The Corner Newsletter: June 03, 2022
Welcome to The Corner. In this issue, we examine the need for stricter regulations to protect children’s data, and review Barry Lynn's address to U.K. enforcers and the European privacy community to boost their antitrust efforts.
New Report on Big Tech Surveillance of Kids Shows Need for Sweeping Action
Karina Montoya
The Federal Trade Commission announced in May it will use its full authority to enforce all prohibitions and security requirements in the Children’s Online Privacy Protection Act. COPPA, enacted by Congress in 1998 and modified in 2013 to include obligations for digital ad networks, focuses on giving parents control over their children’s online data up to age 13. Unfortunately, although the FTC is taking steps in the right direction, this deeply pervasive problem calls for more sweeping action.
A good illustration of the scale of the problem and the speed at which it is growing came days after the FTC’s announcement, when Human Rights Watch released a report assessing scores of remote learning tools and analyzing whether such ed tech violates kids’ privacy online. HRW’s conclusion: Commercialization of pre-teen data through ed tech platforms has reached a “dizzying scale.”
Of the 164 ed tech tools analyzed, 90% directly send or grant access to each child’s data to third parties, mainly ad tech providers. In total, the report identified 196 companies receiving the data, amassed through location controls, contacts lists, microphones, and cameras, among other methods. HRW also made clear that Google is by far the most aggressive tracker of kids’ private personal information, as 80% of the tools assessed had embedded tracking technologies built by Google.
The problem is not new. Activists, teachers, and parents have raised concerns about how Google and other corporations commercialize children’s data in violation of COPPA for years. “Around 2014 we started focusing on behavioral advertising,” said Josh Golin, executive director of Fairplay, an organization that advocates to restrict Big Tech surveillance and manipulation of children. “This problem is massive, and it suggests that it has become the industry standard to ignore COPPA.”
The entrenchment of surveillance advertising in ed tech is no accident. In Google’s case, the corporation has invested heavily to capture generation after generation of users, including through its extensive distribution of low-cost and free Chromebooks to the largest school districts, and the provision of free apps like Gmail and Google Docs, which have come to dominate classrooms.
COPPA has proven moderately effective in the past. Fair Play helped bring a COPPA violation case against Google and YouTube, resulting in a 2019 settlement and a $170 million fine. In 2020, the New Mexico Attorney General sued Google for violating COPPA through such laptops and apps. That case ended with a $3.8 million Google payment to fund a statewide project to “promote education, privacy and safety.”
But Golin makes clear that COPPA needs a major overhaul. “First, it needs to give protections to teens. In no other legal context [do] we consider a 13-year-old a full-fledged adult,” Golin explained. “Second, it should apply to all sites, not only child-directed sites, because that is not where kids spend most of their time. Third, we need to get rid of the ‘knowledge standard.’ Currently, if a site is not child-directed, COPPA applies only if the site ‘knows’ there are users under 13 years old. But this has incentivized platforms to pretend they don’t know that.”
President Biden has urged Congress to pass more stringent legislation to protect minors’ digital lives, and he supports Golin’s points. One potential model is Europe’s new Digital Services Act, which effectively banned all ads targeted at minors. Policymakers reached a political agreement on the DSA in April; once enacted by the end of the year, it will go into effect in early 2025.
Barry Lynn Testifies in House on How Monopolists Drive Shortages and Inflation
Open Markets Executive Director Barry Lynn testified Monday before the Antitrust Subcommittee of the House Judiciary Committee, for the hearing “Rebuilding America’s Economic Leadership and Combatting Corporate Profiteering.” Rakeen Mabud, Robert Reich, and Patrice Onwuka also testified. Lynn titled his remarks as “America’s Break and Take Economic System: How Monopolists Drive Inflation Even as They Destroy National Security.” Lynn said it is “the choke pointing of capacity that embodies inflation deep into the framework of the economy” and is the main source of the severe shortages of basic goods that America has suffered over the last two years.” The hearing included a five-minute exchange between Lynn and Rep. Jim Jordan (R-OH) on the threat that Big Tech corporations pose to freedom of expression. Lynn’s written testimony is available here, and the recording of the hearing is available here.
