Category: reason

With fresh faces in the White House and Congress, many Trump-era political agendas will soon be discarded. But the desire to use antitrust law against popular tech companies isn’t likely to go anywhere. In recent months, Republicans and Democrats have both been itching to flex their regulatory muscle against the likes of Google, Facebook, Apple, and Amazon.

In October, 11 state attorneys general—all Republicans—and the Department of Justice filed a civil suit against Google, accusing the internet search giant of maintaining a digital search and ad monopoly “through anticompetitive and exclusionary practices,” in violation of the Sherman Antitrust Act. But the lawsuit fails to explain either how Google’s practices amount to anything other than normal business deals or how consumers are being harmed.

The bar for showing consumer harm “is unlikely to be met,” said Jessica Melugin, associate director of Center for Technology and Innovation at the Competitive Enterprise Institute, in a statement about the lawsuit. That’s “why so many antitrust enthusiasts are calling for a fundamental rewriting and expansion of U.S. antitrust laws. Those proposed changes sacrifice the primacy of consumer welfare and insert competitors and broader socio-economic goals in its place.”

This impetus was on full display in a fall report from the House Subcommittee on Antitrust, Commercial, and Administrative Law. After a 16-month investigation into the big four tech companies, it seems the most that congressional busybodies can accuse them of is routine business practices and having popular services. But while the 450-page report, issued in October, offers scant evidence of these companies violating current federal law, it’s full of calls to change the law so tech company actions will fall under federal purview.

The subcommittee’s bipartisan “Investigation of Competition in Digital Markets” included seven additional hearings, hundreds of interviews, and nearly 1.3 million obtained “documents and communications.” For all that work, the members found little that’s not already public knowledge and even less to suggest these companies acted in an illegal way.

The report repeatedly accuses Amazon, Apple, Facebook, and Google of having “monopolies” in various facets of digital life. But it uses this term to mean not having exclusive domain over a product or service but merely enjoying large market shares thanks to consumers choosing to use them.

For instance, the report faults “the strong network effects associated with Facebook” for tipping “the market toward monopoly.” Network effects refers to the fact that the more people who are on a particular platform, the more value it holds for users—a phenomenon driven by individual choices and calculations, not anti-competitive action or a lack of alternatives. (Also notable: Facebook’s share of social media traffic has actually been declining for a few years.)

The subcommittee faults Google because “a significant number of entities…depend on Google for traffic”—as if Google is doing something wrong by building a search engine that millions of people choose to use, thereby making it a significant traffic source for sites across the web.

The report faults Amazon for things like having “significant and durable market power in the U.S. online retail market” and preferentially listing its own brands in search results among products from millions of third-party sellers. It faults Apple for pre-installing its own apps on iPhones and iPads and for running an app store that gives users access to outside apps, suggesting that this is “controlling access to more than 100 million iPhones and iPads.”

It’s one of the report’s many misrepresentations about how technologies work and whom they benefit. Without an app store, consumers would have to tediously trawl the web for each new app they wanted to access—almost ensuring that now-dominant names would become even more dominant. New or small offerings now discoverable through the centralized app marketplace would be far less visible or would have to spend far much more on marketing. The app store may benefit Apple, but it also benefits Apple customers and independent app developers.

“Last year in the United States alone, the App Store facilitated $138 billion in commerce with over 85 percent of that amount accruing solely to third-party developers,” Apple said in a statement, pointing out that the company “does not have a dominant market share in any category” where it does business.

Google accused the report of being out of touch with what consumers want while containing “outdated and inaccurate allegations from commercial rivals about Search and other services.”

Amazon also objected to the subcommittee’s “regulatory spit-balling on antitrust,” writing in a blog post that “large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong.”

Calling Apple, Amazon, Facebook, and Google monopolies only works if we’re departing from traditional definitions of the word and its historical meaning in antitrust law. The report calls this redefinition a modernization.

“Congress must lead the path forward to modernize [antitrust laws] for the economy of today,” wrote subcommittee chair David Cicilline (D–R.I.) in the report’s introduction, which also spells out Congress’ intention to more aggressively enforce those laws. “These firms have too much power, and power must be reined in,” wrote Cicilline.

The report recommends a wide swath of changes, including prohibiting “dominant platforms from operating in adjacent lines of business” and creating new presumptions against tech acquisitions. At the progressive magazine The American Prospect, David Dayen suggested gleefully that subcommittee members are “using tech as simply a case study on what an invigorated legislative body can do to rein in the corporate power of any type.”

