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Facebook Accused of Buying and Burying Rivals by US FTC in Renewed Antitrust Fight

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By Reuters | Updated: 20 August 2021

The US Federal Trade Commission (FTC) refreshed its antitrust case against Facebook Inc on Thursday, adding more detail on the accusation the social media company crushed or bought rivals and once again asking a judge to force the social media giant to sell Instagram and WhatsApp.

At 80 pages, the new complaint is significantly longer than the original one and includes additional data intended to support the FTC’s contention that Facebook is a monopolist. An expanded portion of the complaint argues that Facebook dominates the US personal social networking market with more than 65 percent of monthly active users since 2012.

The FTC voted 3-2 along party lines to file the amended lawsuit and denied Facebook’s request that agency head Lina Khan be recused. Khan participated in filing the new complaint.

The agency also repeated its request that a court order Facebook to sell Instagram, which it bought in 2012 for $1 billion (roughly Rs. 7,445 crores), and WhatsApp, which it bought in 2014 for $19 billion (roughly Rs. 1,41,467 crores).

The FTC accused Facebook of an “illegal buy or bury scheme to crush competition” in the headline of the press release on its complaint.

Facebook said it would continue to fight the lawsuit.

“It is unfortunate that despite the court’s dismissal of the complaint and conclusion that it lacked the basis for a claim, the FTC has chosen to continue this meritless lawsuit,” a company spokesman said. “Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.”

Not the same as Twitter

The FTC’s high-profile case against Facebook represents one of the most significant challenges the agency has brought against a tech company in decades, and is being closely watched as Washington aims to tackle Big Tech’s extensive market power.

“Despite causing significant customer dissatisfaction, Facebook has enjoyed enormous profits for an extended period of time suggesting both that it has monopoly power and that its personal social networking rivals are not able to overcome entry barriers and challenge its dominance,” the amended complaint said.

In an effort to show Facebook’s dominance in personal social networking, the FTC’s complaint differentiated it from short video app TikTok and sites like Twitter, Reddit, and Pinterest, which it said are not focused on connecting friends and family.

The amended complaint comes after Judge James Boasberg of the US District Court for the District of Columbia said in June that the FTC’s original complaint filed in December failed to provide evidence that Facebook had monopoly power in the social-networking market.

Beginning in 2007, Facebook invited apps to its platform to make it more attractive but realized that some could develop into competitors, and slammed the door in 2013 to any app that could become a rival but reversed itself in 2018 under pressure in Europe, the complaint said.

“Having suspended its anticompetitive platform policies in response to anticipated public scrutiny, Facebook is likely to reinstitute such policies if such scrutiny passes,” the complaint said.

Facebook shares were up 0.2 percent at $356.09 (roughly Rs. 26,500) in afternoon trading.

‘A better complaint’

John Newman, who teaches at the University of Miami School of Law, said the complaint clearly responds to Judge Boasberg’s concerns about the first version. “There aren’t huge new bombshells in here.”

A second antitrust expert said he believed the court would have a hard time ordering the sale of Instagram or WhatsApp because they were purchased years ago.

“It is a better complaint because it states with much more specificity that Facebook has dominance in social networking,” added Seth Bloom of Bloom Strategic Counsel.

US Senator Amy Klobuchar, the chair of the Senate Judiciary Committee’s antitrust panel, said she was pleased to see the FTC hold Facebook accountable for a “long history of anticompetitive behavior.”

Alex Harman of consumer rights group Public Citizen said, in a reference to the FTC’s new chair, Khan, that the refiling of the case “should be a message to Facebook and other monopolists that there is a new sheriff in town and the party is over.”

© Thomson Reuters 2021

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Australia Plans to Force Parental Consent for Minors on Social Media

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By Reuters | Updated: 25 October 2021

Australia plans to make social media companies obtain parental consent for users under the age of 16 and threaten fines of up to AUD 10 million (roughly Rs. 55 crores) for Internet platforms which fail to comply, under draft legislation published on Monday.

Social media companies, which include anonymous forums like Reddit and smartphone dating apps like Bumble, would also be required to take all reasonable steps to determine users’ ages and prioritise children’s interests when collecting data, the Online Privacy Bill said.

The new proposed rules would put Australia among the most stringent countries in terms of age controls for social media, and build on efforts to rein in the power of Big Tech following mandatory licencing payments for media outlets and plans to toughen laws against online misinformation and defamation.

Facebook this month faced anger from US lawmakers after a former company employee and whistleblower handed thousands of documents to congressional investigators amid concerns the company harmed children’s mental health and has stoked societal divisions — a development cited by Australian lawmakers on Monday.

