September 16, 2022
Photo: Jerod Harris/Getty Images for Vox Media
Hello, and welcome to Protocol Policy! Today we’re talking about WTF is going on in California. Plus, the Ethereum split caught the attention of the SEC, and Amazon faces allegations of creating artificially high prices.
While all eyes were on Capitol Hill this week (recess is over, people), the tech industry was dealt blow after blow in its own backyard, with Gov. Gavin Newsom signing into law both a new transparency bill and a kids privacy bill that tech giants fought hard to kill. The one-two punch from Newsom highlights just how tarnished the tech industry’s reputation has become on its own home turf.
Let’s start with the first law Newsom signed: AB 587. This one requires social media companies making more than $100 million in annual revenue to publish their terms of service and submit semiannual reports to the state attorney general, detailing how they enforced those terms. Each violation can cost them up to $15,000.
The law is different from Texas’ and Florida’s social media laws. It says nothing, for instance, about how social media companies enforce speech. But it could run into the same challenges.
Then there’s the California Age-Appropriate Design Code Act. That law has been no less controversial, and not just for tech.
What’s fascinating about all of this is that it’s happening in California, the state where Big Tech is arguably most influential. Don’t forget: Back in 2009, then-San Francisco Mayor Newsom announced his first run for governor at Facebook’s headquarters, saying the company represents “the best of the new economy in California.”
Now? “California will not stand by as social media is weaponized to spread hate and disinformation that threaten our communities and foundational values as a country,” Newsom said in a statement about the transparency law Tuesday night.
What a difference 13 years and a tech-funded recall campaign make.
The Ethereum split may have reclassified the cryptocurrency as a security. Yesterday, Securities and Exchange Commission Chairman Gary Gensler said that the split could trigger the Howey test, since “the investing public is anticipating profits based on the efforts of others.”
The Consumer Financial Protection Bureau said it will issue guidance on “buy now, pay later” products. In a report, the agency outlined concerns over the risk BNPL products posed to consumers.
Meta had a quiet day in Congress thanks to TikTok. TikTok COO Vanessa Pappas was joined by executives from Meta, Twitter and YouTube as part of a Senate committee hearing on social media and homeland security. Pappas denied allegations of China having access to U.S. user data, as Buzzfeed reported in June. Sens. Rob Portman, Mitt Romney and Josh Hawley were particularly vocal about the potential security risks posed by TikTok operating in the U.S., given its ties to China.
Senators touted the potential benefits of the Platform Accountability and Transparency Act. In the morning panel of that same Senate hearing, Portman and several former social media executives suggested the bill had the potential to increase the transparency of social media platforms and align platform incentives with public interests.
The Federal Trade Commission is going after deceptive user interfaces. The agency voted in its Thursday open meeting to make public a report on the use of “dark patterns” sites to manipulate people into making certain decisions. Examples include auto-renew subscriptions, e-commerce countdown clocks and convoluted privacy option interfaces.The Drug Enforcement Administration opened an inquiry into telehealth ADHD provider Done. Along with Cerebral, Done was one of the companies heavily advertising on social media platforms such as Meta and TikTok, as Protocol reported.
Alibaba — a leading global ecommerce company — is a particularly powerful engine in helping American businesses of every size sell goods to more than 1 billion consumers on its digital marketplaces in China. In 2020, U.S. companies completed more than $54 billion of sales to consumers in China through Alibaba’s online platforms.
California sued Amazon over creating artificially high prices. Attorney General Rob Bonta alleged Amazon limited price competition by forcing third-party sellers to give their lowest prices on Amazon, precluding other platforms from competing on price. The District of Columbia sued Amazon over a similar allegation in 2021; that case was dismissed in March.
The Justice Department has created a nationwide network of crypto prosecutors. The Digital Asset Coordinators Network assigned over 150 federal prosecutors to act as subject matter experts and advisers for U.S. attorneys offices prosecuting cryptocurrency-related crimes.
The EU will likely investigate Microsoft’s $75 billion acquisition bid for Activision Blizzard. Brussels will follow in the footsteps of the U.K.’s Competition and Markets Authority, which will likely escalate its antitrust investigation into the deal after Microsoft declined to provide any suggested remedies.
Tesla is considering moving more battery production from Germany to the U.S. to take advantage of a revamped EV credit that prioritizes domestic production, according to The Wall Street Journal.
Uber reported a major breach that started with an employee’s Slack account. Uber took down Slack and several other internal systems on Thursday to assess the extent of the attack. The hacker claimed to be 18 years old and, in announcing the breach over Slack, said Uber should pay its drivers more. Uber’s former head of security, Joe Sullivan, is facing criminal charges for failing to disclose a security breach in 2016.
The Oversight Board scrutinized Meta’s use of automated image takedowns. In particular, it said the use of Media Matching Service — which uses the decision of a human content moderator to automate future image takedowns — had the potential to “amplify the impact of incorrect decisions.” The board specifically referred to a political cartoon in Colombia that had been placed in the Media Matching Service.
$20 billion: That’s how much Adobe agreed to pay for design platform Figma, in a deal that will ring all kinds of antitrust alarms. If the deal goes through, Figma would be Adobe’s largest acquisition by far —and it would also make VCs, including a16z, Sequoia and Greylock Partners, much richer.
TikTok is the hottest social platform around right now, but that doesn’t mean it’s above “borrowing” from competitors (hence, pulling an Instagram). With a new product launch on Thursday, TikTok began offering its own in-app version of BeReal. It’s not alone, though: Snapchat and Instagram have also borrowed design elements from the buzzy BeReal.
Using economic multipliers published by the U.S. Bureau of Economic Analysis, NDP estimates that the ripple effect of this Alibaba-fueled consumption in 2020 supported more than 256,000 U.S. jobs and $21 billion in wages. These American sales to Chinese consumers also added $39 billion to U.S. GDP.
Thanks for reading — see you Monday!