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Clifford Chance

Clifford Chance

Tech Group Insights

Global. Integrated. Tech Expertise.

Tech Policy Unit Horizon Scanner - September 2020

In this issue we look at how the possibly epoch-defining battle between antitrust enforcers and "Big Tech" is coming to a head with policy recommendations and legislative proposals expected before the end of the year in Australia, the U.S., Europe and the U.K.

Google and Facebook have demonstrated their willingness to resist efforts by antitrust enforcers to regulate their activities, both companies having launched public campaigns against draft legislation in Australia which attempts to "address bargaining power imbalances between Australian news media businesses and digital platforms".

Meanwhile, Representative David Cicilline, head of the U.S. House of Representatives' antitrust committee investigation into the 'GAFA' companies, has set the stage for legislative action in the U.S.,  stating in an interview with Bloomberg that “all of these companies engage in behaviour which is deeply disturbing and requires Congress to take action”.

In addition, we look at the potential implications of a Biden-Harris administration on U.S. tech policy (we look at Trump-Pence in the next edition), a controversial amendment to the law in South Africa that would allow network companies to put up masts on privately-owned land, anger at algorithmic decision-making by public bodies in the U.K. and tech policy developments in China and the Middle East.

Africa

A proposed law is prompting controversy in South Africa as it would allow network companies to erect masts on privately-owned land, even if the landowner does not consent

The government of South Africa has proposed an amendment to the Electronic Communications Act which, if implemented, would give mobile networks and other licensees the right to select, enter and use both public or private land for the deployment of their network infrastructure. As currently drafted, the amendment would allow network companies to erect masts on privately-owned land, even if the landowner does not consent. A "reasonable access fee" may be charged by the landowner where "more intrusive" 5G masts are erected on private property – however, the proposed amendments do not clearly define what would be viewed as "intrusive".

The proposal has been met by opposition from critics, who argue that the "draconian and far-reaching" draft policy could threaten the constitutional rights of South Africans. Over 50,000 submissions to oppose the proposal have been filed with DearSA, a civic rights organisation. In response, the South African Department of Communications and Digital Technologies has cited a Constitutional Court judgement where the court found that network licensees may select the premises and access them for the purposes of constructing their electronic communications network. It has not yet been confirmed if or when the proposed amendments would go into force.

Americas

In focus // What would a Biden-Harris administration mean for tech regulation in the U.S.?

Joe Biden and Kamala Harris are currently about eight per cent on average ahead of Donald Trump and Mike Pence. With the Democratic National Convention now over, we know – barring the unexpected – that one of the pairs will be sworn in as President and Vice President on January 20, 2021. This month we are looking at what a Biden presidency would mean for tech policy; next month we consider the same in respect of a Trump second term.

The Biden-Harris regulatory agenda around platform regulation, privacy, security and section 230 – which we have followed closely – would undoubtedly be part of the focus, as they seek to "build back better" post Covid-19.

The headline is that companies should expect increased regulation of the technology sector under a Biden-Harris Administration. Although he has not been a vocal proponent of breaking up the so-called 'GAFA' companies, Joe Biden has said that not enough time has been spent by the present administration on tackling antitrust issues. He has indicated that he is open to adopting more stringent privacy laws. A Biden-Harris Administration would likely pursue stricter enforcement of privacy violations by tech companies. Such an Administration would also likely be interested in regulating emerging technologies that raise social justice concerns, such as facial recognition software.

Section 230

Readers will recall that a May Trump executive order pared back the "Section 230" immunity for online platforms from liability for user-generated content provided by the Communications Decency Act. That executive order maintained such immunity so long as online platforms remain politically neutral and non-discriminatory. Biden is amongst many on the US political left who want wider-ranging liability for online platform providers for user-generated content (such as hate speech or disinformation), backed up by stronger enforcement mechanisms. What precise shape the eventual settlement will take cannot be predicted, but Section 230 protections do not seem long for this world.

Differences to Trump

A reversal of the United States' withdrawal from the global community could be expected, with international cooperation on issues ranging from climate change to trade to standards on AI and other technology to taxation is likely.

This may include the OECD's digital tax talks. However, as the OECD’s Saint-Amans has warned it is by no means certain that countries' efforts to introduce their own digital services taxes in the absence of multilateral agreement would meet with a less hostile reception from a Biden-Harris Administration than they have from the present Administration – given such measures are perceived as direct attacks on the U.S. tech sector.

