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Main article: Margrethe Vestager

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Europe sets out plan to boost data reuse and regulate “high risk” AIs

17:20 | 19 February

European Union lawmakers have set out a first bundle of proposals for a new digital strategy for the bloc, one that’s intended to drive digitalization across all industries and sectors — and enable what Commission president Ursula von der Leyen has described as ‘A Europe fit for the Digital Age‘.

It could also be summed up as a ‘scramble for AI’, with the Commission keen to rub out barriers to the pooling of massive European data sets in order to power a new generation of data-driven services as a strategy to boost regional competitiveness vs China and the U.S.

Pushing for the EU to achieve technological sovereignty is key plank of von der Leyen’s digital policy plan for the 27-Member State bloc.

Presenting the latest on her digital strategy to press in Brussels today, she said: “We want the digital transformation to power our economy and we want to find European solutions in the digital age.”

The top-line proposals are:

AI

  • Rules for “high risk” AI systems such as in health, policing, or transport requiring such systems are “transparent, traceable and guarantee human oversight”
  • A requirement that unbiased data is used to train high-risk systems so that they “perform properly, and to ensure respect of fundamental rights, in particular non-discrimination”
  • Consumer protection rules so authorities can “test and certify” data used by algorithms in a similar way to existing rules that allow for checks to be made on products such as cosmetics, cars or toys
  • A “broad debate” on the circumstances where use of remote use of biometric identification could be justified
  • A voluntary labelling scheme for lower risk AI applications
  • Proposing the creation of an EU governance structure to ensure a framework for compliance with the rules and avoid fragmentation across the bloc

Data

  • A regulatory framework covering data governance, access and reuse between businesses, between businesses and government, and within administrations to create incentives for data sharing, which the Commission says will establish “practical, fair and clear rules on data access and use, which comply with European values and rights such as personal data protection, consumer protection and competition rules” 
  • A push to make public sector data more widely available by opening up “high-value datasets” to enable their reuse to foster innovation
  • Support for cloud infrastructure platforms and systems to support the data reuse goals. The Commission says it will contribute to investments in European High Impact projects on European data spaces and trustworthy and energy efficient cloud infrastructures
  • Sectoral specific actions to build European data spaces that focus on specific areas such as industrial manufacturing, the green deal, mobility or health

The full data strategy proposal can be found here.

While the Commission’s white paper on AI “excellence and trust” is here.

Next steps will see the Commission taking feedback on the plan — as it kicks off public consultation on both proposals.

A final draft is slated by the end of the year after which the various EU institutions will have their chance to chip into (or chip away at) the plan. So how much policy survives for the long haul remains to be seen.

Tech for good

At a press conference following von der Leyen’s statement Margrethe Vestager, the Commission EVP who heads up digital policy, and Thierry Breton, commissioner for the internal market, went into some of the detail around the Commission’s grand plan for “shaping Europe’s digital future”.

The digital policy package is meant to define how we shape Europe’s digital future “in a way that serves us all”, said Vestager.

The strategy aims to unlock access to “more data and good quality data” to fuel innovation and underpin better public services, she added.

The Commission’s digital EVP Margrethe Vestager discussing the AI whitepaper

Collectively, the package is about embracing the possibilities AI create while managing the risks, she also said, adding that: “The point obviously is to create trust, rather than fear.”

She noted that the two policy pieces being unveiled by the Commission today, on AI and data, form part of a more wide-ranging digital and industrial strategy whole with additional proposals still to be set out.

“The picture that will come when we have assembled the puzzle should illustrate three objectives,” she said. “First that technology should world for people and not the other way round; it is first and foremost about purpose The development, the deployment, the uptake of technology must work in the same direction to make a real positive difference in our daily lives.

“Second that we want a fair and competitive economy — a full Single Market where companies of all sizes can compete on equal terms, where the road from garage to scale up is as short as possible. But it also means an economy where the market power held by a few incumbents cannot be used to block competition. It also means an economy were consumers can take it for granted that their rights are being respected and profits are being taxed where they are made”

Thirdly, she said the Commission plan would support “an open, democratic and sustainable society”.

“This means a society where citizens can control the data that they provide, where digit platforms are accountable for the contents that they feature… This is a fundamental thing — that while we use new digital tools, use AI as a tool, that we build a society based on our fundamental rights,” she added, trailing a forthcoming democracy action plan.

Digital technologies must also actively enable the green transition, said Vestager — pointing to the Commission’s pledge to achieve carbon neutrality by 2050. Digital, satellite, GPS and sensor data would be crucial to this goal, she suggested.

“More than ever a green transition and digital transition goes hand in hand.”

On the data package Breton said the Commission will launch a European and industrial cloud platform alliance to drive interest in building the next gen platforms he said would be needed to enable massive big data sharing across the EU — tapping into 5G and edge computing.

