And Here Come The Completely Ridiculous Lawsuits Over Internet Company 'Bias'

from the these-won't-go-far dept

It was only a matter of time. Given the incorrect and misleading claims of "political bias" in social media moderation/search recently, you knew someone was going to file a lawsuit, and not surprisingly, the first to take the plunge is serial litigant Larry Klayman and his "Freedom Watch" organization. Of course, we've had a few similar lawsuits test the waters, all of which have failed miserably -- from Dennis Prager falsely claiming that YouTube was demonetizing his videos due to his political views (which was not even close to true) to Jared Taylor suing, claiming political bias in Twitter kicking him off its platform.

Klayman's complaint, however, adds layers of nuttiness upon those previous attempts. First off, he's hoping to turn it into a class action lawsuit for "all politically conservative organizations, entities and/or individuals who... have experienced illegal suppression and/or censorship." Second, he's filing it against four companies at once: Google, Facebook, Twitter and Apple. Once again, I thought that conservatives believed in free markets and were against the fairness doctrine which (1) is not currently law and (2) even when it was, only applied to broadcasts over the airwaves. Yet, Klayman pretends that there's some sort of quasi fairness doctrine, and also takes every possible rumor or claim of political bias in tech, no matter how incorrect, and assumes it's true for the purpose of the case.

Literally the case dredges up a ton of disproven articles claiming bias where none has been shown to actually exist. It takes things out of context. For example, it puts tremendous weight on the long-ago debunked story of Facebook's "trending stories" being moderated to block conservatives, and mixes that with Facebook's totally unrelated attempt to increase quality of news, to argue it's proof that Facebook censors conservatives. That's ridiculous. First of all, the Gawker article, claiming Facebook bias in trending news, was later shown to be misleading and just the incorrect claims of a disgruntled ex-employee (and trending stories was a feature that few people even used anyway). The attempts to increase quality is not a sign of political bias, it's a recognition of the fact that choosing what is "quality" involves ranking stuff. That's how ranking works. But to say that's evidence of political bias is complete bullshit. The lawsuit also uses PragerU as an example, even though YouTube showed pretty damn clearly that many fewer of PragerU's videos were demonetized than well-known "liberal-leaning" accounts. But that doesn't stop Klayman.

As for the "harm" to Klayman? Apparently, he believes it's against the law for his fanbase to have stopped growing. Really. It must be a conspiracy against him.

Since Defendants, each and every one of them, have begun their conspiracy to intentionally and willfully, and/or acting in concerted parallel fashion, to suppress conservative content and refuse to deal with Freedom Watch, Freedom Watch’s growth on these platforms has come to a complete halt, and its audience base and revenue generated has either plateaued or diminished.

For instance, the number of subscribers to Freedom Watch’s YouTube channel has remained static especially over the last six months, after years of steady grown, which simply cannot be a coincidence given the facts set forth in the previous section.

Wow. Watch out world. Apparently, any time someone's traffic decreases, you can just sue the sites that used to give you traffic according to Freedom Watch.

Also, it wouldn't be a Larry Klayman lawsuit if there weren't a few good conspiracy theories tossed in for fun. First he claims all these companies are colluding against him, and then reveals it's all part of the evil "leftist agenda" to overthrow the President.

Defendants’ agreement has a plainly anti-competitive effect and has no rational economic justification, as they are willing to lose revenue from conservative organizations and individuals like Freedom Watch and those similarly situated to further their leftist agenda and designs to effectively overthrow President Trump and his administration and have installed leftist government in this district and the 50 states.

Citation needed.

There's more silliness in the lawsuit. It quotes Mark Zuckerberg's testimony before the Senate, claiming that Zuckerberg "struggled to name a single competitor," which the very transcript he included shows is not true. The testimony involved Zuckerberg pointing out accurately that the company had many competitors, but that those were for different pieces of Facebook's business, rather than one competitor who did everything like Facebook -- and specifically named a bunch of companies that compete in different ways with Facebook.

It also claims that all of these companies are "quasi-public spaces." It's kind of incredible to think that some conservatives are now apparently against companies having First Amendment rights and believe in nationalizing their platforms. I'm curious if they now support tossing out the Citizens United Supreme Court ruling, because part of that ruling is that political bias is protected by the First Amendment.

This lawsuit has no chance and has a high likelihood of being laughed out of court, but in case you were wondering the actual claims, he argues that the companies are violating antitrust laws "in restraint of trade" (namely, his businesses using their platforms), anticompetitive behavior (he claims that FreedomWorks is a competitor to all of the platforms), discrimination, and (most incredibly) a violation of the First Amendment. Apparently, he does not see the irony in claiming that these platforms -- which have strong First Amendment rights to determine what content they show on their own platforms -- are actually violating his First Amendment rights in not giving him enough YouTube subscribers. How? Because they should be nationalized or something:

Defendants act as quasi-state actors because they regulate their public platforms, thereby regulating free speech within their public forums, Google/YouTube, Facebook, and Twitter, Apple, Instagram as well as the other social media companies or entities.

Defendants, each and every one of them acting in concert, have deprived Freedom Watch and those similarly situated of its constitutional rights by censoring its content for purely political reasons. Defendants’ censorship is arbitrary and capricious, and is purely viewpoint based.

