Judge Not Impressed By Parler's Attempt To Force Amazon To Put It Back Online

from the not-how-it-works dept

It appears that Parler's antitrust lawsuit against Amazon for suspending its AWS account isn't off to a very good start. In an emergency hearing on Thursday to see whether or not the judge would order Amazon to turn AWS back on for Parler, the judge declined to do so:

U.S. District Judge Barbara J. Rothstein in Seattle said during a hearing Thursday she’s not inclined to order Amazon to immediately put Parler back online. Instead, she expressed interest in taking a more measured approach to deciding whether she should order a permanent injunction to restore web-services to Parler.

Having spoken to two people who followed the hearing, it sounds like the judge did not make an official ruling yet, but said she will quickly. Another comment I heard from people who listened to the hearing was that Parler's lawyer did not seem to understand some fairly basic concepts regarding how all of this works, which does not bode well for his client. Also, Amazon's lawyer has said that they told Parler that the they would allow the site to return to AWS if it put in place a real content moderation strategy -- which again leans into the fact that they suspended, rather than terminated Parler's account (this has become a key point in the lawsuit, as Parler argues that termination violates their contract, while Amazon says the account was merely suspended, which is different from terminated).

One other point: Parler's lawyer apparently told the judge that Parler could not afford to litigate this case all the way to judgment (in the context of arguing that there would be irreparable harm in not turning the site back on immediately, when asked why any harm couldn't later be dealt with by an award of damages). I find this amusing, because just last week (which feels like a century ago, of course), Parler insisted that it didn't need Section 230 at all and CEO John Matze was saying that Parler was big enough to fight off any lawsuits that would come about without 230. At the time, I pointed out to him that while his backers, the Mercer family, are wealthy, they're not that wealthy.

Still, it's pretty stunning to go from "eh, we can handle such lawsuits if we're liable for our users postings" to "uh, we can't afford this lawsuit we filed to keep our site alive" in just one week.

Filed Under: antitrust, aws, injunction, terms of service
Companies: amazon, parler

Parler's Laughably Bad Antitrust Lawsuit Against Amazon

from the i-mean,-what? dept

As you may have heard, over the weekend Amazon removed Parler from its AWS cloud hosting services, causing the website to shut down. I've been working on a longer piece about all of this, but in the meantime, I did want to write about the laughably bad antitrust lawsuit that Parler filed against Amazon in response. Notably, this came just days after Parler's CEO claims that his own lawyers quit (would these be the same "lawyers" who stupidly advised that the company doesn't need Section 230?). Instead, they found a small time independent practitioner who doesn't even have a website* to file what may be the silliest antitrust lawsuit I've seen in a long time. It's so bad that by the end of it, Parler may very well be paying Amazon a lot of money.

There are so many other things I'd rather be writing about, so I'll just highlight a few of the problems with Parler's very bad, no good, horrible, stupidly ridiculous lawsuit. If you want more, I recommend reading Twitter threads by Akiva Cohen or Neil Chilson or Berin Szoka or basically any lawyer with any amount of basic knowledge of antitrust law. The lawsuit is dumb and bad and it's going to do more harm to Parler than good.

The key part of the lawsuit is that Parler, without evidence, claims that Amazon had "political animus" against it, and that it conspired with Twitter to shut down a competitor. It provides no proof of either thing, and... even if it did show proof of political animus, that's... not against the law. And that's kind of a big deal. They're basically saying it's an antitrust violation to dislike Parler. Which it's not. But even if it were, they are simply making up false reasons for why AWS booted Parler.

AWS’s decision to effectively terminate Parler’s account is apparently motivated by political animus. It is also apparently designed to reduce competition in the microblogging services market to the benefit of Twitter.

I mean, even just this paragraph makes no sense. You may have noticed that Amazon and Twitter are different companies. The complaint is against Amazon. Amazon doesn't compete with Parler. None of this makes any sense. The next paragraph demonstrates how rushed and stupid and bad this lawsuit is:

Thus, AWS is violating Section 1 of the Sherman Antitrust Act in combination with Defendant Twitter. AWS is also breaching it contract with Parler, which requires AWS to provide Parler with a thirty-day notice before terminating service, rather than the less than thirty-hour notice AWS actually provided. Finally, AWS is committing intentional interference with prospective economic advantage given the millions of users expected to sign up in the near future

With Defendant Twitter? Let's scroll back up and look at the caption again:

There's only one defendant. And it's not Twitter.

The complaint goes on and on about how there's also bad stuff on Twitter, as if somehow that makes it wrong for AWS to be upset about Parler. But... Parler's whole entire claim to fame is that it moderates differently than Twitter, so claiming that there's the same stuff on Twitter is meaningless. Even worse, the example that Parler uses of how Twitter and Parler have similar content is around people suggesting that political officials including Congressional Representatives, Senators, and VP Mike Pence should be hanged. But the evidence that Parler itself provides undermines its own case, and in some cases directly contrasts its own claims. That's not just bad lawyering, that's legal malpractice.

Here is what Parler says:

What is more, by pulling the plug on Parler but leaving Twitter alone despite identical conduct by users on both sites, AWS reveals that its expressed reasons for suspending Parler’s account are but pretext. In its note announcing the pending termination of Parler’s service, AWS alleged that “[o]ver the past several weeks, we’ve reported 98 examples to Parler of posts that clearly encourage and incite violence.” Exhibit A. AWS provide a few examples, including one that stated, “How bout make them hang?”, followed by a series of hashtags, including “#fu-- mikepence.”...

AWS further stated to Parler that the “violent content on your website . . . violates our terms.” Id. Because, AWS declared, “we cannot provide services to a customer that is unable to effectively identify and remove content that encourages or incites violence against others,” AWS announced the pending termination of Parler’s account.

However, the day before, on Friday, one of the top trends on Twitter was “Hang Mike Pence,” with over 14,000 tweets. See Peter Aitken, ‘Hang Mike Pence’ Trends on Twitter After Platform Suspends Trump for Risk of ‘Incitement of Violence’, Fox News (Jan. 9, 2021), https://www.foxnews.com/politics/twittertrending-hang-mike-pence. And earlier last week, a Los Angeles Times columnist observed that Twitter and other social media platforms are partly culpable for the Capital Hill riot, by allowing rioters to communicate and rile each other up. See Erika D. Smith, How Twitter, Facebook are Partly Culpable for Trump DC Riot, LA Times (Jan. 6, 2021), https://www.latimes.com/california/story/2021-01-06/howtwitter-facebook-partly-culpable-trump-dc-riot-capitol. Yet these equivalent, if not greater, violations of AWS’s terms of service by Twitter have apparently been ignored by AWS

This leaves out some fairly important context. For one, the "Hang Mike Pence" trend was driven mainly by people calling out the insurrectionists who were saying that -- and which Twitter very quickly removed under their content moderation practices. Parler, on the other hand, made it clear that it was still trying to figure out how to moderate, and hoped to rely on volunteers. That's in Parler's evidence. That it didn't have a real plan in place yet. And that is why Amazon kicked it off.

On top of that, Parler's lawsuit claims that AWS needed to give it 30 days notice, but really only gave it a couple of days. Yet, in the evidence that Parler itself provides, Amazon mentions to Parler's policy chief that it has been sending dozens of examples of content that violate its policy for several weeks.

Amazon, for its part, appears to have not even waited to be served by Parler, but hit back hard with a very damning response to Parler that just dismantles Parler's argument bit by bit in fairly explicit terms.

This case is not about suppressing speech or stifling viewpoints. It is not about a conspiracy to restrain trade. Instead, this case is about Parler’s demonstrated unwillingness and inability to remove from the servers of Amazon Web Services (“AWS”) content that threatens the public safety, such as by inciting and planning the rape, torture, and assassination of named public officials and private citizens. There is no legal basis in AWS’s customer agreements or otherwise to compel AWS to host content of this nature. AWS notified Parler repeatedly that its content violated the parties’ agreement, requested removal, and reviewed Parler’s plan to address the problem, only to determine that Parler was both unwilling and unable to do so. AWS suspended Parler’s account as a last resort to prevent further access to such content, including plans for violence to disrupt the impending Presidential transition.

