MLex

8 Oct 2024
By Khushita Vasant and Ilana Kowarski

US Federal Trade Commission Chair Lina Khan today pledged to keep up the fight against noncompete clauses in employee contracts across the US as the agency challenges a court order that banned its sweeping rule.

“We firmly believe we have the authority to do this rule, and so we’re going to keep fighting, and also can do litigation and lawsuits in tandem,” Khan said while speaking at an event*.

The Democratic chair of the FTC said labor markets are different from product markets, and being able to switch jobs and what that process looks like is “different from buying a toaster.”

“Just in terms of how sticky these markets can be, the frictions involved in the labor market… practically, that can mean that employers can have a certain degree of power over workers,” Khan said. “These markets on the labor side are not perfectly competitive as their default state.”

There can already be a degree of concentration resulting in workers not being able to move as quickly as easily, she said. There is research showing that as labor market concentration increases, wages go down and Americans that are in labor markets that are not competitive are losing thousands of dollars each year, the FTC chair said.

After the FTC issued its final rule to ban noncompete clauses nationwide, it was sued in three US federal courts in Texas, Pennsylvania and Florida. The rule was set to go into effect on Sept. 4.

The FTC won the lawsuit filed by a tree services company in Pennsylvania which sought an injunction against the agency from implementing the rule.

Cases in Texas and Florida both resulted in losses for the FTC , with the agency having filed a notice to appeal to the US Court of Appeals for the Eleventh Circuit after a Middle District of Florida judge ruled for Properties of the Villages, a real estate agency focused on retirement living. The scope of the FTC’s defeat in Florida was limited to not being able to enforce the rule against Properties of the Villages.

But less than a week later, US District Judge Ada Brown of the Northern District of Texas found the noncompete rule “arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.”

“The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” Brown said in her ruling.

The FTC has less than two weeks left to file a notice of appeal in the Texas case to the US Court of Appeals for the Fifth Circuit.

Today, Khan cited a study to say that veterinarians who worked for large corporations reported more pressure to generate revenue.

However, those who worked for an independent practice reported higher levels of satisfaction and were also able to use their discretion and latitude more, including for purchasing new equipment and doing upgrades and having more decision making discretion and what types of drugs they’re using, the FTC chair said.

— Healthcare mergers —

Today, Khan also addressed how the FTC assesses the competitive impact of a merger between two veterinary businesses.

Antitrust enforcers make a case-by-case determination about the extent to which general service clinics and specialty clinics exert pricing pressure on one another, and the degree to which pet owners view those clinics’ services as interchangeable, Khan said.

“Our North Star is, ‘What is the market reality?’” she said.

One key question, Khan said, is how different the service offerings are at general versus specialty clinics and whether they are “placing a competitive check on one another,” and if a specialty clinic hiked prices, “to what extent would the fact that you have a general provider really provide some breathing room for the customer?”

The FTC chair said she doesn’t view every private equity acquisition in the healthcare sector in a negative way.

“My view is that not all private equity is the same, and a lot of this is going to be very fact-specific, depending on the specific type of private equity firm, depending on what their specific business strategy is, and what the history shows about what happens once they purchase some of these facilities,” she said.

But Khan expressed concern about PE firms with “strip and flip” business models getting involved in the healthcare sector, warning that such firms could threaten the quality of healthcare and compromise patient safety.

— AI, algorithmic price-fixing —

The FTC also has been “very focused on false AI claims,” where companies may be lured into some opportunities but “then the promises of AI are not actually materializing,” Khan said.

Enforcers have been scrutinizing practices across the AI stack to make sure that no gatekeeper is able to exploit the choke points in these markets, she said. This is because such markets are very capital intensive and require a lot of cloud computing and an enormous amount of data, and there are certain players that already have a leg up in some of these markets, the FTC chair said.

“We’ve also seen troubling allegations of how firms may be using algorithms effectively to price fix, be it in the rental landlord context, or in hotels. And so that’s an area of risk for us as well,” Khan said.

2 Oct 2024
By Frank Hersey

A controversial iris-scanning cryptocurrency project launched by OpenAI’s Sam Altman to uniquely identify all humans on the planet expects a key result soon from a German privacy watchdog as it “surprised” other authorities with new privacy technology, said the chief executive of the project’s tech partner.

Tools for Humanity, the tech partner for Worldcoin, is based in Bavaria. The state’s data watchdog is the leading investigator in Europe into whether Worldcoin respects people’s data rights and whether its database is secure. Regulators around Europe await the outcome.

Fabian Bodensteiner, managing director at Worldcoin, told a tech conference* today the decision is expected soon and that his team is trying to be “as cooperative as possible.”

