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Tag: FTC

  • FTC Commissioner Resigns, Pens Scathing Op-Ed About Lina Khan

    FTC Commissioner Resigns, Pens Scathing Op-Ed About Lina Khan

    FTC Commissioner Christine Wilson is resigning, penning a scathing op-ed in The Wall Street Journal condemning Chairwoman Lina Khan.

    Lina Khan was a controversial choice to lead the Federal Trade Commission, with some in the tech industry opposed to her appointment over her long-standing criticism of Big Tech. Since taking over the agency, Khan has increased regulatory scrutiny of tech companies.

    In her op-ed, Wilson argues the case that Khan has taken the FTC beyond the rule of law, and she can there no longer stand by and “enable her”:

    Much ink has been spilled about Lina Khan’s attempts to remake federal antitrust law as chairman of the Federal Trade Commission. Less has been said about her disregard for the rule of law and due process and the way senior FTC officials enable her. I have failed repeatedly to persuade Ms. Khan and her enablers to do the right thing, and I refuse to give their endeavor any further hint of legitimacy by remaining. Accordingly, I will soon resign as an FTC commissioner.

    Wilson accuses Khan and her allies of breaking with established law and “decades of bipartisan precedent” in the pursuit of their agenda:

    Since Ms. Khan’s confirmation in 2021, my staff and I have spent countless hours seeking to uncover her abuses of government power. That task has become increasingly difficult as she has consolidated power within the Office of the Chairman, breaking decades of bipartisan precedent and undermining the commission structure that Congress wrote into law. I have sought to provide transparency and facilitate accountability through speeches and statements, but I face constraints on the information I can disclose—many legitimate, but some manufactured by Ms. Khan and the Democratic majority to avoid embarrassment.

    Wilson also takes aim at Khan’s past criticism of Big Tech and argues that it disqualifies Khan from serving as an impartial judge in cases involving the companies she has railed against in the past.

    Consider the FTC’s challenge to Meta’s acquisition of Within, a virtual-reality gaming company. Before joining the FTC, Ms. Khan argued that Meta should be blocked from making any future acquisitions and wrote a report on the same issues as a congressional staffer. She would now sit as a purportedly impartial judge and decide whether Meta can acquire Within. Spurning due-process considerations and federal ethics obligations, my Democratic colleagues on the commission affirmed Ms. Khan’s decision not to recuse herself.

    Commissioner Wilson’s op-ed is a lengthy read, one in which she continues to detail her allegations of abuses of power on Khan’s part.

    Most interestingly, Wilson’s position is an increasingly rare one in US politics. Wilson is currently the only Republican FTC Commissioner. As such, she repeatedly calls out her Democratic colleagues at a time when cracking down on antitrust abuses is one of the few things that lawmakers and regultors on both sides of the aisle can agree on.

  • FTC Launches ‘Office of Technology’ to Tackle Big Tech

    FTC Launches ‘Office of Technology’ to Tackle Big Tech

    The Federal Trade Commission is stepping up its efforts to reign in Big Tech, launching a new Office of Technology.

    Big Tech has increasingly been in the crosshairs of politicians and regulators across the political spectrum. In the US, the FTC is one of the main agencies tasked with reigning in Big Tech, and it is forming a new office to help achieve that goal and keep up with the rapid changes that happen within the tech industry.

    The agency described the goal of the office in its press release:

    The Federal Trade Commission today launched a new Office of Technology that will strengthen the FTC’s ability to keep pace with technological challenges in the digital marketplace by supporting the agency’s law enforcement and policy work.

    “For more than a century, the FTC has worked to keep pace with new markets and ever-changing technologies by building internal expertise,” said Chair Lina M. Khan. “Our office of technology is a natural next step in ensuring we have the in-house skills needed to fully grasp evolving technologies and market trends as we continue to tackle unlawful business practices and protect Americans.”

    FTC CTO Stephanie T. Nguyen will head up the new office, which will have its own dedicated staff.

    “I’m honored to lead the FTC’s Office of Technology at this vital time to strengthen the agency’s technical expertise and meet the quickly evolving challenges of the digital economy,” said Nguyen. “I look forward to continuing to work with the agency’s talented staff and building our team of technologists.”

    The FTC says the new office will focus on three primary areas, including strengthening and supporting law enforcement investigations and actions; advising and engaging with staff and the Commission on policy and research initiatives; and highlighting market trends and emerging technologies that impact the FTC’s work.