As Amazon says, the antitrust claims are obviously silly, but even the breach of contract claims are ridiculous because if anyone breached the contract, it was Parler:

Despite Parler’s rhetoric, its lawsuit is no more than a meritless claim for breach of contract. But the facts are unequivocal: If there is any breach, it is Parler’s demonstrated failure and inability to identify and remove such content. AWS was well within its rights to suspend Parler immediately for those failures. Parler also cannot hold AWS liable in tort for enforcing the agreement’s express terms. And there is no antitrust claim where, as here, Parler cannot plausibly plead an agreement to cause it harm and the complained-of conduct is undeniably compatible with a legitimate purpose.

Compelling AWS to host content that plans, encourages, and incites violence would be unprecedented. Parler has no likelihood of prevailing on the merits, and the balance of equities and public interest strongly tip against an injunction. The motion for a temporary restraining order should be denied.

In the Amazon filing, the company notes that it began sending breach reports to Parler in November of last year and detailed the nature of the content that it was concerned about, often directly calling for violence. They include a ton of screenshots of the kind of violent speech that was on Parler, that goes way beyond what you'd see on other platforms, and which other platforms would remove.

Amazon also notes that the exhibit is only a small sampling:

The content AWS provided to Parler is merely representative of volumes of content that poses a security risk and harms others, in direct violation of the AUP. See id. Exs. E-F (examples). That content includes, but is not limited to, calls for violence against a wide range of individuals, including elected officials, law enforcement officers, and teachers. People have acted on these calls: Parler was used to incite, organize, and coordinate the January 6 attack on the U.S. Capitol. See Doran Decl. Exs. F-G. AWS reported to Parler, over many weeks, dozens of examples of content that encouraged violence, including calls to hang public officials, kill Black and Jewish people, and shoot police officers in the head. Executive 2 Decl. Exs. D-F. Parler systematically failed to “suspend access” to this content, much less to do so immediately, and demonstrated that it has no effective process in place to ensure future compliance.3 Executive 2 Decl. 7. Parler itself has admitted it has a backlog of 26,000 reports of content that violates its (minimal) community standards that it had not yet reviewed. Id. Parler’s own failures left AWS little choice but to suspend Parler’s account.

As for Amazon treating Twitter differently? Turns out (beyond everything I mentioned above) there's a bigger problem: Twitter doesn't use AWS:

Parler’s Complaint is replete with insinuations that AWS had equal grounds to suspend Twitter’s account and thus discriminated against Parler. For example, Parler cites the hashtag “#hangmikepence,” which briefly trended on Twitter. ... But AWS does not host Twitter’s feed, so of course it could not have suspended access to Twitter’s content.

Finally, Amazon notes that Section 230 also protects its practices here:

In addition to their facial deficiencies, Parler’s interference and antitrust claims also fail under Section 230(c)(2) of the Communications Decency Act. Under that statute, the provider of an “interactive computer service” is immune for acting in good faith to restrict access to material that is excessively violent, harassing, or otherwise objectionable.

This is actually interesting, in that rather than using 230(c)(1) like nearly every case, Amazon recognizes this is one of those rare (c)(2) cases, giving it the right to restrict access to violent, harassing, or otherwise objectionable content. This part of the law is rarely tested, as (c)(1) handles most moderation claims, but probably doesn't fit here, given the fact that Amazon was denying overall service to Parler, not just moderating specific speech.

Parler's going to lose this lawsuit. And it's going to lose badly.

* In a very, very strange set of circumstances, there is another lawyer with the identical name, David J. Groesbeck, (including middle initial) who is a patent lawyer, also based in Washington state and registered to practice in NY, but they are different, and the patent lawyer (who does have a website) had to put a notice on his website saying he's not the same David J. Groesbeck who has Parler for a client, and giving that lawyer's phone number, since he's being inundated with calls, yelling at him for representing Parler.

Filed Under: antitrust, aws, breach of contract, social media
Companies: amazon, parler, twitter

When You Can't Innovate, You Litigate: Oracle Gleefully Takes Credit For Attacks On Section 230 And Google

from the shameful dept

A few weeks ago, Oracle announced that it was moving its headquarters out of Redwood Shores, in the middle of Silicon Valley, to Austin, Texas. The move is more symbolic than anything else. The company told employees they can continue working from wherever they want and founder Larry Ellison sent an email to all employees saying he'll be working from the island of Lanai, which he purchased a few years ago. But the symbolism of the move works in multiple ways. Despite being founded and headquartered in Silicon Valley for almost half a century, Oracle has long represented the anti-Silicon Valley approach to innovation.

Nearly a decade ago, cartoon artist Manu Cornet made this truly classic cartoon image of tech company org charts (which he thankfully put under a Creative Commons license):

I've heard people at all of those companies more or less confirm the accuracy of every one of those. The Oracle one is particularly on point:

For a while now, people in Silicon Valley have been well aware of Oracle's reputation as the anti-innovation behemoth, especially following its attack on APIs, interfaces, and how software is developed with the case against Google's reimplementation of the Java API. We're still waiting on how the Supreme Court rules on that one, to see whether or not Oracle has succeeded in undermining a key part of how software is developed -- including Oracle's own practices in reimplementing others' APIs.

Bloomberg now has a big report on how all of the recent antitrust cases against Google have Oracle's fingerprints all over them, and in the article, Oracle's top lobbyist gleefully takes credit for it.

What's less known is that Oracle Corp. spent years working behind the scenes to convince regulators and law enforcement agencies in Washington, more than 30 states, the European Union, Australia and at least three other countries to rein in Google's huge search-and-advertising business. Those efforts are paying off.

Officials in more than a dozen of the states that sued Google received what has been called Oracle’s “black box” presentation showing how Google tracks users’ personal information, said Ken Glueck, Oracle’s top Washington lobbyist and the architect of the company’s antitrust campaign against Google. Glueck outlined for Bloomberg the presentation, which often entails putting an Android phone inside a black briefcase to show how Google collects users’ location details — even when the phones aren’t in use — and confirmed the contours of the pressure campaign.

“I couldn’t be happier,” said Glueck about the barrage of lawsuits. “As far as I can tell, there are more states suing Google than there are states.”

The thing is, Oracle more or less admits that it's doing this purely out of spite and the fact that it has failed to innovate and keep up with more nimble and innovative competitors. Oracle and Larry Ellison made some big bets early on that flopped. And rather than correct course and innovate, it has focused on what we've referred to as political entrepreneurship: lobbying and using the powers of government to shut down competitors, rather than innovate.

As many of us suspected, but is now confirmed by the article, Oracle is also a key player in trying to dismantle Section 230:

Oracle was one of the first companies to push Congress to adopt an anti-sex-trafficking measure in Congress, not because it was critical to its business but because Oracle knew it could hurt Google, according to a person familiar with the matter. The legislation weakened legal liability protections for tech companies such as Google from lawsuits over user-generated content in sex-trafficking cases.

Again, as many of us long knew, but didn't have public confirmation of, Oracle plays dirty in trying to smear anyone defending the open internet:

It’s also a master at stealth lobbying tactics, such as digging up dirt on competitors, disseminating opposition research and supporting dark-money groups that publicize negative findings about rivals.

In the article, it also points out that Oracle hired a firm to pay cleaning staff at a research group that wrote reports Oracle didn't like to rifle through the organization's trash to dig up dirt.

The article also confirms our earlier reporting about how Oracle execs sucking up to Trump, and Oracle's ability to label other companies' execs as saying anti-Trump stuff, was the key to it landing the TikTok deal:

Oracle won some battles after fostering ties to President Donald Trump. Oracle Chief Executive Officer Safra Catz and Glueck were part of Trump’s transition team. Catz advised the president on trade policy and serves on the National Security Commission on Artificial Intelligence.

Those ties may have proven fruitful when Microsoft was in pole position to acquire the U.S. operations of TikTok, the popular video app that Trump ordered its Chinese owner to sell. When TikTok picked Oracle as its preferred partner, after a phone call with Executive Chairman Larry Ellison, the president backed Oracle’s last-minute bid for a minority stake in the app as part of a deal that’s pending approvals.

