klobuchar.

You'd think someone would have checked that.

Oh, and it's even worse than it seems, because Rob Marcus isn't CEO of either Time Warner or Time Warner Cable. He left Time Warner Cable after Charter Communications completed its deal.

And this is why so few people trust Congress. Congress is quick to opine on stuff that it regulates without doing even having the most basic understanding of what's going on. Summoning the wrong CEO of the wrong company is a pretty impressive flub.

Filed Under: amy klobuchar, antitrust, chuck grassley, confusiong, jeff bewkes, merger, mike lee, patrick leahy, randall stephenson, rob marcus, senate, senate judiciary committee
Companies: at&t, time warner, time warner cable

Congress Rushes To Legalize Phone Unlocking; But Existing Bills Need A Lot More Work

from the the-view-from-capitol-hill dept

Well, what a difference 114,000 signatures, a Presidential endorsement, and an FCC investigation make! As a lead activist on this issue, I can say that on Capitol Hill there has been a significant sea change on the issue of cellphone unlocking. Numerous Republicans and Democrats have come out publicly in favor of unlocking and against the criminal penalties at hand. On Monday, only a few hours after the Presidential endorsement of unlocking, we heard from Rep. Chaffetz that he was working on legislation -- through him tweeting:

Working on leg to unlock your mobile phones.It is a freedom issue.You own the phone, you should be able to unlock it. .@derekkhanna

— Jason Chaffetz (@jasoninthehouse) March 5, 2013

On Tuesday, Senator Wyden introduced his legislation, the Wireless Device Independence Act. This is a good first step but unfortunately, it does not actually address the problem yet. In its current text, it seems to allow for individuals to unlock their own phones, but it keeps developing, selling, trafficking and discussing the tools and technology of cellphone unlocking still illegal. Without these tools being legalized, unlocking is still effectively illegal.

Also on Tuesday we heard from numerous Members of Congress that they support legalizing unlocking, including Rep. Darrell Issa and Rep. Jarred Polis. Additionally, there was a statement by Senator Patrick Leahy that was seen by many as giving a green light to other Democrats to endorse the legislation. Sen. Leahy, Chairman of the Judiciary committee, released this statement:

"I intend to work in a bipartisan, bicameral fashion to restore users' ability to unlock their phones and provide them with the choice and freedom that we have all come to expect in the digital era,"

Then on Thursday, Senator Amy Klobochar, Senator Richard Blumenthal and Senator Mike Lee introduced the Wireless Consumer Choice Act (and Rep. Anna Eshoo is expected to introduce companion legislation in House).

From Senator Lee:

"Consumers shouldn't have to fear criminal charges if they want to unlock their cell phones and switch carriers... Enhanced competition among wireless services is the surest way to increase consumer welfare."

This statement is confusing as it is supposed to be about this bill – but that's not actually what the Wireless Consumer Choice Act DOES.

The actual text of the Wireless Consumer Choice Act says that: "[the FCC] shall direct providers of commercial mobile services and commercial mobile data services to permit the subscribers of such services, or the agent of such subscribers, to unlock any type of wireless device used to access such services." This is quite a confusing bill text. Here are a few problems. What does permit mean in this context? Is it:

1. Carriers can't actively stop consumers with technological means (unlikely).
2. Carriers can't stop consumers (but which doesn't address manufacturers or others like the DOJ going after you for criminal charges).
3. Facilitate the unlocking by providing the codes upon request? Would they have to give the codes even if you are in contract to not unlock? Doesn't permit mean you are required to period?

The one thing we know for a fact is that "permit" doesn't have anything to do with adjusting their contractual terms to "allow" for consumers to unlock under their contract (all legislation appears to have a clause asked for by CTIA that it won't touch existing contract law). Essentially, this legislation says that the wireless companies can't enforce Section 1201 of the DMCA.

But that doesn't protect against the manufacturers like Apple, HTC, etc. coming after users (as was the case for Sina Khanifar, who joined me on the activism campaign for unlocking). And it doesn't protect against the criminal provisions, which would require another law. So since it has nothing to do with criminal law, it's confusing as to why Sen. Lee's statement would be about criminal law; however, it appears that he may introduce new, supplemental legislation that specifically deals with the criminal provisions as well.

Ok, so we are now at a total of two introduced bills.

Lastly, and perhaps most promising, as mentioned at the top, it appears that Rep. Jason Chaffetz is working on legislation and expected to target the unlocking criminal penalties, like Senator Wyden's bill, but Rep. Chaffetz' bill appears to be seriously considering doing so in an inclusive manner to also legalize the tools. In legalizing developing the tools, trafficking, selling and using the tools, such a bill would be the first real bill to actually make unlocking lawful.

