Monthly Archives: January 2022

Microsoft's surprise $68 billion deal to buy Activision Blizzard is adding a fresh twist to the heated debate over which tech companies have monopolies that need to be reined in.

The big picture: The deal could force a question the company has happily ducked for a decade: whether its size and power make it just as deserving of regulatory scrutiny as its Big Tech rivals.

Why it matters: Regulators have finite resources and will have to prioritize which companies and deals they want to contest.

Flashback: Microsoft, of course, spent years fighting a Justice Department antitrust suit two decades ago but in the most recent wave, regulators have largely focused on Apple, Google, Amazon and Facebook.

Between the lines: Microsoft will argue that, in the mobile age, Apple and Google hold a dominant market position with their tight control over mobile app stores.

The key question is how the regulators at the Federal Trade Commission and other agencies, who will ultimately decide whether the deal can go forward, choose to define the markets it affects.

Of note: On Tuesday the Justice Department and Federal Trade Commission announced the start of a process that will ultimately result in rewritten merger guidelines, which could translate as more hurdles for large deals.

Be smart: A good antitrust case, or a decision to block a deal, isn't determined by people's feelings or a company's size. It's about whether a company has, or with acquisitions could gain, undue control over a relevant market.

Microsoft is counting on the fact that even with the deal, it will have less than 15% of video game industry revenue, trailing both Tencent and Sony. But regulators may choose not to look at the broad "gaming" market as a whole, and instead distinguish between mobile, console, PC and cloud gaming.

Between the lines: Microsoft hasn't entirely escaped the latest tech antitrust surge, with some critics raising concerns about its move to integrate Teams into Office and Windows.

What they're saying: Rep. Ken Buck (R-Colo.), whose office has been pushing tighter regulation of other Big Tech companies, says conversations with Microsoft were "encouraging," while noting the deal still faces agency review.

Public Citizen is calling for regulators to quash the deal.

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Microsoft's Activision Blizzard deal complicates Big Tech regulation - Axios

Federal Trade Commission Chair Lina Khan joined CNBC's Andrew Ross Sorkin and Kara Swisher, host of The New York Times' "Sway" podcast, for her first on-camera interview on Wednesday.

The exclusive interview, part of CNBC's "Capital Exchange," comes as the FTC grapples with a historic merger surge for which the agency has said it needs more resources to tackle. Meanwhile, Khan has laid out a sweeping vision for reforming the agency, including expanding the ways it thinks about both competition policy and consumer protection.

Khan, who prior to the FTC studied concentration in digital markets as an academic and as a staffer for the House Judiciary subcommittee on antitrust, discussed the importance of choosing cases that could deter future deals or behavior that may substantially lessen competition. She also welcomed action from Congress to beef up the agency's budget and staff so it's able to take on more cases, though she said the agency is pushing ahead against better-resourced firms flexing their power against enforcers.

Khan's agency is now responsible for an antitrust suit against Facebook, originally filed under her predecessor, and reported investigations into Amazon.

Both of those companies have called for her recusal in antitrust matters involving their businesses due to her past work. Khan has not publicly stepped back from either and a judge in the Facebook case recently wrote that her recusal in that case was unnecessary because she would not be acting as the adjudicator.

Khan said she was pleased by the judge's decision on her recusal in that matter. She also stressed the importance of looking ahead to the next set of technologies that could help firms amass power, while trying cases focused on past behavior.

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CNBC exclusive: Watch live as FTC Chair Lina Khan sits down with Andrew Ross Sorkin and Kara Swisher to discuss her plans to take on Big Tech - CNBC

A group of three Democrat lawmakers introduced a bill which, if passed, would upend the business models of Big Tech giants such as Meta and Google.

The Banning Surveillance Advertising Act was introduced Tuesday by Reps. Anna Eshoo and Jan Schakowsky along with Sen. Cory Booker.

The act bans "advertising facilitators" from targeting ads or allowing ads to be targeted at people. The bill makes an exception for advertising being targeted based on location. It also allows ads to be placed next to specific pieces of internet content.

The bill would give the Federal Trade Commission powers to enforce against any entity found to be breaking it, and would also allow individual citizens to bring civil action against any entity they believe to be breaking the act.

"The 'surveillance advertising' business model is premised on the unseemly collection and hoarding of personal data to enable ad targeting," Eshoo said in a statement posted on her website.

"This pernicious practice allows online platforms to chase user engagement at great cost to our society, and it fuels disinformation, discrimination, voter suppression, privacy abuses, and so many other harms. The surveillance advertising business model is broken," Eshoo added.

