UK finally runs out of patience with internet players

The UK Government has unveiled a public consultation which may well see stricter rules placed on the digital giants as the era of the wild-west internet draws to a close.

To date the internet giants have largely been unregulated. This was fine when everyone admired the likes of Google, Facebook and Amazon, though numerous scandals have exposed the darker side of the internet economy. Many might have seen the likes of Mark Zuckerberg and Jeff Bezos as friendly folk, out to democratize technology, though the underlying business model has shocked many, forcing slumbering politicians into action.

Today, the Department of Digital, Culture, Media and Sport and the Home Office have jointly launched a new public consultation on proposals which will aim to introduce a new regulatory body to govern the internet economy and create a ‘duty of care’ mandate to ensure online safety and tackle illegal and harmful activity, as well as creating a rulebook suitable for the digital economy. The new body will have the power to hand out fines should any of the internet players fall short of expectations.

“The era of self-regulation for online companies is over,” said Digital Secretary Jeremy Wright. “Voluntary actions from industry to tackle online harms have not been applied consistently or gone far enough. Tech can be an incredible force for good and we want the sector to be part of the solution in protecting their users. However, those that fail to do this will face tough action.”

The new regulator, and the soon to be created rules, will apply to any company that allows users to share or discover user generated content or interact with each other online. Those platforms who do not meet expectations will either have sites blocked or face significant fines. One of the questions which the consultation will look to answer is whether the new regulatory body should be part of an existing department, or a newly formed body which would be funded through a levy placed on the sales of the internet companies in the UK.

While this is a necessary step forward, this is going to be a very complicated process. Creating a mechanism which protects users but also maintains the principles of free speech is a delicate equation to balance. We suspect there will never be a situation where all parties are satisfied, such are the complications when dealing with opinions; who should be the judge on what is offensive and what is acceptable?

Ultimately, this is a move which is long overdue. Social media companies, such as Facebook, have slipped between the regulatory red tape for years, fitting nicely into the grey area between ‘platform’ and ‘publisher’. While these services might have started as a platform, they have certainly evolved beyond that, however, it would not be just to designate them as publishers; they are not content creators as such. A new definition is needed and only then can rules fit for the digital era be created.

Change is on the horizon, and it is unavoidable for the internet economy. That said, the lobby machine will soon be taken up a gear to attempt to minimize the impact of any new rules. Numerous European nations are swiftly moving forward to create more accountability, and the internet players will have to change their game-plan from offensive to damage limitation.

That said, the internet players have been given enough chances to clear up their act over the last few years. These are companies which have operated without the severity of the red-tape restraints of other segments, partly because governments have not understood how these businesses operate, but this era of self-regulation is drawing to a close.

“Despite our repeated calls to action, harmful and illegal content – including child abuse and terrorism – is still too readily available online,” said Home Secretary Sajid Javid.

“That is why we are forcing these firms to clean up their act once and for all.”

If 52% don’t understand data-sharing economy, is opt-in redundant?

Nieman Lab has unveiled the results of research suggesting more than half of adults do not realise Google is collecting and storing personal data through usage of its platforms.

The research itself is quite shocking and outlines a serious issue as we stride deeper into the digital economy. If the general population does not understand the basic principles behind the data-sharing economy, how are they possibly going to protect themselves against the nefarious intentions from the darker corners of the virtual world?

You also have to question whether there is any point in the internet players seeking consent if the user does not understand what he/she is signing up for.

According to the research, 52% of the survey respondents do not expect Google to collect data about a person’s activities when using its platforms, such as search engines or YouTube, while 57% do not believe Google is tracking their web activity in order to create more tailored advertisements.

While most working in the TMT industry would assume the business models of the Google and the other internet are common knowledge, the data here suggests otherwise.

66% also do not realise Google will have access to personal data when using non-Google apps, while 64% are unaware third-party information will be used to enhance the accuracy of adverts served on the Google platforms. Surprisingly, only 57% of the survey respondents realise Google will merge the data collected on each of its own platforms to create profiles of users.

Although this survey has been focused on Google, it would be fair to assume the same respondents do not appreciate this is how many newly emerging companies are fuelling their spreadsheets. The data-sharing economy is the very reason many of the services we enjoy today are free, though if users are not aware of how this segment functions, you have to question whether Google and the other internet giants are doing their jobs.

The ideas of opt-in and consent are critically important nowadays. New rules in the European Union, GDPR, set about significant changes to dictate how companies collect, store and use personal information collected by the service providers. These rules were supposed to enforce transparency and encourage the user to be in control of their personal information, though this research does not offer much encouragement.