As the article highlights, Oracle's revenue has continued to remain steady while all the tech companies it attacks politically have continued to thrive. And the reason for that is that those companies have built better products, while Oracle... hasn't. Instead, it's taken the tried and trued losers' approach. If you can't innovate, litigate. Or, in this case, rig the political system for favors. It's shameful.

Of course, what the Bloomberg report mostly leaves out is how much of this actually harms innovation and competition in the long run. We've already pointed out just how insanely short-sighted Oracle's API copyright case is. If you want to actually undermine Google's market share, making sure that others can reimplement its APIs is key. And while Oracle's cloud business is way behind leaders like Amazon, Microsoft, and Google, one of these days, someone in Oracle's giant legal and lobbying team is going to wake up and remember that Section 230 protects its cloud business too.

But, of course, Oracle would rather set fire to the entire internet than realize it needs to innovate.

Filed Under: antitrust, innovation, ken glueck, litigation, politics, section 230
Companies: google, oracle

Czech Search Engine Seznam Joins In the 'Let's Sue Google' Fun, Seeks $417 Million in Damages

from the good-luck-with-that dept

It seems that people have decided that now is a good time to attack Google in various ways. In October, the US Justice Department sued Google for allegedly violating antitrust laws. This month, ten US states sued Google, alleging anticompetitive behavior, followed by another 38 states, alleging that the company has created an illegal monopoly in online search and advertising. In November, 165 companies and industry bodies sent a letter to the EU complaining about Google and asking for tougher antitrust action. The EU has also released first drafts of its new Digital Services Act, and Digital Markets Act. One of the key elements of the new laws is tackling the power of leading online platforms like Google.

The EU has already taken steps towards that end. Back in 2018, the EU fined Google €4.34 billion for breaching antitrust rules. As part of its compliance with the EU's demands, Google introduced a process whereby other search engines can bid to appear on a "choice screen", which lets Android users pick the default search engine when they set up their smartphone. However, some rival search engines, like DuckDuckGo, were unhappy with the approach. At the end of October, DuckDuckGo, along with Ecosia, Lilo, Qwant and Seznam -- search engines from Germany, France, France and the Czech Republic, respectively -- sent an open letter to the European Commission on the subject:

We are companies operating search engines that compete against Google. As you know, we are deeply dissatisfied with the so-called remedy created by Google to address the adverse effects of its anticompetitive conduct in the Android case. We understand that Google regularly updates you regarding its pay-to-play auction, but it appears that you may not be receiving complete or accurate information.

We are writing to request a trilateral meeting with your office, ourselves, and Google, with the goal of establishing an effective preference menu. Our respective designees could work in advance to create a tight agenda for this meeting to ensure it is productive and collaborative.

Now one of those search engines -- Seznam -- has gone even further, reported here by Reuters:

Seznam.cz, the Czech Republic's leading home-grown web search platform, said on Thursday it had claimed 9.072 billion crowns ($417 million) in damages from Google, alleging that the U.S. giant restricted competition.

What makes this move noteworthy is that Seznam bases its claim on the fact that the EU has already determined that Google had breached EU rules in this area. The complaint concerns the period 2011 to 2018, before the EU forced Google to adopt the choice screen. Seznam's deputy chairman Pavel Zima, is quoted as saying: "we claim the compensation of damage that we have suffered while trying to distribute our applications and services via mobile devices with Android operation system". According to Reuters, Seznam has sent the claim to Google with a 30-day deadline, and says that it is prepared to take civil legal action if necessary. We'll see if it does, and how that works out.

Follow me @glynmoody on Twitter, Diaspora, or Mastodon.

Filed Under: antitrust, competition, eu, search
Companies: google, seznam

Another Day, Another Antitrust Lawsuit For Google:

from the let-me-rest dept

So, just as I was finishing off the post on Wednesday's antitrust lawsuit against Google brought by 10 states, news broke that the other big state antitrust case against Google had been filed as well. This one involves 38 states, led by Colorado and Nebraska. I'm assuming that this is the main state antitrust lawsuit that states had been talking about, as compared to the first lawsuit with fewer states. Whereas the first state lawsuit focused on display ads, this one focuses on the market for search.

You can read the full filing, which I'd recommend. I think this one is the most interesting of the three antitrust lawsuits that have been filed against the company. Part of the argument more or less rehashes the DOJ's weak case that because Google pays Apple an astounding amount of money to be the default search on iPhones, that's proof of anti-competitive behavior. That's an argument that still just doesn't make any sense to me at all. If the accusation is that Google is abusing its position, you'd think it wouldn't be paying $8 to $12 billion dollars to Apple. If anything, that suggests that it's Apple who has the market power, rather than Google.

Where the case gets potentially more interesting is in the part where it argues that Google is abusing its search advertising tool, called SA360, in anticompetitive ways:

Advertising tools that optimize companies’ search advertising purchases have become increasingly important to advertisers. Google’s own search advertising tool, SA360, serves more advertisers than any other tool. Such tools can promote competition in search advertising by, for example, allowing easy comparison of competing offers.

Google has consistently assured advertisers that it would operate SA360 in a neutral manner. But Google harms competition by refusing interoperability to comparable advertising features offered by Microsoft’s Bing general search engine. Instead, Google continuously favors advertising on its own platform and steers advertiser spending towards itself by artificially denying advertisers the opportunity to evaluate the options that would serve those advertisers best. No technical or operational barrier prevents SA360 from providing advertisers with direct and interoperable access to relevant data and important functionality from multiple general search engines.

But the details here matter. If Google is being misleading about SA360, then that seems like it should be an FTC false advertising claim, rather than strictly an antitrust claim. But also, it's odd that the lawsuit seems to insist that refusing to interoperate with the company's main competitor in search, Bing, is somehow proof of anticompetitive behavior. I'd love it if there were a lot more interoperability, but I'm not sure this alone trips a real antitrust concern.

The lawsuit also goes down a weird well in claiming that suppressing "specialized search" sites is anti-competitive. There have been a few such sites that have complained about such things, but generally speaking those are spam sites. The reason that Google demoted them was that they made the Google search process worse, by sending you not to the results users were looking for, but to one of those specialty search engines that had good enough SEO to rank high in Google. That was very much a bad customer experience. But, the complaint argues that Google treats companies differently in way that is potentially problematic:

To artificially foreclose this opportunity and maintain its search-related monopolies, Google takes advantage of the fact that it has already banished rival general search engines to the fringes of the search-related markets, which has fostered an artificial dependence by specialized vertical providers on Google as a way to acquire customers. Doubling down on its exclusionary conduct, Google takes advantage of certain specialized vertical providers’ dependence on Google, treating them differently than participants in other commercial segments and further limiting their ability to acquire customers.

Google has already responded to the lawsuit by saying that it can defend all these decisions as making the product better for its users. And it's going to need to really prove that, because there do remain some decisions that are, at the very least, headscratching (like Google using only its own local listings for the carousel, rather than using the wider ecosystem of sites).

Of the three antitrust lawsuits filed against Google so far, this one strikes me as the most serious (with the caveat that some of the redacted parts of the other lawsuit filed this week sound pretty explosive, but the key details are all redacted, so it's tough to tell). The DOJ's lawsuit remains (by far) the weakest of the bunch.

I am assuming that these lawsuits will eventually be combined in some form. NY's Attorney General had original said that the intention of this latest lawsuit was to be combined with the DOJ's. It seems possible that all three lawsuits will be merged into one massive lawsuit. This latest one still has some problems, but the lawyering is much better than the DOJ's and the end result of this case will likely be the most interesting to watch concerning the future of search and search advertising.