Net neutrality

While some had criticized Biden for his silence on the issue of 'net neutrality' – the principle that internet access service providers should restrict end-users' ability to access and distribute online information or run online applications and services of their choice, using the devices of their choice – during the Democratic primaries, this position has now hardened. A joint Biden-Sanders document states that the FCC should “take strong enforcement action against broadband providers who violate net neutrality principles through blocking, throttling, paid prioritization, or other measures that create artificial scarcity and raise consumer prices.”

Privacy

Biden has stated in a New York Times interview that the U.S. should be "setting standards not unlike the Europeans are doing relative to privacy": a potential indication that GDPR-style U.S. privacy law might be on the cards.

Cicilline draws first blood in the U.S. House of Representatives' antitrust investigation into the tech sector

After hearing testimony from the CEO's of the 'GAFA' companies in July, Representative David Cicilline, the Democrat leading the high-profile antitrust investigation, made his most far-reaching comments to date on the conduct of the companies under investigation, in an interview with Bloomberg.

“All of these companies engage in behaviour which is deeply disturbing and requires Congress to take action,” said Cicilline.  “The kind of common theme is the abuse of their market power to maintain their market dominance, to crush competitors, to exclude folks from their platform and to earn monopoly rents.”

He described Facebook's acquisition of Instagram as "clearly illegal" and a "violation of antitrust laws".

Cicilline said that the House Antitrust Subcommittee plans to issue its report as soon as September, and gave some colour as to what we can expect the report to recommend: modernising the antitrust statutes through legislative change; tech specific recommendations, ranging from portability and interoperability to a more far-reaching "Glass-Steagall of the internet", which would prohibit platform businesses from selling goods and services on their own platforms; revitalising private sector enforcement; and agency reforms, including regulatory reform and ensuring that the Justice Department and the Federal Trade Commission have the resources to do their jobs.

APAC

Google and Facebook have escalated their dispute with the Australian Competition and Consumer Commission over the planned News Media Bargaining Code, while new taxes on tech giants draw closer in Indonesia and the Philippines

Google and Facebook have stepped up efforts to lobby the government of Australia to drop proposed changes set out in the draft News Media Bargaining Code law.

Google published an open letter and is rolling out pop-ups targeted at users of Google Search which warn that "the way Aussies use Google is at risk: your search experience will be hurt by new regulation".

Facebook's Managing Director for Australia and New Zealand, Will Easton, published a blog post threatening to prohibit users from posting news media stories on its sites: if the "draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram."

As described by the Australian Competition & Consumer Commission, the draft law would "allow news media businesses to bargain individually or collectively with Google and Facebook over payment for the inclusion of news on their services", in response to concerns that there is a "fundamental bargaining power imbalance between Australian news media businesses and major digital platforms [which] has resulted in news media businesses accepting less favourable terms for the inclusion of news on digital platform services than they would otherwise agree to".

The code also includes a set of ‘minimum standards’ for:

  • providing advance notice of changes to algorithmic ranking and presentation of news;
  • appropriately recognising original news content; and
  • providing information about how and when Google and Facebook make available user data collected through users’ interactions with news content.

In Google's words, "the law would force us to give an unfair advantage to one group of businesses - news media businesses - over everyone else who has a website, YouTube channel or small business. News media businesses alone would be given information that would help them artificially inflate their ranking over everyone else, even when someone else provides a better result".

Facebook took issue with the law for forcing "Facebook to pay news organisations for content that the publishers voluntarily place on our platforms and at a price that ignores the financial value we bring publishers." A consultation on the draft law closed on 28 August 2020.

Meanwhile, a new 10% VAT on sales by technology firms including Netflix, Amazon, TikTok and Facebook will enter into force in Indonesia and start to be collected from 1 September. Indonesia is the most populous country in Southeast Asia (being home to 270 million people). As described by Reuters,  non-resident foreign firms which sell digital products and services in Indonesia worth at least 600 million rupiah ($41,040) a year, or which generate yearly traffic from at least 12,000 users, must pay the 10% VAT. A bill proposing a similar 12% VAT on digital services has now cleared a lower house committee in the Philippines.

A new PRC programme has the objective of seizing the opportunity of digital trade in certain 'pilot' areas, as the PRC services sectors continues to become more open

On 12 August 2020, the Ministry of Commerce issued the General Proposal of the Pilot Program on Comprehensive Promotion of the Innovative Development of Services and Trades. It includes the following proposed actions/measures to be further implemented by governmental authorities:

  • to explore and launch regulatory measures for cross-border data transfer activities in pilot areas (including Beijing, Shanghai, Hainan and Xiong’An);
  •  to further specify rules and standards applicable to each processing step of data services and explore the commercialisation and securitisation of data assets; and
  • to further promote the utilisation of central bank digital currency in wider areas (including the Jing-Jin-Ji Region, the Yangtze River Delta Economic Zone, the Great Bay Area and certain areas in the Middle-West Region).

