YouTube: Yet Another Tech Giant Under Fire for Privacy Issues

More than 20 consumer advocacy groups, including Consumers Union, Consumer Watchdog, and Public Citizen, filed a complaint with the Federal Trade Commission against Google, the parent company of YouTube. The complaint claims Google has made “substantial profits from the [illegal] collection and use of personal data from children on YouTube.” The complaint was filed just a few days before Mark Zuckerberg testified before Congress to address the future of privacy in the wake of Facebook’s Cambridge Analytica scandal.

While YouTube’s Terms of Service state that its video-sharing service is not to be used by children under 13 years of age, a recent study found that 80% of children in the United States ages 6-12 use YouTube daily. And YouTube is clearly aware its services are used by children. Content providers directly communicate to YouTube that their content is directed at children. In addition, executives at YouTube have remarked “kidfluencer channels [have been] extremely successful because children like to watch on their own.” YouTube has also marketed its services directly to children, launching the YouTube Kids app in 2015; the app even allows children to create their own profiles.

Because YouTube’s services do indeed reach children under 13 years of age, it must comply with the Children’s Online Privacy Protection Act (COPPA). COPPA has several requirements, one of which is that website operators obtain verifiable parental consent before collecting and using the personal information of children. Assuming YouTube does not disclose children’s personal data to the public, it may give proper notice to parents by simply sending them an email and getting a click response. However, YouTube has made no such reasonable effort to give notice to parents of its collection practices.

The complaint asks the Federal Trade Commission to enjoin Google, and to assess civil penalties totaling tens of billions of dollars. The complaint maintains that such a massive fine is necessary in order to adequately deter Google, the second wealthiest company in the world. While it is too early to speculate how the Federal Trade Commission will rule on the matter, there is an immense public interest in halting Google’s conduct: just over the last year, Ofcom reported a double digit increase in the number of children that watch YouTube, the world’s most popular platform among children.

YouTube – Yet Another Tech Giant Under Fire for Privacy Issues

Uber Suffers Another Legal Setback From Recent EU Ruling

The ride sharing application Uber has faced another legal blow following a verdict from the European Union’s highest court Tuesday, April 10th. The Court of Justice of the European Union (ECJ) upheld a French Court’s verdict that Uber was indeed a transportation company, not a “information society service”, as Uber had previously claimed.

Moreover, the ECJ declared that France, as an EU member state, was well within its right to fine and file criminal charges against Uber for running an illegal transportation service. Uber’s appeal sought to strike the fine on the basis that EU countries must first notify the European Commission before passing laws that could potentially impact digital services. The ruling came down once again to Uber’s status as a transportation company as opposed to an information society service.

This is the most recent legal defeat in a series of devastating losses to European regulators for Uber. The Case arrived at the ECJ after Uber appealed a ruling from a French court fining it $907,000 for failing to use professionally licensed drivers for its UberPop application and violating a French law which sets down restrictions on the use of digital technology to find customers for taxying services. This 2014 law comes in the wake of continued conflicts between traditional taxi services and emerging ride sharing platforms leading many to believe that the legislation was developed to target companies like Uber in particular.

The UberPop application, which allowed peer-to-peer interactions for the arrangement of transportation, enabled individuals without the credentials demanded by French law for commercial drivers to ferry passengers.  While, Uber has since discontinued the service, the ruling threatens one of Uber’s greatest fiscal advantages over traditional taxi services, particularly in the European union where digital services receive protection from EU member state’s nation laws. Potentially even more damaging to Uber’s bottom line is the additional red-tape and financial burdens applied to typical transportation companies, which Uber has traditionally skirted.

These added costs further diminish the competitive advantages held by Uber due to its unique structure as European authorities have been increasingly aggressive in holding companies like Uber to more standardized regulations. Another such example was the November 17th ruling last year in the UK demanding that Uber treats its drivers as traditional employees entitled to minimum wages and vacation time.

Uber continues to operate a ride-hailing business in France with professionally licensed drivers, however, the ECJ’s ruling marks another major hit for Uber. This most recent judgment was passed down just months after the ECJ affirmed the holding from a Spanish court also finding Uber to be a transportation company.

The impact of the most recent rulings against Uber may also have significant effects on the EU’s attempts to maintain a single digital market and could potentially impact other companies utilizing digital means to provide services and goods. Regardless, with losses in the UK, Belgium and expulsions from Hungary and Denmark, one thing is certain Uber does and will likely continue to face a significant challenge while operating in European Markets.