Filed Under: antitrust, colorado, competition, nebraska, search, search advertising
Companies: google

Embarrassing: New Antitrust Suit Against Google Confuses WhatsApp Encrypted Backup Option With Giving Google A Backdoor

from the guys,-guys,-guys dept

Look, I get the fact that people are concerned about big technology companies. I'm very concerned about big technology companies too, and think it's important that we figure out ways to build more competition, and to get away from reliance on many of these companies. But the way in which so many assume that antitrust is the only way to get there is problematic. And it's even more problematic when the antitrust lawsuits they file seem to be mostly based on misunderstanding or misrepresenting certain things with totally innocuous explanations. That keeps happening.

The DOJ's antitrust lawsuit against Google is embarrassingly weak, and seems to confuse who has market power (e.g., claiming that Google paying billions to Apple is some sort of proof of its own dominance). The FTC and nearly all states' antitrust suits against Facebook are fundamentally stronger than the DOJ's case against Google, but still, astoundingly weak in terms of actual evidence of antitrust violations.

This week, there are two new entrants. One lawsuit was just announced today, and we'll explore that one later, but yesterday, Texas Attorney General Ken Paxton, who was one of the earliest Attorney Generals who spoke out in favor of going after Google, has now done so, with a an interesting antitrust lawsuit against the company, done with the support of 9 other states, all with Republican Attorneys General. Notably, some of the states (though not all) also signed onto the DOJ's antitrust lawsuit.

This lawsuit takes a different approach from the DOJ's lawsuit, which focused on the market for general search services and search advertising. This one focuses on general display advertising. And maybe there's an argument that Google is doing something bad in how it handles the display advertising market. Indeed, some of the complaint (though heavily redacted), suggests some potentially sketchy behavior on the part of Google, to block competition in the ads space. If that's proven, that would be bad, and it would be good if the lawsuit forced Google to change those practices and enable more competition.

There's also a heavily redacted section, that hints strongly that Google and Facebook worked out some sort of agreement to keep Facebook from competing as directly with (and undercutting the pricing of) Google's display ads business. And that does sound like a potentially huge deal -- one that very well might truly be anticompetitive. But the details and what's redacted are important.

It would be great if the lawsuit focused on things like those two points. But it also includes other things that seem to suggest a near total and fundamental misunderstanding of how technology works, which does not provide much confidence that the Attorneys General know what they're talking about in the other parts. Notably, there's this scary bit that started making the rounds on Twitter, with people asking what the fuck was going on:

Google also has violated users’ privacy in other egregious ways when doing so is convenient for Google. For instance, shortly after Facebook acquired WhatsApp, in 2015, Facebook signed an exclusive agreement with Google, granting Google access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.

That raised many eyebrows, because, if true, that's huge news. Most of the details here are redacted as well, but the complaint calls this a "fundamental breach of privacy." But, this seems like a giant misunderstanding by the lawyers who wrote the lawsuit. What they appear to be referencing is a deal from 2015 in which Google allowed WhatsApp users to easily back up their encrypted data to Google Drive. That's a useful feature, and not at all nefarious. The content is still encrypted, so Google doesn't get access to anything more than the encrypted blob. Google even has this integration as a Google Cloud case study.

That's not exactly the behavior of a company that has a nefarious deal to snoop on everyone's WhatsApp messages. Notably, that integration is a totally voluntary opt-in feature that is really useful. It lets you restore your WhatsApp if you're switching phones, or just make sure you don't lose all your messages if you lose or break your phone. It's a good thing -- not some evil attack on privacy, as the lawsuit suggests.

There is some more redacted content around this, suggesting that Facebook shared some kind of information with Google that it shouldn't have, but the non-redacted parts seem to misunderstand the technology, which seems problematic. It also seems emblematic of lawyers looking to twist anything against the company, rather than looking for actual violations.

As for the rest, much of it seems to misunderstand the ad market. In particular there's a long discussion on header bidding, and how Google did not like header bidding and wanted to kill it:

Finally, Google wanted to eliminate header bidding to foreclose any competition with its publisher ad server monopoly. The companies involved with header bidding would have a foothold on a key function of Google’s ad server: routing a publishers’ inventory to exchanges. With that, a major header bidding player like Amazon or Facebook was well-positioned to eventually compete directly with Google’s monopoly ad server. Without control over publishers’ inventory, Google would lose the ability to block exchange competition and tilt trading to Google.

I'm a publisher. And, every freaking day, we get approached by some new online ad firm that wants us to sign up to use their ads because of their use of header bidding. There must be hundreds of ad providers now offering header bidding. Honestly, as a publisher, at this point, it's almost impossible to put ads on your site that don't make use of header bidding.

If the all powerful Google set out to quash header bidding, holy crumb, did it fail.

There are elements (again, too much redacted) in the complaint that do seem concerning. And if the end result of this lawsuit is to force Google to play more fair with display ads, that would be a good thing. So I'd be happy if that were the result here. But I'm concerned by what appears to be a clumsy misunderstanding of the technology, and the status of the advertising market today.

Filed Under: antitrust, cloud backup, competition, display ads, encryption, ken paxton, messages, privacy
Companies: facebook, google, whatsapp

Open Season: FTC & 48 Attorneys General File Separate Antitrust Lawsuits Against Facebook

from the well-this-will-be-interesting dept

Everyone knew that this was coming eventually, but on Wednesday two separate antitrust lawsuits were filed against Facebook. First, the FTC filed a complaint, followed by 48 Attorneys General, representing 46 states, the District of Columbia and Guam (Guam!), similarly arguing that Facebook's acquisitions of Instagram and Whatsapp were an antitrust violation. I will say, upfront, that both cases appear to have a lot more meat to them than the DOJ's astoundingly weak case against Google. And yet... I'm still somewhat surprised at some of the claims made in both lawsuits that seem somewhat disconnected from reality.

As a quick summary, though, I'd say that both lawsuits make somewhat weak claims regarding acquisitions (mainly, but not limited to) Instagram and WhatsApp. Both lawsuits, though, do make much stronger claims about Facebook abusing its API to try to limit competition (though, doing so without the context of privacy questions that may have driven Facebook to close off more access to its API). I think the API questions are the most interesting to explore, and the ones where Facebook may face the most trouble in court.

Let's go through each one separately. The key to the FTC's case is twofold: (1) that Facebook buys up whatever upstart competitors it can find that represent a competitive threat (e.g., Instagram & Whatsapp) and (2) that it puts in place "restrictive policies" that hinder the upstart competitors it cannot acquire. I'm not sure that either claim is fully supported by the facts, but perhaps there's more evidence to support them. Of course, a key aspect in any antitrust case is proving (1) that there's a market in which the company is a monopoly and (2) that the company leverages that monopoly in a manner that is abusive to competition. The FTC case argues that the "market" here is "personal social networking," which seems like a fairly narrowly defined market:

Facebook holds monopoly power in the market for personal social networking services (“personal social networking” or “personal social networking services”) in the United States, which it enjoys primarily through its control of the largest and most profitable social network in the world, known internally at Facebook as “Facebook Blue,” and to much of the world simply as “Facebook.”

In the United States, Facebook Blue has more than [REDACTED] daily users and more than [REDACTED] monthly users. No other social network of comparable scale exists in the United States.

Of course no one denies that Facebook is the largest, but does that automatically make it a monopolist? In the space of "personal social networking," you could easily argue that there are a number of significantly sized competitors, including Twitter, Snap, YouTube, and TikTok (which, notably, is a relatively new entrant that was able to build up a large audience, despite the presence of Facebook). The complaint says that buying Instagram and WhatsApp were attempts to retain this monopoly position:

Since toppling early rival Myspace and achieving monopoly power, Facebook has turned to playing defense through anticompetitive means. After identifying two significant competitive threats to its dominant position—Instagram and WhatsApp—Facebook moved to squelch those threats by buying the companies, reflecting CEO Mark Zuckerberg’s view, expressed in a 2008 email, that “it is better to buy than compete.” To further entrench its position, Facebook has also imposed anticompetitive conditions that restricted access to its valuable platform—conditions that Facebook personnel recognized as “anti user[,]” “hypocritical” in light of Facebook’s purported mission of enabling sharing, and a signal that “we’re scared that we can’t compete on our own merits.”