Meta and Google did not immediately respond when contacted by Insider about the bill, which could significantly disrupt their ads businesses, if passed.

Google announced in March 2021 it would stop tracking specific users as they browse the web. Meta announced in November 2021 that as of January 19, it will restrict the targeting of ads around sensitive characteristics includinghealth, sexual orientation, religion, and politics.

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Democrats introduce bill to ban targeted advertising by Big Tech firms - Business Insider

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Fines for violations of the European Union's landmark privacy law have soared nearly sevenfold in the past year, according to new research.

EU data protection authorities have handed out a total of $1.25 billion in fines over breaches of the bloc's General Data Protection Regulation since Jan. 28, 2021, law firm DLA Piper said in a report published Tuesday. That's up from about $180 million a year earlier.

Notifications of data breaches from firms to regulators climbed more modestly, by 8% to 356 a day on average.

GDPR has been in force since 2018. The sweeping changes to EU's data rules are aimed at giving consumers in Europe more control over their information.

Companies are required to demonstrate a clear legal basis to collect and process users' personal data. And firms must notify authorities about any data breach within 72 hours of first becoming aware of it.

Failure to comply can result in potentially hefty fines namely, up to 4% of a company's annual global revenues or 20 million euros ($22.8 million), whichever is the bigger amount.

"GDPR has certainly been effective in making everyone sit up and listen to data protection law and data protection enforcement," Ross McKean, chair of DLA Piper's U.K. data protection and security group, told CNBC.

"Prior to GDPR, if you got hit with a fine and you were one of the bigger processors, it was a rounding error, it would barely pay for the Christmas party. Now, you've got fines that are close to a billion euros."

Last year saw EU regulators impose record fines under GDPR, with Big Tech taking the brunt of the penalties.

Luxembourg's privacy watchdog fined Amazon 746 million euros ($850 million) while authorities in Ireland slapped Meta's WhatsApp with a 225 million euro penalty. Both firms are in the process of appealing the respective fines.

It often "takes a while" for regulators to impose large fines once they are introduced in new legislation, McKean said. "That's because investigations take a while. And the law is still full of lots of open legal questions."

Among those open questions is the issue of cross-border data transfers between the EU and the U.S.

In 2020, the European Court of Justice made a seismic ruling invalidating the use of the Privacy Shield framework, a legal framework for moving data across the Atlantic. The ruling was dubbed "Schrems II," after Austrian privacy activist Max Schrems, who originally launched the case.

While the Privacy Shield was invalidated, the ECJ maintained the validity of standard contractual clauses, another mechanism for ensuring EU-U.S. data flows are legally sound. However, firms are still scrambling to figure out the implications of the ruling.

The main contention of the ruling is that the U.S. data protection regime is not equivalent with that of the EU.

McKean says a major "headache" for organizations going forward is legal uncertainty surrounding EU-U.S. data transfers.

Standard contractual clauses (SCCs), by far the most popular method for legally processing such transfers, are on "life support," McKean said, as officials in the EU and U.S. hash out plans for a new data pact to replace Privacy Shield.

Facebook parent company Meta has been caught up in an intense dispute with the Irish Data Protection Commission over the matter. The DPC has ordered Meta to stop using SCCs to send user information from Europe to the U.S., as it investigates the company's data transfer practices.

Meta secured a temporary freeze on the order, but it was dismissed by Ireland's High Court, which allowed the watchdog to proceed with its inquiry.

In a notable case recently, Austria's data protection watchdog said the use of Google Analytics violates GDPR as it potentially exposes users' data to U.S. intelligence agencies. The decision targets a website publisher using Google's web analytics service, rather than Google itself.

Like Meta and other large U.S. tech companies, Google relies on SCCs to process EU-U.S. data transfers. At the time, Google said firms using Google Analytics "control what data is collected with these tools, and how it is used," and that the company provides a "range of safeguards, controls and resources for compliance."

"Every organization with some limited exceptions has an international supply chain and international data transfers," McKean said, adding the Schrems II ruling has had a "profound" impact on businesses of all shapes and sizes.

In addition to increased legal uncertainty, McKean says he expects to see further appeals of GDPR fines emerge in 2022.

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Fines for breaches of EU privacy law spike sevenfold to $1.2 billion, as Big Tech bears the brunt - CNBC

He generally is more measured in private conversations with the companies, said Katie Harbath, who worked at Facebook for more than a decade after joining as the first Republican employee in the companys Washington, D.C., office. Harbath left Facebook late last year. She said, off camera or out of earshot, McCarthy acknowledges that he rails against Big Tech due to pressure from his fellow members. But at the end of the day, I think he understands more than most that Facebooks got to do what theyve got to do, and hes got to do what hes got to do, and its all part of the political game of Washington, Harbath said.

