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Facebook Competition Lawsuit Links Privacy As Anti-competitive Harm To Users – Anti-trust/Competition Law – Canada – Mondaq News Alerts

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On December 9, twin U.S. lawsuits against Facebook were launched
that will shape the competition and privacy landscape for years to
come. They were initiated by the U.S. Federal Trade Commission
(FTC) and a coalition of Attorneys General from 48 U.S. states and
territories 1. They both allege that Facebook is
illegally maintaining its monopoly in the U.S. personal social
networking services market through a persistent pattern of
anti-competitive conduct which includes acquiring nascent rivals,
most significantly Instagram and WhatsApp.  

What you need to know

  • These lawsuits follow a recent trend
    of worldwide government inquiries and anti-trust lawsuits and
    investigations seeking to address market dominance and future
    innovation in Big Tech. The Facebook challenges come at the same
    time as three U.S. anti-trust cases against Google alleging that,
    among other things, Google monopolized the search and search
    advertising markets through an array of anti-competitive and
    exclusionary practices that allowed it, like Facebook, to also
    create a “moat around its kingdom”. 
  • The FTC and the coalition of states
    are seeking remedies that could require Facebook to divest
    Instagram and WhatsApp, or effectively “break up”
    Facebook’s businesses, as well as other remedies to
    “restore competitive conditions”, including prohibiting
    Facebook from imposing anti-competitive conditions on software
    developers to access its APIs and data.
  • These actions also recognize
    diminishing user privacy protections as an important type of
    consumer harm in and of itself. Specifically, the States’
    claims point to Facebook’s degradation of privacy protections
    and options as a specific form of anti-competitive user harm
    directly resulting from Facebook’s market dominance and lack of
    meaningful competition.
  • Traditionally, market harm is
    measured primarily in terms of prices but, with offerings priced at
    zero, consumer harm will also be measured in terms of quality. What
    is unique about the Facebook cases in particular, is the prominence
    of the quality of privacy safeguards as a critical aspect of
    service quality and its erosion as an important indication of
    market power and lack of effective competition. Given the
    convergence of competition, privacy and consumer protection law,
    here are a few guideposts from these cases to keep in mind looking
    ahead:
    • M&A transactions that involve
      aggregation or acquisition of either sensitive consumer information
      or large quantities of personal information should consider:
      • In digital markets, even
        complementary product or service acquisitions may raise significant
        issues if the target’s offering could be considered a potential
        competitor because its offering is a potential “wedge”
        into the acquiror’s market and/or because it had the potential
        to create a network or social graph to map and connect users who
        could have become future customers.
      • Even if a service is offered for
        free, a merger could result in a material erosion of important and
        valuable data privacy features in terms of product quality, deeming
        it anti-competitive.
      • A series of small acquisitions could
        raise significant issues if it is found to be part a practice of
        buying or killing incipient competitors and/or squelching
        competitive innovation.
      • Any post-closing amendments to
        privacy policies and user data handling practices should carefully
        consider the impacts of those changes from a consumer choice and
        privacy perspective (e.g., preferences regarding content being
        shown; availability, quality and variety of data protection; change
        in product functionality or use; user experience; users’
        control of their information).
    • Dominant digital players must be
      careful in crafting exclusivity arrangements and conditions for
      third-party partnerships or access to their platforms to avoid
      allegations of abuse of marker dominance.
    • Organizations that hold a significant
      amount of consumer data, unique consumer data sets or particularly
      sensitive consumer data should be aware of an increased focus on
      their conduct by regulators and ensure they are meeting privacy and
      data protection obligations, including being transparent about
      their data collection and handling practices, to combat any
      perception of abuse of dominance.
      • Where organizations use or combine
        data that is collected from other sources (e.g., third parties,
        affiliates, other platforms), organizations should ensure they have
        users’ consent to process their information for contemplated
        purposes.  

The lawsuits

The FTC and the States Attorney General cases allege that
Facebook is illegally maintaining its dominance through years-long
anti-competitive practices in the personal social networking
services market.

While initiated separately, the 48 Attorneys General, who
launched that States’ claim, now seek to consolidate their case
with the FTC’s. On December 18, the Attorneys General filed a
motion to consolidate in the U.S. District Court for the District
of Columbia, arguing that the States’ claim and the FTC’s
claim have common issues of fact and law.

The FTC’s claim

The FTC claim alleges three main elements to Facebook’s
course of anti-competitive conduct: its acquisition of Instagram,
its acquisition of WhatsApp, and the anti-competitive conditions to
permitting access of its platform.

