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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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The Internet is Littered in ‘Educated Guesses’ Without the ‘Education’

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Although no one likes a know-it-all, they dominate the Internet.

The Internet began as a vast repository of information. It quickly became a breeding ground for self-proclaimed experts seeking what most people desire: recognition and money.

Today, anyone with an Internet connection and some typing skills can position themselves, regardless of their education or experience, as a subject matter expert (SME). From relationship advice, career coaching, and health and nutrition tips to citizen journalists practicing pseudo-journalism, the Internet is awash with individuals—Internet talking heads—sharing their “insights,” which are, in large part, essentially educated guesses without the education or experience.

The Internet has become a 24/7/365 sitcom where armchair experts think they’re the star.

Not long ago, years, sometimes decades, of dedicated work and acquiring education in one’s field was once required to be recognized as an expert. The knowledge and opinions of doctors, scientists, historians, et al. were respected due to their education and experience. Today, a social media account and a knack for hyperbole are all it takes to present oneself as an “expert” to achieve Internet fame that can be monetized.

On the Internet, nearly every piece of content is self-serving in some way.

The line between actual expertise and self-professed knowledge has become blurry as an out-of-focus selfie. Inadvertently, social media platforms have created an informal degree program where likes and shares are equivalent to degrees. After reading selective articles, they’ve found via and watching some TikTok videos, a person can post a video claiming they’re an herbal medicine expert. Their new “knowledge,” which their followers will absorb, claims that Panda dung tea—one of the most expensive teas in the world and isn’t what its name implies—cures everything from hypertension to existential crisis. Meanwhile, registered dietitians are shaking their heads, wondering how to compete against all the misinformation their clients are exposed to.

More disturbing are individuals obsessed with evangelizing their beliefs or conspiracy theories. These people write in-depth blog posts, such as Elvis Is Alive and the Moon Landings Were Staged, with links to obscure YouTube videos, websites, social media accounts, and blogs. Regardless of your beliefs, someone or a group on the Internet shares them, thus confirming your beliefs.

Misinformation is the Internet’s currency used to get likes, shares, and engagement; thus, it often spreads like a cosmic joke. Consider the prevalence of clickbait headlines:

  • You Won’t Believe What Taylor Swift Says About Climate Change!
  • This Bedtime Drink Melts Belly Fat While You Sleep!
  • In One Week, I Turned $10 Into $1 Million!

Titles that make outrageous claims are how the content creator gets reads and views, which generates revenue via affiliate marketing, product placement, and pay-per-click (PPC) ads. Clickbait headlines are how you end up watching a TikTok video by a purported nutrition expert adamantly asserting you can lose belly fat while you sleep by drinking, for 14 consecutive days, a concoction of raw eggs, cinnamon, and apple cider vinegar 15 minutes before going to bed.

Our constant search for answers that’ll explain our convoluted world and our desire for shortcuts to success is how Internet talking heads achieve influencer status. Because we tend to seek low-hanging fruits, we listen to those with little experience or knowledge of the topics they discuss yet are astute enough to know what most people want to hear.

There’s a trend, more disturbing than spreading misinformation, that needs to be called out: individuals who’ve never achieved significant wealth or traded stocks giving how-to-make-easy-money advice, the appeal of which is undeniable. Several people I know have lost substantial money by following the “advice” of Internet talking heads.

Anyone on social media claiming to have a foolproof money-making strategy is lying. They wouldn’t be peddling their money-making strategy if they could make easy money.

Successful people tend to be secretive.

Social media companies design their respective algorithms to serve their advertisers—their source of revenue—interest; hence, content from Internet talking heads appears most prominent in your feeds. When a video of a self-professed expert goes viral, likely because it pressed an emotional button, the more people see it, the more engagement it receives, such as likes, shares and comments, creating a cycle akin to a tornado.

Imagine scrolling through your TikTok feed and stumbling upon a “scientist” who claims they can predict the weather using only aluminum foil, copper wire, sea salt and baking soda. You chuckle, but you notice his video got over 7,000 likes, has been shared over 600 times and received over 400 comments. You think to yourself, “Maybe this guy is onto something.” What started as a quest to achieve Internet fame evolved into an Internet-wide belief that weather forecasting can be as easy as DIY crafts.

Since anyone can call themselves “an expert,” you must cultivate critical thinking skills to distinguish genuine expertise from self-professed experts’ self-promoting nonsense. While the absurdity of the Internet can be entertaining, misinformation has serious consequences. The next time you read a headline that sounds too good to be true, it’s probably an Internet talking head making an educated guess; without the education seeking Internet fame, they can monetize.

______________________________________________________________

 

Nick Kossovan, a self-described connoisseur of human psychology, writes about what’s

on his mind from Toronto. You can follow Nick on Twitter and Instagram @NKossovan.

 

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Tight deadlines on software projects can put safety at risk: survey

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TORONTO – A new survey says a majority of software engineers and developers feel tight project deadlines can put safety at risk.

Seventy-five per cent of the 1,000 global workers who responded to the survey released Tuesday say pressure to deliver projects on time and on budget could be compromising critical aspects like safety.

The concern is even higher among engineers and developers in North America, with 77 per cent of those surveyed on the continent reporting the urgency of projects could be straining safety.

The study was conducted between July and September by research agency Coleman Parkes and commissioned by BlackBerry Ltd.’s QNX division, which builds connected-car technology.