Steve DelBianco, president and CEO of right-leaning tech trade group NetChoice, said McCarthys fundamental free-market instincts are still there. DelBianco added that he views McCarthys antagonism toward the Big Tech companies as nothing more than political messaging. McCarthy is reflecting what his caucus does to fundraise and motivate base voters, DelBianco said. NetChoice counts Amazon, Google and Facebook among its members.

Even some of McCarthys own colleagues dont think his heart is into his new, anti-Big Tech kick, noting, among other things, that hes opposed to the major bipartisan antitrust push that could effectively break up the tech giants. When POLITICO asked Rep. Ken Buck (R-Colo.), the Republican leading that bipartisan antitrust push, about his thoughts on McCarthys anti-Big Tech rhetoric, Buck replied with a question of his own: Hes anti-Big Tech?

Allies of the GOP leader say that McCarthys extensive criticism in recent years is a manifestation of a party growing increasingly frustrated with large tech platforms a frustration fanned by former President Donald Trump, who has been booted off a few of those platforms. Even as he maintained that McCarthys position was not political, Matt Sparks, the congressmans spokesperson, said his boss viewpoint was at least in part derived from the sentiment among voters.

Our position today is simply a reflection of what our constituents are seeing and facing and feeling on the platforms, said Sparks, later adding that the GOP leader is not anti-technology.

McCarthy speaks with business executives to address concerns from fellow lawmakers and constituents, he said. And if someone with a personal connection to McCarthy who just happens to represent a Big Tech company dials up the congressman, hes going to pick up the phone, Sparks said.

There are a number of tech representatives with those connections. Frederic Barnes is a lobbyist at TikTok who worked for McCarthy. George Caram served as the congressmans senior legislative assistant for science, space and technology and now represents Apple. Brian Worth, former director of coalitions for McCarthy, lobbies for Amazon and Wing, a subsidiary of Googles parent company, Alphabet. Jeff Miller, a political adviser to McCarthy, also represents Apple and Amazon.

McCarthys relationship with the Big Tech companies was initially marked by public flattery and a mutually beneficial back-and-forth. Even during his time as a California state legislator in the early 2000s, McCarthy saw the potential of these companies as a force for good, Sparks said. On several occasions between 2011 and 2013, McCarthy led delegations of congressional Republicans on tours of the Silicon Valley campuses of Google and Facebook, even nabbing some face-to-face time with Facebook CEO Mark Zuckerberg. He has received tens of thousands of dollars in campaign and PAC donations from Silicon Valley companies and tech executives over the course of his congressional career.

He had this goal of converting Silicon Valley to be more Republican, said one former House leadership staffer who worked under McCarthy and now represents several Big Tech companies. In his mind, those folks should have been supporting Republicans from a policy standpoint because business policy-wise, Republicans are better than Democrats for them for their businesses and innovation.

A video from 2012 shows McCarthy lavishing praise on Facebook and Twitter at their booths at the Republican National Convention.

At that time, Facebook, Google, Amazon and Apple were all powerful companies, but they hadnt yet become the powerhouses in the world economy that they are today. Facebooks market capitalization was $50 billion when McCarthy, flanked by former House Majority Leader Eric Cantor and then-House Budget Chair Paul Ryan (R-Wis.), participated in a public interview in 2011 at Facebooks headquarters with Chief Operating Officer Sheryl Sandberg. Today, Facebooks market cap stands at roughly $932 billion.

But it wasnt just the economics of Silicon Valleys tech behemoths that initially drew Republicans like McCarthy. Republicans engaged with social media companies because there was something powerful about being able to communicate outside the bounds of legacy intermediaries like traditional media, said John Stipicevic, McCarthys former deputy chief of staff for floor operations and member services who is now a lobbyist for, among other clients, Microsoft.

Now those same companies are far different and, the way many GOP lawmakers in the House see it, are going into overdrive to silence and censor conservatives and anyone who thinks differently from their expansive liberal workforce, Stipicevic said.

The Republican position is simply a representation of their constituents' concerns, he continued. Leader McCarthy since his days as Majority Whip, has always had a pulse on the Conference. And it is pretty clear where most members are.

The allegation that major social media platforms were censoring conservative voices first began bubbling up as a conservative rallying cry in 2016, amid controversy over reports that Facebook employees intentionally suppressed articles from right-leaning news sources. Researchers have since shown that conservatives receive more engagement on social media than liberals.