I can see Instagram fitting into that model, but am a little more perplexed by the inclusion of WhatsApp, which is more about messaging than a traditional "social network." It really feels like they're shoehorning WhatsApp into this bucket to make the argument seem stronger. The case even admits that WhatsApp is about messaging, not social networking, but then argues that Facebook feared that WhatsApp could eventually pivot to social media. Which, sure. But... it still seems like a stretch to argue that this automatically makes it anticompetitive to buy.

If anything, this lawsuit suggests that Facebook's management has both read and internalized Clayton Christensen's "The Innovator's Dilemma" and recognized that competition could come from orthogonal directions.

As for Instagram, the company was quite small -- famously only 13 employees -- when Facebook acquired it. It is true that it was building up some level of success, but it seems to suggest some level of revisionist thinking to say that it was somehow going to take down Facebook, and that acquiring it somehow changed Facebook's competitive landscape in any meaningful way.

The other issue is that both the Instagram and Whatsapp decisions were reviewed at the time -- and approved by the FTC and the DOJ. If anything, this all feels a bit like revisionist history to go back many years later and say "well these were obviously anti-competitive" when they certainly didn't appear to be at the time of acquisition. And, yes, the lawsuits have quotes from people inside Facebook noting that Instagram and WhatsApp could potentially represent a competitive threat, but merely buying up some potential competitors doesn't automatically mean that it's anti-competitive behavior.

The FTC's case gets a lot stronger when it talks about certain practices the company put in place to discourage and stymie other competitors:

In order to communicate with Facebook (i.e., send data to Facebook Blue, or retrieve data from Facebook Blue) third-party apps must use Facebook APIs. For many years— and continuously until a recent suspension under the glare of international antitrust and regulatory scrutiny—Facebook has made key APIs available to third-party apps only on the condition that they refrain from providing the same core functions that Facebook offers, including through Facebook Blue and Facebook Messenger, and from connecting with or promoting other social networks.

As someone who believes strongly that, for competitive reasons, Facebook should open up its APIs, this argument seems more compelling to me. There's also a much stronger case to be made here that selectively opening up its API based on competitive rationale is more likely to have resulted in consumer harm.

By suppressing, neutralizing, and deterring the emergence and growth of personal social networking rivals, Facebook also suppresses meaningful competition for the sale of advertising. Personal social networking providers typically monetize through the sale of advertising; thus, more competition in personal social networking is also likely to mean more competition in the provision of advertising. By monopolizing personal social networking, Facebook thereby also deprives advertisers of the benefits of competition, such as lower advertising prices and increased choice, quality, and innovation related to advertising.

It feels like that argument would need a lot more evidence. While I agree that the API arguments are the strongest, the entire complaint ignores the fact that there are competitors, and that some of those competitors have sprung up in recent years, despite what it claims are recent barriers to entry. Snap and TikTok both became prominent well after it is argued that Facebook was hellbent on suppressing competition. And both are doing decently well. The complaint doesn't even mention TikTok, and only mentions Snap to say that Facebook failed in its attempt to purchase the company (which seems to cut against the argument that Facebook was just buying up any competitors). There are some other mentions of "Snap" but, amusingly, that's only because it was the internal code-name for Facebook's failed attempt to compete with Instagram, prior to purchasing Instagram.

Based on all of that, I think the claims about buying up Instagram and WhatsApp are pretty weak -- but there is an interesting area to explore regarding whether or not Facebook used its API access to suppress competition.

Specifically, between 2011 and 2018, Facebook made Facebook Platform, including certain commercially significant APIs, available to developers only on the condition that their apps neither competed with Facebook (including, at relevant times, by “replicating core functionality” of Facebook Blue or Facebook Messenger), nor promoted competitors. Facebook punished apps that violated these conditions by cutting off their use of commercially significant APIs, hindering their ability to develop into stronger competitive threats to Facebook Blue.

And:

On July 27, 2011, Facebook introduced a new policy that “Apps on Facebook may not integrate, link to, promote, distribute, or redirect to any app on any other competing social platform.”

This policy was intended to harm the prospects for—and deter the emergence of— competition, including personal social networking competitors. Indeed, the immediate impetus for the policy was Google’s launch of the Google+ personal social network. In a July 27, 2011, email, a Facebook manager explained: “[W]e debated this one a lot. In the absence of knowing what and how google was going to launch, it was hard to get very specific, so we tended towards something broad with the option to tighten up as approach and magnitude of the threat became clear.” Later that same day, another Facebook employee protested the anticompetitive move to colleagues: “I think its [sic] both anti user and sends a message to the world (and probably more importantly to our employees) that we’re scared that we can’t compete on our own merits.”

To me, this is the strongest argument in the entire filing, though it doesn't seem to be the one most people are focusing on.

One other thing highlighted in the complaint -- which we've discussed here before -- is how Facebook bought an analytics company called Onavo, which it pretended as a VPN service, but which it actually used as a tool to snoop on what apps people were using, in order to quickly identify up and coming competitive threats:

By acquiring Onavo, Facebook obtained control of data that it used to track the growth and popularity of other apps, with an eye towards identifying competitive threats for acquisition or for targeting under its anticompetitive platform policies. As a December 2013 internal slide deck noted: “With our acquisition of Onavo, we now have insight into the most popular apps. We should use that to also help us make strategic acquisitions.” Facebook also used Onavo data to generate internal “Early Bird” reports for Facebook executives, which focused on “apps that are gaining prominence in the mobile eco-system in a rate or manner which makes them stand out.” Facebook shut down Onavo in 2019 following public scrutiny; however, it continues to track and evaluate potential competitive threats using other data.

Of course, looking for useful data to identify competitors isn't, by itself, anti-competitive. It's kind of expected. I do think there's a potential "false advertising" claim that could be made about Facebook claiming Onavo was a VPN or was somehow designed to protect user privacy -- but that's different from an antitrust claim.

Moving on to the AGs' case. It replicates many of the same arguments, though in many more words. Once again, it focuses on Instagram and WhatsApp, but not in very convincing ways. The issue of Facebook's API policies is more compelling:

As part of its strategy to thwart competitive threats, Facebook pursued an open first–closed later approach in which it first opened its platform to developers so that Facebook’s user base would grow and users would engage more deeply on Facebook by using third-party services. This strategy significantly boosted engagement on Facebook, enhanced the data it collected, and made the company’s advertising business even more profitable. Later, however, when some of those third-party services appeared to present competitive threats to Facebook’s monopoly, Facebook changed its practices and policies to close the application programming interfaces (“APIs”) on which those services relied, and it took additional actions to degrade and suppress the quality of their interconnections with Facebook.

Again, I am in agreement that this is the behavior by Facebook that is most concerning -- but it also leaves out some important context. Namely, that Facebook was pressured to close down access to its APIs because many people (including some of the AGs who are part of this lawsuit) were making noises about the privacy concerns related to Facebook's more open API access (as noted in the Cambridge Analytica scandal). One of the more frustrating things to me about all of this is how few people are willing to grapple with the tradeoffs here. If you complain about privacy issues it pushes Facebook to close off access to its APIs, which give it more anticompetitive power. But if you demand more open APIs, then you have more privacy questions.

The AG's case, though, does make the (compelling) argument that Facebook used its more open API access setup to build growth, and then slowly cut back on it to block competitors:

One critical reason for Facebook’s accelerated growth trajectory was a series of initiatives that opened Facebook up to mutually beneficial partnerships with third parties.

In 2007, Facebook launched Facebook Platform—an innovative tool that set it apart from other firms. Facebook Platform had a set of open APIs—mechanisms for sharing data between independent services—that enabled developers to build applications that interoperated with the Facebook social networking site. Developers scrambled to create applications on the Facebook Platform, enhancing Facebook Blue’s functionality, driving more users to the Facebook site, and increasing the engagement of existing users. Facebook Platform created a symbiotic relationship between Facebook and developers that yielded significant value for both.