“We are ensuring (Australians’) data and privacy will be protected and handled with care,” said Attorney-General Michaelia Cash in a statement.

“Our draft legislations means that these companies will be punished heavily if they don’t meet that standard,” she added.

Assistant Minister for Mental Health and Suicide Prevention David Coleman said the “leak of Facebook’s own internal research demonstrates the impact social media platforms can have on body image and the mental health of young people”.

Facebook’s director of public policy in Australia and New Zealand, Mia Garlick, said in a statement that the company was reviewing the proposed law and understood “the importance of ensuring Australia’s privacy laws evolve at a comparable pace to the rate of innovation and new technology we’re experiencing today”.

Under the draft law, privacy watchdog the Office of the Australian Information Commissioner would receive full investigation and enforcement powers, with the ability to fine a corporation up to AUD 10 million (roughly Rs. 55 crores), 10 percent its annual turnover or three times the financial benefit of any breach.

© Thomson Reuters 2021

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Australia Plans to Force Parental Consent for Minors on Social Media

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By Reuters | Updated: 25 October 2021

Australia plans to make social media companies obtain parental consent for users under the age of 16 and threaten fines of up to AUD 10 million (roughly Rs. 55 crores) for Internet platforms which fail to comply, under draft legislation published on Monday.

Social media companies, which include anonymous forums like Reddit and smartphone dating apps like Bumble, would also be required to take all reasonable steps to determine users’ ages and prioritise children’s interests when collecting data, the Online Privacy Bill said.

The new proposed rules would put Australia among the most stringent countries in terms of age controls for social media, and build on efforts to rein in the power of Big Tech following mandatory licencing payments for media outlets and plans to toughen laws against online misinformation and defamation.

Facebook this month faced anger from US lawmakers after a former company employee and whistleblower handed thousands of documents to congressional investigators amid concerns the company harmed children’s mental health and has stoked societal divisions — a development cited by Australian lawmakers on Monday.

“We are ensuring (Australians’) data and privacy will be protected and handled with care,” said Attorney-General Michaelia Cash in a statement.

“Our draft legislations means that these companies will be punished heavily if they don’t meet that standard,” she added.

Assistant Minister for Mental Health and Suicide Prevention David Coleman said the “leak of Facebook’s own internal research demonstrates the impact social media platforms can have on body image and the mental health of young people”.

Facebook’s director of public policy in Australia and New Zealand, Mia Garlick, said in a statement that the company was reviewing the proposed law and understood “the importance of ensuring Australia’s privacy laws evolve at a comparable pace to the rate of innovation and new technology we’re experiencing today”.

Under the draft law, privacy watchdog the Office of the Australian Information Commissioner would receive full investigation and enforcement powers, with the ability to fine a corporation up to AUD 10 million (roughly Rs. 55 crores), 10 percent its annual turnover or three times the financial benefit of any breach.

© Thomson Reuters 2021

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Facebook Now Reportedly Accused of Wrongdoing by Another Whistleblower

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By Agence France-Presse | Updated: 23 October 2021

A former Facebook worker reportedly told US authorities Friday the platform has put profits before stopping problematic content, weeks after another whistleblower helped stoke the firm’s latest crisis with similar claims. The unnamed new whistleblower filed a complaint with US financial regulator Securities and Exchange Commission that could add to the company’s distress, said a Washington Post report.

Facebook has faced a storm of criticism over the past month after former employee Frances Haugen leaked internal studies showing the company knew of potential harm stoked by its sites, prompting US lawmakers’ to renew a push for regulation.

In the SEC complaint, the new whistleblower recounts alleged statements from 2017, when the company was deciding how to handle the controversy related to Russia’s interference in the 2016 US presidential election.

“It will be a flash in the pan. Some legislators will get pissy. And then in a few weeks they will move onto something else. Meanwhile we are printing money in the basement, and we are fine,” Tucker Bounds, a member of Facebook’s communications team, was quoted in the complaint as saying, The Washington Post reported.

The second whistleblower signed the complaint on October 13, a week after Haugen’s scathing testimony before a Senate panel, according to the report.

Haugen told lawmakers that Facebook put profits over safety, which led her to leak reams of internal company studies that underpinned a damning Wall Street Journal series.

The Washington Post reported the new whistleblowers SEC filing claims the social media giant’s managers routinely undermined efforts to combat misinformation and other problematic content for fear of angering then US president Donald Trump or for turning off the users who are key to profits.

Erin McPike, a Facebook spokeswoman, said the article was “beneath the Washington Post, which during the last five years would only report stories after deep reporting with corroborating sources.”