If the research suggests more than half of adults do not understand how Google collects personal information or uses it to enhance its own advertising capabilities, what is the point of the opt-in process in the first place?

Reports like this suggest the opt-in process is largely meaningless as users do not understand what they are giving the likes of Google permission to do. The blame for this lack of education is split between the internet giants, who have become experts at muddying the waters, and the users themselves.

Those who use the services for free but do not question the continued existence of ‘free’ platforms should forgo the right to be annoyed when scandals emerge. Not taking the time to understand, or at least attempt to, the intricacies of the data-sharing economy is the reason many of these scandals emerge in the first place; users have been blindly handing power to the internet giants.

The internet players need to do more to educate the world on their business models, however the user does have to take some of the responsibility. We’re not suggesting everyone becomes an internet economy expert, but gaining a basic understanding is not incredibly difficult. However, it does seem ignorance is bliss.

Austria and Australia join the march against Silicon Valley

The days of the wild-west internet seem to be coming to a close with Austria and Australia becoming the latest nations to update the rules governing the business activities of the internet giants.

At the foot of the Alps, the Austrians are proposing a new 5% sales tax on digital revenues which are realised in the country, another European state to tackle the ‘creative’ accounting practices of Silicon Valley. Down under, the Australian Government plans on introducing tougher rules which will place greater accountability on social media platforms for extreme and offensive content.

For years the world watched in amazement as the likes of Google, Facebook and Amazon climbed higher up the ladder of influence. We gazed in wonderment as Silicon Valley seemed to pluck profits out of thin-air and their CEOs hit celebrity status. But then the scandals started to roll-in and we all realised these companies had abused the privilege of self-regulation.

The Cambridge Analytica scandal was the watershed moment, a saga which dominated headlines around the world for months and hauled politicians away from free lunches and back into the debating chambers. All of a sudden everyone realised the likes of Zuckerberg, Bezos and Page were not our friends, but incredibly intelligent businessmen who were exploiting the grey areas sitting idly between the mass of criss-crossing red-tape.

What followed this scandal was a more forensic look at the business models of the internet giants. Those looking close enough found trickily worded terms and conditions, confusing processes, ransom opt-ins and abused freedoms. Users were being tracked without their knowledge, personal information was being traded as a commodity and tax havens were being exploited. Opinion on Silicon Valley turned sour.

On the other side of the coin, it wasn’t just the craft and cunning of Silicon Valley lawyers to blame, but inadequate rules for today’s digital era. Politicians and regulators woke up to the fact rules and legislation needed to be updated to create a fair and reasonable policy landscape to hold the internet giants accountable. Experts were brought in to account for the vast gulf in competence and the march towards Silicon Valley began.

A perfect storm has been brewing around the internet giants and as the weeks pass more countries are taking a more stringent approach to the business of the internet. Australia has been trundling along with incremental progress, and now Austria has entered the fray.

“Through the digital tax package, we are closing tax loopholes and thereby ensuring that large digital corporations, agency platforms and retail platforms are called to account,” said Austrian Finance Minister Hartwig Löger. “Through fair taxation of the digital economy, we are establishing equity in taxation.”

Moving forward, a digital tax of 5% will be introduced for large digital corporations, those with global sales of € 750 million, of which €25 million originates in Austria. The new rules will also take away VAT exemptions for deliveries from foreign countries. Previously, orders valued below €22 were exempt from the tax.

“Through this measure, we are taking digital agency platforms to task,” said State Secretary of Finance Hubert Fuchs. “No one is entitled to evade the obligation to pay tax.”

Austria is of course not alone in this tax assault. As the member states of the European Union cannot agree on a bloc-wide tax mechanism, plans were blocked by nations who benefit from the status quo such as Ireland, individual states have gone on alone. France and the UK have already set plans in motion, but we expect such proposals to start snowballing before too long.

Australia is targeting a different area of contention however. Following events in Christchurch, New Zealand, and the simultaneous live-streaming of the incident, the Australian Government has introduced new rules which will hold social media and other social media platforms accountable for the dissemination of offensive material.

The Sharing of Abhorrent Violent Material bill creates new offences for content service providers and hosting services who fail to act expeditiously to remove videos containing “abhorrent violent conduct”. Such conduct is defined as terrorist acts, murders, attempted murders, torture, rape or kidnap.

The technology community and legal experts have slammed the new rules, and while there are some valid points, the social media and hosting platforms might have to be forced forward. It is an incredibly difficult task to identify these videos, such is the complexity of identification in such as vast swarm of uploaded content nowadays, but without the threat of penalty there is a risk progress will not move at a desired pace.

