Earlier this month, the Federal Trade Commission (“FTC” or “the Commission”) announced a new “Start with Security” campaign. Announced in a speech by Chairwoman Edith Ramirez, the campaign she described will be centered on a series of resources and presentations that the FTC’s Consumer Protection Bureau will deliver to corporate groups to provide companies, especially small to medium sized businesses, with best practices and other guidance on specific data security topics.
This is a welcome development. The “Start with Security” presentations are intended to fill a gap presented by the FTC’s current method of protecting consumers and ensuring good corporate data security practices, which embodies light-touch regulatory principles. Today, the FTC’s primary tool for recommending and enforcing reasonable behavior in the data security space is through the enforcement authority granted to it by Section 5 of the FTC Act, which allows it to stop unfair or deceptive acts or practices.
With unfair practices, the FTC brings a case when a particular company’s data security practices caused, or were likely to cause, a substantial injury that consumers could not reasonably avoid and were not outweighed by benefits to consumers or competition. In the case of deceptive acts, the FTC brings cases when it believes a company has failed to support a promise to keep information secure with reasonable and appropriate processes.
Through settlements and guidances informed by the last decade of data security cases, the Commission has developed a set of commercially reasonable security practices that companies should implement in a manner appropriate for their respective businesses. This case-by-case approach allows for the flexible development of policy that reflects what companies are actually doing with consumers’ information and points to areas for improvement or minimum standards.
At yesterday’s hearing on “The Internet of Things: Exploring the Next Technology Frontier” before the House Energy & Commerce Committee’s Commerce, Manufacturing, and Trade Subcommittee, Members of Congress questioned panelists about the impact of Internet-connected devices, now often referred to as the Internet of Things (IoT), on our economy as well as how Congress or regulators could protect consumers’ personal information. Bijan explained two months ago how the IoT is garnering increased attention from regulators like the Federal Trade Commission (FTC). An interesting aspect of the hearing concerned how IoT devices can improve the efficiency of local, state, and the Federal governments. IoT devices can help us improve our daily lives, but they may have a greater impact on how governments deliver services.
Cities and states have made great strides in using Big Data to maximize services. One of the most notable government executives to embrace Big Data was former Maryland Governor Martin O’Malley. While serving as Mayor of Baltimore, his administration created a system called CitiStat to track all sorts of data on city government services like monitoring civil servant overtime and sick leave; response times for filling potholes and trash collection; and crime statistics. (You can find out more about CitiStat in this report.) CitiStat saved Baltimore an estimated $350 million during O’Malley’s mayoralty, and he later expanded the CitiStat model to the state level while Governor of Maryland from 2007 to 2015. IoT devices provide the kind of data that could take such government data analysis and service delivery to the next level.
A 2013 Cisco study on how IoT technology could transform the public sector estimated that governments around the world could benefit to the tune of $4.6 trillion. Consider some of the basic services that we often take for granted: roads, clean water, schools, parks, firefighters and police. Citizens expect their governments to provide these services, but many governments are still reeling from the slow economic recovery and often struggle to provide these essential services while also maintaining balanced budgets. The plethora of data from IoT devices could help governments reduce costs, improve deployment of resources, and promote economic development.
Yesterday Austin-based Usenet provider Giganews was awarded more than $5.6 million in attorney’s fees and costs by a federal court in California, relating to its lengthy battle to exonerate itself of spurious infringement allegations from serial copyright litigant Perfect 10. The court awarded fees in order to “discourage serial litigants from bringing unmeritorious suits and then unnecessarily driving up litigation costs in order to drive a settlement.” (A statement by Giganews and link to the order are here.)
Represented by “high stakes” IP litigator Andrew Bridges of Fenwick & West, Giganews has been slugging it out with adult content purveyor Perfect 10 since 2011.
Perfect 10 is likely no stranger to copyright nerds; its litigation campaigns against a who’s-who of Internet properties in the previous decade yielded few victories for the company, but did lead to important precedents on intermediary liability and fair use, including search engines’ use of thumbnails. (Some of these cases comprise the so-called Perfect 10 “trilogy”; including Perfect 10 v. Google, Inc., Perfect 10 v. Amazon.com, Perfect 10 v. VISA, Perfect 10 v. CCBill LLC.) MORE »
An expert panel convened on Capitol Hill this morning, discussing new research on the detrimental effect that regulatory uncertainty has on Internet investment (as well as additional copyright law and policy challenges, which we live tweeted on @DisCo_Project).