  • FTC May Launch Antitrust Lawsuit Against Amazon

    FTC May Launch Antitrust Lawsuit Against Amazon

    The Federal Trade Commission is reportedly preparing an antitrust lawsuit against Amazon, the latest in regulators’ efforts to reign in Big Tech.

    Big Tech has been coming under increased scrutiny in recent years, with critics accusing companies of dominating their respective markets and unfairly using their size and influence to do so. FTC Chairwoman Lina Khan has been a vocal critic of Big Tech, and Amazon in particular, making a possible lawsuit against the company unsurprising.

    According to The Wall Street Journal, the FTC is looking at whether Amazon unfairly favors its own products and services, and whether it deals unfairly with third-party sellers. Regulators are also scrutinizing whether Amazon Prime unfairly bundles services to Amazon’s benefit.

    The Journal’s sources say it’s unclear whether the FTC will file a suit, and Amazon’s executives have not yet met with individual FTC commissioners to make their case. At this point, the FTC could decide either way on whether to pursue action.

  • FTC Wants to Eliminate Noncompete Agreements

    FTC Wants to Eliminate Noncompete Agreements

    The Federal Trade Commission has proposed a rule that would ban noncompete clauses in the US labor market.

    Noncompete clauses are a common part of many employment agreements, barring an individual from working for a competing company when their employment ends. The FTC believes that eliminating such agreements would add some $300 billion per year to workers’ earnings.

    “The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said Chair Lina M. Khan. “Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand. By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”

    At a time when tens of thousands of workers are being laid off, eliminating noncompete agreements would expand employment opportunities for 30 million Americans, many of them in the industries hardest hit by layoffs.

    “Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages—even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law,” said Elizabeth Wilkins, Director of the Office of Policy Planning. “The proposed rule would ensure that employers can’t exploit their outsized bargaining power to limit workers’ opportunities and stifle competition.”

    The new rule, which is open for public comment, would apply to employees, as well as “independent contractors and anyone who works for an employer, whether paid or unpaid. It would also require employers to rescind existing noncompetes and actively inform workers that they are no longer in effect.”

  • FTC Orders Mastercard to Stop ‘Illegal Business Tactics’

    FTC Orders Mastercard to Stop ‘Illegal Business Tactics’

    The Federal Trade Commission has ordered Mastercard to stop its ‘illegal business tactics’ in an effort to level the debit card payment field.

    Debit cards are increasing in popularity, but Mastercard has unfairly dominated the industry. The 2010 Dodd-Frank Act known includes a provision known as the Durbin Amendment. The Durbin Agreement “required banks to enable at least two unaffiliated networks on every debit card, thereby giving merchants a choice of which network to use for a given debit transaction.”

    According to the FTC, Mastercard flouted “the law by setting policies to block merchants from routing ecommerce transactions using Mastercard-branded debit cards saved in ewallets to alternative payment card networks, including networks that may charge lower fees than Mastercard.”

    As a result, the FTC is ordering Mastercard to provide competing networks with the customer data they need to be able to process debit card payments.

    “This is a victory for consumers and the merchants who rely on debit card payments to operate their businesses,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “Congress directed the FTC to enforce this part of the Dodd-Frank Act and prevent precisely this kind of illegal behavior. We take this responsibility seriously, as demonstrated by our action today.”

  • Epic Games Fined $520 Million Over Child Privacy Laws & Dark Patterns

    Epic Games Fined $520 Million Over Child Privacy Laws & Dark Patterns

    Epic Games, the creator of Fortnite, has been fined $520 million by the FTC for failing to comply with child privacy laws and employing “dark patterns.”

    According to the Federal Trade Commission, Epic violated the Children’s Online Privacy Protection Act (COPPA) by collecting massive amounts of data without parental consent. What’s more, the company made it needlessly difficult for parents to request that any data regarding their children be deleted. Because the company licensed and marketed various Fortnite-inspired toys and merchandise, the company could not say it didn’t know that many of its users were children.

    In addition, the FTC accused Epic of using so-called “dark patters” to trick children into unintentional purchases. As a result, the company was fined $275 million for the COPPA violations, and will pay another $245 million in refunds for dark pattern purchases. The company is also required to change Fortnite’s default settings to better protect children’s privacy.

    “As our complaints note, Epic used privacy-invasive default settings and deceptive interfaces that tricked Fortnite users, including teenagers and children,” said FTC Chair Lina M. Khan. “Protecting the public, and especially children, from online privacy invasions and dark patterns is a top priority for the Commission, and these enforcement actions make clear to businesses that the FTC is cracking down on these unlawful practices.”