Following the incident, Facebook pointed out that it did take down the video quickly, though it was not able to use AI to identify the content. This is where it becomes incredibly difficult for the technology industry; these applications need abhorrent content to be trained to identify abhorrent content. It’s a bit of a catch-22 situation, but harsh penalties for non-compliance will force the industry to find a solution.

“We have heard feedback that we must do more – and we agree,” said Facebook COO Sheryl Sandberg in a letter to the New Zealand Herald. “In the wake of the terror attack, we are taking three steps: strengthening the rules for using Facebook Live, taking further steps to address hate on our platforms, and supporting the New Zealand community.”

Sandberg has promised new restrictions on how live videos can be uploaded and streamed to the platform, though details were incredibly thin. Facebook will not want to introduce too many restrictions, making the process too convoluted and tiresome will impact user experience, though it clearly has to do something. The opportunity to broadcast horrific acts has become too accessible.

This is the problem which Facebook and everyone else in the digital economy is facing. The promise is to open up the gates and allow people to express themselves, but unfortunately there are people who will take advantage of this situation. It is an incredibly difficult equation to balance.

Technology will eventually help the internet companies get to a suitable position, with the potential of AI grafting through the millions of uploads, however the training period is going to be a difficult process. The risk of going too sensitive is restricting free speech, though with content uploaded from shows such as Game of Thrones, there is plenty of room for error.

The internet giants will want to resist change, despite giving the impression of encouraging more regulation and government intervention, but it won’t be able to hold back the tides forever. With privacy concerns, fake news, tax evasion, political influence, anti-trust accusations and the unknown power of data analytics, the internet giants are simply fighting on too many fronts.

These are companies who have incredible financial power and immense armies of lobbyists, but Silicon Valley is the bad guy right now. Politicians have spotted an opportunity to make PR points by unloading on the punching bag, and you can guarantee there will be many lining up to take a swing.

UK sets out battle plan to tackle Silicon Valley’s ‘Digital Gangsters’

Facebook is only the tip of the iceberg, but Parliament is coming after Zuckerberg and his Silicon Valley cronies in the long-standing battle to understand and curb the influence of social media.

Featuring representatives from both sides of the political aisle led by the Department for Digital, Culture, Media and Sport (DCMS), this perhaps set the scene for one of the most aggressive stances against the social media giants. If all the recommendations are followed up on, there could be some major disruption on the horizon.

New regulations, new definitions for the business model, a new regulator, new fines, new competition investigations and new levies against the internet players, the outcome certainly justifies the months spend investigating the complex and diverse tapestry of social media and its impact on today’s society.

“We hope that the Government will include these considerations when it reviews the UK’s competition powers in April 2019, as stated in the Government response to our Interim Report,” the report states in its concluding statements. “Companies like Facebook should not be allowed to behave like ‘digital gangsters’ in the online world, considering themselves to be ahead of and beyond the law.”

Such is the pace of the legislative machine, nothing will change in the immediate future, but this is an important first step into the red-tape maze of regulation. This parliamentary committee, and the subsequent report, are laying the foundations for the future. The scene has been set, with the committee painting a complex picture of deception, greed and mistrust, readying bureaucrats for an assault.

To understand how we have gotten to this point you have to go back to Cambridge Analytica scandal. Until this point the data economy was thundering along relatively undisturbed, free from the worries of regulation and oversight, however this scandal pulled the curtain back ever so slightly. The data machine was slightly exposed, but ever since politicians have been clawing to understand the cogs and levers.

But what does this report recommend? Firstly, new regulatory mechanisms. The parliamentary committee has suggested the formation of a new regulatory body, which will be funded by levies placed on the internet companies wishing to operate in the UK, which would have greater insight and powers to pry open business models and processes. Another interesting recommendation is the creation of new definitions for the internet economy.

This is part of the issue today and the reason internet giants have so much freedom. Rules have been designed for different types of organizations for a bygone era. To compensate for the inadequacy of the rulebook, new clauses have been built on top. The issue has been compounded, creating a complicated red-tape maze with loop holes, secret corridors and grey areas for lawyers to expose. The shaky foundations have not provided a suitable mechanism to hold the segment accountable.

The report states what many already know but little has been done to correct. These social media companies are no-longer simply ‘platforms’ and neither are they ‘publishers’, therefore they should not be regulated as such. A new definition should be created, with rules specific to this segment. It’s amazing to think it has taken this long to come to this conclusion, but the committee is pushing for specific rules for specific circumstances.