Facebook acquiring Instagram

The FTC alleges that by acquiring Instagram, Facebook eliminated
it as competitive threat to its social network dominance. It
alleges Instagram was a digital service offering that could have
been a viable “wedge” into broader social activity and
sharing on mobile to mature into a competing personal social
network. The FTC’s claims are based on the proposition that
network effects grow around social products, like photo sharing,
and because there are only a finite number of different social
mechanics to invent, by buying Instagram, a competitor was
neutralized.

Facebook acquiring WhatsApp

Similarly, the FTC alleges that Facebook feared WhatsApp for
similar reasons and decided to acquire it rather than compete to
neutralize another significant competitive threat to its personal
social networking monopoly. In addition, the FTC claims that
Facebook has harmed innovation by keeping WhatsApp limited to
providing mobile messaging rather than allowing it to offer
competing personal social networking functions.

Facebook maintaining and enforcing anti-competitive
conditions for platform access

The FTC claims Facebook Platform, an infrastructure which
encouraged software developers to build apps and tools that
integrate with Facebook, used its market power to deter and
suppress competitive threats to its personal social networking
monopoly. It argues it did this through practices that deterred
software developers from developing features which would pose a
competitive threat to Facebook, and where such competitive threats
were identified, terminated their access to the application
programming interfaces (APIs) on which those services relied.
 

The States’ Attorney General claim

While substantially similar to the FTC’s claim, the
States’ claims against Facebook are notable for two
reasons:

  1. in addition to Facebook’s
    acquisition of Instagram and WhatsApp, the States outline a series
    of other transactions that point to Facebook’s “buy or
    bury” anti-competitive tactics to maintains its monopoly;
    and
  2. the States’ focus on the erosion
    of user privacy protections and options as further evidence of its
    monopoly power.

Facebook’s “buy or bury” strategy

It is alleged by the States, that in response to threats by
other applications, Facebook’s strategy was to buy or bury
rival companies which presented a viable competitive threat to its
monopoly. This was done using a two-step approach—first,
Facebook would attempt to acquire the competitor, and if
unsuccessful, it would use its dominance to block these potential
competitors’ access to key inputs. 

Degrading users’ privacy

The States’ claim against Facebook further highlights the
intersection of privacy and competition. The States argue that
Facebook’s unlawful monopoly power gave it “wide
latitude” to: set the terms on how users’ personal
information is collected, used, and protected; determine how and
when content is displayed to users; and control how users engage
with their connections and what content they see when they interact
with them.

The States further argue, that as Facebook’s control of the
personal social networking market grew through acquisitions, its
incentives to protect user privacy diminished. Early in its
history, Facebook had used privacy as a competitive differentiator.
Initially, Facebook was sensitive and responsive to users’
feedback on privacy as it strived to distinguish itself from
Myspace, then the dominant player. But once the competitive threats
from Myspace, and then Instagram and WhatsApp, abated, Facebook
then reneged on its pre-acquisition promises or became more
aggressive about collecting data on its users’ off-platform
activity and pushing users to make more information. The States
allege, that with every privacy policy update, Facebook steadily
increased the richness of the data it collected and retained while
expanding what it did with that data and limiting the user
options.

The States pointed to Facebook’s inaction regarding fake
accounts, the proliferation of ads, and collection of additional
personal information consumers might otherwise be reluctant to
share as tangible examples of user harm due to Facebook’s
degradation of data protection and privacy options.

Canadian comparison

In comparison to the United States’ ability to retroactively
divest or dissolve a merger, the Canadian Competition Bureau’s
reach is more restricted. The merger provisions of the
Competition Act allow the Commissioner of Competition
(Commissioner) to apply to the Competition Tribunal (Tribunal) to
dissolve a merger that prevents or lessens competition
substantially. However, the Competition Act requires such
an application to be made within one year of that merger being
substantially completed. As such, the Commissioner would be unable
to unwind the Instagram and WhatsApp mergers under the
Competition Act’s merger provisions based on the same
facts as presented.

However, apart from the merger provisions, the
Competition Act’s abuse of dominance
provisions provide another avenue for the Commissioner to challenge
Facebook’s conduct, including past mergers. These provisions
are aimed at preventing a dominant firm from engaging in conduct
intended to eliminate or discipline a competitor or deter entry or
expansion by competitors. A practice of systematic acquisitions
aimed at eliminating nascent competitors could fall within the
scope of this provision2

Under the dominance provisions, the Tribunal may make an order
prohibiting the dominant firm from engaging in the practice. It may
also make any remedial order that is reasonable and necessary
(including ordering a divestiture of assets or shares) to restore
competition and may order the dominant firm pay an administrative
monetary penalty of up to $10 million (for first-time
offenders).

The abuse of dominance provisions also have a limitation period,
albeit three years. Accordingly, if the Commissioner could prove
that a series of mergers were part of a single continued practice
of anti-competitive acquisitions which continued until less than
three years prior to an application, he could attempt to seek such
a remedy. As of yet, a merger has never been unwound by way of
abuse of dominance provisions.