The use of "arbitrary and capricious" is bizarre, seeing as that's the standard used in administrative law, concerning government body rulemaking is unfair. But, once again, none of these companies are government bodies.

Oh, and in case you're wondering, he's asking for... $1 billion. Because, why not?

Filed Under: antitrust, first amendment, free speech, larry klayman, political bias
Companies: apple, facebook, freedom watch, google, twitter, youtube

Senator Mark Warner Lays Out Ideas For Regulating Internet Platforms

from the be-careful dept

For over a year now, Senator Mark Warner has been among the most vocal in saying that it's looking like Congress may need to regulate internet platforms. So it came as little surprise on Monday when he released a draft white paper listing out "potential police proposals for [the] regulation of social media and technology firms." Unlike much of what comes out of Congress, it does appear that whoever put together this paper spent a fair bit of time thinking through a wide variety of ideas, recognizing that every option has potential consequences -- both positive and negative. That is, while there's a lot in the paper I don't agree with, it is (mostly) not in the hysterical moral panic nature found around such debates as FOSTA/SESTA.

The paper lays out three major issues that it hopes to deal with:

1. Disinformation that undermines trust in our institutions, democracy, free press, and markets.
2. Consumer protection in the digital age
3. Antitrust issues around large platforms and the impact it may have on competition and innovation.

All of these are issues worth discussing and thinking about carefully, though I fear that bad policy-making around any of them could actually serve to make other problems even worse. Indeed, it seems that most ideas around solving the first problem might create problems for the other two. Or solving the third problem could create problems for the first one. And so on. That is not to say that we should throw up our hands and automatically say "do nothing." But, we should tread carefully, because there are also an awful lot of special interests (a la FOSTA, and Articles 11 and 13 in the EU) who are looking at any regulation of the internet as an opportunity to remake the internet in a way that brings back gatekeeper power.

On a related note, we should also think carefully about how much of a problem each of the three items listed above are. I know that there are good reasons to be concerned about all three, and there are clear examples of how each one is a problem. But just how big a problem they are, and whether or not that will remain the case is important to examine. Mike Godwin has been writing an important series for us over the last few months (part 1, part 2 and part 3) which makes a compelling case that many of the problems that everyone is focused on may be the result of a bit of moral panic, overreacting to a smaller problem and not realizing how small it is.

We'll likely take more time to analyze the various policy proposals in the white paper over time, but let's focus in on the big one that everyone is talking about: the idea of opening up Section 230 again.

Make platforms liable for state-law torts (defamation, false light, public disclosure of private facts) for failure to take down deep fake or other manipulated audio/video content -- Due to Section 230 of the Communications Decency Act, internet intermediaries like social media platforms are immunized from state tort and criminal liability. However, the rise of technology like DeepFakes -- sophisticated image and audio tools that cart generate fake audio or video files falsely depicting someone saying or doing something -- is poised to usher in an unprecedented wave of false and defamatory content, with state law-based torts (dignitary torts) potentially offering the only effective redress to victims. Dignitary torts such as defamation, invasion of privacy, false light, and public disclosure of private facts represent key mechanisms for victims to enjoin and deter sharing of this kind of content.

Currently the onus is on victims to exhaustively search for, and report, this content to platforms who frequently take months to respond and who are under no obligation thereafter to proactively prevent the same content from being re-uploaded in the future. Many victims describe a "whack-a-mole" situation. Even if a victim has successfully secured a judgment against the user who created the offending content, the content in question in many cases will be re-uploaded by other users. In economic terms, platforms represent "least-cost avoiders" of these harms; they are in the best place to identify and prevent this kind of content from being propagated on their platforms. Thus, a revision to Section 230 could provide the ability for users who have successfully proved that sharing of particular content by another user constituted a dignitary tort to give notice of this judgement to a platform; with this notice, platforms would be liable in instances where they did not prevent the content in question from being re-uploaded in the future a process made possible by existing perceptual hashing technology (e.g. the technology they use to identify and automatically take down child pornography). Any effort on this front would need to address the challenge of distinguishing true DeepFakes aimed at spreading disinformation from satire or other legitimate forms of entertainment and parody.

So this seems very carefully worded and structured. Specifically, it would appear to require first a judicial ruling on the legality of the content itself, and then would require platforms to avoid having that content re-uploaded, or face liability if it were. The good part of this proposal is the requirement that the content go through a full legal adjudication before a takedown would actually happen.

That said, there are some serious concerns about this. First of all, as we've documented many times here on Techdirt, there have been many, many examples of either sketchy lawsuits that were filed solely to get a ruling on the books to try to take down perfectly legitimate content. If you don't remember the details, there were a few different variants on this, but the standard one was to file a John Doe lawsuit, then (almost immediately) claim to have identified the "John Doe" who admits to everything and agrees to a "settlement" admitting defamation. The "plaintiff" then sends this to the platforms as "proof" that the content should be taken down. If Warner's proposal goes through as is, you could see how that could become a lot more common, and you could see a series of similar tricks as well. Separately, it could potentially increase the number of sketchy and problematic defamation lawsuits filed in the hopes of getting content deleted.