Just to be clear, legislation goes through a process, and these bills will be revised and go through a committee. These committee hearings may be one of the first times that Congress has discussed some of the issues with the DMCA in the recent past. It's really pretty incredible that they haven't even held oversight hearings.

Unfortunately, none of the bills under consideration or under discussion appear to include anything beyond unlocking. They do not include anything to allow for accessibility technology for persons who are blind or deaf, allow for jailbreaking, or allow for computer science research. These issues will require additional activism and engagement to get them on the table.

If a narrow bill passes on unlocking, instead of taking on more substantive reforms, it is my intention to next lead a targeted campaign on accessibility technologies. There is no legitimate governmental reason for keeping these accessibility technologies illegal -- and we cannot continue to deny persons who are deaf and blind technology that can help them because a law was written before modern technology, outlawing them by default.

Today is just over two months since my last day on Capitol Hill -- and in those two months I have seen the anti-SOPA coalition accomplish their first forays in actively passing positive legislation. These may seem like small victories, but as I discuss in my piece for Boing Boing, these are small, strategic, affirmative victories that will culminate in even greater action. I encourage people to stay involved and continue to reach out to their Members of Congress on this issue. It's up to us to ensure that they actually fix the problem, as opposed to just checking the box.

Update: This afternoon we find out that Rep. Goodlatte, House Judiciary Committee Chairman, will be introducing a bipartisan bill with Ranking Member Rep. Conyers on this issue -- but it's unclear what they have in mind. Let's hope that Goodlatte's bill actually solves the problem by including legalizing the tools permanently -- rather than a check the box approach. But Goodlatte was also an original sponsor of the Stop Online Piracy Act (SOPA) so we will have to see their approach. The worst check the box approach would be to simply reverse the decision of the Librarian of Congress and provide a temporary "exception" for three years and let the Librarian rule on this again in three years. That would keep the underlying technology illegal but also require the same triennial review process, that has failed here, to ask permission. That would be truly unacceptable.

Filed Under: amy klobuchar, anti-circumvention, copyright, dmca, jason chaffetz, laws, mike lee, patrick leahy, phone unlocking, richard blumenthal, ron wyden

The 'Cloud Computing Act Of 2012'... Or How Internet Regulation Can Go Awry

from the paved-with-good-intentions dept

Sen. Amy Klobuchar has introduced a new bill, the "Cloud Computing Act of 2012" (S.3569), that purports to "improve the enforcement of criminal and civil law with respect to cloud computing." Given its introduction so close to the election, it's doubtful this bill will go anywhere. Still, it provides an excellent case study of how even well-meaning legislators can botch Internet regulation.

What the Bill Does

From its 1980s origins as a law restricting hacking into government computers, the Computer Fraud and Abuse Act (CFAA) has morphed into a general-purpose federal law against trespassing on anyone else's computers. With that breadth, the CFAA extends to a wide variety of activities, ranging from data scraping (see, e.g., EF Cultural Travel v. Explorica) to fake profiles (see, e.g., the Lori Drew prosecution related to Megan Meier's death) to ex-employees walking out the door with competitively sensitive information (see, e.g., US v. Nosal and WEC v. Miller).

The proposed bill's main substantive provisions attempt to give "cloud computing services" extra protections under the CFAA. First, the bill says that each unauthorized access of a cloud computing account counts as a separate CFAA offense. Second, the bill specifies a formula for computing losses in CFAA violations involving cloud computing services, setting a minimum floor of $500 loss per affected cloud computing account.

Problems with the Bill 

The CFAA is Already a Mess.  Good luck trying to read the CFAA's text. Constant amendments over the years have created spaghetti code. This bill adds only slightly to the CFAA's overall lack-of-tidiness, but every incremental amendment makes the CFAA more unwieldy.

The Definition of "Cloud Computing Service" is Incoherent. The bill seeks to protect cloud computing services, but what are those? Check out the bill's definition:

the term "cloud computing service" means a service that enables convenient, on-demand network access to a shared pool of configurable computing resources (including networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or interaction by the provider of the service.

What??? This sounds more like a vendor's sales pitch than a basis for criminal prosecution. We can reinforce the definition's weakness by trying to determine what isn't a cloud computing service. Every user-generated content website seems to qualify; but so should every online bank. In fact, this definition of cloud computing service probably becomes co-extensive with the Internet generally.