The report also calls for a new ‘code of ethics’, designed by independent experts and overseen by the newly created regulatory body, to hold the internet giants accountable. Using the same principle as Ofcom uses for the regulation of broadcasters, these rules would be specific to the case. It would be a square peg for a square hole.

This new approach may also be extended to the murky world of political campaigning also. After the ICO called for a pause of political spending during election periods last year, the committee has responded by suggesting new powers which would:

“…define digital campaigning, including having agreed definitions of what constitutes online political advertising, such as agreed types of words that continually arise in adverts that are not sponsored by a specific political party.”

Again, this is a criticism of the sluggish nature of regulation, not recognising the world has evolved. New rules should reflect the new digital landscape, the changing methods of promoting messages and microtargeted political campaigning. More transparency will be suggested, “clear, persistent banners on all paid-for political adverts and videos, indicating the source and the advertiser”, as well as new transparency metrics for campaigns to declare such activities.

Perhaps a more dangerous area which has finally been addressed is the in-direct campaigning which benefits or detracts from parties and individuals. These are organizations such as Leave.EU, which had no direct link to political bodies but presenting questionable materials to individuals through the hyper-targeted advertising model offered by social media companies. This takes the committee into the nefarious world of foreign influence also.

Finally, the committee is also tasking the Competition Markets Authority (CMA) to conduct an extensive investigation into the power and influence of the social media companies. Again, this means little for the moment, but it could be the first step towards identifying potential ‘monopolies’, providing justification to break up the gathering empires.

This aspect of the report leans on documentation sourced by Six4Three, a tech company which is suing Facebook for in-appropriately influencing the success of its products.

“Given the contents of the Six4Three documents that we have published, it should also investigate whether Facebook specifically has been involved in any anti-competitive practices and conduct a review of Facebook’s business practices towards other developers, to decide whether Facebook is unfairly using its dominant market position in social media to decide which businesses should succeed or fail,” the report states.

The content of this report should not be dismissed as busywork for boresome bureaucrats but a direct threat to the success of Silicon Valley. The internet companies should be very worried about the content of this report, the conclusions these politicians have drawn and the potential implications of any recommendations. This is a political hot point right now, and we suspect there is enough ill-feeling towards the internet players to take these suggestions forward.

Facebook is the company which is constantly attracting the headlines, but this company is just one of many. The mentality has spread throughout the digital ecosystem, but Facebook is the scape goat. Unfortunately for all those involved, Facebook CEO Mark Zuckerberg has continued to antagonise politicians by refusing to show up to briefings, compounding the problem and rallying political enemies towards a single cause.

Although these recommendations are only the first steps into the complicated world of regulation, there is potential for significant disruption. With GDPR bubbling away in the background, and further privacy regulations in the pipeline, the basic business model of the internet giants is being challenged here. This document could be a defining factor in the future of the digital economy.

Privacy champion Max Schrems is back with another lawsuit

The man who is largely credited with the downfall of Safe Harbour has re-emerged from the shadows to take eight of the internet giants to court over GDPR violations.

As user privacy increasingly seems to be an alien concept to Silicon Valley and the other internet players, Austrian data privacy champion Max Schrems has jumped into the limelight once again. This time he is challenged eight internet companies and their data privacy practices, suggesting they are violating Europe’s General Data Protection Regulation (GDPR).

Through a filing with the Austrian Data Protection Authority, by Schrem’s non-profit NOYB, the complaints focus on the ‘right to access’ enshrined in Article 15 GDPR and Article 8(2) of the Chart of Fundamental Rights. Amazon, Apple, DAZN, Filmmit, Netflix, Sound Cloud, Spotify and YouTube are on the receiving end of the lawsuit, with the potential penalties ranging from €20 million through to €8 billion.

“Many services set up automated systems to respond to access requests, but they often don’t even remotely provide the data that every user has a right to,” said Schrems. “In most cases, users only got the raw data, but, for example, no information about who this data was shared with. This leads to structural violations of users’ rights, as these systems are built to withhold the relevant information.”

GDPR is supposed to hand control of personal data back to said individual. Its aim is to hold the digital society accountable to their actions and provide a certain level of justification for holding onto, and potentially monetizing, an individual’s personal information. Several clauses are also aimed at transparency to ensure the user is fully informed, or at least offering the user the opportunity to be, about how these software and services providers commercialise data.

In addition to what raw data is being stored, individuals do now also have the right to know where this data was sourced, the recipients and also the purpose. This is where a few of the complaints are focusing specifically, as this is the information which was absent from some of the responses.

