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Welcome to The Corner. In this issue, we explore how Big Tech giants like Facebook are reacting to a proposed law in California that would require platforms to pay news publishers a fee for using their content in a bid to revive decimated newsrooms in the state.

Big Tech Targets Democracy in California in Widening War Against News Bargaining Codes

Karina Montoya

Last week, the California State Assembly passed AB 886, the California Journalism Preservation Act (CJPA), a bill that would require Big Tech platforms — primarily Google, Facebook, and Microsoft — to pay news publishers a fee for using their content. Increasingly, platforms have shifted the design of their content display in ways that allow users to read most of the news without clicking on links, which drives more ad revenues to the platforms but not the news outlets.

As a response, Facebook is threatening to pull all news links from its Facebook and Instagram platforms in California. Google hasn’t reacted to CJPA yet, but based on its response to similar dealings in other countries, it’s reasonable to expect that it will follow suit. This makes the first time a Big Tech platform has threatened U.S. citizens, and demonstrates how Big Tech is willing to go to maintain its dominance, even if it involves suppressing fundamental liberties to share news and information.

The California bill requires large platforms to pay a usage fee directly to news publishers for featuring their news content. Unlike what some media have reported, the state of California will not collect the fees, according to the Office of Assemblymember Buffy Wicks, the bill sponsor. To determine such fee, CJPA mandates a binding arbitration between the platforms and digital newsrooms. There will be specific arbitration periods where platforms will negotiate with all newsrooms that give notice of their right to receive compensation.

Facebook and Google’s responses to these regulatory efforts in countries around the world have created chaos for news publishers and the public. Australia is a particularly serious case. When the Australian government was about to approve its News Media Bargaining Code [[link removed]] in December 2020, Facebook pulled news from its social-network feeds in the country to pressure lawmakers into loosening the effects of the legislation.

The harm went beyond news, as Facebook ended up blocking all sorts of Australian websites, including hospitals and emergency services. Although Facebook characterized it merely as a “mistake,” whistleblowers who spoke to the Wall Street Journal showed [[link removed]] that it was a deliberate tactic to wreak havoc in the country. The ban was lifted after the Australian government amended the code [[link removed]] to make the arbitration process mandatory only if Big Tech failed to cut deals directly with news outlets.

Google initially took a similar tact in Australia, and threatened to block use of its search engine in the country. It soon shifted course, however, and moved to strike secret deals with the largest media companies in Australia, in anticipation of the modified News Media Bargaining Code that would allowed it to do so. During that same period, Google also ran [[link removed]] [[link removed]] “an [[link removed]] experiment” [[link removed]] to remove local news sites from search results in Australia. The corporation defended the “experiment” arguing that people would still be able to access news stories in the Google News tab.

Canada, which is in the process of passing its own news bargaining law called Bill C-18 [[link removed]], or the Online News Act, is now being subjected to the same scare tactics. In February, Google started limiting access [[link removed]] to news results in its search engine in that country. This month, just as in California, Facebook also announced it would block news [[link removed]] on both Facebook and Instagram in Canada if Bill C-18 is passed.

There are key difference between CJPA and the Australian and Canadian approaches. CJPA, for instance, does not require an individual negotiation between digital platforms and news outlets prior to entering arbitration. Also, it explicitly allows the platforms to enforce their content moderation policies — a concern for some organizations opposing the bill. Additionally, the bill requires news outlets to use 70 percent of the funds in employing journalists and to generate public reports on how the funds are spent.

“Big Tech is waking up to the reality that governments can indeed govern digital platforms,” said Keldon Bester, co-founder of the Canadian Anti-Monopoly Project. Thus far, however, it’s not clear that any of this first-generation of efforts is the most effective way to protect journalists and citizens — especially as they do not address the ability of the two platforms to simply cut off access to the news.

But for the moment, such details appear to be irrelevant for Big Tech. As Bester notes, “it doesn’t matter if it’s the best legislation or not, Big Tech will fight against it if it doesn’t fit their interests.”

U.S. Trade Rep Tai to Speak on Biden Trade Policy, at Open Markets Event in DC

Open Markets Institute will host a half-day event [[link removed]], “The Next World System: Can US Trade Policy Make Us More Secure?” on Thursday, June 15. U.S. Trade Representative Katherine Tai will headline the event, sharing President Biden’s new vision of trade, which aims to reinvigorate U.S. manufacturing and technological innovation, defend American workers and small businesses, and ensure the security and resiliency of supply chains. Other participants include Tim Wu, the former White House Special Assistant to the President for Technology and Competition Policy, FT Columnist and author Rana Foroohar, former OIRA director Sabeel Rahman, and AFL-CIO International Director Catherine Feingold. Get tickets to attend in-person or virtually here [[link removed]].

📝 WHAT WE'VE BEEN UP TO: Open Markets executive Director Barry Lynn released a statement [[link removed]] on Facebook’s threat to cut off access to news in its feeds for users in California in retribution for the legislature passing the California Journalism Preservation Act [[link removed]], which would force platforms to redistribute profits they get from news distribution to support newsrooms throughout the state. Lynn said, “This action proves the corporation poses a direct and immediate danger to American democracy, and demands an immediate response by the U.S. government.”