    “The Justice Department takes very seriously its mission to protect consumers’ data privacy rights,” said Associate Attorney General Vanita Gupta. “This proposed order sends a message to all online providers that collecting children’s personal information without parental consent will not be tolerated.”

  • FTC ‘Likely’ to File Lawsuit to Block Microsoft’s Activision Deal

    FTC ‘Likely’ to File Lawsuit to Block Microsoft’s Activision Deal

    Microsoft may face its biggest challenge yet to its acquisition of Activision Blizzard, with a report saying the FTC is likely to file a lawsuit to block the deal.

    Microsoft announced a deal to purchase Activision for $68.7 billion in early 2022, one of the biggest tech acquisitions in history. The deal was met almost immediately with scrutiny, regulatory investigations, and challenges over concerns it would give Microsoft too much power in the gaming and PC market.

    According to a report by Politico, the FTC is “likely” to challenge the deal in court over concerns it would give Microsoft an unfair advantage. Nothing has been decided for certain, but the outlet’s sources say FTC commissioners are skeptical of Microsoft and Activision’s arguments in favor of the deal.

    As recently as September, CEO Satya Nadella was optimistic that the acquisition would win approval, but this latest development certainly casts doubt on that.

    As Politico points out, it would be a major blow to Microsoft’s image if the FTC manages to scuttle the deal. Microsoft has worked hard to position itself as separate from Apple, Google, Meta, and Amazon’s antitrust issues, touting itself as a company that learned its lessons decades ago and has an enlightened approach to competition.

  • Vonage to Pay $100 Million in FTC Settlement

    Vonage to Pay $100 Million in FTC Settlement

    Vonage has agreed to a $100 million settlement with the Federal Trade Commission for making it difficult for customers to cancel service.

    Vonage was one of the early VOIP providers and continues to be a significant force in the industry. Unfortunately, according to the FTC, Vonage made it nearly impossible for customers to cancel service with the company:

    Who can forget the eerie admonition about Hotel California: “You can check out any time you like. But you can never leave.” It’s a feeling that may have been echoed by people who attempted to cancel their service with internet phone provider Vonage. In a $100 million settlement, the FTC alleges that Vonage thwarted the efforts of consumers and small businesses who to tried to cancel their service. It’s the latest action in the FTC’s ongoing battle against illegal hurdles, detours, roadblocks, and ruses often called “dark patterns.”

    The FTC goes on to say that Vonage blocked all means of cancelling, save one, and then put roadblocks up to make that one means as hard to use as possible:

    Vonage made it easy to sign up for its services, but blocked all but one method for cancellation. Vonage offered people a variety of ways to sign up – including through its website or by calling a toll-free number. But starting in 2017, Vonage gave people one way – and only one way – to cancel: by speaking to a live “retention agent” on the phone. When people asked to cancel via email or web chat, the FTC says Vonage was unyielding, telling customers that the company “will not accept cancellation via email, fax, SMS or other electronic methods.”

    The settlement, the largest of its kind over canceling services, sends a clear signal that companies that make it hard for customers to cancel do so at their own peril.

  • FTC Cracking Down on ‘Junk Fees’ and ‘Bait-and-Switch’ Auto Sales

    FTC Cracking Down on ‘Junk Fees’ and ‘Bait-and-Switch’ Auto Sales

    The Federal Trade Commission is preparing to crack down on unsavory auto sales practices amid skyrocketing prices.

    The price of automotive purchases in the US has been exploding as a result of supply chain issues and rising inflation. The result has been record prices, often made worse by dealerships adding on “junk fees.” The FTC is preparing to crack down on these practices, proposing new rules to address the problem.

    “As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

    The FTC is proposing rules that would address four specific types of dishonest, exploitative behavior:

    • Ban bait-and-switch, wherein customers are lured in with deceptive promises, only to be saddled with more expensive options, worse financing terms, and more.
    • Ban fraudulent junk fees, such as services and options that offer no value or benefit.
    • Ban surprise junk fees and prohibit dealers from charging additional, undisclosed fees without the customer’s written consent. The rule would also require the dealer to inform the customer what the vehicle would cost without the add-on fees, giving the customer the ability to make an informed decision.
    • Require full disclosure of costs and conditions upfront. This would require the “offering price” to be the full and total price, with only government taxes and fees excluded.

    The FTC’s rules should help address some of the more egregious issues plaguing car buyers, especially since the beginning of the supply chain issues impacting the industry.