In 2008, Facebook introduced Facebook Connect—a tool that facilitated still greater interconnection with Facebook Blue. Through Facebook Connect, users could sign in to third-party websites using their Facebook credentials. By 2011, Facebook Connect had become one of the most popular ways to sign in to services across the internet as users took advantage of the efficiency afforded to them. As was the case with the Facebook Platform, third-party sites and Facebook itself found the relationship fostered by Facebook Connect to be a mutually valuable one. Facebook provided third parties with information about users and their friends and drove traffic to third-party sites by making it easier for users to sign in. In return, Facebook captured valuable data about users’ off-Facebook activity to enhance its social graph and ability to target advertising.

In April 2010, Facebook invited even more interaction with third-party websites and apps. It launched the Open Graph API, enabling those sites to add plug-ins, such as the Facebook “Like” button that allowed Facebook Blue users to become “fans” of the third-party site. The sites were highly motivated to install the Like button and encourage its use, as a “Like” would be shared on the user’s news feed and profile, thereby promoting the site to the user’s friends and family. One week after the introduction of Open Graph, 50,000 websites had installed Open Graph plug-ins. Those sites realized the immediate benefits of a massive new distribution channel, and Facebook’s growth increased accordingly.

But then when upstarts began using the openness to build up more competitive power, Facebook cut back on the access:

After the threat from Google+ had passed, and after years of promoting open access to Facebook Platform, Facebook increasingly turned to Platform as a tool to monitor, leverage, and harm (via rescinding API access) apps that Facebook viewed as actual or potential competitive threats.

In 2013, Facebook amended its Platform policy (described above) to forbid applications that “replicat[e] [Facebook’s] core functionality,” with no explanation as to what Facebook considered its core functionality, or how such policies would apply when Facebook expanded its functionality to a new area.

Facebook began to selectively enforce its policies to cut off API access to companies Facebook worried might one day threaten its monopoly. Facebook itself described its Platform as a “critical piece of infrastructure” for new apps being developed: this is particularly true for social apps which rely heavily on network effects. Facebook knew that an abrupt termination of established access to Facebook APIs could be devastating to an app—especially one still relatively new in the market. An app that suddenly lost access to Facebook’s APIs was hurt not only because its users would no longer be able to bring their friend list to the new app, but also because a sudden loss of functionality, which creates broken or buggy features, suggests to users that an app is unstable. Facebook’s actions therefore disincentivized developers from creating new features that might compete with Facebook: adding new social features to an existing app might come at the significant cost of access to Facebook’s APIs.

In 2014, Facebook announced significant changes to its Platform APIs with “Graph API 2.0” (also referred to internally as Platform 3.0). In connection with Graph API 2.0, Facebook required prior review of all requests to access many Platform APIs, including the Find Friends API, resulting in those APIs being cut off for third-party apps that previously had enjoyed such access on Platform. Under the new approach, developers could not access Facebook’s APIs unless they submitted an application and received approval, which Facebook refused to grant to apps it classified as competitors or potential competitors. That allowed Facebook to proactively and categorically ensure that no app that might constitute a competitive threat would get API access in the first place, sparing Facebook the need to withdraw access after-the-fact.

One Facebook employee described in January 2014 the jarring impact of enticing developers to interconnect and then suddenly revoking their access:

We sold developers a bill of goods around [Open Graph] 2 years ago and have been telling them ever since that one of the best things they could do is to a/b test and optimize the content and creative. Now that we have successes . . . in 2013, we’re talking about taking it away . . . . Even if we were to give them more traffic on home page in some other way, it still nullifies all of their work to integrate [Open Graph] for the last 2 years.

As a further part of its scheme to maintain its monopoly position, Facebook has used its control over Facebook Platform to degrade the functionality and distribution of potential rivals’ content when it perceived those firms as threats to Facebook’s monopoly power. This degradation suppressed the flow of user traffic to the rivals’ services, reducing overall output, and harming users in the process.

Again, this entire narrative leaves out some of the privacy questions raised by the open platform access -- but I do think that these are the strongest arguments in the complaint.

There are some mostly-redacted stories included in the complaint, arguing that certain companies, whose names are redacted, were directly harmed by Facebook's API policies. It would be interesting to see who these companies are, because I've seen some somewhat scammy companies make the argument that Facebook's API policies were designed to harm them, but then the details suggest that the reality was more that Facebook was trying to stop them from being scammy. The details matter here.

There are some examples with named companies, including Twitter's Vine, Path, and Circle. Some of those stories seem somewhat compelling, though I'm not sure they move the needle enough.

In the end, I think these complaints are stronger than the DOJ's complaint against Google. That's not to say that they are particularly strong. I do think the most compelling arguments are entirely around Facebook's use of the API, though the company will have arguments it can make in response regarding reasons why it made those decisions (with a focus on protecting user privacy). Whether or not that will be enough to hold up will likely be a key part of this case. The arguments about Instagram and WhatsApp, while they'll get most of the public attention, and are the arguments that people frequently make about Facebook's position, strike me as fairly weak. Both acquisitions were reviewed and approved at the time, and the presence of other competitors in the marketplace seems to undercut the arguments there.

The key question that I think the courts will look at is whether or not Facebook pulling back on API access trips an antitrust wire. Antitrust experts may have better suggestions for cases to look at, but the Aspen Skiing case appears to be roughly analogous -- in which the question was whether or not a dominant firm terminating an agreement to deal with a competitor was an antitrust violation. However, subsequent cases have shown that the Supreme Court no longer seems to support that notion. Verizon v. Trinko likely cut back the Aspen Skiing rules significantly -- and the courts would need to signal a pretty big shift to bring those rules back around for Facebook.

As for remedies, if Facebook were forced to spin off Instagram and WhatsApp, I honestly don't think it would have that big of an impact on Facebook itself. I'm not against that being the final decision, but I don't see how that would solve any of the issues at play. Either way, Facebook is going to be very busy in court for the next decade or so....

Filed Under: anti-competitive, antitrust, apis, attorneys general, competition, ftc, lawsuists
Companies: facebook, instagram, whatsapp

What The Election Means For Tech

from the take-your-pick dept

If Trump Wins...

For Republicans, bashing “Big Tech” has become as central to the Culture War as bashing the “Big Three Networks” once was. Demanding “neutrality” from social media companies has become what “net neutrality” has been for Democrats: the issue that sucks up all the oxygen in the room — except far more politically useful.

ISPs aren’t in the content moderation business, but social media would be unusable without it. (Just try using 8Kun or Gab!) Democrats have always struggled to identify real-world examples of net neutrality violations, but Republicans find “anti-conservative bias” everywhere, everyday. Content moderation at the scale of billions of posts is wildly imperfect, so anyone can find examples of decisions that seem unfair. But Republicans won’t settle for mere “neutrality.” They want to end Section 230’s legal protections for moderating hate speech, misinformation, using fake accounts to game algorithms, and most foreign election interference. All of these tend to benefit Republicans, so moderating them seems to prove the claim that “Big Tech” is out to get conservatives.

This won’t just be empty rhetoric anymore. Making every tech issue about “bias” will make most tech legislation impossible, but Trump won’t really need new legislation. He’ll finally weaponize the two independent agencies that regulate tech: the Federal Communications Commission and the Federal Trade Commission. Their current chairmen are traditional Republicans and serious lawyers uninterested in playing political games. But in August, Trump abruptly withdrew the renomination of Republican stalwart Mike O’Rielly after he obliquely criticized Trump’s Executive Order demanding political “neutrality” of social media. Trump quickly nominated the junior administration staffer behind the White House’s crackdown. No one should doubt that the next FCC and FTC chairmen will be Trump loyalists unencumbered by legal or constitutional scruples — and eager to turn the screws on Trump’s “enemies.” Each agency will become ever more a political battleground in which "tech" issues serve as proxy war for deeper cultural conflict.

If Biden Wins...

Trump called “Sleepy Joe” a tool of the “radical, socialist left.” Biden insisted his primary victory was a mandate for centrist pragmatism. Perhaps nowhere will Biden’s leadership be tested more than in tech policy.