One would hope that if Warner did push down this road, he would only do so in combination with a very strong federal anti-SLAPP law that would help deal with the inevitable flood of questionable defamation lawsuits that would come with it.

To his credit, Warner's white paper acknowledges at least some of the concerns that would come with this proposal:

Reforms to Section 230 are bound to elicit vigorous opposition, including from digital liberties groups and online technology providers. Opponents of revisions to Section 230 have claimed that the threat of liability will encourage online service providers to err on the side of content takedown, even in non-meritorious instances. Attempting to distinguish between true disinformation and legitimate satire could prove difficult. However, the requirement that plaintiffs successfully obtain court judgements that the content in question constitutes a dignitary tort which provides significantly more process than something like the Digital Millennium Copyright Act (DMCA) notice and takedown regime for copyright-infringing works may limit the potential for frivolous or adversarial reporting. Further, courts already must make distinctions between satire and defamation/libel.

This is all true, but it does not take into account how these bogus defamation cases may come into play. It also fails to recognize that some of this stuff is extremely context specific. The paper points to hashing technology like those used in spotting child pornography. But such content involves a strict liability -- where there are no circumstances under which it is considered legal. Broader speech is not like that. As the paper acknowledges in determining whether or not a "deepfake" is satire, much of this is likely to be context specific. And so, even if certain content may represent a tort in one context, it might not in others. Yet under this hashing proposal, the content would be barred in all contexts.

As a separate concern, this might also make it that much harder to study content like deepfakes in ways that might prove useful in recognizing and identifying faked content.

Again, this paper is not presented in the hysterical manner found in other attempts to regulate internet platforms, but it also does very little beyond a perfunctory "digital liberties groups might not like it" to explore the potential harms, risks and downsides to this kind of approach. One hopes that if Warner and others continue to pursue such a regulatory path, that much more caution would go into the process.

Filed Under: antitrust, cda 230, consumer protection, deepfakes, disinformation, free speech, intermediary liability, intermediary liability protection, mark warner, regulating social media, section 230
Companies: facebook, google, twitter

Some Thoughts On The EU's Latest $5 Billion Google Antitrust Fine

from the what's-best-for-innovation? dept

As was widely expected, earlier today, the EU Commission brought down its latest antitrust fine against Google, this time for an eye-popping $5 billion. The number gets the attention, but it's worth looking at the underlying details here. This was the result of a two year investigation, specifically into certain bundling practices that Google used concerning Android and some of its apps. When Competition Commissioner Margrethe Vestager first announced the investigation in April of 2016, she more or less explained where they were headed:

The Commission's preliminary view is that Google has implemented a strategy on mobile devices to preserve and strengthen its dominance in general internet search. First, the practices mean that Google Search is pre-installed and set as the default, or exclusive, search service on most Android devices sold in Europe. Second, the practices appear to close off ways for rival search engines to access the market, via competing mobile browsers and operating systems. In addition, they also seem to harm consumers by stifling competition and restricting innovation in the wider mobile space.

And... that's more or less exactly what the Commission found in today's announcement.

Commissioner Margrethe Vestager, in charge of competition policy, said: "Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules."

In particular, Google:

• has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store);
• made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and
• has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called "Android forks").

I've been critical of some antitrust activity and supportive of others over the years, and I think it's important to take a step back and look at whether or not this actually will likely lead to greater innovation -- no matter what the reasoning is (and, it should be noted, many European officials have made it clear they think EU antitrust activities should be used to harm American companies because they're big and American, rather than for any principled reason concerning competition or innovation). And, of course, there are some people who simply hate big tech companies and will cheer on any attack on them whether it's for good or bad reasons.

Just to set some signposts for the discussion: I believe, and have argued strongly over the years, that competition is the key to innovation and innovation is an important component of making everyone's lives better. You are free to disagree with those claims, but then we're having a very different discussion. This is the lens through which I view this entire discussion. Based on that, antitrust activities are useful when they are used to stop truly harmful monopolistic practices that hold back competition and innovation. But, antitrust activities for other reasons, or which don't seem likely to result in greater competition and innovation tend to be wasteful and silly. So... where does this latest fine from the EU come down?

As I noted when the investigation was first announced, it seemed that only one of the three "prongs" of the investigation really seemed like a big issue: the preventing manufacturers from selling phones with alternative versions of Android. There is a non-nefarious reason why Google might want this -- because if those non-Google Android versions are poorly done, it could confuse people and reflect poorly on Google... but this condition could clearly be used to stifle competition and innovation in the space. There's a reasonable argument that this was always a step too far, and Google never should have gone down that path in the first place.

The other reasons given for the fine remain... a lot less compelling. First, there's the issue of tying Google search and Chrome to offering Google Play as a pre-installed app. First off, the EU admits (oddly) that this is unfair because everyone expects the Google Play store to be pre-installed:

As part of the Commission investigation, device manufacturers confirmed that the Play Store is a "must-have" app, as users expect to find it pre-installed on their devices (not least because they cannot lawfully download it themselves).