    With inventory in short supply, some dealerships have taken to gouging customers. Others have even reserved the right to price-adjust up to six months after purchase, charging the customer more depending on current pricing.

    The FTC’s new rules should be a boon for consumers and reign in the dishonest, predatory behavior some dealerships are engaging in.

  • FTC Takes Action Against a CEO for His Company’s Data Privacy Failures

    FTC Takes Action Against a CEO for His Company’s Data Privacy Failures

    The Federal Trade Commission has thrown down the gauntlet on data privacy, taking action against a CEO for his company’s failures.

    According to the FTC, alcohol marketplace Drizly was notified of security issues at least two years prior to a data breach but failed to take any action to address the problems.

    The problems stemmed from an initial 2018 incident that alerted the company to the issues. The company claimed to address the problem but took little to no action to actually do so, leaving the company open to an even bigger breach two years later.

    In 2018, a Drizly employee posted company cloud computing account login information on the software development and hosting platform GitHub. As a result of this security breakdown, hackers were able to use Drizly’s servers to mine cryptocurrency until the company changed its login information for its cloud computing account. Drizly failed to take steps to adequately address its security problems while publicly claiming to have appropriate security protections in place. Two years later, a hacker breached an employee account, got access to Drizly’s corporate GitHub login information, hacked into the company’s database, and then stole customers’ information.

    As a result, the FTC is holding Drizly and CEO James Cory Rellas responsible, imposing a range of restrictions on the company.

    “Our proposed order against Drizly not only restricts what the company can retain and collect going forward but also ensures the CEO faces consequences for the company’s carelessness,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “CEOs who take shortcuts on security should take note.”

    Companies should take note of the Drizly case as it sends a clear message that the FTC is cracking down on companies, and their executives, for negligent data breaches.

  • Aviation Advocates and Wireless Carriers Gear Up for Next 5G Fight

    Aviation Advocates and Wireless Carriers Gear Up for Next 5G Fight

    After a bruising fight between carriers and the aviation industry over 5G, an aviation coalition has laid the groundwork for the next round.

    Verizon and AT&T spent billions to purchase C-band spectrum at Federal Communications Commission (FCC) auctions. C-band is considered among the best spectrum for 5G, providing a good balance of speed, range, and building penetration.

    The Federal Aviation Administration and the airline industry objected to Verizon and AT&T deploying C-band around airports, sparking a major debate about the safety of 5G and the airlines. The concern revolved around potential interference with airplane altimeters, which operate on spectrum very close to C-band.

    The parties eventually agreed to limit C-band deployment around airports until July 2023, but aviation advocates want to make that ban permanent, especially for C-band in the 4,200-4,400MHz range. The advocates also want 5G transmitters restricted from pointing 90 degrees above the horizon.

    The aviation coalition outlined their wishes in a letter to the FCC:

    These concepts, such as preventing antennas pointing 90 degrees above the horizon and maintaining the wireless spurious emissions in the 4200-4400 MHz band consistent with current mitigations, would appear to not compromise wireless operators’ actual use cases while further assuring aviation safety and providing a workable RF environment against which future radio altimeters can be designed and built.

    Only time will tell if the aviation advocates will prevail, although Verizon and AT&T will likely strongly oppose any extension of the C-band limits. Whatever the outcome, all parties no doubt want to avoid the fallout they experienced from Round One.

  • FTC May Take Action Against Twitter and CEO Over Whistleblower Allegations

    FTC May Take Action Against Twitter and CEO Over Whistleblower Allegations

    Federal Trade Commission Chairwoman Lina Khan opened the door to the possibility of new action against Twitter and CEO Parag Agrawal.

    Peiter “Mudge” Zatko is a well-known hacker who previously served as Twitter’s head of security. Zatko was hired by then-CEO Jack Dorsey before being fired by his successor. Zatko came forward in August to blow the whistle about mismanagement at the company, claiming Twitter and its executives had misled investors about the scope of its bot problem, as well as its security issues.

    Even more concerning, Zatko said the company was in violation of its 2011 settlement with the FTC over security issues. Chairwoman Khan is taking those allegations seriously, opening the door to an investigation into Twitter’s compliance with the terms of the settlement.

    “There has absolutely been a problem with companies treating FTC orders as suggestions,” Khan said during a Senate Judiciary subcommittee hearing, according to MarketWatch. “We have a program underway to really toughen that up.”

    Khan also said she was “extremely disturbed” over the allegations and that the agency would be “looking at this closely.”

