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California Joins Facebook Investigation, Amazon Accused of “Tying” by Online Merchant, Facebook Pulled Up Over Fake Ads and more
This is Part II of the IP Privacy and Anti-trust news for the week of 11th November, 2019. Part I is available here.
California Joins the Facebook Investigation Cavalcade; Amazon Accused of “Tying” by Online Merchant; Lavazza Dragged to Court by Amazon Reseller; Tik Tok Responds to Allegations of National Security Risk; Facebook Pulled Up Over Fake Ads and more.
California Joins the Facebook Investigation Cavalcade
Over the last couple of months, nearly every US state has announced investigations into antitrust or privacy-related matters of Google or Facebook, or both. Conspicuous by its absence from that list was the home of Big Tech itself, California. However, it turns out, California officials have been investigating Facebook over its privacy practices for over a year now, state attorney general Xavier Becerra announced.
California’s probe was launched in 2018, shortly after news broke about the Cambridge Analytica scandal, wherein the political consulting firm had improperly accessed data of tens of millions of users of the social media giant. However, what initially began as an inquiry into the scandal developed into a more overarching investigation into potential violations of California law by Facebook, via a wilful deceit of users and misrepresentation of its privacy practices. The announcement of the investigation was accompanied by a subpoena for key information the company has allegedly failed to release, including executive communication regarding auditing third party developers’ access to data, advertising policies, and email correspondence from both CEO Mark Zuckerberg and COO Sheryl Sandberg.
On its end, Facebook, through a statement by Will Castleberry, Facebook’s vice president of state and local policy, has claimed it has “cooperated extensively with the state of California’s investigation”, and has “provided thousands of pages of written responses and hundreds of thousands of documents.”
Facebook has been embroiled in countless investigations over the last year, pertaining to the Cambridge Analytica scandal and its privacy policies and practices in general. The Federal Trade Commission’s investigation into the scandal resulted in a $5 billion fine, and another investigation by the FTC—this time pertaining to antitrust violations—is currently underway. This is in addition to House Judiciary Committee’s antitrust investigation along with investigations by 47 attorney generals across the US.
Amazon Accused of “Tying” by Online Merchant
In a potential blow to the e-commerce behemoth, an online merchant has sent a letter to federal lawmakers accusing Amazon of forcing sellers to use its expensive logistics services, ultimately raising prices for consumers. The 62-page letter effectively lays out an antitrust case that underscores the consequent harm to consumers—which is the traditional standard for antitrust cases in the US. The primary allegation against Amazon is that it is “tying” its marketplace and logistics services together, an antitrust violation where a company’s dominance in one market is used to gain an advantage in another.
The letter claims that online merchants are penalised for using any logistics services but Amazon’s, through decreased visibility on the e-commerce site, as well as heavy penalties—including suspension—for delayed deliveries (which are not levied if Amazon’s services are being used). This forces merchants to use Amazon’s logistics services, even though, as claimed in the letter, competitors’ services are cheaper and faster. The merchant, who claims he can’t pursue an antitrust case himself due to the terms of his contract with Amazon, hopes that the Federal Trade Commission, which is already interviewing Amazon merchants, will pursue an investigation, or that a logistics services competitor will file a suit, alleging unfair losses in business due to Amazon’s practices.
Amazon, in an emailed statement, countered the merchant’s allegations, claiming that the prices of its logistics services were competitive and often cheaper than competitors’, and that merchants were not penalised in any manner for using other delivery options. However, in a July letter to a federal antitrust panel, Amazon conceded that products of merchants who did use Amazon’s services were likely to feature more prominently in Amazon’s search results, but this was not because of algorithmic bias, but because Amazon’s logistics “generally provides a better and more reliable experience for our customers than fulfilment through other means”.
Lavazza Dragged to Court by Amazon Reseller
Lavazza, an Italian manufacturer of coffee products, has been slapped with a lawsuit by an American reseller, LY Berditchev Corp., which accuses the coffee manufacturer of filing false intellectual property infringement complaints and defaming the reselling company. According to the lawsuit, Berditchev is in the business of reselling products, including via Amazon, and Lavazza’s products are amongst those being sold by Berditchev. The suit goes on to claim that Lavazza filed false intellectual property infringement complaints with Amazon, alleging that the products being sold were counterfeit, a claim vehemently denied in the suit.
Berditchev further claims that Amazon has a policy of acting on nearly every “properly submitted” infringement complaint, “to meet a minimum liability standard”, and here too, the reseller’s products were taken down from the site. Despite repeated requests, the suit claims, Lavazza refused to retract these false complaints, damaging the reseller’s immediate revenue, as well as its “performance metrics” on the e-commerce site, hampering the sale of other products of the reseller. Consequently, Berditchev has filed the lawsuit, claiming that Lavazza has made false and misleading representations, engaged in unfair competitive practices (as the two companies are competitors in the sale of coffee products), and defamed the reseller.
Tik Tok Responds to Allegations That it is a National Security Risk
In light of investigation by the US government of potential national security risks posed by TikTok, the social media video app owned by Chinese firm ByteDance, Vanessa Pappas, the general manager of TikTok US, issued a formal response to these concerns via a blog post addressed to TikTok’s stakeholders. She outlined several steps the company had taken, over the past year, in a bid to allay fears that the app was a risk to national security. She said claimed that the company had built a senior team of US leaders with industry experience, and that content moderation on the site was done by “US-based employees”.
She added that the company employed “several rounds of human moderation” and reviews to ensure adherence to its US policies. Pappas further claimed that all US data collected by the company was kept in the US and none of its data centres were located in China, and the company employed a team dedicated to ensuring compliance with cybersecurity standards. However, she did not address issues pertaining to copyright infringement, which had been raised by several major music publishers.
Facebook Pulled Up Over Fake Ads
In a lawsuit filed against Facebook by a media personality, John de Mol, over the misappropriation of his and other celebrities’ likeness in fake ads related to cryptocurrency scams on the social media website, a Dutch court not only ordered Facebook to remove all the offending ads, but also directed that Facebook can be required to use filter technologies to pre-emptively take down such ads. These fake ads had become a major concern, with victims of scams furthered by these ads reporting a total of €1.7 million in damages.
Facebook’s arguments were that pre-emptively removing such ads would run afoul of EU law against general monitoring conditions being placed on Internet platforms, and of the right to freedom of expression. It also claimed that it was just a neutral platform and could not be held liable for content posted by users. However, the Court rejected these arguments citing a recent EU ruling that directed platforms to remove hate speech.
A similar suit last year, brought by UK consumer advice personality Martin Lewis, was withdrawn after Facebook agreed to apply new measures to combat such fake ads—Facebook added a “scam ads report button”. While it is unclear whether Facebook aims to appeal the verdict of the Dutch court, it has promised to bring this button to its Dutch site early next month.
Authored and compiled by Neharika Vhatkar (Associate, BananaIP Counsels) and Param Gupta (Legal Intern)
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