“We want to make it work here,” said Bodensteiner, referring to the UK and Europe. “We don’t just want to leave Europe and dodge things. We want to stay in the conversations.”

Worldcoin is still “having conversations” with UK regulators, he said, without giving any further details. The conversations have been going on for quite some time .

Some of the criticisms of the Worldcoin project to issue humans with unique identifiers to prove humanity, including via iris scans, have involved personal data privacy and data handling. Regulators around the world have taken notice.

The organization is “proactively working with those regulators, because a lot of the points that are made actually really helped us improving our technology. For example, the SMPC [secure multi-party computation] scheme, is really something where I think we surprised the whole scene a little bit,” he said.

Bodensteiner says the tech, being made available open source, is making it possible to store sensitive data in a secure way.

— Hostile Europe? —

Europe’s regulators have taken a mixed approach. Over the summer, the Austrian data watchdog allowed Tools for Humanity to enter the country with its iris-scanning orbs. Poland followed next.

Scanning is not happening in Spain until the end of the year or until the Bavarian regulator makes a final decision. Portugal soon followed, Italy effectively warned the organization not to bother trying there and the French privacy watchdog has carried out impromptu visits of collection points .

— Global south —

Bodensteiner said the project’s emphasis is in the Asia Pacific region. Critics point out that it is active in jurisdictions with poor data protection or weak currencies. Argentina is a particular focus, said the CEO, stating that 60 percent of all people age 18 to 65 in Buenos Aires now have World ID.

This enables the team to do “classic business development work to develop first strong use cases and business cases, how this technology can help save money or sell more for those businesses.”

He wouldn’t divulge revenue figures, although he said the team doesn’t yet want to settle on a fee structure and that it’s following the OpenAI approach of developing a technology and seeing what happens.

— $828,000 fine —

Last week, Worldcoin and its developer and data processor Tools for Humanity were handed a combined fine of 1.1 billion won (about US $828,000) and issued corrective orders by the South Korean watchdog for violating the country’s privacy regulations . This came after Worldcoin claimed “100 percent compliance” with South Korean privacy law last month.

The action follows an investigation which uncovered that Worldcoin and Tools For Humanity had gathered sensitive biometric information from South Korean users without proper legal grounds and subsequently transferred the data across borders.

In May, Hong Kong’s authorities also ordered Worldcoin to cease scanning for breaching privacy law.

30 Sep 2024

By Lewis Crofts

Google has dropped its insistence that users have a Gmail account to access services such as YouTube and the Play Store on handsets running Android, in a move designed to comply with the EU’s rules on tech gatekeepers, MLex has learned.

The practice had been under scrutiny at the European Commission, and the regulator is now seeking feedback to see if the changes are sufficient under the Digital Markets Act.

Users have long been able to set up a Google account with a third-party e-mail address, when using a desktop computer. But, in an update to a user manual, Google told users it will no longer require a Gmail address when doing the same on a mobile device.

Handsets use the Android operating system to give access the Play Store for apps and other services such as YouTube.

The Digital Markets Act prohibits certain kinds of “tying” where the use of one platform is linked to the use of another. Google was suspected of giving a leg-up to Gmail by ensuring that any user of an Android handset owned a Gmail account too.

The commission is understood to have been in talks with Google, taking preliminary investigative steps into the company at the end of August. This prompted Google to make changes to its Android platform.

Under the new policy, users can insert a third-party e-mail address to identify themselves on devices, cutting the tie with Gmail. If users want to create a Google account with a non-Gmail email address, they can do so, receiving a code through their other account to activate their services.

The DMA stipulates that one “core platform service” — such as Android — can’t be tied to the use of another such designated platform. Gmail isn’t such a “core platform service,” but it is caught by the tying ban anyway due to its user numbers.

Google, Amazon, Apple and Meta Platforms are all at various stages of scrutiny by the EU authorities over their compliance with the DMA. Some have started to make changes under increased opposition from the commission.

Google’s move shows voluntary changes being made early by a company before a probe escalates into a full non-compliance investigation.

30 Sep 2024

By Nicholas Hirst

Microsoft could face heavier antitrust interventions against its software and tech offerings in Germany, with the national competition authority today underlining its market clout in a number of digital markets, from business software to social networking to cloud services and AI.

Today the Bundeskartellamt said Microsoft’s “omnipresent” and “indispensable” digital services meant it was caught by a German law that gives regulators a shortcut to impose additional antitrust duties on companies with a “paramount significance for competition across markets.“

Andreas Mundt, the president of the Bundeskartellamt, which enforces the law, described Microsoft’s ecosystem as “stronger and more closely interconnected than ever before, because overarching all of its activities is the increasing use of the cloud and AI, key technologies in which Microsoft has consolidated its strong position.” In an announcement, his agency highlighted Microsoft’s ability to leverage its market power and financial might to expand in new markets and shield itself from competition.

