Facebook and Google face another costly battle

EU’s view is that free social media is not a public good if its business model hoovers up user data without consent.

For many people, it probably sounds a little rich to hear the European Union (EU) accuse Silicon Valley of being a graveyard of innovation. But that’s where we are in 2019. Regulators are hitting the likes of Alphabet Inc.’s Google and Facebook Inc. with a flurry of antitrust fines and data-privacy probes, implying that they regard tech billionaires as more John D. Rockefeller than Nikola Tesla.

The endgame, according to Brussels’ top data watchdog, is to make sure new startups aren’t blown out of the water by Big Tech (or gobbled up), which should ultimately benefit consumers by allowing them more choice.

Tackling this so-called “kill zone,” where fledgling tech companies are acquired or copied out of existence by deep-pocketed incumbents, is a prime ambition for European Data Protection Supervisor Giovanni Buttarelli, nicknamed “Mr GDPR” after the data-privacy law. When I met him in Brussels recently, Buttarelli checked off the barriers to entry for a startup: It needs to first outbid the likes of Amazon.com Inc., Facebook and others for engineering talent; then sell its product through an app store probably run by Google or Apple Inc.; and finally compete against big players with established networks and huge cash piles. And even it clears all these hurdles, it’s still vulnerable to being taken out.

There’s a connection between this dominance of Big Tech – which is proven by the decline in venture-capital financing for upstarts, as my colleague Noah Smith has written – and harm to consumers. The EU view is that the “free” price tag of social media and apps is not a public good if it’s underpinned by a business model that hoovers up data from users without consent. And if the profits from that are spent on blocking competition, there’s less chance of a market-based alternative. Google and Facebook rebut this view, insisting that a disruptive rival could unseat them anytime. But regulators have given up waiting for one.

The recipe for fixing things, according to Buttarelli, is threefold. He wants more competition through antitrust enforcement, more data protection through GDPR, and more fairness and transparency for customers from the tech giants themselves.

None of this would destroy Facebook or Google. GDPR is estimated to have inflicted a negative impact of 2 to 3 percent on the two companies’ total ad revenues, according to Bank of America analyst Justin Post. The running total of EU antitrust fines against Google is about 6.7 billion euros ($7.5 billion), while the company’s yearly sales are more than $100 billion. Still, Eric Leandri, co-founder of French search engine Qwant, says he’s confident that recent fines against Google on competition and data-privacy grounds – which the US firm is appealing – will have had a chilling impact.

Defenders of the Silicon Valley faith will grumble about mission creep in Brussels. It’s certainly true that regulators need to be careful not to muddy the waters with inconsistent or unclear regulation. The recent German competition ruling against Facebook uses data privacy as its main argument, but without a prior ruling on GDPR infringement. That’s a potential problem because it’s hard to separate the need to enforce user privacy with the need to safeguard competition. Indeed, both things might be in conflict one day, says Ariel Ezrachi, a competition specialist at Oxford University. Imagine the right to keep your data private under one law alongside the need to share your data in a competitive market under another.

Another thing not covered in Buttarelli’s plan is where investment comes from. It was no surprise when Sweden’s music-streaming giant Spotify Technology SA decided to list its shares on the New York Stock Exchange last year. If Europe fails to unify its fragmented capital markets, especially after Brexit, the fruits of Buttarelli’s labour will end up in America regardless.

Source: Hindustan Times, 20/02/2019

India will lead the way in reining in social media misinformation

Whether through suo moto action by companies or executive action, India is setting the tone of discourse on the issue

is founder of Siana Capital, a venture fund management company focused on deep science and tech in India

The news last week was focused on a parliamentary panel in India summoning Jack Dorsey, CEO of Twitter, to appear before it by this month’s end. Twitter claimed an earlier summons was issued with insufficient notice. However, now two weeks should be enough time for Dorsey to juggle his schedule.

It appears that there was broad consensus within the parliamentary panel, with the ruling Bharatiya Janata Party and the main opposition party Congress closing ranks. The heart of the issue is whether social media organizations such as Twitter can choose to either throttle or promote specific content on their apps. The ability to do so would place these organizations on par with media houses that are involved in news promotion. Without this ability, they can claim to be solely platforms for social interaction and little else, with no responsibility for content. If, however, they are media houses, the rules of the game change significantly and they can be held accountable for the content their sites carry. With general elections around the corner, this issue takes on further importance.

This debate is not new, nor is it confined to India. Firms such as Facebook and Google have been subjected to scrutiny in the US, with their top brass being summoned by the US legislatures for hearings about their role in the spread of misinformation during the 2016 US presidential elections.

They have also been scrutinised in another realm: the use of personal data. Google has, just a couple of weeks ago, been fined $57 million by France’s data protection watchdog, known as the CNIL. While the amount may seem small in comparison to the multibillion-dollar fines levied on it in the past for alleged antitrust (monopoly) behaviour, this fine is the largest yet after Europe came out with its revised General Data Protection Regulation last year. The fine was levied for the lack of user consent for targeted advertising. CNIL has said that Google failed to fully disclose to users how their personal information is collected and what happens to it after its collection. CNIL found that Google also did not properly obtain users’ consent for the purpose of showing them personalized ads.

Since Europe has taken the lead in privacy regulation, it appears that the rest of the world will follow, with localized legislation to achieve more or less the same effect. As targeted advertising is at the heart of the business model for firms such as Facebook and Google, Europe is setting a precedent to the reining in of Big Tech’s suspected misuse of private data.

While Europe may be the leader with respect to data privacy, it appears that India will lead the way for the rest of the world with respect to checking the spread of misinformation on social interaction platforms (or indeed, media houses, as the case may be). India’s action last year to rein in the spread of “viral” videos and other content on WhatsApp, a messaging platform owned by Facebook, led WhatsApp to make significant changes in the way users could spread information on the app. WhatsApp CEO Chris Daniels made the trek to India last year to meet Ravi Shankar Prasad, the minister for information technology.

In a blog post dated 19 July 2018, WhatsApp announced that it was launching a test to limit forwarding that will apply to everyone using the app. For the rest of the world, that limit on forwarding was set to 20, but according to the blog, “In India— where people forward more messages, photos, and videos than any other country in the world, we’ll also test a lower limit of 5 chats at once and we’ll remove the quick forward button next to media messages.”

In a small footnote to the same blog on 21 January this year—approximately four weeks ago— WhatsApp announced that it had “carefully evaluated” its test and listened to user feedback, and found that the forwarding limit had significantly reduced forwarded messages around the globe. The test has apparently been so successful that starting 21 January, the India-based limit of five forwards has been applied to all WhatsApp users across the globe.

WhatsApp said that it feels that limiting forwarding to only five chats at once will help keep it “focused on private messaging with close contacts”. It claims to be going back to its roots as a private messaging app, a simple, secure and reliable way to communicate with friends and family. Its India experience set the tone for this worldwide action.

Meanwhile, during the current fracas with Twitter, it has become apparent that the firm does not have empowered executives in India who can represent the firm’s policies and procedures to the Indian parliamentary panel. I have little doubt that we will soon see the Twitter CEO in India, considering that Twitter users here represent at least 10% of its user base. In addition, it is likely that Twitter, like WhatsApp before it, will appoint a head for its Indian operation, with sufficient empowerment to deal with the parliamentary panel’s demands and, more importantly, a seat at the top table at Twitter’s headquarters in the US.

Like Europe did with personal data, India will lead the way in reining in social media misinformation, whether through forced suo moto action by these companies or through executive action.

Source: Mintepaper, 19/02/2019 (14-15)