Okay, fair enough. But you know what that very same Play Store lets you do? Download other browsers and search apps. I don't use Chrome on my phone (I use Firefox, Firefox Focus -- which is fantastic, or Brave). I've even used alternative app stores in the past, but eventually shifted back to the Play Store, mainly because Google seemed to do a much better job of stopping dangerous or crappy apps from getting on my phone. And, as Google has suggested, part of the reason for requiring Chrome to be installed is that tons of other apps actually use Chrome components as part of how they work. So not installing Chrome with the Play Store would actually lead to a lot of apps not working properly.

The other issue for which Google was dinged was the payments to device manufacturers to make Google search the "exclusive" pre-installed search on those devices. Now, I could totally see a valid antitrust complaint on this point if Google were forcing manufacturers into this agreement against their will, and were able to force them to do so. But... here it's about Google doing a business deal to pay manufacturers to be the exclusive. As we pointed out at the beginning of the investigation, how is that different than when Google paid Mozilla to be the default search engine in Firefox? Then Microsoft outbid Google and Bing became the default.

Either way, on this issue, Google stopped doing this practice entirely in 2014.

Google says it's going to appeal this decision, and Google CEO Sundar Pichai is hinting that if the ruling is upheld, Google may no longer be able to offer Android for free in the EU. Google also argues that the way its designed its Android business has created a tremendous amount of choice -- including providing smart phone / tablet / other devices that are available at price points and in markets where Google's main competitor in this space, Apple, refuses to make any real offerings. And that's a fairly compelling point.

The bigger question, again, though is what will be the real impact on innovation for end users of all of this. I'm not convinced (should this hold up) that it will have much of an impact either way. I doubt making any of the required changes will really harm Google that much (as noted, in at least one case, it already gave up the practice four years ago). But I also don't see how any of the required changes really helps competitors or app developers in any significant way. It doesn't make any of them more likely to get more users, or provide a better way for them to get their services out there.

One of the issues with anything having to do with innovation is that it's impossible to envision the "innovation that would have occurred" in the counterfactual scenario in which the supposed antitrust violations never occurred. But looking over these issues, I'm hard pressed to think of how anything would have developed all that differently if Google hadn't done these things in the first place. Perhaps Amazon's Fire devices would have a larger market? Perhaps we'd have seen more innovation with other third parties building out their own versions of Android with their own playstores. But it seems unlikely that it would have materially changed how the search market and browser market developed.

Of course, it should be noted that there is some amount of karma here. Back during the Microsoft antitrust fight, Google stepped up in 2006 to complain to the EU Commission about Microsoft's bundling and default practices. Specifically, Microsoft's browser at the time included a built in search box that defaulted to Microsoft's own search (at the time, called MSN search). And Google didn't like that.

"The market favors open choice for search, and companies should compete for users based on the quality of their search services," said Marissa Mayer, the vice president for search products at Google. "We don't think it's right for Microsoft to just set the default to MSN. We believe users should choose."

And, amusingly, Microsoft's own response to that criticism was nearly identical to Google's today, saying that "the user is in control" and it's easy to change the defaults. So there's absolutely some hypocrisy in how Google has acted through this whole thing.

However, in the end, I'm still hard pressed to see how today's fine will actually change anything in a way that improves innovation and what the public gets to do. Google is competing with lots of companies on a variety of different fronts these days. Earlier this year we had a podcast exploring how companies might disrupt Google, and I don't see how these moves make any of what we discussed any easier at all. Instead, it seems to be fighting the last fight, over mobile UI, rather than the next real competitive and innovative fights on different kinds of services.

Filed Under: android, antitrust, bundling, chrome, competition, eu, innovation, margrethe vestager, monopolies, search, tying
Companies: google

Judge In AT&T Merger Ruling Had Zero Understanding Of The Markets AT&T Now Dominates

from the net-neutraliwha? dept

So, we already discussed how the Judge that let the AT&T merger proceed showed a comically narrow reading of the media and telecom markets when he approved AT&T's $86 billion Time Warner merger without a single condition. At no point in his 172-page ruling (pdf) did U.S. District Court Judge Richard Leon even utter the phrase "net neutrality," showing a complete failure to understand how AT&T intends to use regulatory capture, vertical media integration (ownership of must-have content like HBO) and its stranglehold over broadband markets in synergistically anti-competitive ways.

Leon focused almost exclusively on bickering between AT&T and DOJ-hired economists over whether the merger would result in higher rates for consumers (which, if you've watched AT&T do business should be a foregone conclusion). But because U.S. antitrust law is already ill-equipped to help police these kinds of vertical integrations, DOJ economists were locked into very specific confines of economic theory, even if it should be obvious to everybody and their uncle that AT&T will use its ownership of CNN, HBO, and other media properties to jack up licensing costs for streaming competitors.

Of course higher costs for licensing (which in turn means higher costs for consumers) is just one way AT&T intends to leverage its greater scale anti-competitively. It also couldn't be more clear that with net neutrality rules out of the way, AT&T has an absolute arsenal of creatively anti-competitive tools at their disposal, whether that means hijinks at interconnection points (something else Leon likely has never heard of), to the use of usage caps to "zero rate" AT&T's own content, while still penalizing competitors like Netflix.