McCarthy didnt jump into the anti-Big Tech fray until around 2018, when Google search results listed the ideology of the California Republican Party as Nazism during the primary. (Google blamed Wikipedia for the error.)

Brendan Carr, the senior Republican on the Federal Communications Commission, said McCarthys thinking has evolved alongside the Republican Partys. A very short time ago, we saw a party that in too many instances put corporate interests at the top of their legislative agenda, Carr said. He pointed to McCarthys framework and the accompanying policy proposals from Rep. Cathy McMorris Rodgers (R-Wash.), the top Republican on the Energy and Commerce Committee, as an example of the party pivoting to respond to a changing tech industry.

If you go back to 2012, 2013, 2014, those Silicon Valley corporations did not have the massive power that they have today, and they certainly were not exercising the power they did have in a way that was so directly contrary to some of our core values in this country including free speech, Carr said.

The decisions that large corporations have chosen to make, in terms of putting their corporate interests so clearly in conflict with individual liberty, caused some real rethinking for a lot of people in the conservative space, said Carr, who has worked with McCarthys office on proposals to take on Big Tech. (Carr is married to McCarthys general counsel.)

The fervor against Silicon Valley on the right has only intensified since Twitter, Facebook and YouTube booted Trump from their platforms last year and followed by exiling several MAGA conservatives this year. Earlier this month, McCarthy called for paring back Section 230 of the Communications Decency Act, social medias prized legal liability shield, after Twitter suspended Rep. Marjorie Taylor Greenes (R-Ga.) personal account.

Republicans have also objected to tech and telecom companies cooperation with the House Select Committee investigation of Jan. 6. Earlier this year, McCarthy threatened retribution for those companies, including Apple, who provide email or phone records to the committee.

"I think McCarthy's a very reasonable politician, said Republican lobbyist Sam Geduldig, who also represents, among other clients, Microsoft. Its not hard to figure out Kevin McCarthy. He cares about voters and the politicians that those voters elect.

Lobbyists for the Big Tech companies, however, say McCarthy is more open to hearing their perspective than his rhetoric indicates. Two lobbyists told POLITICO that, even as Speaker Nancy Pelosi has entirely shut out Facebook from her offices, McCarthy will always take their calls and has assured them that he still respects the tech industry.

I don't think his public antagonism towards Big Tech should not be taken as being anti-tech, said one lobbyist who represents major tech companies.

Miller, one of McCarthys closest friends on K Street, riled up GOP lawmakers last year as he lobbied aggressively against a set of bipartisan trust-busting bills aimed at paring back the power of the techs behemoths. Miller is a registered lobbyist for both Apple and Amazon, two companies that the antitrust overhaul would directly affect. As Miller was lobbying against the package in Congress, McCarthy publicly announced his opposition to the bills.

In its place, McCarthy has proposed a narrower set of antitrust reforms, including proposals to expedite the court process with direct appeal to the Supreme Court in antitrust cases and to empower state attorneys general to lead the charge against the tech giants. But anti-monopoly advocates say that McCarthys ideas dont go far enough and would not change the law to account for the conduct of the largest tech firms.

They obviously dont want antitrust, said Matt Stoller, director of research for the left-leaning advocacy group American Economic Liberties Project. Thats their history, its their track record. They opposed the antitrust investigation of Big Tech, they oppose these laws. There literally is nothing to indicate that they want to do anything but protect Silicon Valley.

McCarthy has, instead, made it clear that he would prioritize speech issues, including paring back Section 230 for the largest social media platforms, if the GOP takes over power in the House.

McMorris-Rodgers and Rep. Jim Jordan (R-Ohio), the ranking member on the Judiciary Committee, would play powerful roles in tech policy should Republicans take back control. And they say they are serious about enacting McCarthys framework.

Were focussed on winning back the majority we haven't done that yet, so I don't want to get ahead of things, Jordan told POLITICO in an interview. But if, Lord willing, we win it back, and Lord willing, I get to be chairman, well look at definitely Section 230.

I think overall Kevin's just done a great job of keeping the team together, Jordan said. And I think hes like, seeing like everyone else in the country, when you kick off a sitting member of Congress and the president something's got to change.

Buck, the Republican who is leading the bipartisan antitrust push in the House, was skeptical that changing Section 230 would rein in Big Techs power. At the same time, he observed that they are major political players and spend a lot of money in this town.

Big Tech wants changes to 230, Buck said. Thats not something theyre opposing."

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McCarthys love-hate relationship with Silicon Valley - POLITICO