Welcome to the CAVEAT Weekly Newsletter, where we break down some of the major developments and happenings occurring worldwide when discussing cybersecurity, privacy, digital surveillance, and technology policy.
At 1,800 words, this briefing is about a 9-minute read.
At a Glance.
- Judge finds that Google holds an illegal monopoly.
- Microsoft pulled back on its AI partnership with Emirati firm over concerns related to Chinese influence.
Judge finds that Google maintains an illegal monopoly over online searches.
The News.
On Monday, Federal Judge Amit Mehta ruled that Google maintains a monopoly over online searches and advertising and is currently in violation of antitrust laws. In the opinion, Judge Mehta stated that “after having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly.” With this ruling, Attorney General Merrick Garland stated that “this victory against Google is a historic win for the American people.”
This lawsuit was originally filed in 2020 when the Department of Justice and several state attorney generals sued the company. After largely agreeing with their case, the court found that Google had both a monopoly in general search services and general search text advertisements. In their ruling, the court stated that Google maintains these monopolies through exclusive agreements with various partners. Due to these agreements, the judge stated that these restrict Google’s rivals from being able to access the scale needed to compete with Google, which has in turn, resulted in a lack of overall innovation in the industry. In the judge’s opinion, they wrote “unconstrained price increases have fueled Google’s dramatic revenue growth and allowed it to maintain high and remarkably stable operating profits.” The judge continued stating that “Google in turn has used these monopoly profits to secure the next iteration of exclusive deals through higher revenue share payments.”
Google’s President of Global Affairs, Kent Walker, stated that “this decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily avaliable.” Walker continued stating that “as this process continues, we will remain focused on making products that people find helpful and easy to use.”
The Knowledge.
With this massive ruling, Google could be at substantial risk as a second trial is going to be used to determine what punishment the company should face. While this trial will take sometime to conclude, its rulings could have the potential to dramatically change the tech industry. For example, in the Mehta’s opinion, he cited how Google has used exclusive agreements to lock in partners by paying them substantial amounts of cash and in turn push out competition. However, if the second trial found that Google needed to dissolve these agreements, then it could have substantial negative ramifications for Google and its partners. For example, in Google’s agreement with Apple, Google pays Apple $20 billion annually, which equates to roughly thirty-six percent of the company’s earnings through search advertising made through Safari. If the agreement was dissolved, this would equate to a four to six percent loss in profit for Apple.
Aside from potentially causing substantial profit losses for companies involved in these agreements, this ruling is also representative of a change in antitrust policy. Rebecca Haw Allensworth, a legal professor at Vanderbilt Law School, highlighted how the ruling was “a sign that the tide is changing in antitrust law generally away from the laissez faire system that we’ve had for the last forty years.” This ruling is representative of the Biden administration’s overall efforts to hold tech giants more accountable. Aside from this case, his office also filed a series of lawsuits against other companies, like Apple, as well as opened several antitrust investigations into other companies like Microsoft and Nvidia. While many of these lawsuits and investigations are still being conducted, these efforts are representative of the growing pressures facing large technology companies that could result in significant changes.
The Impact.
While the impacts of these antitrust lawsuits are going to take some time to be fully resolved, these cases have the potential to significantly change how the industry performs and behaves. While these changes will not occur simultaneously, these impacts could result in services and products changing dramatically over the next few years as well as result in new more competitive products and services being introduced by rivals. For now, average consumers are unlikely to see any of these changes, but overall these industry changes should theoretically promote a more competitive and innovative industry, which in turn will result in more impactful and useful tools for consumers. For large technology companies as well as their partners, organizations should be aware of the growing pressure facing this industry and plan accordingly.
Microsoft scaled back AI deal with Emirati firm.
The News.
Last week, Microsoft announced its intention to modify its plan to work with Emirati AI firm, G42. When the $1.5 billion partnership was initially announced in April, red flags were raised in Congress over concerns surrounding China’s potential ability to access the sensitive technologies being shared between the two companies given G42’s previous ties with the nation. However, under this new plan, Microsoft has stated that they intend to install greater safeguards with G42 to ensure sensitive information and trade secrets are better protected. More specifically, this new plan would involve Microsoft leasing these technologies to G42 instead and also institute a new arrangement that would give the company significantly more oversight over any hardware and software transferred to G42.