Facebook has faced previous firestorms of controversy, but that has not translated into substantial new US legislation to regulate social media.

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WhatsApp, Facebook Monetise Users’ Data, Can’t Claim Privacy Protection on Their Behalf, Says Government

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By Press Trust of India | Updated: 23 October 2021

The Centre has defended in the Delhi High Court the legal validity of its new IT rule requiring messaging apps, such as WhatsApp, to “trace” the first originator of the information, saying that the law empowers it to expect such entities to create safe cyberspace and counter illegal content either themselves or by assisting the law enforcement agencies.

The Centre said that Section 87 of the Information Technology Act gave it the power to formulate Rule 4(2) of the Intermediary Rules – which mandates a significant social media intermediary to enable the identification of the first originator of information in “legitimate state interest” of curbing the menace of fake news and offences concerning national security and public order as well as women and children.

In its affidavit filed in response to WhatsApp’s challenge to the rule on the ground that breaking the encryption invades its users’ privacy, the Centre has claimed that platforms “monetise users’ information for business/ commercial purposes are not legally entitled to claim that it protects privacy”.

“Petitioners (WhatsApp and Facebook), being multi-billion dollar enterprises, almost singularly on the basis of mining, owning and storing the private data of natural persons across the world and thereafter monetising the same, cannot claim any representative privacy right on behalf of the natural persons using the platform,” said the affidavit filed by Ministry of Electronics and Information Technology.

“WhatsApp collects users’ personal information and shares it with Facebook and third-party entities for business/commercial purposes (WhatsApp’s privacy policy of 2016 and its 2021 update). In fact, the regulators of various countries dearly hold that Facebook should be fixed with accountability for its services and data management practices,” it added.

The Centre said reasons regarding technical difficulties cannot be an excuse to refuse compliance to the law of the land and if a platform does not have the means to trace the “first originator” without breaking the encryption then it is the platform which “ought to develop such mechanism” in larger public duty.

“The Rule does not contemplate the platforms breaking the end-to-end encryption. The Rule only contemplates the platform to provide the details of the first originator by any means or mechanism available with the platform. If the platform does not have such means, the platform ought to develop such mechanism considering the platforms widespread prevalence and the larger public duty,” the affidavit said.

The Centre said “if the intermediary is not able to prevent or detect the criminal activities happening on its platform, then the problem lies in the platform’s architecture and the platform must rectify their architecture and not expect the change of legislation. Reasons regarding ‘technical difficulties’ cannot be an excuse to refuse compliance to the law of the land.”

In August, a bench headed by Chief Justice DN Patel had sought the Centre’s stand on WhatsApp petition challenging new rule on the ground it violates the right to privacy and is unconstitutional.
WhatsApp’s parent company Facebook has also mounted a similar challenge to the rule.

In its plea, WhatsApp had said that the traceability requirement forced it “break end-to-end encryption” and thus infringe upon the fundamental rights to privacy and free speech of the hundreds of millions of citizens using its platform to communicate privately and securely.

The Centre, in its response, has said that the petition by WhatsApp is not maintainable as a challenge to the constitutionality of any Indian law is not maintainable at the instance of a foreign commercial entity.

It further claimed that Rule 4(2) is an “embodiment of competing rights of citizens of India” and aims to preserve the “rights of vulnerable citizens within the cyberspace who can be or are victims of cyber-crime”.

The Centre said there are checks and balances to ensure that the rule is not misused or invoked in cases where other less intrusive means are effective in identifying the originator of the information.

The identification of the first originator pertains only to viral content relating to heinous crimes, as specified in the rule, and not identifying all users or citizens, it said.

“If the IT Rules 2021 are not implemented the law enforcement agencies will have difficulty in tracing the origin of fake messages and such messages will percolate in other platforms thereby disturbing peace and harmony in the society further leading to public order issues,” the affidavit said.

The Centre has also said that in case of any legal proceeding having any message on the platform as evidence, WhatsApp would lose the defence of ‘intermediary protection’ but it “does not mean that WhatsApp will be held guilty and its officials would be legally responsible”.

“The courts can include WhatsApp as a respondent and consider ‘Contributory Negligence’ and ‘Vicarious liability on WhatsApp and its executives’ (under Section 85). Such liabilities will fructify only when such a case comes up and WhatsApp is named as an entity that it is sufficiently proved that it has contributed to the commission of the crime,” it added.

The centre also said that the Supreme Court itself had asked the Central government to “take all the steps necessary to identify persons who create and circulate electronic information” about certain offences such as sexual abuse.