Congress hasn’t passed substantial tech legislation since 1996 — and even that overhaul of the Communications Act (of 1934!) mostly reflected pre-Internet assumptions and fears. Congress used to make regular course-corrections through biennial reauthorization of federal agencies — but stopped in 1998, the year Congress became pure political spectacle. The FCC and FTC have since been left to improvise. The FCC’s long been a “junior varsity Congress” — same political baggage, no electoral accountability. The more serious FTC is trending that way. Each change of the White House means increasingly large shifts in tech policy.

These problems are as thorny as our broken judicial nomination process — and equally unlikely to be corrected through our broken legislative process. If Biden wants to be remembered for resolving them, he’ll need to do for tech what he’s proposed for the courts: convene an expert bipartisan commission with a clear mandate to develop once-in-a-century legislation, and then get ‘er done.

Biden’s nominations for FCC and FTC Chairs will reveal whether he’s genuinely interested in leading on tech — or content, like Trump and Obama, to exploit tech issues to excite his base. Strong Chairs in Biden’s mold could build Congressional consensus for significant, but viable, and therefore moderate, legislation. But if he picks bomb-throwers over problem-solvers, we’ll have four more years of the same digital culture wars — and creating a stable digital-era regulatory framework may have to wait several more presidencies.

If Trump Wins...

Republican fulmination about “anti-conservative bias” will continue to escalate. Don’t expect Republicans to pass any legislation. But they’ve always been more interested in stoking resentment among their base — and using threats of legal action to coerce large tech companies to change their content moderation practices in ways that help Republicans.

The FCC will proceed with a rulemaking to sharply limit Section 230’s protections. The only question is whether Ajit Pai issues a more restrained proposal on transparency mandates before he leaves the FCC. If not, Brendan Carr (or whoever Trump might appoint to replace Pai) could propose most or all of what NTIA has asked for. This dynamic will make it difficult for bipartisan legislation to pass amending 230, but something like the EARN IT Act and other amendments targeted at unlawful content might pass.

If Biden Wins…

Many Republicans will blame “Big Tech” for their losses, and claim that “election interference” (by Big Tech) delegitimized the new administration. They’ll do everything they can to deter content moderation beyond narrow categories of porn, dirty words, illegal content, promoting terrorism, self harm, and harassment (narrowly defined). Most Democrats want exactly the opposite: to coerce tech companies into moderating misinformation as a condition of maintaining their 230 protections. There simply is no common ground here.

So unless Democrats win enough Senate seats to abolish the filibuster, the debate over content moderation won’t be resolved anytime soon. Instead, Democrats will focus on liability for third-party content that isn’t moderated — which is what nearly all 230 cases are actually about. The EARN IT Act already has bipartisan support, as does making 230 protection contingent on removing unlawful content, and requiring websites to prove that their practices are “reasonable.” Each is deeply problematic, but practical details of real-world implementation don’t seem to matter much.

Biden has said he wants to “revoke” Section 230 “immediately,” but there’s little reason to expect repeal to happen. Instead, expect him to focus on “hold[ing] social media companies accountable for knowingly platforming falsehoods,” as a Biden spokesman put it after Trump’s Executive Order in May.

Here, more than in any other area, an expert commission is the only way out of this debate. The issue is simply too complicated — both legally and technically — for Congress to handle.

If Trump Wins...

Status quo: The FCC will maintain its hands-off approach to broadband regulation and net neutrality legislation will remain stalled in Congress. At most, a Democratic House and Senate might pass legislation purporting to revive the 2015 Open Internet Order, but Trump would veto it — and it’s far from clear that’s even a valid way to legislate. Instead, expect activists to focus on pushing for state-level broadband legislation. The courts are unlikely to allow that so long as the FCC retains broad preemption. But for some activists, the point has always been to keep the fight going forever, not to actually win in court.

If Biden Wins…

Even a centrist FCC Chair would face overwhelming activist pressure to revive the FCC’s 2015 Open Internet Order. But will they want to be remembered merely for playing yet another round of Title II ping-pong — or for finally convincing Congress to resolve this issue? There’s been a bipartisan consensus on the core of net neutrality since Republican Chairman Michael Powell gave his “Four Freedoms” speech in 2004. Democratic Chairman Genachowski pushed hard for legislation. He resorted to issuing the 2010 Open Order only after Republicans pulled out of legislative talks, calculating that they’d have more leverage after the midterms.

Resolving this issue could be the key to broader telecom reforms that Congress has been unable to tackle since passing the 1996 Telecom Act — a law based on markedly pre-digital assumptions about the future. Democrats should be careful not to overplay their hand: the D.C. Circuit decision upholding the FCC’s 2015 Order made clear that the FCC’s rules only applied to companies that held themselves out as offering “unedited” services anyway, meaning that ISPs could opt-out of Title II if they really wanted to.

If Trump Wins...

Expect more antitrust lawsuits like the Google suit. But if the Google suit is the strongest case this Administration has, they’re unlikely to win any significant remedies in court. And even if those suits do succeed, they’re unlikely to significantly address Republicans’ real concerns about “bias.” So don’t expect Republicans’ current “litigate but don’t legislate” approach to last long. Trump is famous for turning on a dime, and Congressional Republicans will face enormous pressure, especially if Democrats take the Senate, to “strengthen” the antitrust laws. Ken Buck’s minority report indicates where populist Republicans might find common ground with anti-corporate populists on the left.

If Biden Wins…

There’s enormous political pressure from all quarters to “do something” about antitrust. But don’t assume that legislation will be anywhere near as radical as what Congressional Democrats have proposed. Even Rep. David Cicilline’s much-hyped proposal to turn antitrust law on its head is careful to note that it represents only the views of his staff — not the Committee or its members.

It’s one thing for Democrats to talk about flipping the burden of proof in merger cases, but giving the government such leverage would have, for example, made it easy for Trump to force AT&T to spin off CNN — or to make editorial changes as implicit conditions of the Time Warner deal. Democrats pushing such ideas simply haven’t thought through the implications of what they’re proposing. Do they really want to make it easier for Republicans to use the antitrust laws as political weapons against the media, both new and old? A more considered, serious approach from the administration would focus on increased funding, more aggressive enforcement, and carefully targeted statutory changes.

If Trump Wins…

Status quo: Absent a court decision striking down state privacy laws on dormant commerce grounds — hard cases to win, which usually take years — Republicans will continue to insist on national privacy legislation to prevent every state from layering its own set of data rules on top of California’s. But Democrats have little political incentive to negotiate for any legislation that would displace California’s approach, which they claim as a win despite its glaring amateurishness and many practical pitfalls.

If Biden Wins…

If Democrats also take the Senate, they’ll have no excuse for not finally passing the comprehensive baseline privacy legislation they’ve talked about for years. Preemption should be an easier “give” for Democrats if they have more leverage in writing the legislation and are assured of handling at least the crucial first 3-4 years of enforcing the new law. Passing a federal law, even if it overlaps significantly with California’s, would allow the Administration to take credit for addressing the top complaint about “Big Tech”: not bigness per se, but a perceived lack of control over data collection.

If Trump Wins…

Status quo: The White House will raise legitimate concerns about Chinese tech companies giving the Chinese government access to private user data and influence over content moderation decisions. They’ll hype “deals” like TikTok’s partnership with Oracle, but Chinese entities will retain control. The only real winners will be American companies favored by the White House. It’ll be cronyist mercantilism veiled in talk of privacy and free speech. Republicans will increasingly find themselves in a quandary: the greatest beneficiaries of their push to hamstring American “Big Tech” companies will be Chinese companies that have achieved the scale necessary to expand into the U.S. market, as TikTok has done.

If Biden Wins…

Republicans will hammer the Biden Administration for any perceived weakness on China — especially when it comes to tech. Expect the White House to try to depoliticize CFIUS and treat the review process as more of a law enforcement exercise than policymaking driven by the White House. If Democrats are smart, they’ll try to insulate themselves from inevitable Republican attacks by drawing clearer statutory lines about foreign ownership of tech companies serving the U.S. market. The real test will come the first time CFIUS declines to take action against a Chinese company: will the White House intervene under political pressure?