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Police in Gatineau, Quebec, Canada, raided a small New Year’s Eve party held in violation of the province’s coronavirus restrictions, fining the six adults at the party $1,546 ($1,214 U.S.) each. One man was arrested on charges of assaulting an officer and resisting arrest. One woman was arrested for not providing ID. She was released after complying with the order but police say she may still face charges.

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I wrote about this case last year, shortly after the Second Circuit panel decision (which was titled U.S. v. Blaszczak) concluding by a 2-1 vote that a federal agency “has a ‘property right in keeping confidential and making exclusive use’ of its nonpublic predecisional information.” Because of this, the panel held that a federal employee’s leak of the information—and the receipt of that information by someone cooperating with the employee—could be felony wire fraud and conversion of government property.

In Blaszczak, the people dealing with the employee were using this information to trade stocks, and some of the securities charges on which they were convicted were focused on that. But the wire fraud and conversion charges did not require a showing of such illegal trading—the parties were convicted for the “theft” of government information quite apart from how the information is used.

Say then that investigative journalists have a relationship with a federal government employee, and cooperate with the employee to get a leak of confidential government “predecisional information” about the government’s planned policy changes. Under the panel’s theory, they too would be guilty of felony conversion of federal property and wire fraud.

Indeed, even if they just get the leak out of the blue, they would likely still be guilty of felony conversion, so long as they knew the leak was of confidential information. In such a situation, they would have “knowingly convert[ed] to [their] use … any … thing of value of the United States,” or “receive[d] … or retain[ed] [such a thing of value] with intent to convert it to [their] use or gain, knowing it to have been embezzled, stolen, purloined or converted.” Participation in the leak itself isn’t required; knowing use of the leaked information suffices. (If the “property” could somehow be valued at under $1000, such behavior would be just a misdemeanor, but I assume that under the federal-predecisional-information-as-property theory that the panel majority adopted, most leaked information would be valued at more than that.)

Nor would journalists have an obvious First Amendment defense that others don’t possess. As I’ve canvassed in my Freedom of the Press as an Industry, or for the Press as a Technology? From the Framing to Today article, the First Amendment generally doesn’t give institutional media more protection than other speakers.

Even if a court could distinguish use of government property for public speech purposes (whether by the media or other speakers) from such use for private purposes, the statutes on which the panel relies draw no such distinction. And the panel’s reasoning as to property draws no such distinction, either: If the predecisional information is federal government property, and using that information for one purpose (selling stocks) is conversion of that property, then using that information for another purpose (selling newspapers) would be as well. Certainly journalists (or independent bloggers or other commentators) have no assurance that they would escape criminal liability under the panel’s theory.

There have been procedural developments since then (there usually are). Several months after the panel decision, the Supreme Court adopted a narrower reading of “property” in Kelly v. U.S.—the Bridgegate case—than some lower courts had done. The defendants in Blaszcak then petitioned the Court for certiorari. (The lead case is now styled Olan v. U.S.). And the government didn’t file a substantive argument about the certworthiness of the case, but instead asked the Court to send the case back down to the Second Circuit:

Petitioners contend that their convictions … are infirm because a federal agency’s predecisional, confidential information about a regulation does not constitute “property” under the federal fraud statutes or a “thing of value” under the federal conversion statute. After the court of appeals issued its decision in this case and denied rehearing, this Court decided Kelly v. U.S., which held that “a scheme to alter … a regulatory choice is not one to appropriate the government’s property.” …

A remand … would allow the court of appeals to consider the issue …. Accordingly, the appropriate course is to grant the petitions for writs of certiorari, vacate the decision below, and remand the case for further consideration in light of Kelly.

I’m pleased to see that the Second Circuit decision will at least likely be reconsidered, though it seems to me to make sense for the Court to be the one doing the reconsidering. The issue strikes me as being of huge First Amendment significance, and likely of even greater securities law significance (though as to the latter I’m not an expert).

Here, by the way, is a passage from the National Association of Criminal Defense Lawyers amicus brief in the Second Circuit phase of the case that puts the substantive issue well:

Consider a government employee, believing the government is about to enact a misguided policy, who makes an interstate telephone call to a journalist and relays “confidential” information about the planned policy. Assume the employee does so in the hope that the journalist’s newspaper will publish the article, that the publication will lead to public pressure, and that the pressure will lead the government to reverse its misguided decision. Further, assume the information will help the newspaper increase its circulation. On the prosecution’s theory in this case, the employee, the journalist, and the newspaper would be well advised to consult with counsel before proceeding, for this conduct would satisfy each element of the fraud and theft offenses for which the defendants were convicted.

