The U.S. Senate is considering legislation—S. 2710, the Open App Markets Act—that would, among other restrictions, bar app stores from requiring app developers to use the store’s own in-app payment system.
Background…
The U.S. Senate is considering legislation—S. 2710, the Open App Markets Act—that would, among other restrictions, bar app stores from requiring app developers to use the store’s own in-app payment system. The bill was introduced by Sen. Richard Blumenthal (D-Conn.), who has argued that it would “open the app economy to new competitors and give mobile users more control over their own devices.”
But…
The app store market is competitive and mobile users already have a choice of relatively open and relatively closed platforms. More open platforms, like the Google Play store, offer users the benefits of greater customization and a broader range of apps and payment options. More closed platforms, such as Apple’s App Store, foreclose some of these options, but instead promise users greater privacy and security and a more curated experience that can ensure better device operation.
Moreover…
Requiring closed platforms to allow the use of alternative payment options would see large developers and rival payment processors get the benefit of the app store’s investments without paying for them. The Open App Markets Act would substitute regulatory fiat for consumer choice, sacrificing the benefits currently enjoyed by many consumers.
Read the full explainer here.
Ian Adams •
December 14, 2021
Since taking office, the Biden administration has moved aggressively to use enforcement actions and rulemakings—many of them outlined in the administration’s July 2021 executive order—ostensibly as a means to promote market competition.
Background…
Since taking office, the Biden administration has moved aggressively to use enforcement actions and rulemakings—many of them outlined in the administration’s July 2021 executive order—ostensibly as a means to promote market competition. Among the targets of this approach has been the freight-rail sector. The administration advocates for mandated reciprocal switching, a form of compelled network interoperability, on grounds that it would improve the rail industry’s competitive environment.
The Biden EO called on the Surface Transportation Board (STB) to “strengthen regulations pertaining to reciprocal switching agreements,” which the board is expected to do in early 2022. The regulations would be based on a six-year-old notice of proposed rulemaking (NPRM), which was, in turn, based on far older data.
But…
Concerns about competition in the freight-rail industry, and particularly about consolidation among Class I railroads, have been both overblown and misdirected, driving officials to seek counterproductive regulatory remedies. A reciprocal-switching mandate would render rail networks both less efficient and less resilient, as it would undermine firms’ ability to schedule their operations precisely.
Such a mandate would be particularly counterproductive in the midst of the ongoing supply-chain crisis. Over the longer term, a switching mandate would undermine the very incentives that have yielded enormous private investment in the development and ongoing maintenance of rail infrastructure.
Read the full explainer here.
The liability protections granted to intermediaries under Section 230(c)(1) of the Communications Decency Act of 1996 can and should be conditioned on platforms taking reasonable steps to curb harmful conduct.
Background…
The liability protections granted to intermediaries under Section 230(c)(1) of the Communications Decency Act of 1996 can and should be conditioned on platforms taking reasonable steps to curb harmful conduct. Online platforms should operate under a duty of care obligating them to adopt reasonable content-moderation practices regarding illegal or tortious third-party content.
But…
Platforms should not bear excessive costs for conduct that does not and should not give rise to liability, while they should internalize the costs of responding to actual harms and meritorious litigation. This will require reforms to civil procedure, a regulatory agency to oversee creation of a duty of care, and implementation of a “safe harbor” or presumption of reasonableness.
Read the full explainer here.
Policymakers in the United States, the United Kingdom, and the European Union recently have pursued legislative and regulatory changes to make it more difficult for large companies, especially digital platforms, to acquire other firms.
Background…
Policymakers in the United States, the United Kingdom, and the European Union recently have pursued legislative and regulatory changes to make it more difficult for large companies, especially digital platforms, to acquire other firms.
Most recently, Sens. Amy Klobuchar (D-Minn.) and Tom Cotton (R-Ark.) have introduced S. 3197, which would virtually outlaw all acquisitions by the largest online platforms.
But…
Startup formation and venture capital investment are extremely sensitive to the availability of exits, most of which occur through acquisitions. Making it more difficult (or impossible) for start-ups to be acquired by the world’s largest tech firms would imperil the incentive for investors to fund innovative new products and services, and limit competition between digital platforms. The measure also raises significant constitutional questions, due both to the extremely small number of firms it would target and to changes it would make to judicial review that imperil separation of powers.
Read the full explainer here.
Data is one of the pillars of the modern digital economy, but its value is contingent on its ability to flow around the globe in real time, permitting individuals and firms to develop new and novel insights and to operate at higher levels of efficiency and safety.