Barry Lynn Delivers “Distinguished Speaker” Address at U.K. Antitrust Enforcer
Open Markets Executive Director Barry Lynn last week delivered a “distinguished speaker” address to the full staff of the Competition and Markets Authority in their London headquarters. Lynn also met separately with CMA’s leadership team, including CEO Andrea Coscelli and General Counsel Sarah Cardell, as well as board members and inquiry chairs. Lynn emphasized the continuity of the development of U.S. and British antimonopoly law over the last four centuries, and encouraged the CMA to follow the lead of the Biden Administration in renouncing the “Consumer Welfare” competition philosophy.
Open Markets Calls on Privacy Community to Demand Stronger EU Antimonopoly Enforcement
Open Markets hosted a panel discussion at the Computers, Privacy & Data Protection conference in Brussels. The panel, titled “Are Democratic Institutions Doing Enough to Protect Democracy, Freedom and Privacy from the Threat of Monopoly Power,“ included Barry Lynn, Open Markets Senior Fellow Johnny Ryan, member of the European Parliament Rene Repasi, and antitrust economist Cristina Cafarra. Moderating was Christian D’Cunha of DG Connect.
🔊 ANTI-MONOPOLY RISING:
The U.K. Competition and Markets Authority last week launched an investigation into whether Google’s role as a major player in all aspects of the advertising tech market distorts competition. Google operates the market used by publishers to showcase ads, the ad exchanges where marketers buy space, and the ad servers which store publishers’ inventory. Regulators fear Google may be preferencing its own ad exchange servers and unfairly limiting the compatibility of its ad exchanges with third party ad servers. (CNBC, The Verge)
Last week, Twitter agreed to pay a $150 million fine levied by the FTC and Department of Justice over claims that the company violated user privacy regulations. According to the agencies, Twitter entered into an agreement with the FTC in 2011 that it would not use information gathered for security, such as phone numbers and emails, to help advertisers with targeting users. (NPR)
Washington D.C. Attorney General Karl Racine last week sued Facebook CEO Mark Zuckerberg for contributing to the Cambridge Analytica data scandal, in which that corporation used personal information for political purposes. The lawsuit also charges Zuckerberg with misleading Facebook users about their privacy protections. (Washington Post)
Apple last week lost a bid to dismiss a lawsuit brought by app store competitor Cydia in the 9th Circuit Court of Appeals. Cydia in 2020 alleged that Apple illegally operates a monopoly over iOS app distribution. Cydia, which once had 23 million users, says this monopoly contributed to the closure of its business. The court dismissed an earlier lawsuit by Cydia, ruling the complaints were outside the statute of limitations. In the new complaint accepted by the court as timelier, Cydia argues that Apple technology updates between 2018 and 2021 harmed Cydia. (TechCrunch, Reuters)
Sens. Elizabeth Warren and Mike Round recently introduced a bipartisan joint resolution that would direct the FTC to investigate price fixing, monopolization, and other antitrust violations believed to be occurring in the U.S. beef industry. The joint resolution invokes a rule under the FTC Act of 1914 that has not been used since the 1920s. (Reuters, Bloomberg)
Wisconsin-based Uriel Pharmacy last week filed a class action lawsuit against Advocate Aurora Health, alleging that the health care system abused its power to raise prices for employers. Uriel claims that health care costs in the Milwaukee region are 44% above the national average. (Milwaukee Journal Sentinel via Yahoo News)
📝 WHAT WE'VE BEEN UP TO:
Executive Director Barry Lynn addressed an in-person editorial board lunch of the Financial Times in London. Lynn focused on the origins of the supply chain crisis, the dangers of first-degree discrimination by platform monopolists, and strategies for addressing these threats as swiftly as possible.
Senior fellow Johnny Ryan filed a formal complaint with European Ombudsman Emily O'Reilly regarding further delays by the EU Commission to conduct investigation on data protection and regulations in Ireland.