    Senator Richard Blumenthal pressed Khan on whether the agency would name Agrawal in any action taken against the company, given Zatko’s claims that Agrawal was aware of the issues and Twitter’s alleged deception.

    “Absolutely,” Khan said. “If we have a basis for naming individuals because we find that they meet the legal standard for that we won’t hesitate to do it.”

  • FTC Taking a Closer Look at Amazon’s iRobot Acquisition

    FTC Taking a Closer Look at Amazon’s iRobot Acquisition

    The Federal Trade Commission (FTC) is taking a closer look at Amazon’s iRobot acquisition.

    Amazon announced in August that it was buying iRobot for $1.7 billion. Almost immediately, privacy advocates raised alarms over the deal, especially given Amazon’s privacy policies and issues with Alexa and Ring security products.

    According to Reuters, the FTC is taking a closer look at the deal. The privacy implications, as well as Amazon’s already dominant position in the smart home market, are the driving factors for the FTC.

    Given the current scrutiny Big Tech is under, and the measures lawmakers are taking to prevent large companies from buying out smaller competitors, it would not be surprising if the FTC scuttles the deal.

  • FTC Targets ‘Corporate Surveillance’ and ‘Data Security’

    FTC Targets ‘Corporate Surveillance’ and ‘Data Security’

    The Federal Trade Commission (FTC) is targeting “corporate surveillance,” wherein companies profit from the data they collect on consumers.

    Corporate surveillance has become a growing problem, with companies collecting vast quantities of consumer data — often without the individual knowing — and then sharing or selling the data to data brokers and other entities. Obviously, the more data is collected, the more vulnerable individuals become to online threats, identify theft, and more, as the FTC makes clear.

    Commercial surveillance is the business of collecting, analyzing, and profiting from information about people. Technologies essential to everyday life also enable near constant surveillance of people’s private lives. The volume of data collected exposes people to identity thieves and hackers. Mass surveillance has heightened the risks and stakes of errors, deception, manipulation, and other abuses.

    In response, the FTC is investigating whether new rules are needed and soliciting public feedback on the matter.

    The Federal Trade Commission is asking the public to weigh in on whether new rules are needed to protect people’s privacy and information in the commercial surveillance economy.

    Consumer and privacy rights groups have long called for the US to crack down on data brokers and other shady data collection practices. Even corporate executives have called for the US to take action and roll out comprehensive privacy laws.

    The FTC’s public inquiry may be the first step toward US consumers finally being protected from predatory corporate surveillance.

  • FTC Sues to Block Meta From Purchasing VR Company Within

    FTC Sues to Block Meta From Purchasing VR Company Within

    The Federal Trade Commission is moving to block Meta from purchasing VR company Within, calling it an “illegal acquisition.”

    Lawmakers and regulators are becoming more critical of acquisitions in the tech industry, especially when it involves a larger, market-dominating company buying up a smaller rival. Within currently makes the popular Supernatural fitness app, a category Meta clearly wants a foothold in.

    The FTC is concerned the acquisition is just the latest example of Meta trying to extend its dominance in the VR market through buyouts rather than fair competition.

    “Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition Deputy Director John Newman. “Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app. But Meta chose to buy market position instead of earning it on the merits. This is an illegal acquisition, and we will pursue all appropriate relief.”

    The complaint also alleges that Meta’s attempt to purchase Within will result in less competition than if the company was willing to invest the time and resources necessary to create its own app.

    The complaint alleges that Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space. But instead of entering, it chose to try buying Supernatural. Meta’s independent entry would increase consumer choice, increase innovation, spur additional competition to attract the best employees, and yield other competitive benefits. Meta’s acquisition of Within, on the other hand, would eliminate the prospect of such entry, dampening future innovation and competitive rivalry.

  • Lawmakers Want the FTC to Address VPN Providers’ ‘Deceptive Data Practices’

    Lawmakers Want the FTC to Address VPN Providers’ ‘Deceptive Data Practices’

    Senator Ron Wyden and Representative Anna G. Eshoo have written FTC Chairwoman Lina Khan asking the agency to address “deceptive data practices” in the VPN industry.

    Virtual private networks are often touted as a vital security and privacy measure, but many computer experts say their importance is overrated. To make matters worse, many VPN providers don’t live up to the claims they make about the privacy they offer.

    The lawmakers point out how widespread the problems are in their letter:

    “In December 2021, Consumer Reports (CR) found that 75 percent of leading VPN providers misrepresented their products and technology or made hyperbolic claims about the protection they provide users on their websites, such as advertising a ‘military-grade encryption’ which doesn’t exist,” the lawmakers write. “Advocacy groups have also found that leading VPN services intentionally misrepresent the functionality of their product and fail to provide adequate security to their users. We’re highly concerned that this deceptive advertising is giving abortion-seekers a false sense of security when searching for abortion-related care or information, putting them at a higher risk of prosecution.”

