Emerging Technologies Washington Update

June 13, 2019

Pardon Our Dust

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This Week: House Judiciary Subcommittee convenes first hearing on online platforms and market power, FCC commissioners appear before Senate Commerce Committee, G20 Finance Ministers agree on path forward for digital tax, FTC hosts final competition and consumer protection hearing.

Week in Review

The Senate spent the week considering another slew of judicial nominations, but on Tuesday, Senate Democrats tried to force a vote on House-passed net neutrality legislation. Senate Commerce Committee Chairman Wicker (R-MS) objected. The effort was largely symbolic on the one year anniversary of the FCC repealing Obama-era net neutrality regulations. The Democratic-controlled House passed the Save the Internet Act earlier this year with little expectation of the Republican-controlled Senate taking it up. Wicker and Senator Sinema (D-AZ) announced a bipartisan net neutrality working group earlier this year, but have not yet offered a proposal.

On the other side of the Capitol, the House brought its first FY20 appropriations bills to the floor in a “minibus” that included the Labor-Health and Human Services-Education, Defense, State-Foreign Operations, Energy-Water, and Legislative Branch bills. A final vote is expected early next week amid a veto threat from the White House. Today, the House Intelligence Committee holds a hearing on the “National Security Challenges of Artificial Intelligence, Manipulated Media, and “Deepfakes.”

Elsewhere, 10 state attorneys general led by Xavier Becerra (CA) and Tish James (NY) filed a suit on Tuesday to block the proposed merger between T-Mobile and Sprint, which is still undergoing review at the Department of Justice. FCC Chairman Pai endorsed the merger last month, arguing that the companies’ commitments will help close the digital divide in rural America and advance US leadership in 5G. The attorneys general of Colorado, DC, Maryland, Michigan, Mississippi, Nevada, Virginia, and Wisconsin joined the suit.

Looking Ahead

Next Wednesday, the Senate Appropriations Committee will markup a $4.5 billion supplemental funding bill per the President’s request for more funding to secure the border. Leader McConnell (R-KY) is also expected to bring the FY20 National Defense Authorization Act (NDAA) to the floor.

The House will vote on its first FY20 minibus early next week before bringing up its second package of spending bills, including the Commerce-Justice-Science, Agriculture-Rural Development-FDA, Interior-Environment, Military Construction-Veterans Affairs, and Transportation-Housing and Urban Development bills.

House Judiciary Subcommittee Convenes First Hearing on Online Platforms and Market Power

On Tuesday, the House Judiciary Antitrust Subcommittee convened a hearing entitled “Online Platforms and Market Power, Part 1: The Free and Diverse Press.” The hearing was the first in series the Committee initiated to investigate the state of competition within digital markets. The investigation will also seek to determine the efficacy of existing antitrust law and what, if any, reforms are needed to ensure greater oversight of the technology industry.

Subcommittee Chairman Cicilline (D-RI) opened the hearing by stating an investigation into the business practices of dominant technology companies is long overdue. He argued that the monopolization of digital advertising has negatively affected credible journalism and led to the reduction of credible news. His Democratic colleagues expressed similar remarks during the hearing and discussed with witnesses the ways in which the Federal Trade Commission (FTC) can be reinvigorated to ensure oversight of the technology industry. Full Committee Ranking Member Collins (R-GA) and other Republican Subcommittee members cautioned that while oversight is necessary, the federal government should not enact laws that would stifle the free market.

The Subcommittee paid particular attention to the impact digital advertising has on news organizations. The majority of witnesses agreed that news publishers face a disadvantage within advertising markets due to the dominance of a few online platforms. Several witnesses explained that these platforms maintain their digital advertising dominance due to the amount of consumer data they possess.

FCC Commissioners Appear Before Senate Commerce Committee

On Wednesday, the Senate Commerce Committee held a Federal Communications Commission (FCC) oversight hearing featuring testimony from FCC Chairman Ajit Pai and Commissioners Mike O’Rielly, Brendan Carr, Jessica Rosenworcel, and Geoffrey Starks. While lawmakers discussed issues related to consumer privacy, net neutrality, and robocalls, the Committee focused much of the discussion on rural broadband access and 5G deployment.