Uber is private company originating from Silicon Valley that now operates globally as a ride hailing application.

Uber Suffers Another Legal Setback From Recent EU Ruling

Silicon Valley Long Dominated Startup Funding – Now has a new challenger

The U.S. venture capital world has been forced to share its monopoly of the global market with a new upcoming player: China. The country has emerged as a power in the VC world. Asian investors directed nearly as much money into startups as American investors did, totaling 40% of the record $154 billion in global venture financing versus 44%, reported in the Wall Street Journal’s article that analyzes data from private market data tracker Down Jones VentureSource. China, in particular, has seen a surge in investments marked by over the top valuations, intense competition for the best targets, and uncertainty on returns.

During the beginning of the year, 3,418 new venture-capital and private-equity funds in China raised 1.6 trillion yuan ($241.76 billion), over double the amount of 2015 and more than 10 times that of 2006, according to consultancy Zero2IPO Group. It estimates about 12,000 investment firms manage 8.5 trillion yuan in capital, an increase from 8,000 firms managing 5 trillion yuan in 2015. This has helped drive funding totals into the stratosphere and has transformed the VC landscape, from an USA-monopoly to a duopoly environment. However, even with these changes, U.S. investors remain the largest sources of global venture capital, conducting more deals than any other group. In 2017, American investors did nearly half of the venture rounds. The U.S. is also one of the most important drivers of innovation, with many of China’s biggest investments simply copying the American-created technology.

On the other side of the startup’s excitement over cash available to finance new technology, there is a very real prospect of the development of a trade war between the U.S. and China. This could potentially cripple venture finance along with overall investments if the countries go through with the threats to levy billions of dollars in tariffs on each other’s products. However, since the tariffs are mostly focused on product exports like cars and agricultural goods, they are unlikely to have a strong impact on most startups.

China is creating “unicorns” at almost the same pace as the U.S., benefiting on funding from internet giants like Alibaba and Tencent Holdings. Money has rushed into the tech sector due to dwindling investment returns elsewhere and policy decisions by the Chinese government. Such decisions opened the credit taps last year to spur slowing growth, stirring money towards “innovation” in hopes of creating new economic drivers. This situation has lead experts to say that Chinese tech companies are at a critical size. The Chinese market alone is not enough to support their business and valuation, and the money will end up going first to the adjacent market where Chinese technology business models and capital have more impact.

Nevertheless, many in the U.S worry that strategic interests drive China’s new endeavors into technologies. Experts say these interests include the Chinese state and local governments having investments in private venture funds and Beijing’s interest in spurring startup VC activity.

Silicon Valley Long Dominated Startup Funding – Now has a new challenger

Bayer Faces U.S. Hurdles for Monsanto Antitrust Nod

The road to success is not a bed of roses. Although their deal was approved by more than thirty authorities around the globe, Bayer A.G. (“Bayer”), the German conglomerate chemical firm, still faces a legal challenge in the United States to win antitrust approval to buy American seeds supplier Monsanto Company (“Monsanto”). The U.S. government is worried that $62.5 billion deal could seriously hurt competition.

Looking back to August of last year, the decision on whether to approve the symbolic transaction has been postponed twice and suspended four other times. The deadline for the merger approval is currently scheduled to take place on April 5, 2018.

The significant proposed acquisition between Bayer and Monsanto would make the company the world’s largest integrated pesticide and seeds business. In fact, this would create a company with a market share of more than a quarter of the world’s seed and pesticides business. The transaction will constitute to the destruction of competition in at least three markets: pesticides, seeds, and traits.

In the United States, EU, and Brazil, the authorities are attempting to conduct further investigation of how combining Bayer and Monsanto will impact the price and supply of key products for farmers.

One of the effective solutions to solve potential antitrust issues is to sell a company’s assets when company seeking regulatory approval for a deal. After the CEO meetings, Bayer decided to resolve antitrust issue by selling assets to another company in order to carry out its project and achieve its $60 billion-plus takeover of St. Louis-based Monsanto. In particular, Bayer agreed to sell parts of its seed and herbicide assets to rival, BASF, for $7 billion to solve EU regulatory concerns. Moreover, Bayer agreed to divest its vegetable seeds business to BASF.