The new research quantifies the impact of Internet regulations, including intermediary liability limitations, by showing their effect on early-stage investment. A new report by Fifth Era and Engine finds that legal uncertainties for digital content intermediaries discourage early-stage investment around the world, reinforcing findings from a 2011 report that found early-stage investors in the United States were considerably less likely to invest in new online services exposed to legal risks.
In a similar vein, another 2011 paper found that changes in copyright policy changes could spur demonstrable investment in new online services. Comparing investment in online services in the U.S. and Europe in the wake of the 2008 Cablevision case — a federal appellate court ruling widely heralded as giving additional legal certainty to online platforms — researchers found that U.S. investment increased considerably. In contrast, a follow-up study by the same authors explored the impact of judicial decisions in Europe that increased legal exposure for online platforms, and found decreased investment when applying the same methods.
The Fifth Era report reinforces this conclusion, providing further evidence that additional risk and uncertainty in the online environment decreases investment. This conclusion is not entirely surprising — but the authors’ specific findings provide impressive data on how severely risk can stifle early-stage investment.
Today, the Wall Street Journal published an article after getting its hands on a confidential FTC memo from the now settled U.S. antitrust investigation of Google. The document, an internal memo by the FTC’s Bureau of Competition recommending that that the Commission proceed with an antitrust case against Google for a variety of allegedly anticompetitive actions, was mistakenly released in response to a FOIA request. The Journal also reports that the FTC’s Bureau of Economics disagreed with the Bureau of Competition, recommending that the agency not proceed with charges — a recommendation the agency ultimately followed. Also, and perhaps most interestingly, the Bureau of Competition’s recommendation advised against proceeding with the most high-profile accusation, search bias, which is now the focus of the European Commission’s competition investigation. As most DisCo readers probably remember, the FTC eventually voted to close its investigation of Google (and dismissed the search bias accusations outright) after the company addressed several of the practices outlined in the Bureau of Competition’s memo.
Although the WSJ article is certainly an interesting read, the fact remains that there are many checks and balances within the FTC and — with the benefit of hindsight — it is pretty clear that the Commission’s decision not to proceed on the charges of “search bias” was the right call.
Let’s look at what has happened in the marketplace since the FTC settlement.
We in Europe know that petrol (gas) prices are usually double that of the United States. Vehicle ownership can overall cost you EUR10,000 annually. All this makes transport systems ripe for disruption in the digital era. Throw in ongoing high unemployment and economic uncertainty, and the enablers of disruption – like collaborative consumption – have shifted from nice idea to necessity for many.
It is this sharing economy that has fuelled increasing disruption in the field of mobility. Until recently mobility had been enhanced by services like apps for maps and transit timetables, but was yet to be truly disrupted as media, music and travel bookings have been.
Now digital innovation and the competition it fuels is coming thick and fast. There are hundreds of taxi apps alone, offering their platform to consumers for free. The lack of lock-in has been a consumer boon: the apps have to impress immediately or the customer will ditch them. Which is about as far away from the old taxi cartels as can be imagined.
But are Uber-headlined fights with legacy systems and regulators the full story? Is the US the source of the best innovations? I would say no. In hindsight, 2014 was the year that a diverse range of European innovators started to reach critical mass at home and achieve major expansion globally.
European digital policy debate is in flux. In the new uncertain mix we find new EU leadership figures; gridlocked legal proposals on data protection; Parliament nakedly chasing after Google; and posturing by the French and German governments to ban or regulate certain platforms in order to create ‘platform neutrality.’
This final demand occupied the minds of panelists at a recent CCIA event at Bloomberg last week. It was a relief to hear figures such as Kaja Kallas MEP, Chris Sherwood (Allegro Group), Adam Cohen (Google) and Brian Williamson (Plum Consulting) agreed that the shadow boxing needs to end. They collectively pinned down the problem: Europe can’t afford to be fighting imaginary opponents or dancing around the issues holding back digital companies. Europe keeps trapping itself by looking backwards.
For Kallas, the invention of debates around ‘platform neutrality’ is “protectionism in disguise.” She’s not wrong. The French and German governments have failed to make an adequate case about why certain digital companies need special regulation ; they simply resort to alluring phrases and words like ‘neutrality.’ This tactic dresses up the favours they’d like to do for Europe’s non-existent search engine champion, but it doesn’t change the market reality. Digital innovations are continuing to integrate into the economy, meaning the idea of ‘platform neutrality’ is quickly moving from the category of ‘flimsy’ to ‘irrelevant.’