Amusingly, even many of the Wall Street analysts that have routinely cheered on this kind of behavior were quick to point out how Leon appears entirely oblivious to these additional layers of potential pitfalls. For example Wall Street analyst Craig Moffett, who once heralded broadband usage caps as the pinnacle of modern technological achievement, was quick to point out in a research note to clients that Leon had completely missed the forest for the trees:

"The DOJ focused entirely on the risks that would arise from joint ownership of DirecTV and Turner’s cable networks (recall that they even proposed divestiture of one or the other as a preemptive remedy)," said Moffett. "And, therefore, so did Judge [Richard] Leon. Neither ever even raised the issue of whether there might be a more material competitive harm arising from the combination of Turner programming and an ISP."

"The theoretical harm here is obvious," he says. "A wireless or wired ISP, now unfettered by net neutrality regulations, could, in theory, advantage its own content over the content of others, either by zero rating (that is, not counting owned-and-operated content against monthly data caps), by prioritizing (the old fast lanes/slow lanes chestnut), or even by adopting a regime of content exclusivity."

Many analysts believe Leon's myopic ruling set precedent that will result in the DOJ being less likely to police future, major deals in this space, whether it's T-Mobile's competition and job eroding merger with Sprint, or Comcast's latest $65 billion effort to acquire Fox. This slow but steady consolidation in both the media and telecom space will, slowly but surely, mean less overall competition in broadband, fewer diverse options in terms of local reporting, and higher rates for everybody in the chain.

ISPs (and their ocean of dollar per hollar policy folks) have been immensely successful in claiming that ISP oversight must be stripped away if ISPs are to compete on a "level playing field" with Silicon Valley in the ad and streaming wars to come. But as some were quick to note, this intentionally ignores ISPs hold a natural monopoly over the broadband last mile, making the regulatory approach to dealing with ISPs notably different than companies like Facebook (which you can, with a few minor exceptions, choose not to use):

"But neither Facebook nor Google owns the ultimate distribution layer of the consumer connection to the internet. They aren’t the world’s largest telecom company. Neither is Netflix or Amazon or any of the other companies AT&T and Time Warner are afraid of. (Yes, I know Google owns Google Fiber, but that has been more failure than success.)

Tech companies might have vertically integrated the creation and production of content with consumer-facing apps and services, but they all depend on internet connections to reach their audiences. And those connections are increasingly wireless. AT&T and Time Warner aren’t trying to catch up to Netflix by merging; they’re trying to step ahead of them in line by marrying Time Warner’s content to AT&T’s network."

Again, this idea that natural broadband monopolies require different and tougher rules because they're different is something ISPs like to play dumb about. But again, the idea that the domination of media and broadband in concert could be a real problem (especially for startups and small businesses) isn't something Leon bothers to seriously think about at any point in his 172 page ruling. Despite the fact that the obvious harm caused by letting a handful of companies dominate the pipes to the home and the content running over it is becoming painfully apparent in the Comcast era.

As companies like AT&T, Comcast and Verizon beef up with media acquisitions in the hopes of challenging Google and Facebook in the media space, the rules governing the potential downsides of these deals are being routinely stripped away. Whether that's the death of net neutrality (which also gutted the lion's share of FCC authority over ISPs) or the steady assault on decades-old media consolidation rules, for too many are dumbly looking the other direction as these companies try and build a decidedly dystopian broadband and media future.

Filed Under: antitrust, competition, consumer welfare, doj, merger, net neutrality, richard leon, zero rating
Companies: at&t

Following AT&T's Lead, Comcast Makes A $65 Billion Bid For Fox

from the merge-ALL-The-things! dept

Encouraged by AT&T's massive merger victory this week, Comcast has made its own $65 billion acquisition offer for a large chunk of 21st Century Fox. According to the Comcast announcement, the company's all cash $65 billion dollar offer is a notable step up from Disney's own $52.4 billion all-stock package, setting up a showdown between two companies that have had a contentious relationship since Comcast's 2004 failed hostile takeover attempt of Disney.

The deal includes the FX Channel, numerous regional sports networks, and a minority stake in European cable TV giant Sky, which would all be tacked on to the NBC Universal assets Comcast acquired back in 2011. Fox will however retain Fox News, Fox Sports, and Fox broadcasting, which will all remain under the existing Fox brand. In its statement, Comcast rolled out the usual claptrap about how the combination would be lovely for all involved:

"We have long admired what the Murdoch family has built at Twenty-First Century Fox. After our meetings last year, we came away convinced that the 21CF businesses to be sold are highly complementary to ours, and that our company would be the right strategic home for them."

Comcast had previously hinted that it was waiting to see the outcome of AT&T's own merger battle with the DOJ before making its own bid for Fox. Comcast and many analysts believe that the comically broad nature of AT&T's court victory (based on a pinhole narrow reading of the markets by U.S. District Court Judge Richard Leon, who clearly has never heard of things like zero rating or net neutrality), means the precedent set will likely result in a DOJ that's more hesitant to intervene in potentially problematic merger moving forward.

That's especially true of vertical integration mergers, where modern U.S. antitrust law tends to be ill-equipped to handle some of the more complex new media anti-competitive concerns that pop up. Combined with the death of ISP privacy rules and the neutering of net neutrality, we're creating a brave new landscape where there's very little to stop giants like Comcast and AT&T from using their last mile monopolies--combined with massive ownership of content needed to compete with these giants--as anti-competitive bludgeons against consumers and competitors alike.