In discussions on broadband deployment, Members on both sides of the aisle criticized the agency for rampant inaccuracies in broadband mapping, with Chairman Wicker urging the FCC not to move forward on investments in broadband deployment until the agency addresses these issues. The Chairman announced the introduction of the Broadband Deployment Accuracy and Technological Availability (DATA) Act with Sens. Peters (D-MI), Thune, (R-SD), and Klobuchar (D-MN), legislation aimed at improving the accuracy of FCC broadband maps by strengthening the process by which broadband data is collected, as well as expanding interagency coordination. In response, Chairman Pai explained that he plans to circulate an order and report in the coming weeks aimed at refining the agency’s data collection practices in an effort to improve the broadband maps.

With regard to consumer privacy, Sen. Blumenthal (D-CT) and Sen. Schatz (D-HI) questioned the FCC’s commitment to consumer privacy and security, particularly related to the agency’s efforts to address allegations of unlawful collection by mobile carriers of consumer geolocation. “I am appalled that a year after the first disclosure that mobile carriers are selling geolocation information and endangering domestic violence survivors and the public, that we still have no word from the FCC on the investigation of this practice,” Sen. Blumenthal stated. While Chairman Pai noted that the agency’s investigation into these allegations is nearing completion, he was unable to confirm a timeline for public release.

G20 Finance Ministers Agree on Path Forward for Digital Tax

On Sunday during a meeting in Japan, G-20 finance ministers appeared to reach consensus on a digital tax on technology companies. The plan aims to legally close loopholes that allow dominant technology platforms to pay less corporate tax. In the past, prominent tech companies have faced criticism for avoiding higher taxes by headquartering themselves in countries with lower tax rates while selling their products elsewhere.

While France and the U.K. have been strong advocates for taxing dominant tech companies, U.S. regulators have expressed concern that the tax unfairly targets U.S. companies.  Details of the digital tax will be finalized in 2020, but for now it appears that the U.S. and other finance ministers have come to an initial agreement. The debate surrounding a digital tax has focused on two key issues, the first being the right to tax a company where its products are sold regardless of where the company is based. The second facet to the discussion relates to a country’s application of a global minimum tax rate to prevent companies from catching corporate tax breaks. While regulators must still reach agreement on specific aspects of the proposed digital tax, a public statement from the meeting noted that finance ministers “welcome the recent progress on addressing the tax challenges arising from digitization and endorse the ambitious program that consists of a two-pillar approach. We will redouble our efforts for a consensus-based solution with a final report by 2020.”

FTC Hosts Final Competition and Consumer Protection Hearing

On Wednesday, the FTC held the fourteenth and final hearing in its series on Competition and Consumer Protection in the 21st Century. The hearing, hosted by Creighton University School of Law in Omaha, Nebraska, featured a series of roundtable discussions with State Attorneys General and senior staff on a range of topics, including consumer protection, antitrust enforcement, and related legal and economic considerations.

During the sessions on consumer protection enforcement and policy, participants shared insight into efforts spearheaded by their State Attorneys General offices to address consumer protection issues as well as ongoing collaboration with the FTC. They underscored that consumer privacy and cybersecurity remain top priorities for their offices. The panelists were generally pleased with the support provided by the FTC to date, lauding the agency for sharing their resources and expertise. Participants also underscored the importance of maintaining partnerships between state and federal enforcement officials, particularly when addressing complex issues that impact consumers across state borders.

The FTC is in the midst of multi-pronged efforts to examine the state of competition in the technology market. In addition to the series of hearings on competition and consumer protection – first announced in June 2018 –  the agency announced in February 2019 the creation of a dedicated technology task force. The task force has been charged with examining industry practices and conducting law enforcement investigations in the technology market. Additionally, the task force has been directed to coordinate and consult with FTC staff throughout on technology-related matters, including prospective merger reviews in the technology sector and reviews of consummated technology mergers.