Implications for business

The recent actions of the FTC, the Department of Justice, and
the coalition of State Attorneys General demonstrate that
regulators are taking a broader view of the interplay between
privacy, consumer choice, and competition in monopolization cases,
which is also emerging as a global theme.

Going forward, businesses that are engaged in the digital
economy should be aware that the Competition Bureau’s
enforcement initiatives will continue to be focused on this sector.
Increased enforcement by foreign anti-trust regulators will likely
continue to exert pressure on the Competition Bureau to enhance its
enforcement efforts. As such, businesses in the digital economy
contemplating M&A transactions or engaging in conduct that
could affect competitors should recognize that they are more likely
to face scrutiny from the Competition Bureau.

Footnotes

1
Complaint for Injunctive and Other Equitable Relief, Federal Trade
Comm’n v. Facebook, Inc., No. 20-cv-03590 (D.C. Dec. 9,
2020)
; and 
Complaint, State of New York v. Facebook, Inc., No. 20-cv-03589
(D.C. Dec. 9, 2020)
.

2 For example, in Laidlaw, Tribunal found
sufficient support to find an overarching purpose to monopolize the
market through a pattern of acquisitions itself, which led to the
finding that the serial acquisitions were a single continued
practice of anti-competitive acts. See Canada (Director of
Investigation and Research) v. Laidlaw Waste Systems Ltd.
,
(1992), 40 C.P.R. (3d) 289 (Comp. Trib.)
[“Laidlaw“].

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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Ottawa orders TikTok’s Canadian arm to be dissolved

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The federal government is ordering the dissolution of TikTok’s Canadian business after a national security review of the Chinese company behind the social media platform, but stopped short of ordering people to stay off the app.

Industry Minister François-Philippe Champagne announced the government’s “wind up” demand Wednesday, saying it is meant to address “risks” related to ByteDance Ltd.’s establishment of TikTok Technology Canada Inc.

“The decision was based on the information and evidence collected over the course of the review and on the advice of Canada’s security and intelligence community and other government partners,” he said in a statement.

The announcement added that the government is not blocking Canadians’ access to the TikTok application or their ability to create content.

However, it urged people to “adopt good cybersecurity practices and assess the possible risks of using social media platforms and applications, including how their information is likely to be protected, managed, used and shared by foreign actors, as well as to be aware of which country’s laws apply.”

Champagne’s office did not immediately respond to a request for comment seeking details about what evidence led to the government’s dissolution demand, how long ByteDance has to comply and why the app is not being banned.

A TikTok spokesperson said in a statement that the shutdown of its Canadian offices will mean the loss of hundreds of well-paying local jobs.

“We will challenge this order in court,” the spokesperson said.

“The TikTok platform will remain available for creators to find an audience, explore new interests and for businesses to thrive.”

The federal Liberals ordered a national security review of TikTok in September 2023, but it was not public knowledge until The Canadian Press reported in March that it was investigating the company.

At the time, it said the review was based on the expansion of a business, which it said constituted the establishment of a new Canadian entity. It declined to provide any further details about what expansion it was reviewing.

A government database showed a notification of new business from TikTok in June 2023. It said Network Sense Ventures Ltd. in Toronto and Vancouver would engage in “marketing, advertising, and content/creator development activities in relation to the use of the TikTok app in Canada.”

Even before the review, ByteDance and TikTok were lightning rod for privacy and safety concerns because Chinese national security laws compel organizations in the country to assist with intelligence gathering.

Such concerns led the U.S. House of Representatives to pass a bill in March designed to ban TikTok unless its China-based owner sells its stake in the business.

Champagne’s office has maintained Canada’s review was not related to the U.S. bill, which has yet to pass.

Canada’s review was carried out through the Investment Canada Act, which allows the government to investigate any foreign investment with potential to might harm national security.

While cabinet can make investors sell parts of the business or shares, Champagne has said the act doesn’t allow him to disclose details of the review.

Wednesday’s dissolution order was made in accordance with the act.

The federal government banned TikTok from its mobile devices in February 2023 following the launch of an investigation into the company by federal and provincial privacy commissioners.

— With files from Anja Karadeglija in Ottawa

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Here is how to prepare your online accounts for when you die

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LONDON (AP) — Most people have accumulated a pile of data — selfies, emails, videos and more — on their social media and digital accounts over their lifetimes. What happens to it when we die?

It’s wise to draft a will spelling out who inherits your physical assets after you’re gone, but don’t forget to take care of your digital estate too. Friends and family might treasure files and posts you’ve left behind, but they could get lost in digital purgatory after you pass away unless you take some simple steps.