    The lawmakers then went to provide specific examples of some of the abuses VPN companies have become known for:

    “VPN services have also been exposed for collecting, and, in some cases, abusing, user data. In 2020 it was revealed that a leading analytics firm used personal data from over 35 million people who had downloaded one of their 20 VPN and ad-blocking apps to power their analytics platform without consent.  Notably, the apps didn’t reveal their connection to the analytics firm. Another study found that 75 percent of Android VPN apps report personal user data to third-party tracking companies and 82 percent request permissions to access sensitive resources, including user accounts and text messages.”

    The lawmakers’ letter makes clear the dangers of downloading and installing a VPN without doing due diligence to ensure it lives up to its claims. Many VPNs provide little to no information about their business or their leadership, offering little real-world accountability for their actions. Many have not been independently audited to verify their claims.

    One VPN that often comes recommended by top security experts for checking all of the above boxes is Mullvad. Based in a privacy-friendly jurisdiction, Mullvad’s apps are open-source and have been externally audited. The company has a zero-logs policy, and accounts are anonymous. In fact, the company recently removed the ability to have a reoccurring subscription to cut down on how much information it has on its customers.

    Unfortunately, VPN companies of Mullvad’s caliber are few and far between.

  • US Lawmakers Want the FTC to Investigate TikTok’s Data Handling

    US Lawmakers Want the FTC to Investigate TikTok’s Data Handling

    TikTok continues to face pressure over its latest privacy faux pas, with two US senators asking the FTC to investigate the company.

    News broke in June that TikTok was sharing US user data with its employees in China in direct violation of the company’s own claims. The reports were based on leaked recordings of some 80 internal meetings. The reaction has been swift and predictable, with FCC Commissioner Brendan Carr asking Apple and Google to ban the app from their stores. Adding to the company’s woes, two senators have penned a letter to the FTC asking the agency to investigate.

    Senate Select Committee on Intelligence Chairman Mark R. Warner and Vice Chairman Marco Rubio penned the letter, accusing the company of acting in direct violation of its executive’s sworn testimony:

    “We write in response to public reports that individuals in the People’s Republic of China (PRC) have been accessing data on U.S. users, in contravention of several public representations, including sworn testimony in October 2021,” the senators wrote to FTC Chair Lina Khan. “In light of this new report, we ask that your agency immediately initiate a Section 5 investigation on the basis of apparent deception by TikTok, and coordinate this work with any national security or counter-intelligence investigation that may be initiated by the U.S. Department of Justice.”

    The senators also make the case that TikTok was aware of the issue, and the company’s failure to do anything, along with its collection of biometric data, represents a major security threat:

    “TikTok’s Trust and Safety department was aware of these improper access practices and governance irregularities, which – according to internal recordings of TikTok deliberations – offered PRC-based employees unfettered access to user information, including birthdates, phone numbers, and device identification information. Recent updates to TikTok’s privacy policy, which indicate that TikTok may be collecting biometric data such as faceprints and voiceprints (i.e. individually-identifiable image and audio data, respectively), heighten the concern that data of U.S. users may be vulnerable to extrajudicial access by security services controlled by the CCP.”

    This isn’t the first time TikTok has found itself in hot water over its data practices. The company has stumbled from one privacy scandal to another, been the subject of multiple investigations and lawsuits, and was nearly banned in the US during the Trump administration.

    All things considered, it’s truly amazing the app is still on the market.

    The senators’ letter is quoted in its entirety below:

    Dear Chairwoman Khan:

    We write in response to public reports that individuals in the People’s Republic of China (PRC) have been accessing data on U.S. users, in contravention of several public representations, including sworn testimony in October 2021. In an interview with the online publication Cyberscoop, the Global Chief Security Officer for TikTok’s parent company, ByteDance, made a number of public representations on the data security practices of TikTok, including unequivocal claims that the data of American users is not accessible to the Chinese Communist Party (CCP) and the government of the PRC. As you know, TikTok’s privacy practices are already subject to a consent decree with the Federal Trade Commission, based on its improper collection and processing of personal information from children. In light of this new report, we ask that your agency immediately initiate a Section 5 investigation on the basis of apparent deception by TikTok, and coordinate this work with any national security or counter-intelligence investigation that may be initiated by the U.S. Department of Justice.