It would violate Section 641, as charged in this case, because on the prosecution’s theory all “confidential” information is the government’s property, the information was disclosed without permission, the disclosure was intended to deny the government the “use and benefit” of the property in precisely the manner identified by the prosecution here—undermining the government’s ability to implement a chosen policy—and the information was worth more than $1,000 to the ultimate recipient, the newspaper.

On the prosecution’s theory, this conduct would also violate the fraud statutes, for similar reasons: It would constitute a scheme to deprive the government of what the prosecution contends is government “property”—that is, the information about regulatory plans—and to convert that property to one’s own use (that is, to run a profitable newspaper story).

The prosecution may protest that it would never bring such a case. But the vibrant public discourse guaranteed by the First Amendment requires greater protection than a prosecutor’s indulgence. See McDonnell, 136 S. Ct. at 2372-2373 (“[W]e cannot construe a criminal statute on the assumption that the Government will ‘use it responsibly.'” (quoting United States v. Stevens, 559 U.S. 460, 480 (2010))). When, as here, “the most sweeping reading of [a] statute would fundamentally upset” constitutional constraints on federal prosecution, it “gives … serious reason to doubt the Government’s expansive reading … and calls for [courts] to interpret the statute more narrowly.” Bond v. United States, 572 U.S. 844, 866 (2014).

Of course, information is sometimes treated as property, and indeed business confidential information has been so treated in related areas (as in Carpenter v. U.S. (1987)); that too raises potential First Amendment problems for business journalists whose articles are often based on leaks from within a company.

But the First Amendment concerns become even greater when the information has to do with the inner workings of the government, and not just of a private business. And the case for treating the information as property becomes weaker; to quote again the NACDL brief,

To be sure, the Supreme Court in Carpenter, on which the government relied heavily below, affirmed a fraud conviction based on a scheme to steal and trade on “confidential business information.” But it was critical in Carpenter that the scheme involved a very particular business—the Wall Street Journal—and a very particular kind of information—the planned content of future columns. The Journal obviously held much more than a “regulatory” interest in its forthcoming columns. These columns were, in the Carpenter Court’s words, the Journal’s “stock in trade.” It requires no great leap of logic to find that a newspaper has a property interest in the only thing it sells—the particular stories it plans to print—and that misappropriating such valuable, confidential information is a form of fraud.

Here, by contrast, the information about future regulatory actions is not something the government ever sells, much less its entire stock in trade. And the government can identify only hypothetical regulatory injury from disclosure of the information, unlike the obvious commercial loss at issue in Carpenter....

 

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Episode 343 of the Cyberlaw Podcast is a long meditation on the ways in which technology is encouraging other nations to exercise soft power inside the United States. I interview Nina Jankowicz,, author of How to Lose the Information War on how Russian disinformation has affected Poland, Ukraine, and the rest of Eastern Europe – and the lessons, if any, those countries can offer a divided United States.

In the news, Bruce Schneier and I dig for more lessons in the rubble left behind by the SolarWinds hack. Nobody comes out looking good. Persistent engagement and defending forward only work if you’re actually, you know, engaged and defending, and Russia’s cyberspies managed (not surprisingly) to hide their campaign from NSA and Cyber Command. More and better defense is another answer (not that it worked during the last 40 years it’s been tried). But whatever solution we pursue, Bruce makes clear, it’s going to be expensive.

Taking a quick break from geopolitics, Michael Weiner gives us a rundown on the new charges and details (mostly redacted) in the Texas case against Google for monopolization and conspiring with competitor Facebook. The scariest thing about the case from Google’s point of view, though, may be where it’s been filed. Not Washington but the Eastern District of Texas, the most notoriously pro-plaintiff, anti-corporate jurisdiction in the country.

Returning to ways in which foreign governments are using our technology against us, David Kris tells the story of the Zoom executive who used pretextual violations of terms of service to take down speech the Chinese government didn’t like, censoring American efforts to hold a Tiananmen memorial. The good news: he was charged criminally by the Justice Department. The bad news: I can’t help suspecting that China learned this trick from the ideologues of Silicon Valley.