To be fair, the failed definition isn't totally the drafter's fault. I don't think it's possible to define "cloud computing service" precisely. Tip to legislators: if you can't clearly define your subject matter of your legislation, you're probably doing something wrong.

What's the Problem That Needs to Be Solved? I can't figure out how the proposed amendments address any problem we're seeing in the field. It's possible I've missed some relevant case, but I can't think of a single case I've seen where the CFAA underprotected a cloud computing service or this legislation would have changed the outcome. Seeking some clarity, I submitted a press inquiry to Sen. Klobuchar's office last week and got no response. So I have no idea what problem this bill purports to solve.

Implications

This bill exemplifies several ongoing problems with efforts to legislate the Internet:

1) Legislative grandstanding. It's flashy for legislators to tell their constituents that they are fighting hard to protect emerging technologies like "cloud computing." But legislators rarely understand cutting-edge technologies, and usually rapidly evolving technologies are poor candidates for legislative intervention. So legislators' efforts to push buzzword-laden legislation are often more for show than substance.

2) Regulatory exceptionalism. As I explain here, legislators keep creating new "exceptionalist" rules for subsets of the Internet ecosystem--online dating sites, social networks, cloud computing services, etc. We saw how well that worked in California's effort to ban employers from asking employees for social media login credentials. California so utterly failed at defining "social media" that it simply covered the entire Internet...and all non-networked electronic data too! Yet, legislators seemingly haven't learned from their colleagues' repeated failed efforts to precisely define the contours of some Internet subcommunity. The proposed CFAA amendment, and its gibberish definition of "cloud computing service," exemplifies this.

3) Code proliferation. For every problem, real or perceived, legislators think they can fix the problem with more regulatory code. But the manufacturing of new legal code exacts a toll of its own. This bill increases the CFAA's complexity with minimal or zero commensurate benefit. If Sen. Klobuchar or anyone else really wants to "fix" the CFAA, a good start would be to reduce the law's length, organize it better, and reduce its implications for users' ordinary Internet activity.

Filed Under: amy klobuchar, cloud computing, privacy, regulations

Senator Coons Admits That SOPA 'Really Did Pose Some Risk To The Internet'

from the a-little-late-for-that dept

See update at the bottom.

A few folks have been sending over a recent article from Hillicon Valley, in which Senator Chris Coons, a co-sponsor of PIPA admits that SOPA "really did pose some risk to the internet."

Coons said it was "truly memorable" when one of his sons shook him awake and asked "why I wanted to break the Internet and why Justin Bieber thought I should go to jail."

The pop star had suggested that supporters of the Protect IP Act should be arrested after a campaign against the bill had claimed it could result in Bieber going to jail for singing songs that belonged to other artists.

"That was my first warning that we were not communicating effectively," Coons said. He added that he believes some elements of SOPA "overreached" and "really did pose some risk to the Internet."

Of course, I think that some folks are a little confused by this. The issue with Bieber wasn't actually about PIPA at all. Instead, Coons had directly sponsored (along with Senator Amy Klobuchar) a different bill, S.978, which would have made a felony out of certain forms of online streaming. This was at the center of the FreeBieber campaign, which was actually separate from PIPA (which was S.968). While the House version of SOPA pulled in similar language, PIPA was always separate from S.978. Coons, though, was a co-sponsor of PIPA as well. It's a little unclear from the context if Coons was really talking about S.968 or S.978 in what was quoted above.

Either way, it seems worth pointing out that, if it takes your kid to clue you in to the fact that you were pushing for legislation that "really did pose some risk to the internet," perhaps you shouldn't be putting forth that legislation in the first place. It certainly makes it clear that he didn't understand what he was supporting.

One hopes that Coons (and, really, all our elected officials) will use this as an opportunity to realize that jumping into regulating the internet without realizing what the hell they're doing is a mistake that should not be repeated. In the meantime, it looks like Coons may be trying to make amends to the tech community, and is now co-sponsoring the new Startup Act, which would provide a significant boost to entrepreneurs and startups by easing immigration laws for both entrepreneurs and highly skilled engineering students, allowing them to stay in the US where they can build companies that create jobs, rather than going back to their home countries to compete against Americans.

Update: Posted a slight clarification, as some insist that he was only speaking about SOPA -- the House bill, rather than PIPA, the Senate bill he co-sponsored. While the two bills were distinct, there were significant similarities -- especially on the key points that would have "posed some risk to the internet." If Senator Coons is making a material distinction between the two bills, that suggests he still doesn't understand the two bills he supported in the Senate and how they, too, had significant problems.

Filed Under: amy klobuchar, chris coons, justin bieber, pipa, sopa, streaming