For example, there's now nothing of note preventing AT&T and Comcast from exempting its own content (like HBO or a regional sports game) from arbitrary and unnecessary usage caps, while penalizing those who use a competitor's service (Netflix, or the next Netflix). Similarly, there's nothing stopping Comcast or Verizon from arbitrarily throttling competitors at interconnection points, driving up the cost for competitors to access their broadband subscribers. There's an ocean of creative ways to hamstring competitors the government is now largely helpless to effectively police, and as the AT&T court win shows, the ISP claim that this isn't a problem because antitrust will save us all clearly isn't a valid argument.

With the FCC making it very clear it's a glorified rubber stamp, that leaves the DOJ as the only real wild card in terms of whether any meaningful conditions get applied to this deal. Granted if you followed the NBC Universal merger, you'll recall that Comcast has a pretty terrible history of ignoring merger conditions when it suits it, and regulators from both parties tend to do little more than grumble when the company tap dances around imposed restrictions (though that was a major reason why Obama-era regulators blocked Comcast's 2014 attempted acquisition of Time Warner Cable (not to be confused with Time Warner)).

Obviously there's still plenty of folks that see zero problems with massive broadband monopolies gobbling up countless media empires while paying millions of dollars to neuter state and federal oversight. And their theory that these kinds of deals are no problem because the market self-regulates (ignoring there is no free market competition in broadband to organically hold them accountable) will soon have a perfect opportunity to put their theories to the test.

Filed Under: antitrust, broadband, competition, content, doj, mergers, streaming
Companies: at&t, comcast, disney, fox, time warner

AT&T Defeats DOJ In Merger Fight, Opening The Door To Some Major Competitive Headaches

from the what-could-possibly-go-wrong dept

AT&T has defeated the DOJ in a court battle over whether or not the company will be allowed to acquire Time Warner for $86 billion.

In a ruling (pdf), U.S. District Court Judge Richard Leon stated that the government failed to make its case that the merger would harm AT&T's competitors, most of which are now trying to keep pace in the streaming video space. Consumer advocates have routinely warned that AT&T will use its greater leverage to make must-have content (like Time Warner owned CNN or HBO) significantly more costly for companies hoping to compete with AT&T's own TV services, including its newish streaming video effort, DirecTV Now.

That a company with a thirty-year history of anti-competitive behavior will likely use this greater leverage to behave badly shouldn't have been a particularly hard case to make, suggesting that DOJ lawyers may have flubbed key components of its case. The DOJ sued to thwart the deal last November, and while the agency claimed it was to protect consumers, the incongruity with other Trump administration consumer policies (like, well, everything) have fueled speculation that Trump's disdain for Time Warner owned CNN, or his close relationship with Rupert Murdoch may have colored the DOJ's decision to sue.

It's an indisputable and massive win for AT&T, and the DOJ's first antitrust court loss since 2004. Leon didn't just kill the lawsuit, he didn't offer any conditions to mitigate potential anti-competitive problems, and largely urged the DOJ not to appeal. AT&T, as you might expect, was thrilled with the court's failure to block its latest megamerger:

"We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner. We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative."

Anybody that has witnessed AT&T's versions of "affordable" and "innovative" likely isn't to buy that claim. This is, after all, a company that thought it would be a good idea to charge consumers more money just to protect their own privacy. It's also the same company that has been repeatedly dinged by government for either ripping off its own customers, or turning a blind eye while all manner of others did. Not surprisingly, more consumer-oriented folks like former FCC staffer and consumer advocate Gigi Sohn had a decidedly different take on AT&T's court win:

"Big media conglomerates are the winners and consumers are the losers with Judge Leon’s decision. Merging AT&T, one of the largest cable, satellite and mobile broadband companies with Time Warner will lead to higher prices, fewer choices and perhaps more importantly, fewer voices. Coupled with the demise of the 2015 net neutrality rules yesterday, AT&T will be free to favor Time Warner content over its cable and its fixed and mobile broadband networks."

Numerous companies were waiting on the AT&T decision before pursuing their own, previously-unthinkable merger ambitions. Comcast, for example, has stated the company was holding off on making its $60 billion offer for Fox's remaining assets until it saw the outcome of the case. Sprint and T-Mobile are also considering a merger that's likely to reduce competition in wireless and kill tends of thousands of sector jobs.

It's not just the AT&T merger that's problematic. The wave of major consolidation this loss will trigger, combined with the death of net neutrality protections opens the door to an absolute ocean of bad behavior by companies that have already clearly documented they'll stop at nothing to keep real competition at bay. And while the rise of streaming competitors crafting original content may mitigate some of this, you'd have to be pretty naive to think AT&T's stranglehold over broadband and media, combined with Trump era regulatory capture ends particularly well for the consumers and small businesses caught in its wake.