If there’s no clear, quick election result, the stage will be set for the “mother of all battles” over online speech. If Trump and his supporters claim victory and insist that ballots that “changed the result on election night” must be fraudulent, “Big Tech” companies will apply warning labels to such content — and block paid ads making the same claims. Republicans will go absolutely ballistic. They’ll throw every legal theory they can against the wall. Don’t expect any of it to stick: website operators have a clear First Amendment right to reject, or put disclaimers around, third party content — just as newspapers do with letters to the editor. But that won’t stop Republicans from filing multiple lawsuits and complaints with federal regulators, including the Federal Election Commission. Expect the Trump administration to get creative in finding ways to “stick it” to tech companies in interregnum.

As ugly and politicized as tech policy is today, if tech policy becomes wrapped up in a “Florida recount but worse” fight, we’ll quickly come to look back at today’s tech policy battles as mild by comparison.

Filed Under: antitrust, china, donald trump, intermediary liability, joe biden, net neutrality, predictions, privacy, section 230, tech policy

Nixon Scandal Resulted In A Law To Prevent The Politicization Of Antitrust Cases; Meanwhile Trump Uses His Politicized Antitrust Effort In Campaign Ad

from the different-times-apparently dept

Everyone knows about President Richard Nixon and the Watergate scandal, but you might now know as much about another huge scandal that preceded that one -- involving Nixon meddling, for political purposes, in an antitrust case by his Justice Department against a large "tech" company/conglomerate at the time. The case involved ITT trying to buy up some smaller companies, and the DOJ brought an antitrust case against them. The scandal part was that ITT approached the White House and worked out a deal: ITT would donate $400,000 (roughly $2.5 million today) to the 1972 Republican National Convention, and Nixon would get the DOJ to drop the case. Which he did. As the Nixon tapes eventually revealed, he called up then deputy Attorney General Richard Kleindienst and said:

“The I.T.T. thing — stay the hell out of it. Is that clear? That’s an order ... I do not want McLaren to run around prosecuting people, raising hell about conglomerates, stirring things up.”

Kleindienst's responded that he understood. Soon after he was nominated to be Attorney General, and during his Senate confirmation hearings he was asked whether the White House had interfered in the DOJ case against ITT, and he denied it. During Watergate, when the Nixon tapes came out, proving that Kleindienst lied, he ended up pleading guilty for lying to Congress.

The reason that the IIT quid pro quo deal with the White House was revealed was because a lobbyist for ITT named Dita Beard had sent around a memo with the details of the deal, which amusingly closed with "please destroy this, huh?" It wasn't destroyed, and instead was leaked to the Washington Post's Jack Anderson who sent his associate, a young Brit Hume, to Beard's house to verify the memo and get an explanation for it.

So, what's this historical story got to do with anything? Well, as we've discussed a few times now, current Attorney General Bill Barr's antitrust crusade against Google is clearly a politicized farce. Barr told the DOJ that they had to file before the election. DOJ staffers resigned from working on the case in protest. And the final case is stunningly weak.

But, after the ITT/Nixon debacle, Senator John Tunney introduced and got passed into law the Antitrust Procedures and Penalties Act, better known as the Tunney Act. It was designed to prevent another ITT/Nixon situation from happening again, by trying to stop the DOJ/White House from politicizing antitrust. The mechanism to do so is somewhat simplistic, but any settlement agreement is supposed to go before a judge to check to make sure the deal is in the public interest, rather than for shady political reasons. Parts of the law are often ignored in antitrust settlements, and it makes news when judges remember it exists.

However, it does seem notable that the whole intent of the law was to stop sketchy backroom politicization of antitrust activities by the White House telling the Justice Department what to do. And yet, now, we literally have a President of the United States directly politicizing his own DOJ's antitrust campaign. On Wednesday evening Trump tweeted out a weird campaign ad that rambles incoherently about "big tech" being bad, and how something needs to be done. Then he flat out admits that because he believes big tech is "against him" that's why "we" are going after Google:

Big tech has to be spoken to and probably in some form has to be stopped because they're taking away your rights. They're taking away things that nobody would have believed possible. So one of the things we're doing -- you saw what happened with Google -- with the lawsuit. One of the things we're doing is looking very powerfully and strongly at big tech. Go out and vote.

In any other administration in history, this alone would have been a scandal. The DOJ is supposed to be an independent agency from the President, and isn't supposed to bring cases based on political whims, such as tech companies "not liking" the President. And the President isn't supposed to be claiming direct credit for the lawsuit. Like others have pointed out, this is like Stupid Watergate. Things that Nixon did behind closed doors Trump is doing blatantly out in the open, and somehow that's why he gets away with it.

Here, he's flat out admitting that the DOJ cases against Google is not for legitimate reasons by for political ones, and he's using that case, for which he takes credit, in a literal campaign ad. If the courts actually cared about the Tunney Act (and a few judges out there might still believe in it) this would be yet another giant gaping hole in the case. Google now has more than enough evidence to highlight that the entire case was brought for political purposes, and not for legitimate ones.

The Nixon/ITT mess raised enough concerns that it caused some to talk about impeachment (of course that was then superseded by Watergate). Here, Trump is doing worse things in public, and it barely gets a shrug.

Filed Under: antitrust, doj, donald trump, motives, politicization, richard nixon, tunney act
Companies: google

Should Antitrust Protect Competitors Or Competition?

from the rewriting-antitrust dept

While there is plenty of breaking news to go around, tech junkies will not have missed the Department of Justice’s long-awaited announcement of their antitrust lawsuit against Google. This is just the latest in a number of government moves aimed at applying more pressure to big tech. Congress is also reviewing potential reforms to antitrust law in order to make it easier to target online platforms. During recent hearings, the House Judiciary Committee examined how these companies compete and highlighted individual competitors­­ that struggle to compete or work with dominant firms.

But in its rush to legislate market fairness into the tech world, Congress seems to be missing the point: we need to protect competition, not the competitors themselves.

The Supreme Court warned about this nearly two decades ago. As the Court explained of the Sherman Act, “[t]he purpose of the Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

In other words, competition law doesn’t care what happens to small competitors, it cares that these companies have a chance to compete.

This is where Congress is treading on dangerous ground. Earlier this month, the House Judiciary Committee released an extensive report detailing their investigation into online markets. In this report, Congress finds themselves worried about what happens to individual competitors, not competition writ large.

For example, at one point the report states that “Google’s preferential treatment of its own verticals, as well as its direct listing of information in the ‘OneBox’ that appears at the top of Google search results, has the net effect of diverting traffic from competing verticals and jeopardizing the health and viability of their business.” Because of this, the report recommends Congress overturn judicial precedent on attempted monopolization, which currently requires that plaintiffs show that the company has a dangerous probability of monopolization.

But Google does not seem to be preventing vertical search engines from competing and as far as we can tell, it hasn’t monopolized this service. Their “OneBox” gives users a quick answer to a question or a product they are looking for. True, a competing vertical search engine may lose traffic, but the consumers get more search results overall. If Google could monopolize vertical search markets, then that would effectively prohibit competitors from offering better, rival services. But so long as a firm like Google can’t actually achieve that monopoly in the new market, the competitive constraints on behavior still exist.

And even if a general search feature and anticompetitive conduct led to monopolization of vertical search, antitrust law would act as a check to protect competition. The Department of Justice’s long-predicted antitrust lawsuit against Google is evidence of this. If Google has illegally acquired, attempted to acquire or maintained a monopoly, then current antitrust law will ensure that any anticompetitive harms are corrected without hurting the consumers. But if they simply outcompeted rivals by offering a more efficient product, then competition policy should not, and currently does not, worry about the individual competitors who can’t keep up.

Competition protects consumers and is critical in the online marketplace. In the fast-moving technology sector, some companies will not keep up. But Congress cannot lose focus by worrying about individual competitors. Instead, they must keep an eye out for anticompetitive behavior that prohibits competitions because the firm controls the entire market. In the end, if we artificially prop up less efficient or innovative competitors, then it will be the consumers who end up suffering.

Jeffrey Westling is a technology and innovation resident fellow at the R Street Institute.

Filed Under: antitrust, competition, competitors, doj
Companies: google