“Due to the range-like bundling of complementary offerings, [Microsoft] retains a significant advantage over competitors who only operate in individual sub-markets,” the Bundeskartellamt said. “Added to this is the comprehensive technical integration of the products from the Microsoft ecosystem.”A spokesperson for Microsoft said: “We recognize our responsibility to support a healthy competitive environment and we will strive to be proactive, collaborative and responsible in working with the Bundeskartellamt.”

German investigators also noted that many developers had built products on top of Microsoft’s software, meaning that their success depends on being compatible with Microsoft, who may also be a rival.

“Microsoft often plays a dual role, as the company not only sets the framework for third-party developers, but also acts as their competitor,” said the Bundeskartellamt. Google’s parent company Alphabet, Amazon, Apple and Meta Platforms have all already been designated as falling under the German rules for „paramount significance.“

The Bundeskartellamt said it had not yet decided to move to impose additional conduct duties on Microsoft as a result.

Today’s inquiry into Microsoft should shed light on the interaction between German and EU pro-competition rules.  The German law that has caught Microsoft, formally known as provision 19a, is similar to the EU’s Digital Markets Act, or DMA. In addition, EU antitrust enforcers are considering imposing antitrust remedies on Microsoft’s Teams communications service — something that could overlap with the 19a rules.

In the statement from the Bundeskartellamt, Mundt said that today’s decision “applies to Microsoft as a whole, not only to individual services or products.” While the German regulator could not look at services covered by the DMA, which currently catches Windows and LinkedIn, it remained free to act against competition concerns elsewhere, he clarified.

A parallel 19a inquiry into Google was settled, with the tech company making concessions on the use of data in relation to 25 services, ranging from Google Assistant to Gmail, that fell outside the scope of the DMA (see here).

Browser developer Opera today called on the Bundeskartellamt to look at Microsoft Edge, which the commission decided should escape regulation under the DMA.

“Edge’s durable and privileged position on Windows devices creates an uneven playing field for its competitors,” said Cristian Samoilovich, Opera’s government affairs head.

“These tactics undermine consumer choice and damage innovation in the desktop browser space.”

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M&A-Entwicklungen, fachkundige, vorausschauende Analysen von spezialisierten Berichterstatter:innen über den Prüfungsprozess, die Verfahrensschritte und die Gerichtsverfahren, die sich aus genehmigten oder blockierten Transaktionen ergeben.

Wichtige Entwicklungen im EU-Beihilferecht und den Durchsetzungsmaßnahmen: EU-Untersuchungen und politische Änderungen bei der Unterstützung von Unternehmen und Sektoren durch EU-Regierungen.

Globale Handelsabkommen, sich ändernde Handelspolitiken sowie Handelsstreitigkeiten und deren Durchsetzung (einschließlich Antidumping-, Antisubventions- und Schutzmaßnahmenuntersuchungen).

Neueste Entwicklungen im Bereich Datenschutz und Regulierung mit exklusiven, zukunftsorientierten Berichten über GDPR und CCPA, internationalen Datenfluss, Cybersecurity sowie die sich ständig weiterentwickelnden Auswirkungen von AI.

Maßnahmen zur Regulierung neuer und etablierter Technologien, die eine vernetzte Welt antreiben. Umfassende Berichterstattung über Online-Sicherheit, Inhaltsmoderation, Plattformregulierung, künstliche Intelligenz, vernetzte Geräte und Telekommunikationsregulierung.

Berichterstattung über den Mobilitätswandel, der mit dem Aufkommen vernetzter, automatisierter, gemeinsam genutzter und elektrischer Fahrzeuge den Verkehr umgestaltet und weltweit neue regulatorische Fragen zur Daten-, Energie- und Industriepolitik aufwirft

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Exklusive Berichte über die Aufsicht über das globale Investment- und Privatkundengeschäft, Schattenbanken, Kryptowährungen und digitale Finanzen, nachhaltige Finanzen, Clearinghäuser, Investmentfonds, Versicherer, Zahlungsdienste und mehr.

Änderungen in der Gesetzgebung zur Korruptionsbekämpfung, über Ermittlungen, Rechtsstreitigkeiten und Strafverfahren, Bekämpfung von Geldwäsche, Insiderhandel, Betrug und Marktmanipulation.

Erhalten Sie Einblicke in neueste Entwicklungen und künftige Regulierung von AI.