In the EU, the review of the Monsanto deal by the European Commission (“the Commission”) is set to greenlight after in-depth investigation by the Commission. The European Competition Commissioner, Margrethe Vestager, indicated that Bayer properly addressed its concern by selling its assets to competitor. She firmly stated that “Our decision ensures that there will be effective competition and innovation in seeds, pesticides and digital agriculture markets also after this merger.” The competitors can effectively compete with each other and the number of the competitors in these relevant markets will remain the same.

However in the United States, the intense review procedure is being led by Assistant Attorney General for the Antitrust Division, Makan Delrahim, who also spearheaded the filing of the antitrust lawsuit to block AT&T Inc.’s takeover of Time Warner Inc.

From the Justice Department’s antitrust division’s view, although selling the assets to BASF, a good buyer who can compete effectively in the business, does help with some of the issues, the officials do not think it goes far enough.  The government would like Bayer to take a step further and divest more.

In its substantive standard of review of the proposed merger, the Justice Department is analyzing the economic relationship among entities on the same level of market (“horizontal restraint”) as well as the economic relationship along supply chains (“vertical restraint”)

No one knows what the future holds, but the companies still have hope after two previous deals – the combination of Dow Chemical Co. and DuPont Co. and China National Chemical Corp.’s takeover of Syngenta AG that won antitrust clearance.


Bayer Faces U.S. Hurdles for Monsanto Antitrust Nod (PDF)

China Averts U.S. Trade War Tensions and Also Eases Relations with Japan

Withdrawing from the Trans-Pacific Partnership (TPP) and increasing bilateral tariffs have brought the U.S. and China on the edge of a trade war. Recent developments, however, have brought hopes of averting a trade war.


In a speech last week, Chinese President Xi Jinping promised to open the country’s economy and lower import tariffs. Xi said China will widen market access for foreign investors, addressing a chief complaint from the Trump administration. Specifically, Xi said that China would raise the foreign ownership limit in the automobile, shipbuilding, and aircraft sectors.


Although there have been no talks between the U.S. and China since U.S. tariffs were announced, Trump struck a conciliatory tone in response to Xi’s announcement. He tweeted that he was “thankful” for the Chinese leader’s kind words on tariffs and access for U.S. automakers, predicting that the two countries will “make great progress together.”


Others, however, are not so optimistic. Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, said that the promised reforms are in sectors where China already has a “distinct advantage” or “strangehold” over the sector. For example, Xi pledges to open up the auto sector, where it maintains a 25 percent auto import tariff compared to the U.S’s. 2.5 percent. Analysists have cautioned that Chinese concessions on autos, while welcome, are a relatively easy win for China to offer to the U.S.


Easing relations with the U.S. is not China’s only strategy in approaching these trade disputes. China’s foreign minister Wang Yi met senior officials on Monday, April 16, in Tokyo for China’s first high-level economic talk in eight years with Japan. While there was no direct reference to Trump, the two nations’ finance ministers agreed on the importance of multilateral free trade and spoke against trade protectionism.


Victor Teo, an assistance professor at the University of Hong Kong and academic associate at the Harvard programme on US-Japan relations, said that the relationship between China and Japan has reached a turning point in order to concentrate on the challenges posed by Trump’s trade policies.

China Averts U.S. Trade War Tensions and Also Eases Relations with Japan (PDF)

CBS Presents Formal Offer to Buy Viacom Below Current Valuation

The broadcast television network, CBS, has offered to buy the TV and film company, Viacom. While CBS is best known for controlling the CBS broadcast network, Showtime, and streaming network, CBS All Access, Viacom is popular for its cable channels like MTV and Nickelodeon, and its movie studio, Paramount. The Redstone family, led by media magnate Sumner Redstone, has 80% of the voting power for both companies.


The conditions of the all-stock bid, however, are not equal for both parties. Sources have said that CBS has valued Viacom at less than its market value and CBS would assume control. Sources have also said that Leslie Moonves, current CEO and Chairman of CBS, would be leading the new combined entity for two years at least. In deal negotiations, it is unusual to start valuing the target company at a discount.


The negotiation activity around the companies has been reflected in the share prices of both. As a result, on April 2 (the day after the conditions of the bid appeared in the news), CBS stock closed at $52.86, up about 4.2%. Viacom’s stock, valued at $29.42 per share, was down more than 3%.


In February, CBS and Viacom set up special committees to explore the merger. Nevertheless, this is not the first time that the two companies have explored a merger deal. In 2016, the negotiations failed due to price and governance issues. Redstone is trying again to combine both companies in an effort to increase the volume of the two entities in a critical moment of consolidation and rapid change in media and entertainment.