Background…
Data is one of the pillars of the modern digital economy, but its value is contingent on its ability to flow around the globe in real time, permitting individuals and firms to develop new and novel insights and to operate at higher levels of efficiency and safety.
But…
Those data flows increasingly run into barriers when they seek to cross national borders. These often take the form of “data-localization” requirements to locate, store, and/or process data within national boundaries.
However…
Data-localization policies are often framed as necessary to protect critical digital infrastructure and national-security interests, but they serve instead as trade barriers that hurt consumers more than they help. An examination of the impact on the financial services industry helps to illustrate the problem.
Read the full explainer here.
Background… Legal history offers examples of areas where attempting to apply liability directly to bad actors is likely to be ineffective, but where certain related parties might be able to...
Background…
Legal history offers examples of areas where attempting to apply liability directly to bad actors is likely to be ineffective, but where certain related parties might be able to either control the bad actors or mitigate the damage they cause. In such cases, the common law has long embraced indirect or vicarious liability, holding one party liable for wrongs committed by another. The purpose of this kind of indirect liability is to align incentives where they can be most useful by placing responsibility on the least-cost avoider.
But…
The immunity from liability granted to online platforms by Section 230 of the Communications Decency Act is a departure from normal rules governing intermediary behavior. It is impossible to know exactly how a robust common law of online intermediary liability would have developed in a world where Section 230 immunity never existed.
However…
Lessons can be drawn from how the offline world has dealt with third-party liability, especially when an intermediary operates under a duty of care. The common law offers several examples of duties that business owners owe to their customers or, sometimes, to the outside world. Central among these is the legal obligation to take reasonable steps to curb harm from the use of a business’ goods and services. If the business has created a situation or environment that puts people at risk, it has an obligation to mitigate that risk. It also can have obligations to prevent risk of harm to customers or others with whom it has entered into a relationship, even if the business did not directly create the risk.
Read the full explainer here.
Background… The Communications Decency Act of 1996’s Section 230 holds that the law will not treat online service providers as speakers or publishers of third-party content, and that actions the...
Background…
The Communications Decency Act of 1996’s Section 230 holds that the law will not treat online service providers as speakers or publishers of third-party content, and that actions the providers take to moderate content hosted by their services will not trigger liability. A quarter-century later, a growing number of lawmakers seek reforms to Section 230. In the 116th Congress alone, 26 bills were introduced to modify the law’s scope or to repeal it altogether.
But…
While the current debate popularly centers on whether platforms should be forced to host certain content or when they should be forced to remove other content, such reforms are virtually certain to harm, not improve, social welfare: As frustrating as imperfect content moderation may be, state-directed speech codes are much worse.
However…
The real gains to social welfare will materialize from reforms that better align the incentives of online platforms with the social goal of deterring or mitigating illegal or tortious conduct. To the extent that the current legal regime permits social harms online that exceed concomitant benefits, it should be reformed to deter those harms if such reform can be accomplished at sufficiently low cost.
Read the full explainer here.
Four months after a similar antitrust measure was advanced to the floor of the U.S. House, a bipartisan group of senators, led by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa), announced that they will introduce legislation designed to drastically reduce the ability of digital platforms to favor their own goods and services.
Background…
Four months after a similar antitrust measure was advanced to the floor of the U.S. House, a bipartisan group of senators, led by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa), announced that they will introduce legislation designed to drastically reduce the ability of digital platforms to favor their own goods and services. Dubbed the American Innovation and Choice Online Act, the bill presumes that the practice of “self-preferencing” is inherently harmful to competition.
But…
While the draft Senate bill does make certain improvements over its House counterpart, the legislation fundamentally misunderstands the nature of platform competition and the benefits that accrue to consumers from many self-preferencing practices. The bills also would delegate enormous power and discretion to antitrust regulators, who may use that power to achieve fundamentally political ends.
Read the full explainer here.
All around the world, policymakers are proposing legislative changes that would drastically alter the ways that online platforms can operate.
Background…
All around the world, policymakers are proposing legislative changes that would drastically alter the ways that online platforms can operate. Motivating these initiatives have been fears that, absent explicit regulation, digital markets would suffer from failures that could not later be remediated.
But…
These putative reforms are not rooted in a rigorous assessment of the costs and benefits of regulatory intervention. In lieu of empirical evidence, lawmakers are relying on highly abstracted theories of potential harm whose bearing on real-world markets is uncertain. Policymakers should instead rely on the tried-and-tested Consumer Welfare Standard that has successfully guided U.S. antitrust enforcement for the better part of a century.
Read the full explainer here.