Filed Under: antitrust, competition, consolidation, doj, merger, richard leon
Companies: at&t, time warner

Yelp's Newest Campaign: Asking Google To Do The Right Thing

from the don't-be-evil,-guys dept

Back in 2014, we wrote about a campaign by Yelp which it called "Focus on the User," in which it made a very compelling argument that Google was treating Yelp (and TripAdvisor) content unfairly. Without going into all of the details, Yelp's main complaint was that while Google uses its famed relevance algorithm to determine which content to point you to in its main search results, when it came to the top "One Box" on Google's site, it only used Google's own content. Four years ago, the Focus on the User site presented compelling evidence that users of Google actually had a better overall experience if the answers for things like local content (such as retailer/restaurant reviews) in the One Box were ranked according to Google's algorithm, rather than just using Google's own "Local" content (or whatever they call it these days).

As we noted at the time, this argument was pretty compelling, but we worried about Yelp using the site to ask the EU to then force Google to change how its site functioned. As we wrote at the time:

... the results are compelling. Using Google's own algorithm to rank all possible reviews seems like a pretty smart way of doing things, and likely to give better results than just using Google's (much more limited) database of reviews. But here's the thing: while I completely agree that this is how Google should offer up reviews in response to "opinion" type questions, I still am troubled by the idea that this should be dictated by government bureaucrats. Frankly, I'm kind of surprised this isn't the way Google operates, and it's a bit disappointing that the company doesn't just jump on this as a solution voluntarily, rather than dragging it out and having the bureaucrats force it upon them.

So while the site is fascinating, and the case is compelling, it still has this problem of getting into a very touchy territory where we're expecting government's to design the results of search engines. It seems like Yelp, TripAdvisor and others can make the case to Google and the public directly that this is a better way to do things, rather than having the government try to order Google to use it.

It took four years, but it looks like Yelp is at least taking some of my advice. The company has relaunched the "Focus on the User" site, but positioned it more towards convincing Google employees to change how the site handles One Box content, rather than just asking the government for it. This is a good step, and I'm still flabbergasted that Google hasn't just done this already. Not only would it give users better overall results, but it would undercut many of the antitrust arguments being flung at Google these days (mainly in the EU). It's a simple solution, and Google should seriously consider it.

That said, while Yelp has shifted the focus of that particular site, it certainly has not not given up on asking the government to punish Google. Just as it was relaunching the site, it was also filing a new antitrust complaint in the EU and again, I'm still concerned about this approach. It's one thing to argue that Google should handle aspects of how its website works in a better way. It's another to have the government force the company to do it that way. The latter approach creates all sorts of potential consequences -- intended or unintended -- that could have far reaching reverberations on the internet, perhaps even the kind that would boomerang around and hurt Yelp as well.

Yelp makes a strong argument for why Google's approach to the One Box is bad and not the best overall results for its users. I'm glad that it's repurposed its site to appeal to Google employees, and am disappointed that Google hasn't made this entire issue go away by actually revamping how the One Box works. But calling on the government to step in and determine how Google should design its site is still a worrisome approach.

Filed Under: algorithm, answers, antitrust, competition, eu, local content, one box
Companies: google, yelp

AT&T Cans Exec Over Cohen Payment Kerfuffle, Pretends This Kind Of Influence Peddling Isn't Perfectly Routine

from the whoops-a-daisy dept

As you've probably seen, AT&T was recently exposed for paying $600,000 into a shady shell LLC operated by President Trump's "fixer" Michael Cohen. Initially, AT&T tried to claim that the company had simply hired Cohen for "insight" into President Trump. Given AT&T could easily gain said insight into Trump from any number of its lawyers, lobbyists, and above-board consultants (not to mention the ocean of politicians and regulators in its back pocket), the idea they'd pay a dubious NYC "fixer" for such insight never really carried much weight.

It seems fairly obvious at this point that AT&T was probably paying Cohen for additional access to the President. A leaked document provided to the Washington Post makes it clear that AT&T hoped to gain some advantage in its business before the FCC (net neutrality, privacy, protectionism, protecting its monopoly power), and its efforts to gain regulatory approval for the company's $86 billion Time Warner merger:

"A “scope of work” describing Cohen’s contract in an internal AT&T document shows that he was hired to “focus on specific long-term planning initiatives as well as the immediate issue of corporate tax reform and the acquisition of Time Warner.”

He was also directed to “creatively address political and communications issues” facing the company and advise the company on matters before the Federal Communications Commission."

There's every indication that this additional attention may have paid monumental dividends.

While the Trump DOJ did sue to block AT&T's merger (DOJ antitrust chief Makan Delrahim wandering off script to actually defend antitrust law), the repeal of net neutrality and broadband privacy rules was a smashing success. AT&T has also had great success in its efforts to force NAFTA "reform" making it easier for AT&T to expand into the Mexican wireless market. And AT&T's luck has been stellar at the FCC, where the Commission majority (the makeup of which was dictated by AT&T lobbying) has rubber stamped AT&T's every desire, including the protection of its business broadband monopoly.

As the scandal has grown, AT&T CEO Randall Stephenson was forced to admit the error of his ways in an e-mail to AT&T employees. Stephenson admitted the payments to Cohen were a mistake, but tried his best to pretend that this wasn't routine behavior for AT&T:

"To be clear, everything we did was done according to the law and entirely legitimate. But the fact is, our past association with Cohen was a serious misjudgment. In this instance, our Washington D.C. team’s vetting process clearly failed, and I take responsibility for that.