Wired quoted Ryan’s call for an independent review of how to reform and strengthen the Data Protection Commission, the Irish group responsible for supervising enforcement of the General Data Protection Regulation. “We cannot know from outside what the problems are,” Ryan said. “The GDPR is supposed to be an immense project. And the Commission has neglected the GDPR,” he said. Ryan’s effort was also covered by Mondaq.
Food systems program manager Claire Kelloway spoke on the current crisis of baby formula shortages on an NPR podcast. “Because the WIC program is such a large purchaser, it buys about half of the formula on the market,” Kelloway said. “Once a company has an exclusive deal to service a state, competitors don't have a financial incentive to compete in that state.”
NPR also quoted Kelloway on the baby formula shortage. "They're concentrating production into a few, very large plants but that creates a lot of risk," Kelloway said. "A huge part of the crisis we're seeing now is from the closure of one plant.” Articles by Global Circulate and Task and Purpose used Kelloway’s comments from her NPR appearance.
Legal director Sandeep Vaheesan was quoted by PV Magazine calling for the FTC to investigate potential fraud by electrical utility companies. “The FTC can help build a comprehensive factual record for legislative and administrative reconstruction of the power sector to ensure public accountability and sustainability,” Vaheesan said. “The FTC can lay the groundwork for utility reform and help rein in the power of these massive corporations.”
Open Markets was quoted in China.org about consolidation across all industries in America, in including the baby formula market. "Nearly every marketplace in America is vastly more consolidated than a generation ago … In close to 40 metropolitan areas across America, Walmart sells more than half of all groceries. Amazon, meanwhile, dominates e-commerce in general, and many specific lines of business."
Empower Wisconsin mentioned Open Markets’ support for blocking Elon Musk’s effort to buy Twitter. “Even more recently, the Open Markets Institute’s call to block Mr. Musk’s purchase of Twitter coincided with your own investigation of the deal.” This topic was also included in The Dispatch.
Open Markets was cited by Quartz, analyzing a list of consolidated industries led by merging corporations over the years. “The Open Markets Institute (OMI), a non-profit in Washington DC, maintains a list of industries in which companies have consolidated over the years. These range from the trivial to the crucial. The cowboy boot business is ruled by four brands that all belong to Berkshire Hathaway. Whirlpool bought Maytag in 2006, and by 2018, its washers and dryers constituted up to 58% of their market. ‘At 93 of the 100 largest [airports in the U.S.],’ the Institute finds ‘one or two airlines control a majority of the market.’”
📈 VITAL STAT:
56%
JetBlue’s cash offer represented a 56% premium to Frontier’s cash-and-stock offer as of last Wednesday, ISS said. (New York Times)
📚 WHAT WE'RE READING:
“Gazprom Set the Russian Invasion of Ukraine in Motion.” (The Atlantic Council Energy Source, Alan Riley): In the article, Riley argues that Moscow kept “natural gas supplies low and prices high in advance of the conflict” because it “wanted to keep the Europeans vulnerable and therefore less likely to intervene when Russia invaded Ukraine.”
“The Staff of Uvalde’s Local Paper Cover the Worst Day of Their Lives.” (New Yorker, Rachel Monroe). The author shows the drama of Uvalde’s school shooting through the eyes of the only staffed journalists in this Texan county, revealing the urgency of empowering local news to serve a community‘s most critical moment.
Nikki Usher’s Book:
News for the Rich, White, and Blue: How Place and Power Distort American Journalism
Nikki Usher, a senior fellow at Open Markets Institute’s Center for Journalism & Liberty, has released her third book, News for the Rich, White, and Blue: How Place and Power Distort American Journalism. In her latest work, Usher offers a frank examination of the inequalities driving not just America’s journalism crisis but also certain portions of the movement to save it.
Open Markets Employment Opportunities
You can find the full job listings here.
🔎 TIPS? COMMENTS? SUGGESTIONS?
We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.