The merger, if successful, would bring back together the two media companies more than ten years after their spin-off. When the split took place in 2005, Viacom was expected to be the fast-growing company, but currently CBS is the stronger one, in part due to its strong programming lineup. CBS has also gained success in the streaming market, a sector dominated by Netflix.


Since 2016, Robert Bakish, president and CEO of Viacom, Inc., has taken several steps to improve the company’s performance. Some of the measures include improving relations with cable and satellite companies and cutting costs. On one hand, according to the analyst Brian Wieser, Viacom’s weakness is not a surprise because “they haven’t really established many zeitgeist-changing programs or content,” he said. On the other hand, more optimistic opinions have suggested that CBS may ultimately pay a premium for Viacom stock.

CBS Presents Formal Offer to Buy Viacom Below Current Valuation (PDF)

The U.S. and China are Not Far From a Trade War

If there was any lingering hope China would not hit back against the Trump administration’s duties on imports of aluminum and steel, it has officially been crushed. 128 U.S. products, from fruits to wine, will be facing a 25% tariff increase. Further, China’s Ministry of Commerce announced, despite its obligations to the World Trade Organization to reduce tariffs on goods such as fruit and ethanol, it would increase tariffs on those products by an extra 15%.


In addition to imposing tariffs on steel and aluminum, Trump had previously threatened to impose protective duties on $60 billion of other Chinese products. On April 3, his administration announced a list of 1,300 proposed tariff increases designed to penalize China for disadvantaging U.S. companies in the Chinese market. Trump is seeking to retaliate against China’s theft of  U.S. intellectual property, and the newly proposed tariffs, the administration says, are equal to “the harm caused by China’s unreasonably technology transfer policies.”


Financial markets have been rattled over fear of a U.S.–China trade war and the damage it could cause to world growth. China’s Ministry of Commerce indicated the move was intended to push Trump to refrain from the broiling trade war, arguing U.S. tariffs on Chinese products violate World Trade Organization rules.


Taking tough action on China’s unfair trade practices was a center piece of Trump’s campaign. Yet as he attempts to deliver on this promise, stock markets have plummeted and major U.S. companies, including General Electric and Goldman Sachs, are pushing back.


There is strong support in the technology and finance industries for the idea that China blocks off valuable markets from American competition.  Some major players, such as Apple, Google, and Microsoft, have been supportive of targeting China’s trade practices. But whether firing back at China with tariffs will work as a solution is less clear.


The Information Technology Industry Council, and advocate group for those companies, has said it is not happy with using tariffs as the primary remedy. Other technology and investment companies now say Trump’s measures could severely damage supply chains they have built over decades.


The U.S. faces a tricky balancing act between cracking down on China’s allegedly unfair economic practices and prompting it to scale up those practices.  Trump leaves no indication he intends on scaling back punitive measures. At least in the short term, uncertainty and fear of a trade war will continue to influence global markets.

The U.S. and China are Not Far From a Trade War (PDF)

Streaming Soon: A Fight Over AT&T, Time Warner, and the Future of TV

The future of media has its day in court. On Thursday, March 22, 2018, the trial between AT&T and the U.S. DOJ over AT&T’s proposed $85 billion acquisition of Time Warner began. How Judge Richard Leon rules could shape the future of video, as the tug of war between cable companies and streaming services has seen millions of consumers cut the cord in favor of the latter. The key question at trial is what impact the merger will have on American consumers. AT&T believes that the merger would help the company remain competitive in the marketplace against tech giants such as Netflix and Amazon, while offering premium content at lower rates. The DOJ believes the exact opposite; the merger would give AT&T too much power, resulting in higher rates for consumers.


Justice Department lawyer Craig Conrath’s opening statement claimed the merger would hike rates for consumers by $0.45 a month on average, and that “Time Warner would be a weapon for AT&T because AT&T’s competitors need Time Warner.” In addition, the DOJ believes that the merger would stunt innovation in online video. AT&T’s leading lawyer, Daniel Petrocelli, claimed the merger would lead to a decrease in rates by $0.50 a month. He explained that the merger would give AT&T access to better customer data, leading to more effective “addressable advertisements.” These advertisements are tailored to specific households based on viewer data, and are nearly triple the cost. The increase in advertisement costs for large companies would lead to a decrease in rates for the consumer. But as Matt Wood, policy director at Free Press, a consumer advocacy group, suggests, “mergers create cost savings, but they don’t have to pass them along to consumers unless there’s competitive pressure.”