Aaand, right on cue, it turns out that China’s been accused of using its 50-cent army to file complaints of racism and video game violence against Americans using the platform to criticize China’s government, a tactic the target claims is getting YouTube to demonetize his videos.

Next, Bruce points us toward a deep and troubling series of Zach Dorfman articles about how effectively China is using technology to vault over US intelligence agencies in the global spying competition.

Finally, in quick succession:

• David Kris explains what’s new and what’s not in Israel’s view of international law and cyberconflict.
• I note that President Trump’s NDAA veto has been overridden, making the cyberczar and DHS’s CISA the biggest winners in the cyber policy arena.
• Bruce and I give a lick and a promise to the FinCen proposed rule regulating cryptocurrency. We’re both inclined to think more reregulation is worth pursuing, but we agree it’s too late for this administration to get anything on the books.
• David Kris notes that Twitter has been fined around $550 thousand over a data breach filing that was a few days late – a fine imposed by the Irish data protection office in a GDPR ruling that is a few years late.
• Apple has lost its bullying copyright battle against security start-up Corellium but the real risk to Corellium may be in the as-yet unresolved claim for violation of the DMCA.
• And the outgoing leadership of DHS is issuing new warnings about the cyber risks of using Chinese technology, this time touching on backdoors in TCL smart TVs and the risk of compromise from Chinese data services.

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New York Gov. Andrew Cuomo has given hospitals a conundrum. Fail to use all of your COVID-19 vaccines within seven days of receipt? That’ll be a $100,000 fine. Vaccinate someone out of the state-designated order? That’ll be a $1 million fine.

Damned if you let your vaccines expire, damned if you don’t let your vaccines expire—by using them on anyone outside of the approved hierarchy.

The state’s distribution plan mandated that a slew of people receive the vaccine before the elderly, including health care workers, patient-facing employees at long-term care facilities, first responders, teachers, public health workers, grocery store workers, pharmacists, transit employees, those who uphold “critical infrastructure,” and individuals with significant co-morbidities. Such a plan is common across the U.S., and it requires a robust logistical framework to execute properly.

That hasn’t been going so well.

“States have held back doses to be given out to their nursing homes and other long-term-care facilities, an effort that is just gearing up and expected to take several months,” reports The New York Times. “Across the country, just 8 percent of the doses distributed for use in these facilities have been administered, with two million yet to be given.”

In New York, most individuals over 65 were not eligible to receive the vaccine until recently—when the state graduated to Phase Three of its plan—which partially explains the sluggish rollout. That prioritization, or lack thereof, inspired backlash from politicians and armchair pundits alike, many of whom argued that the elderly should have been first in line to receive the vaccine.

But the state is still struggling to increase the speed at which it administers the shots. Right now, New York’s hospitals have gone through less than half of the doses shipped to them.

That’s a problem. Both the Moderna and Pfizer vaccines can last for several months when frozen but must be thawed before use. And at that point, they have a very limited shelf life.

Of the nearly 900,000 vaccinations sent to New York, only about 275,000 people have received the first dose, or 30 percent. Some states lag even farther behind: North Carolina clocks in at around 26 percent, California at 24 percent, Florida at 23 percent. Kansas is at 15 percent.

But New York leads the way in filling the process with fear and red tape. In Washington, D.C., by contrast, the Department of Health is reportedly encouraging health care providers to administer surplus vaccines nearing expiration to any willing recipient. David MacMillan documented such an experience on TikTok after a pharmacist approached him randomly in a D.C. Giant supermarket with an offer to get the Moderna vaccine.

A similar approach is popular in Israel, which has vaccinated 12 percent of its population with the first dose—the U.S. is at 1 percent—and has moved so rapidly that it is running out of vaccines. They, too, allow the younger population to benefit from extra vaccines. More than 100,000 Israelis between the ages of 20 and 40 have been inoculated.

In MacMillan’s case, he lucked out when two people didn’t show up for their scheduled appointments—something that is bound to happen and is out of health care workers’ control. The pharmacist “turned to us and was like, ‘Hey, I’ve got two doses of the vaccine and I’m going to have to throw them away if I don’t give them to somebody,” MacMillan said on TikTok. “‘We close in 10 minutes. Do you want the Moderna vaccine?'” In D.C., that’s one more person who’s been vaccinated against COVID-19 and one tiny step closer to herd immunity.

Had that happened in New York, the pharmacist might be out of a job.

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