    Additionally, these recent reports suggest that TikTok has also misrepresented its corporate governance practices, including to Congressional committees such as ours. In October 2021, TikTok’s head of public policy, Michael Beckerman, testified that TikTok has “no affiliation” with another ByteDance subsidiary, Beijing-based ByteDance Technology, of which the CCP owns a partial stake. Meanwhile, as recently as March of this year, TikTok officials reiterated to our Committee representations they have previously made that all corporate governance decisions are wholly firewalled from their PRC-based parent, ByteDance. Yet according to a recent report from Buzzfeed News, TikTok’s engineering teams ultimately report to ByteDance leadership in the PRC.

    According to this same report, TikTok’s Trust and Safety department was aware of these improper access practices and governance irregularities, which – according to internal recordings of TikTok deliberations – offered PRC-based employees unfettered access to user information, including birthdates, phone numbers, and device identification information. Recent updates to TikTok’s privacy policy, which indicate that TikTok may be collecting biometric data such as faceprints and voiceprints (i.e. individually-identifiable image and audio data, respectively), heighten the concern that data of U.S. users may be vulnerable to extrajudicial access by security services controlled by the CCP.

    A series of national security laws imposed by the CCP, including the 2017 National Intelligence Law and the 2014 Counter-Espionage Law provide extensive and extra-judicial access opportunities for CCP-controlled security services. Under these authorities, the CCP may compel access, regardless of where data is ultimately stored. While TikTok has suggested that migrating to U.S.-based storage from a U.S. cloud service provider alleviates any risk of unauthorized access, these latest revelations raise concerns about the reliability of TikTok representations: since TikTok will ultimately control all access to the cloud-hosted systems, the risk of access to that data by PRC-based engineers (or CCP security services) remains significant in light of the corporate governance irregularities revealed by BuzzFeed News. Moreover, as the recent report makes clear, the majority of TikTok data – including content posted by users as well as their unique IDs– will remain freely accessible to PRC-based ByteDance employees.

    In light of repeated misrepresentations by TikTok concerning its data security, data processing, and corporate governance practices, we urge you to act promptly on this matter.

    Sincerely,

  • Senators Ask the FTC to Investigate Microsoft’s Activision Acquisition

    Senators Ask the FTC to Investigate Microsoft’s Activision Acquisition

    US Senators are asking the Federal Trade Commission to investigate the Microsoft/Activision deal, over concerns regarding Activision’s past scandals.

    Microsoft announced in January, 2022 that it was purchasing Activision Blizzard for $68.7 billion. Microsoft has been buying gaming studios, both for their immediate benefit, as well as their potential to help the company as it competes in the burgeoning metaverse.

    One of the major challenges the company faces with the acquisition, however, is Activision’s history of sexual harassment and discrimination. Microsoft CEO Satya Nadella addressed this in his comments when the deal was announced, saying: “After the close, we will have significant work to do in order to continue to build a culture where everyone can do their best work.”

    Nadella’s assurance is not enough for Senators Elizabeth Warren, Bernie Sanders, Sheldon Whitehouse, and Cory Booker, however. The four senators have written a letter urging the FTC to take a closer look at the deal, expressly over concerns the merger could undermine employee-led efforts to hold Activision’s leadership accountable. Similarly, it’s believed Activision CEO Bobby Kotick will be leaving following the merger, effectively being given a golden parachute and a way to save face and avoid accountability.

    “Workers at Activision Blizzard, following years of rampant sexual misconduct and discrimination and unfair labor practices, have led calls for greater transparency and accountability in the gaming industry, and we are deeply concerned that this acquisition could further disenfranchise these workers and prevent their voices from being heard,” said the senators.

    The senators also quoted FTC Chairwoman Khan as recently stating that “robust antitrust enforcement can help ensure that workers have the freedom to seek higher pay and better working conditions, and can help promote economic opportunity and widespread prosperity for all.”

    The FTC had already declared its intentions to investigate the merger. With the senators’ additional urging, the agency will likely take an even closer look than it originally planned.

  • Lawmakers Introduce Bills to Ban Mergers Over $5 Billion

    Lawmakers Introduce Bills to Ban Mergers Over $5 Billion

    US Senator Elizabeth Warren and Representative Mondaire Jones have introduced bills to ban corporate mergers over $5 billion.