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Facebook’s Oversight Board Says Company Not ‘Fully Forthcoming’ on How It Deals With High-Profile Users

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By Reuters | Updated: 22 October 2021

Facebook’s independent oversight board demanded more transparency from the social media giant on Thursday, saying the company was not “fully forthcoming” on how it deals with certain high-profile user accounts.

The comments follow a Wall Street Journal report last month that said millions of Facebook accounts belonging to celebrities, politicians, and other high-profile users were exempted from some internal checks.

The board said that Facebook has not been transparent with the company’s ‘cross-check’ system, an internal program the social media network says is used to double-check enforcement actions against certain users.

“Facebook needs to commit to greater transparency and to treat users fairly,” the board said in a tweet.

In relation to its May decision to uphold the indefinite suspension of former US President Donald Trump’s account after the January 6 riot, the board said when Facebook referred the case, it did not mention the cross-check system until it was asked.

“Given that the referral included a specific policy question about account-level enforcement for political leaders, many of whom the Board believes were covered by cross-check, this omission is not acceptable,” it said.

Facebook, in the form of a policy advisory opinion, has asked the board to review its cross-check system and make recommendations on how it can be changed.

A company spokesperson said the board’s work had been “impactful,” which is why it asked for input into the cross-check system.

Facebook created the board mainly to address criticism over how it handles problematic content and is responsible for independent verdicts on a number of thorny decisions related content moderation.

Going forward, the board will publish quarterly and annual transparency reports to provide assessment on whether its recommendations were implemented.

In its first quarterly report, the board said over half a million Facebook and Instagram users submitted appeals between October 2020 and the end of June 2021, of which more than a third were related to content concerning Facebook’s rules on hate speech.

© Thomson Reuters 2021

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Facebook’s Name-Change Will Not Deter Lawmaker or Regulatory Scrutiny: Experts

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By Reuters | Updated: 21 October 2021

Renaming Facebook is unlikely to enable the tech giant to distance itself from regulatory and public scrutiny around the potential harms caused by its social media apps, marketing and branding experts told Reuters. Tech publication The Verge reported on Tuesday that the California-based firm is planning to change its corporate branding to reflect that as well as owning the social media platform that made it a global household name, it also now includes other thriving businesses like Instagram, WhatsApp and Oculus.

The company declined to comment regarding the report on the possible rebranding. It did not immediately respond to a request for comment for this story.

Facebook is battling intense scrutiny after a whistleblower leaked thousands of internal documents that showed it contributed to increased polarisation online when it made changes to its content algorithm, failed to take steps to reduce vaccine hesitancy, and was aware that popular social media app Instagram harmed the mental health of teenage girls.

The US Senate held a hearing earlier this month into the effect of Instagram on young users.

“Legislators and politicians are sufficiently smart to not be fooled by a rebranding,” said James Cordwell, an internet analyst at Atlantic Equities.

Renaming can be an effective strategy to allow subsidiary brands to maintain their own reputations, said Marisa Mulvihill, head of brand and activation at Prophet, a branding and marketing consultancy. But the media and regulators “are not going to stop investigating or creating reforms just because you rebranded,” she added.

The new parent company name could reflect Facebook’s focus on building the ‘metaverse,’ The Verge reported, referring to a proposed digital world where people can use different devices to move and communicate in a virtual environment.

It could also prevent a possible negative perception around the Facebook name from affecting WhatsApp, the messaging app used by nearly 2 billion people globally, and Oculus, its virtual reality brand, experts said.

According to Prophet’s annual ranking, Facebook’s brand relevance to US consumers has dropped “precipitously” over the past several years, Mulvihill said.

“What you don’t want is for that to proliferate and have a negative halo effect on other parts of your business,” said Deborah Stafford-Watson, head of strategy at brand consultancy firm Elmwood.

Other major companies have taken similar steps. Google reorganised under a holding company called Alphabet in 2015, as the company best known for internet searches increasingly pursued ambitions like autonomous driving technology.

In 2003, cigarette seller Philip Morris rebranded itself as Altria, at a time when the company owned Kraft Foods. It later spun off the food division.

While the move to rebrand as Altria didn’t remove the negative connotations of tobacco from the cigarette brands itself, it did help to limit the effects on Kraft, Mulvihill said.

Facebook will continue to confront the same pressures even after a rebrand, the experts said.

“I don’t think it’s going to help Facebook mitigate regulators’ scrutiny or the general public’s skepticism, if not distrust,” said Natasha Jen, a partner at Pentagram, a design studio that does advertising and communication work. “Trust is something you need to earn.”

© Thomson Reuters 2021

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