As somebody who has covered AT&T for decades now, I can assure you this Cohen payment is just a tiny portion of the greasy influence peddling AT&T engages in on a daily basis. The idea that this behavior wasn't perfectly in line with AT&T's "values" is laughable. And in a country where flimsy lobbying disclosure requirements are routinely tap danced around, trying to claim that this was all above board because you didn't violate any laws is akin to claiming you're an expert high jumper because you cleared a bar one inch off the damn ground.

And despite the payment being well in line with AT&T's behavior, the company decided to throw top lobbying and policy man Bob Quinn under the bus as penance for its sins:

"For the foreseeable future, the External & Legislative Affairs (E&LA) group will report to our General Counsel David McAtee. Bob Quinn, Senior Executive Vice President – E&LA, will be retiring. David’s number one priority is to ensure every one of the individuals and firms we use in the political arena are people who share our high standards and who we would be proud to have associated with AT&T."

Bob Quinn had been on the job for less than two years after the retirement of former top lobbying and policy man Bob Cicconi. You may recall Quinn from such hits as AT&T's laughable efforts to pretend it supports net neutrality while simultaneously spending millions to dismantle popular federal net neutrality protections. And again, while paying Cohen to gain access to the President is certainly shady, it's well in line with AT&T's behavior over the last several decades. The question then becomes: will anybody actually do anything about any of it?

AT&T's a shining example of how "creative" influence peddling has infected this country down to its marrow. From co-opting minority groups and creating fake consumer groups to undermine productive proposals, to using think tanks, hired consultants and academics to spread disinformation, testify as "objective" experts and write Op-Eds where financial ties are rarely disclosed, there's a universe of influence peddling and lobbying AT&T routinely engages in that existing U.S. laws don't even operate in the same dimension on.

America has, time and time again, made it abundantly clear that this kind of influence peddling, lobbying and disinformation is not just perfectly legal, it's the norm. So whether this latest scandal results in substantive change or is just brushed aside as a one-off instance of bad judgement by just a few otherwise innocent companies will be interesting to see.

Filed Under: antitrust, bob quinn, donald trump, influence peddling, lobbying, michael cohen, randall stephenson
Companies: at&t, essential consultants

Comcast Prepares To Get Even Larger With Sky, Fox Acquisitions

from the what-could-go-wrong dept

The cable company Americans love to hate is about to go supernova. Comcast acquired NBC Universal back in 2011, giving the company unprecedented control of not only the conduit into the house, but also the information and news being sent over those wires. And while regulators affixed some flimsy conditions to the deal, Comcast managed to ignore many of them, a major reason why regulators moved to block Comcast's acquisition of Time Warner Cable a few years ago.

Because we're unwilling to learn much of anything from history, Comcast's now on the verge of growing significantly larger. The company recently unveiled a $30 billion plan to acquire European pay TV giant Sky. And this week, reports began to bubble up indicating that if regulators approve AT&T's $86 billion acquisition of Time Warner, Comcast plans to make its own, massive $60 billion bid for the lion's share of 21st Century Fox assets:

"Comcast Chief Executive Brian Roberts only plans to proceed with the bid if a federal judge allows AT&T Inc’s planned $85 billion acquisition of Time Warner Inc to proceed, the sources said. The U.S. Department of Justice has opposed the AT&T-Time Warner deal over antitrust concerns, and a decision from U.S. District Court Judge Richard Leon is expected in June."

By all accounts, AT&T is likely to defeat the DOJ in court, meaning Comcast's latest megamerger is likely to move forward. The bid is an effort to undermine a similar bid for Fox from Disney, a company Comcast has had an adversarial relationship with ever since executives rebuffed Comcast's $54 billion Disney acquisition offer back in 2004. And while this deal wouldn't include the Fox broadcast network or Fox News, it would include Fox's 30% ownership stake in Hulu (Comcast also owns 30%), it would include numerous U.S. and global operations as well as the lion's share of Fox's film properties.

That said, there's still cause for worry here. Comcast's conditions affixed to its NBC Universal merger just expired, giving it newfound freedom to do things like meddle with Hulu's competitive potential. Should Comcast also nab Disney's 30% stake in Hulu, the company will have full authority to try and hamstring Hulu's ability to disrupt Comcast's own streaming or traditional video services, which is a shame given that Hulu just figured out that it should aspire to something greater than being a glorified ad for traditional cable TV.

Comcast's explosive growth spurt comes as the company has not only successfully lobbied to kill net neutrality and consumer privacy protections, but is quietly securing a massive monopoly over broadband in many markets. At the same time, industry BFF Ajit Pai at the FCC is happily gutting decades-old media consolidation rules designed to protect smaller media outlets from exactly this type of rampant consolidation. For good measure, we're also watching as lobbyists dismantle both the FCC's and FTC's ability to hold Comcast accountable when it engages in anti-competitive behavior.

This provides the cable giant with ample leeway to use its combined domination of both content and broadband to hamstring competitors in an absolute ocean of creative new ways. If you thought the country was having any real conversation about the possible anti-competitive implications of this perfect storm of consolidation, monopoly dysfunction, and dismantled government oversight of telecom monopolies, you'd be wrong.

Filed Under: antitrust, competition, consolidation
Companies: 20th century fox, comcast, sky