While this deal was endorsed by the Biden administration when it was announced, GOP Congress members have routinely expressed their concerns over the last several months. These Congressional members routinely argued that if stronger safeguards were not established critical technologies could be inadvertently exposed to Beijing. However, with this announcement, these Congress members have now begun to praise the company for its decision to implement stronger safeguards and secure American technologies.
The Knowledge.
With Microsoft’s new decision, this move reflects the significant pressure that the government is placing on the private sector to secure critical American intellectual properties and technologies. For several months, the Biden administration and its agencies have been routinely updating existing export laws to ban domestic firms from being able to send specific technologies to other countries, especially China.
As US companies continue to maintain dominance in developing and deploying these emerging technologies, the US government has continued to implement new regulations to ensure that this dominance is maintained. For example, over the past several months, the Commerce Department has updated export rules several times to prevent the exportation of chip equipment and other advanced tools to unapproved nations. With these moves, officials routinely expressed their concerns related to nations, namely China, being able to copy and produce these technologies undermining both the US’s competitive edge as well as posing a significant threat to national security. With Microsoft adjusting its deal, it is clear that the US is using both hard and soft power to control these technologies. Given how fast this deal was adjusted over several months, it is likely that both Congress and the Biden administration will continue to pressure private companies to ensure any deals involving these technologies are properly vetted and secured before anything is formalized.
The Impact.
Despite Microsoft adjusting its deal with G42, it is unlikely that these new safeguards will stifle innovation or development but rather will slow the process down to ensure that these technologies are being properly handled. However, while these safeguards may slow innovation, they will translate to ensuring that US technologies remain secure and do not get exposed to potentially malicious actors. For now, these adjustments are unlikely to have any immediate impact on the AI industry; however, these changes are indicative of a pattern continuing to expand within the federal government.
Given the federal government's continued practice of updating regulations and investigating AI business dealings, AI developers should be aware that this pressure is unlikely to wane anytime soon. Regardless of which candidate wins the upcoming November election, both parties have made it clear that they intend to ensure the US maintains its technological edge.
Other Noteworthy Stories.
US court blocks Biden administration net neutrality rules.
What: The Sixth Circuit US Court of Appeals has blocked the Federal Communications Commission’s (FCC) attempted reinstatement of net neutrality rules.
Why: Last Thursday, the Sixth Circuit Court announced that it would temporarily block the net neutrality rules until late October or early November while the court seeks to schedule times to hear oral arguments regarding the issue. In this announcement, the court wrote, “the final rule implicates a major question, and the commission has failed to satisfy the high bar for imposing such regulations.” The court wrote that “net neutrality is likely a major question requiring clear congressional authorization.”
In response to this announcement, the FCC’s Chair, Jessica Rosenworcel, stated that “today’s decision by the Sixth Circuit is a setback but we will not give up the fight for net neutrality.”
US Senate committee rejects effort to bar AI disclosure rules for political ads.
What: The US Senate Commerce Committee announced that it has rejected the FCC’s bid to require political radio and television ads to disclose if content was created with AI.
Why: Last Wednesday, the Senate Commerce Committee voted 14-12 along party lines to reject the FCC’s proposed rule. For context, if passed, these rules would have required political advertisers to disclose if they used AI to develop their television or radio ads. However, these disclosures were not required for advertisements being displayed on streaming platforms or over the internet.
In response to the rejection, the FCC has announced that it is considering a petition that would request the agency clarify an existing law that prohibits candidates from fraudulently misrepresenting issues to also include using deliberately deceptive AI-generated content.
Justice Department sues TikTok over alleged violations of children’s privacy laws.
What: The Department of Justice (DoJ) has begun a lawsuit against TikTok and its parent company, ByteDance, over alleged violations of children’s online privacy.
Why: Last Friday, the DoJ accused the social media application of allowing children thirteen or younger to create accounts while also collecting data on those children. Additionally, the lawsuit also alleges that these companies refused to delete these accounts and continued to collect information despite parental requests. If accurate, these allegations would mean that these companies are violating the Children’s Online Privacy Protection Act (COPPA) as well as a previous settlement agreement that the app agreed to in 2019. In the filing, the DoJ stated that “to put an end to TikTok’s unlawful massive-scale invasions of children’s privacy, the [US] brings this lawsuit seeking injunctive relief, civil penalties, and other reliefs.” This lawsuit comes after an investigation was conducted by the Federal Trade Commission (FTC).
TikTok has responded to this lawsuit stating that they “disagree with these allegations, many of which relate to past events and practices that are factually inaccurate or have been addressed.”