Europe

EU // New Competition Tool and Digital Services Act

By way of reminder the deadline for submissions to the European Commission's two public consultations (on the new Digital Services Act and the New Competition Tool) is 8 September 2020.  Proposals for legislation are currently expected before the end of the year or early in 2021. Our podcast on this topic provides insights into the likely path ahead.

EU // Privacy Shield / "Schrems" Decision

Following the July decision of the Court of Justice of the EU (CJEU) which annulled the EU-US Privacy Shield but validated standard contractual clauses ("Schrems Decision"), the European Data Protection Board (EDPB) has published a frequently asked questions document to explain the practical effects of the Court's decision. The EDPB is currently analysing the judgment to determine the kind of supplementary measures that could be provided in addition to Standard Contractual Clauses (SCCs) or Binding Corporate Rules (BCRs), "whether legal, technical or organisational measures", to transfer data to third countries where SCCs or BCRs will not provide the sufficient level of guarantees on their own.

UK // The use of algorithmic decision-making by public bodies is in the spotlight in the UK following public exams debacle

Students sitting public examinations in the U.K. did not sit exams this year because schools were closed following the coronavirus lockdown. Instead, A-level students were given grades by the official exam regulator, Ofqual. Teachers provided an estimated grade and ranked individual students against every other pupil at their school within the same estimated grade. Ofqual then ran the data through an algorithm, which factored in the school's performance in previous years. The algorithm reduced nearly 40% of students' grades compared with their teachers' estimates and was found to have disproportionately reduced the grades of students from underprivileged backgrounds.

After public outcry and substantial media attention, the government abandoned the algorithm and decided to award A-level and GCSE students their teacher-recommended grades. 

The significant U-turn has led to the resignation of the top civil servant at the Department for Education, Jonathan Slater, and Sally Collier, the Ofqual head. Meanwhile, the Cabinet minister in charge of education, Gavin Williamson, remains in post.

Similarly, the Home Office has announced that it will discontinue the use of another controversial algorithm, a streaming tool used since 2015 to assess visa applications. The decision follows a judicial review of the system brought by the Joint Council for the Welfare of Immigrants and digital rights group Foxglove.  In their legal submissions, the campaign groups argued that the technology is racially biased.

The deadline for responses to the UK Digital Taskforce's call for information closed at the end of July. The Taskforce, headed by Jason Furman, has been set up to build on the findings of the CMA's online platforms and digital advertising market study and advise the government on how a new regulatory regime for digital markets should be designed. It will deliver its advice to government by the end of 2020.

The deadline for Ofcom's Call for Evidence on Video-sharing platform regulation is on 24 September 2020.

Middle East

AI and AI ethics remain key priorities under the Kingdom of Saudi Arabia's G20 Presidency, and the subject of a recent convention in Dubai

The Kingdom of Saudi Arabia's 2020 G20 Presidency continues, and July saw the Digital Economy Ministers' Meeting, where ministers from the G20 countries met to discuss how emerging digital technologies might be harnessed to realise 21st century opportunities. Discussions focussed on how to address issues of anti-competitive practices, digital divides, SME market access, consumer trust, and privacy. The subsequent Ministerial Direction outlines give key future priorities for collaboration between the G20 members: developing trustworthy AI; "data free flow with trust and cross-border data flows"; smart cities; measurement of the digital economy; and security in the digital economy.

The Artificial Intelligence Ethics Advisory Board (an initiative by Smart Dubai) has recently convened for its second meeting of 2020, bringing together board members representing leading government and private-sector entities to explore plans for the upcoming period. The Board was formed to steer the development and deployment of human-centred ethical AI, and to encourage fairness, transparency, and accountability in AI systems in Dubai. The meeting was split into three main portions, the first of which was dedicated to exploring the results of the 'Request for Information' that Smart Dubai had conducted under the theme 'Practical, Ethical AI for Business and Societal Impact'. The second segment concerned AI Audit Practices, where a representative from PwC showcased AI audit practices, sharing views on how conducting review processes while developing AI powered products and services can inform the development of a regulatory framework for AI in Dubai. The meeting concluded with a segment covering cybersecurity.