Open Markets led a joint letter [[link removed]] to the European Commission, spearheaded by OMI Europe director Max von Thun, on the critical role third parties play in enforcing the Europe’s Digital Markets Act (DMA). Despite the DMA formally moving into its implementation phase last month, little remains known about the role of third parties, such as consumers, civil society, and SMEs, in this process. The joint letter, signed by 15 organizations, calls on the Commission to provide urgent clarity on their role in order to avoid a closed-door dialogue between the EU and Big Tech.

OMI Europe director Max von Thun also wrote an opinion piece in Euractiv [[link removed]] calling on the European Commission to clarify the role of third parties in helping to enforce the DMA in its signature bill regulating Big Tech. “Absent substantial support and engagement from third parties, the DMA risks failing to live up to its considerable promise,” von Thun writes. “Measures to tackle anti-competitive practices tend to be unsuccessful when not designed with input from those they are supposed to benefit.”

Open Markets’ senior fellow Johnny Ryan published an op-ed in The Economist [[link removed]]criticizing the European Union for weak enforcement of the General Data Protection Regulation (GDPR), designed to rein in Big Tech’s harmful privacy practices, five years after it was passed. “Europe remains unable to police big tech’s use of people’s data, despite an enforcement budget of more than €330m ($355m),” Ryan writes. “This is enforcement without tooth or claw.” Ad Exchanger [[link removed]]and Digiday [[link removed]] cited the Economist opinion by Ryan, who is also a senior fellow at Irish Civil Liberties Council.

Ryan was also quoted in OWP [[link removed]], ModernGhana, [[link removed]]and Tech Policy Press [[link removed]] discussing the EU’s $1.3 billion fine levied against Meta for transferring data of European users to the U.S. “If the company has to scrub data for hundreds of millions of European Union users going back 10 years, it is very hard to see how it will be able to comply with that order [within the E.U.’s deadline].”

Open Markets Institute’s chief economist Brian Callaci was quoted in The American Prospect [[link removed]]on the novel antitrust challenge filed by a union against the University of Pittsburgh Medical Center alleging the hospital system is a monopsony that constrains labor markets. Callaci said, “Labor groups are learning what antitrust can do and regulatory agencies are learning about how labor groups view the problem of market power.”

OMI Europe director Max von Thun was quoted by International Financial Law Review [[link removed]] commenting on the U.K.’s new Digital Markets, Competition and Consumers bill. “The most significant part of the bill is the new standalone regulatory regime it creates for big tech," von Thun said. "This will enable the CMA to impose 'conduct requirements' on dominant platforms to stamp out anti-competitive practices, and use pro-competition interventions to make digital markets more competitive,” efforts to tackle tech giants.”

TNR [[link removed]] cited statistics [[link removed]] from Open Markets Institute to bolster its argument that stricter antitrust enforcement will improve conditions for workers.

Santa Fe News [[link removed]] listed Open Markets along with other groups that have opposed the mega merger in the grocery space between Kroger and Albertsons.

🔊 ANTI-MONOPOLY RISING:

Texas won its bid to move its antitrust lawsuit against Google from a federal court in New York back to one in the state. The lawsuit accuses Google of violating the law by dominating the digital advertising market. The tech giant faces a similar antitrust suit by the Department of Justice. ( Reuters [[link removed]])

Meta lost a legal case accusing EU regulators of overstepping its authority when they demanded the company submit a trove of sensitive data as part of an investigation into the social-network giant’s practices. The EU General Court ruled that Meta, which says it has handed over more than a million documents, failed to prove that the request “went beyond what was necessary.” ( Bloomberg [[link removed]])

Indivior, which makes the opioid addiction treatment drug Suboxone, has agreed to pay $102 million to 41 states and the District of Columbia to avoid going to trial over claims the company engaged in anticompetitive practices, such as keeping cheaper generics off the market through patent manipulation. ( NPR [[link removed]])

As a result of an antitrust order from the German Federal Cartel Office, Meta will be forced to offer its users a choice over whether to combine data across its different platforms or not, marking the first time the social-network giant has offered freedom of choice over its cross-site tracking and profiling of users. ( TechCrunch [[link removed]])

Luxembourg’s competition authority is conducting a first-of-its-kind study of anti-competitive practices among players in the Web3 blockchain technology space. Officials said they would like to ensure that the Web3 space develops in a way that is competitive, particularly given the strong potential of the sector. ( CoinDesk [[link removed]])

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE [[link removed]] 📈 VITAL STAT: $500 Million

The amount Ford alleged it overspent on insurance for its employees between 2009 and 2013 due to a price-fixing conspiracy by Blue Cross Blue Shield. The auto manufacturer has filed a suit in a district court in Detroit. ( Detroit Free Press [[link removed]])

📚 WHAT WE'RE READING:

“ [[link removed]] Breakthrough Supply Chains.” [[link removed]] ( McGraw Hill, Christopher Gopal et al.): Written by four leading experts in supply chain management, the book describes how supply chains should ideally work in a resilient and sustainable world.

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Written and edited by: Barry Lynn, Max von Thun, Ezmeralda Makhamreh, Karina Montoya, and Anita Jain.

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