Here’s how you can prepare your digital life for your survivors:

Apple

The iPhone maker lets you nominate a “ legacy contact ” who can access your Apple account’s data after you die. The company says it’s a secure way to give trusted people access to photos, files and messages. To set it up you’ll need an Apple device with a fairly recent operating system — iPhones and iPads need iOS or iPadOS 15.2 and MacBooks needs macOS Monterey 12.1.

For iPhones, go to settings, tap Sign-in & Security and then Legacy Contact. You can name one or more people, and they don’t need an Apple ID or device.

You’ll have to share an access key with your contact. It can be a digital version sent electronically, or you can print a copy or save it as a screenshot or PDF.

Take note that there are some types of files you won’t be able to pass on — including digital rights-protected music, movies and passwords stored in Apple’s password manager. Legacy contacts can only access a deceased user’s account for three years before Apple deletes the account.

Google

Google takes a different approach with its Inactive Account Manager, which allows you to share your data with someone if it notices that you’ve stopped using your account.

When setting it up, you need to decide how long Google should wait — from three to 18 months — before considering your account inactive. Once that time is up, Google can notify up to 10 people.

You can write a message informing them you’ve stopped using the account, and, optionally, include a link to download your data. You can choose what types of data they can access — including emails, photos, calendar entries and YouTube videos.

There’s also an option to automatically delete your account after three months of inactivity, so your contacts will have to download any data before that deadline.

Facebook and Instagram

Some social media platforms can preserve accounts for people who have died so that friends and family can honor their memories.

When users of Facebook or Instagram die, parent company Meta says it can memorialize the account if it gets a “valid request” from a friend or family member. Requests can be submitted through an online form.

The social media company strongly recommends Facebook users add a legacy contact to look after their memorial accounts. Legacy contacts can do things like respond to new friend requests and update pinned posts, but they can’t read private messages or remove or alter previous posts. You can only choose one person, who also has to have a Facebook account.

You can also ask Facebook or Instagram to delete a deceased user’s account if you’re a close family member or an executor. You’ll need to send in documents like a death certificate.

TikTok

The video-sharing platform says that if a user has died, people can submit a request to memorialize the account through the settings menu. Go to the Report a Problem section, then Account and profile, then Manage account, where you can report a deceased user.

Once an account has been memorialized, it will be labeled “Remembering.” No one will be able to log into the account, which prevents anyone from editing the profile or using the account to post new content or send messages.

X

It’s not possible to nominate a legacy contact on Elon Musk’s social media site. But family members or an authorized person can submit a request to deactivate a deceased user’s account.

Passwords

Besides the major online services, you’ll probably have dozens if not hundreds of other digital accounts that your survivors might need to access. You could just write all your login credentials down in a notebook and put it somewhere safe. But making a physical copy presents its own vulnerabilities. What if you lose track of it? What if someone finds it?

Instead, consider a password manager that has an emergency access feature. Password managers are digital vaults that you can use to store all your credentials. Some, like Keeper,Bitwarden and NordPass, allow users to nominate one or more trusted contacts who can access their keys in case of an emergency such as a death.

But there are a few catches: Those contacts also need to use the same password manager and you might have to pay for the service.

___

Is there a tech challenge you need help figuring out? Write to us at onetechtip@ap.org with your questions.

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Google’s partnership with AI startup Anthropic faces a UK competition investigation

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LONDON (AP) — Britain’s competition watchdog said Thursday it’s opening a formal investigation into Google’s partnership with artificial intelligence startup Anthropic.

The Competition and Markets Authority said it has “sufficient information” to launch an initial probe after it sought input earlier this year on whether the deal would stifle competition.

The CMA has until Dec. 19 to decide whether to approve the deal or escalate its investigation.

“Google is committed to building the most open and innovative AI ecosystem in the world,” the company said. “Anthropic is free to use multiple cloud providers and does, and we don’t demand exclusive tech rights.”

San Francisco-based Anthropic was founded in 2021 by siblings Dario and Daniela Amodei, who previously worked at ChatGPT maker OpenAI. The company has focused on increasing the safety and reliability of AI models. Google reportedly agreed last year to make a multibillion-dollar investment in Anthropic, which has a popular chatbot named Claude.

Anthropic said it’s cooperating with the regulator and will provide “the complete picture about Google’s investment and our commercial collaboration.”

“We are an independent company and none of our strategic partnerships or investor relationships diminish the independence of our corporate governance or our freedom to partner with others,” it said in a statement.

The U.K. regulator has been scrutinizing a raft of AI deals as investment money floods into the industry to capitalize on the artificial intelligence boom. Last month it cleared Anthropic’s $4 billion deal with Amazon and it has also signed off on Microsoft’s deals with two other AI startups, Inflection and Mistral.

The Canadian Press. All rights reserved.

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