    Mergers have become an increasingly major concern for lawmakers, in both the US and the EU. Big Tech, in particular, has come under scrutiny, with many mergers being viewed as anticompetitive. Various measures have been proposed, but new bills — Prohibiting Anticompetitive Mergers Act — by Warren and Jones may be the most aggressive yet, proposing a total ban on mergers over $5 billion.

    The bills would give the Federal Trade Commission (FTC) and the Department of Justice (DOJ) the power to block mergers without needing a court order. The two agencies would also be given the power to undo mergers they deem harmful.

    “For the last five decades, big companies have had almost free reign over our economy, squashing competitors, growing bigger and bigger, and abusing their market power to price gouge consumers and crush workers and small businesses. This unconstitutional behavior has to stop. My new bill with Rep. Jones would restore our country’s anti-monopoly tradition by banning the biggest, most anticompetitive mergers and giving the DOJ and the FTC stronger tools to enforce our antitrust laws and restore real competition in our markets. Congress needs to take bold action to bring down prices for families and promote a fairer economy for all Americans, and our bill would do just that,” said Senator Warren.

    “In 2021, our antitrust agencies received more merger filings than in any other year during the last decade,” said Congressman Mondaire Jones. “From major tech mergers between companies like Facebook and Instagram to agriculture mergers between companies like Wayne and Sanderson Farms, the recent rise in corporate consolidation has increased unemployment, suppressed wages, and allowed companies to hike up prices even further during this period of inflation. It’s why we need the Prohibiting Anticompetitive Mergers Act, which I’m proud to introduce with Senator Elizabeth Warren. Our bill would empower workers, raise wages, reduce prices, combat inequality, and enable small businesses to thrive. By banning the biggest, most anticompetitive mergers, overhauling the merger-review process to include consideration of labor-market consequences, and strengthening agencies’ tools to break up harmful mergers, our bill will tackle corporate consolidation head on and help build a fairer, more vibrant economy that works for everyone.”

    In just the last few weeks, Microsoft announced plans to acquire Activision Blizzard for $68.7 billion, and Google is purchasing Mandiant for $5.4 billion. Similarly, Amazon is purchasing MGM for $8.45 billion. If the bills should pass, these deals could be on the chopping block, or undone after the fact.

  • FTC Will Review Microsoft’s Activision Blizzard Purchase

    FTC Will Review Microsoft’s Activision Blizzard Purchase

    The Federal Trade Commission (FTC) is preparing to review Microsoft’s $68.7 billion purchase of Activision Blizzard amid increased scrutiny of major acquisitions by Big Tech.

    Microsoft announced in mid-January that it was purchasing Activision Blizzard, the maker of StarCraft, Warcraft, Call of Duty, Overwatch, and more. The deal is poised to completely shakeup the gaming landscape, provided Microsoft can close it.

    According to Bloomberg, the company’s plans are coming under close inspection by the FTC. Chairwoman Lina Khan, in particular, has been an outspoken critic of Big Tech and their acquisitions.

    Should the deal fall through, there are many potential ripple effects, not the least of which is Activision CEO Bobby Kotick. It’s believed Kotick will leave the company once the acquisition is complete. Kotick has been under fire for some time over his (mis)handling of various discrimination and sexual harassment complaints. Until now, the acquisition was seen as a graceful way for him to leave the company and pave the way for change.

  • FTC’s Suit Against Facebook Can Proceed, Judge Rules

    FTC’s Suit Against Facebook Can Proceed, Judge Rules

    Facebook was dealt a major blow today as Judge James Boasberg ruled the Federal Trade Commission’s (FTC) suit against it will not be dismissed.

    The FTC had previously sued Facebook in December 2020, over what it said was anticompetitive behavior, only to have Judge Boasberg throw the case out. The FTC refiled, including more evidence to support its case that Facebook is a monopoly that abuses its power, buying up competitors to head off competition. 

    This time around, according to The Washington Post, the FTC has successfully convinced Judge Boasberg that it should have its day in court — although the judge seemed less than convinced the FTC could win its case.

    “Although the agency may well face a tall task down the road in proving its allegations, the Court believes that it has now cleared the pleading bar and may proceed to discovery,” Boasberg wrote in his decision.

    Facebook also lost its bid to force FTC chair Lina Khan to recuse herself. The company is opposed to her playing a role in the suit, given her past criticism of the company.

    “Although Khan has undoubtedly expressed views about Facebook’s monopoly power, these views do not suggest the type of ‘axe to grind’ based on personal animosity or financial conflict of interest that has disqualified prosecutors in the past,” Boasberg wrote.

    As with any case of this magnitude, it will likely take years to litigate.