Tuesday night’s The Daily Show interview of Abbi Jacobson and Ilana Glazer, the creators and stars of the Comedy Central TV show Broad City, underscores the transformative role of the Internet in democratizing the entertainment industry.
Jacobson and Glazer launched Broad City in 2009 (when they were 25 and 21) as a web series on YouTube. The 25 episodes about the misadventures of two Jewish women in their 20s in New York City built a cult following and attracted the attention of Amy Poehler. Poehler helped migrate Broad City to the Comedy Central cable network (owned by media giant Viacom), and Poehler now serves as one of the show’s executive producers.
During Tuesday’s interview, Jon Stewart said that because of the Internet, “it feels like there’s more opportunity than there ever was for people” to break into comedy. “It’s been democratized to some extent.” Jacobson and Glazer agreed. Stewart then asked, “Do you think a show like this, voices like yours, unique and joyful, could have gotten on the air without the Web?” Jacobson and Glazer replied no.
On two sides of the country yesterday two branches of the federal government engaged in legal processes likely to affect competition in the music industry.
As DisCo previewed, yesterday the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights considered the competitive challenges in the music publishing industry, and the effects on competition, innovation, and consumers. Witnesses from across the music ecosystem discussed the continued need for the consent decrees. Several urged that the consent decrees be strengthened with additional transparency safeguards, while others claimed they may no longer be necessary (at least in theory if you ignore all transaction costs and have a perfect marketplace). Over the last year alone, four federal courts have found evidence that the same publisher behaviors that gave rise to the consent decrees in the first place still continue today, suggesting that the consent decrees remain necessary to curtail anticompetitive behaviors.
Just as the Senate hearing ended in D.C., jury deliberations in the Blurred Lines case (which we covered when Robin Thicke initiated the litigation by filing for a declaratory judgment) resumed in California, ultimately ending in a judgment against Robin Thicke and Pharrell Williams, for millions in actual damages plus profits. Several observers have said that is “horrific” and “really dangerous”, as well as “a bad result” that is “bad for pop music” and “could make songwriting and recording a minefield for every artist”.
Günther Oettinger, the European Commissioner for Digital Economy and Society, recently gave a keynote address at the #Digital4EU Stakeholder Forum, in which he discussed the importance of a Digital Single Market in Europe and uniform Internet regulations. He also spoke of the need for Europe to catch up in digital innovation. Although I plan to address some controversy in the remarks, it is important to note that much of what Oettinger said was on target. Streamlining digital rules across the 28 member states of the European Union and ensuring that Europe produces (and attracts) more programmers and IT experts will go a long way to making Europe even more competitive in the digital economy. (I have also discussed some other issues not addressed by Commissioner Oettinger, which would also go a long way into making Europe more competitive.)
On the more worrying side, Oettinger’s speech veered fairly overtly into jingoistic territory:
The Americans are in the lead, they’ve got the data, the business models and so the power… They come along with their electronic vacuum cleaner and suck up all the data, take it back to California, process it and sell it as a service for money.
This is not surprising. Politicians playing to a domestic audience is par for the course. Furthermore, consumers and innovation across the world benefit from more competition, whether it comes from Silicon Valley, Berlin or Beijing. Besides a stylized version of how Internet companies actually operate, what was misguided is the notion that using the size of European markets (the EU is the world’s biggest economy) to drive companies to adopt European regulatory standards as the de facto global standard is going to benefit European companies (whether they benefit consumers is an entirely different matter). This was an implicit assumption underlying Oettinger’s remarks, and was made explicit in other commentary from top European politicians:
Still, said Jan Philipp Albrecht, chief negotiator for the European Parliament on the EU’s new data protection law, “If you can achieve…a standard [globally] that is somehow near…your own, then this is an advantage.”
The Wall Street Journal surmised the takeaway from this series of statements as:
Their hope: As rules such as the right to remove Web links to personal information spread, European companies would get a leg up in the next era of Internet commerce.
But is this correct? To answer that question, it is helpful to break down this line of thinking into two questions: (1) whether large markets can drive regulatory norms, and (2) whether high levels of regulation would advantage European enterprise.