If the government loses, we could see an increase in vertical integration between distributors and content providers. Steven Salop, a professor of economics and law at Georgetown University Law School believes that a merger “could direct the future path of the industry.” On the other hand, if the government wins, antitrust regulators would have a huge advantage in ending any similar, future mergers. Nonetheless, the outcome’s effects are not limited to media mergers either; it could have rippling effects in other sectors, such as CVS’s $69 billion bid for insurance giant Aetna.

Streaming Soon- A Fight Over AT&T, Time Warner, and the Future of TV (PDF)

Chevron Attorney Admits What Trump Won’t

Amidst a major lawsuit accusing Chevron and four other energy companies of misrepresenting their contributions to global warming, Chevron attorney, Theodore Boutrous, claimed it does not dispute that humans have induced climate change at a court hearing in late March.


Both Oakland and San Francisco filed a lawsuit against ConocoPhillips, Exxon Mobil Corp, Royal Dutch Shell PLC, BP PLC, and Chevron last year. The cities are pursuing an abatement fund as a remedy for the flooding they claim is directly linked to global warming. Democratic party leaders filed the lawsuits as a means to confront the massive issue of climate change in the judiciary. To date, more than 900 lawsuits regarding global warming span 25 different countries.


The United States’ climate change policy has dramatically changed since President Donald Trump was appointed. In addition to expressing his intent to remove the United States from the Paris Agreement, President Trump has gone as far as advocating for heavier fossil fuel production. The President has unapologetically stated that his administration is “putting an end to the war on coal,” and has even stated climate change was a hoax.


Most recently, the President issued a directive ordering the federal government to cease using climate change as a factor in its decision-making, even though the climate has been a consideration in every major court decision within the past few years. The directive further revealed the Trump Administration’s plans to table the Clean Power Plan. The Obama Administration implemented the plan in 2015 as a means to reduce power plants’ carbon pollution across the nation.


In the heat of this political pivot in climate change, plaintiffs’ lawyers will also have to overcome tricky precedents surrounding tort claims relating to global warming. For example, Kivalina v. ExxonMobil is a Ninth Circuit decision from 2009, which granted a motion to dismiss a case where Eskimos sought monetary relief for damages they suffered as a result of climate change.


The oil giants are confident this lawsuit will also get thrown out. In their recent filing, they argue that only Congress can legally monitor carbon emissions. The oil companies rely on AEP v. Connecticut, a Supreme Court decision from 2011, determined that climate change “is an undertaking for the political branches.”


Although none of the companies admitted liability for climate change, all of them acknowledged the scientific merits of global warming.

Chevron Attorney Admits What Trump Won’t (PDF)

Court of Appeals Upholds “Blurred Lines” Ruling

The lines were blurred as to whether Robin Thicke and Pharrell Williams copied Marvin Gaye’s 1977 disco song, “Got to Give it Up.” Their song, “Blurred Lines,” was the biggest hit of 2013. Gaye’s family claimed Thicke copied the song without permission and brought the case to trial in 2015. After a seven day trial, the jury initially awarded Gaye’s family a damages award of more than $7 million. The jury was only able to rely on the sheet music, and not on recordings of the two songs.


On March 21, 2018, in a 2-1 decision, the Ninth Circuit upheld the jury’s finding that Thicke and William’s song “Blurred Lines” infringed on Gaye’s copyright song. The court also awarded damages in the amount of $5.3 million. The Gaye estate will also receive 50 cents per interest on future revenue from the song.


Opponents of the case warned that the suit could have a “chilling effect on creativity.” In her dissent, Judge Jacqueline Nguyen said the decision allowed the copyright of something that had never been copyrighted before: musical style. She said Thicke’s song only resembled Gaye’s in style and that the decision “strikes a devastating blow to future musicians and composers everywhere.” Over 200 musicians filed a brief in favor of Thicke and Williams, saying that the ruling would have an “adverse impact…on the music industry and would “eliminate[e] any meaningful standard for drawing the line between permissible inspiration and unlawful copying.”


The majority rejected the idea that the decision was a devastating blow on music. The court suggested that the case actually rested on the skills of Thicke’s attorneys. Gaye’s attorney applauded the ruling, saying that the decision encourages writers to create original work.


Drawing from the court’s dissent, Thicke’s attorney stated that there would be further appeal.

Court of Appeals Upholds Blurred Lines Ruling (PDF)