If privacy is an alien concept, then transparency is a dirty, inconceivable word to the internet players. It seems former habits have been hard to shake.

NOYB Snip

As you can see from the table above, Schrems has tested out how some of the internet players have reacted to the introduction of GDPR. Progress has been made, except in the case of Sound Cloud and DAZN, but that is irrelevant. The introduction of GDPR on May 25 2018 was not the starting line to gradually move yourself through to compliance, day one was a hard introduction of the rules. There are some circumstances where companies can avoid penalties, but these are scenarios where non-compliance would be seen as out of the control of the company, or best efforts have been made.

This is where these firms might find themselves in a bit of hot water. An automated response which offers up some information but not all which is required through the new regulation should not be considered good enough. The pair ignoring the requests completely should be very worried about the repercussions. And finally, the Austrian regulator will also have to decide whether four weeks is an appropriate response time or too long. None of these firms are in a safe place right now.

Another interesting aspect will be the readability of the data. In the complaint, Schrems notes the raw data was provided in what would be considered cryptic form for the general public. Users would not be able to read the data therefore it is not being made accessible by the company. Whether this is taken as a violation of GDPR remains to be seen, though Austria could set precedent.

Many of the internet giants have resisted the calls from data privacy advocates and governments around the world, but GDPR is supposed to be a stick to keep the segment in line. These are companies which will want to avoid giving too many details away as the power and depth of the data sharing economy has the potential to spook large swathes of the general public. Too much light shed on data processing and exchanging practices would also offer more ammunition to the blood-thirsty politicians, many of whom are on a PR crusade to make heads roll.

Ultimately this will give us a good indication as to how sharp European regulators’ teeth actually are. In passing GDPR, the European Commission has offered a stick to the pro-privacy regulators, but how hard they swing it remains to be seen. The dreaded ‘up to’ phrase is present when looking at potential fines, so let’s see whether these regulations have the stones to dish out appropriate punishments.

Justice Department eyes up social media probe over competition

Department of Justice spokesman Devin O’Malley has raised the prospect of an investigation into whether the social media giants are impacting competition through ‘intentionally stifling the free exchange of ideas’.

In a statement following the Senate Intelligence Committee grilling, O’Malley outlined plans to meet with state attorneys general to discuss the concerns over the next couple of weeks in Washington. While this does not necessarily mean a full investigation or any legal action, the social media giants are receiving plenty of unappreciated attention currently.

“The attorney general has convened a meeting with a number of state attorneys general this month to discuss a growing concern that these companies may be hurting competition and intentionally stifling the free exchange of ideas on their platforms,” said O’Malley.

Attorney General Jeff Sessions has apparently taken on President Trump’s battle against the social media giants. Aside from the Senate Intelligence Committee questioning the effectiveness of social media giants in providing an unbiased and uninfluenced platform for free speech and news, Trump is going tweeting crazy as well.

Trump’s latest target is Google as the President accuses the search platform of political bias. The remarks have escalated the conservative campaign against the internet industry, accusing the technology company of burying Republican orientated news in search results while offering more prominence to the opposition. While the ‘everyone is evil except me’ rhetoric from the President is starting to become boring, we are waiting to see whether the irony of one of the social media giants creating unprecedented exposure for his vile opinions will ever hit home.

Of course, while these are sub-plots, yet to emerge as major thorns for the social media companies, the current saga is focused on the Senate Intelligence Committee. Yesterday saw Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey face the grilling, attempting to justify their actions. The questions focused on efforts to keep Russia, Iran and others from disrupting elections and causing other problems. Some Senators found it difficult to believe there isn’t a political bias on the platforms, but that is to be expected.

The current political climate is such that temper tantrums will be thrown and accusations dished out if there is any minor disagreement to propaganda. The concept of the press questioning claims and presenting their analysis to allow citizens to make up their own minds seems to have disappeared. And we thought government was run by mature adults.

While these two internet heavyweights seemingly performed admirably in defending their positions, Google’s empty chair took more than its fair share of criticism. Rather than facing the questions of the Senators, Google decided to skip the hearing after alternative representatives were rebuffed. Instead of defending itself, Senators took aim and fired. Google has largely enjoyed a good relationship with both parties in the US political shark tank, though how this snub impacts the relationship remains to be seen.

With the Senate Intelligence Committee attacking the social media giants from the front, the Oval Office using their own platforms to attack in the virtual world and the Department of Justice gathering support on the horizon, it is looking like another couple of uncomfortable months. We suspect the US political system has already decided who is to blame, but a series of investigations and hearings are needed to justify the accusation. You know, the normal way to identify guilt.