The results reflect a timeless tug of war engineers and developers grapple with as they balance the need to meet project deadlines with regulations and safety checks that can slow down the process.

Finding that balance is an issue that developers of even the simplest appliances face because of advancements in technology, said John Wall, a senior vice-president at BlackBerry and head of QNX.

“The software is getting more complicated and there is more software whether it’s in a vehicle, robotics, a toaster, you name it… so being able to patch vulnerabilities, to prevent bad actors from doing malicious acts is becoming more and more important,” he said.

The medical, industrial and automotive industries have standardized safety measures and anything they produce undergoes rigorous testing, but that work doesn’t happen overnight. It has to be carried out from the start and then at every step of the development process.

“What makes safety and security difficult is it’s an ongoing thing,” Wall said. “It’s not something where you’ve done it, and you are finished.”

The Waterloo, Ont.-based business found 90 per cent of its survey respondents reported that organizations are prioritizing safety.

However, when asked about why safety may not be a priority for their organization, 46 per cent of those surveyed answered cost pressures and 35 per cent said a lack of resources.

That doesn’t surprise Wall. Delays have become rampant in the development of tech, and in some cases, stand to push back the launch of vehicle lines by two years, he said.

“We have to make sure that people don’t compromise on safety and security to be able to get products out quicker,” he said.

“What we don’t want to see is people cutting corners and creating unsafe situations.”

The survey also took a peek at security breaches, which have hit major companies like London Drugs, Indigo Books & Music, Giant Tiger and Ticketmaster in recent years.

About 40 per cent of the survey’s respondents said they have encountered a security breach in their employer’s operating system. Those breaches resulted in major impacts for 27 per cent of respondents, moderate impacts for 42 per cent and minor impacts for 27 per cent.

“There are vulnerabilities all the time and this is what makes the job very difficult because when you ship the software, presumably the software has no security vulnerabilities, but things get discovered after the fact,” Wall said.

Security issues, he added, have really come to the forefront of the problems developers face, so “really without security, you have no safety.”

This report by The Canadian Press was first published Oct. 8, 2024.

Companies in this story: (TSX:BB)

The Canadian Press. All rights reserved.

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Beware of scams during Amazon’s Prime Big Deal Days sales event: cybersecurity firm

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As online shoppers hunt for bargains offered by Amazon during its annual fall sale this week, cybersecurity researchers are warning Canadians to beware of an influx of scammers posing as the tech giant.

In the 30 days leading up to Amazon’s Prime Big Deal Days, taking place Tuesday and Wednesday, there were more than 1,000 newly registered Amazon-related web domains, according to Check Point Software Technologies, a company that offers cybersecurity solutions.

The company said it deemed 88 per cent of those domains malicious or suspicious, suggesting they could have been set up by scammers to prey on vulnerable consumers. One in every 54 newly created Amazon-related domain included the phrase “Amazon Prime.”

“They’re almost indiscernible from the real Amazon domain,” said Robert Falzon, head of engineering at Check Point in Canada.

“With all these domains registered that look so similar, it’s tricking a lot of people. And that’s the whole intent here.”

Falzon said Check Point Research sees an uptick in attempted scams around big online shopping days throughout the year, including Prime Days.

Scams often come in the form of phishing emails, which are deceptive messages that appear to be from a reputable source in attempt to steal sensitive information.

In this case, he said scammers posing as Amazon commonly offer “outrageous” deals that appear to be associated with Prime Days, in order to trick recipients into clicking on a malicious link.

The cybersecurity firm said it has identified and blocked 100 unique Amazon Prime-themed scam emails targeting organizations and consumers over the past two weeks.

Scammers also target Prime members with unsolicited calls, claiming urgent account issues and requesting payment information.

“It’s like Christmas for them,” said Falzon.

“People expect there to be significant savings on Prime Day, so they’re not shocked that they see something of significant value. Usually, the old adage applies: If it seems too good to be true, it probably is.”

Amazon’s website lists a number of red flags that it recommends customers watch for to identify a potential impersonation scam.

Those include false urgency, requests for personal information, or indications that the sender prefers to complete the purchase outside of the Amazon website or mobile app.

Scammers may also request that customers exclusively pay with gift cards, a claim code or PIN. Any notifications about an order or delivery for an unexpected item should also raise alarm bells, the company says.

“During busy shopping moments, we tend to see a rise in impersonation scams reported by customers,” said Amazon spokeswoman Octavia Roufogalis in a statement.

“We will continue to invest in protecting consumers and educating the public on scam avoidance. We encourage consumers to report suspected scams to us so that we can protect their accounts and refer bad actors to law enforcement to help keep consumers safe.”

Falzon added that these scams are more successful than people might think.

As of June 30, the Canadian Anti-Fraud Centre said there had been $284 million lost to fraud so far this year, affecting 15,941 victims.

But Falzon said many incidents go unreported, as some Canadians who are targeted do not know how or where to flag a scam, or may choose not to out of embarrassment.

Check Point recommends Amazon customers take precautions while shopping on Prime Days, including by checking URLs carefully, creating strong passwords on their accounts, and avoiding personal information being shared such as their birthday or social security number.

The cybersecurity company said consumers should also look for “https” at the beginning of a website URL, which indicates a secure connection, and use credit cards rather than debit cards for online shopping, which offer better protection and less liability if stolen.

This report by The Canadian Press was first published Oct. 8, 2024.

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