“We want to mobilize up to €2BN in order to create and mobilize this alliance,” he said. “In order to run this data you need to have specific platforms… Most of this data will be created locally and processed locally — thanks to 5G critical network deployments but also locally to edge devices. By 2030 we expect on the planet to have 500BN connected devices… and of course all the devices will exchange information extremely quickly. And here of course we need to have specific mini cloud or edge devices to store this data and to interact locally with the AI applications embedded on top of this.

“And believe me the requirement for these platforms are not at all the requirements that you see on the personal b2c platform… And then we need of course security and cyber security everywhere. You need of course latencies. You need to react in terms of millisecond — not tenths of a second. And that’s a totally different infrastructure.”

“We have everything in Europe to win this battle,” he added. “Because no one has expertise of this battle and the foundation — industrial base — than us. And that’s why we say that maybe the winner of tomorrow will not be the winner of today or yesterday.”

Trustworthy artificial intelligence

On AI Vestager said the major point of the plan is “to build trust” — by using a dual push to create what she called “an ecosystem of excellence” and another focused on trust.

The first piece includes a push by the Commission to stimulate funding, including in R&D and support for research such as by bolstering skills. “We need a lot of people to be able to work with AI,” she noted, saying it would be essential for small and medium sized businesses to be “invited in”.

On trust the plan aims to use risk to determine how much regulation is involved, with the most stringent rules being placed on what it dubs “high risk” AI systems. “That could be when AI tackles fundamental values, it could be life or death situation, any situation that could cause material or immaterial harm or expose us to discrimination,” said Vestager.

To scope this the Commission approach will focus on sectors where such risks might apply — such as energy and recruitment.

If an AI product or service is identified as posing a risk then the proposal is for an enforcement mechanism to test that the product is safe before it is put into use. These proposed “conformity assessments” for high risk AI systems include a number of obligations Vestager said are based on suggestions by the EU’s High Level Expert Group on AI — which put out a slate of AI policy recommendations last year.

The four requirements attached to this bit of the proposals are: 1) that AI systems should be trained using data that “respects European values and rules” and that a record of such data is kept; 2) that an AI system should provide “clear information to users about its purpose, its capabilities but also its limits” and that it be clear to users when they are interacting with an AI rather than a human; 3) AI systems must be “technically robust and accurate in order to be trustworthy”; and 4) they should always ensure “an appropriate level of human involvement and oversight”.

Obviously there are big questions about how such broad-brush requirements will be measured and stood up (as well as actively enforced) in practice.

If an AI product or service is not identified as high risk Vestager noted there would still be regulatory requirements in play — such as the need for developers to comply with existing EU data protection rules.

In her press statement, Commission president von der Leyen highlighted a number of examples of how AI might power a range of benefits for society — from “better and earlier” diagnosis of diseases like cancer to helping with her parallel push for the bloc to be carbon neutral by 2050, such as by enabling precision farming and smart heating — emphasizing that such applications rely on access to big data.

Artificial intelligence is about big data,” she said. “Data, data and again data. And we all know that the more data we have the smarter our algorithms. This is a very simple equation. Therefore it is so important to have access to data that are out there. This is why we want to give our businesses but also the researchers and the public services better access to data.”

“The majority of data we collect today are never ever used even once. And this is not at all sustainable,” she added. “In these data we collect that are out there lies an enormous amount of precious ideas, potential innovation, untapped potential we have to unleash — and therefore we follow the principal that in Europe we have to offer data spaces where you can not only store your data but also share with others. And therefore we want to create European data spaces where businesses, governments and researchers can not only store their data but also have access to other data they need for their innovation.”

She too impressed the need for AI regulation, including to guard against the risk of biased algorithms — saying “we want citizens to trust the new technology”. “We want the application of these new technologies to deserve the trust of our citizens. This is why we are promoting a responsible, human centric approach to artificial intelligence,” she added.

She said the planned restrictions on high risk AI would apply in fields such as healthcare, recruitment, transportation, policing and law enforcement — and potentially others.

“We will be particularly careful with sectors where essential human interests and rights are at stake,” she said. “Artificial intelligence must serve people. And therefore artificial intelligence must always comply with people’s rights. This is why a person must always be in control of critical decisions and so called ‘high risk AI’ — this is AI that potentially interferes with people’s rights — have to be tested and certified before they reach our single market.”

“Today’s message is that artificial intelligence is a huge opportunity in Europe, for Europe. We do have a lot but we have to unleash this potential that is out there. We want this innovation in Europe,” von der Leyen added. “We want to encourage our businesses, our researchers, the innovators, the entrepreneurs, to develop artificial intelligence and we want to encourage our citizens to feel confident to use it in Europe.”

Towards a rights-respecting common data space

The European Commission has been working on building what it dubs a “data economy” for several years at this point, plugging into its existing Digital Single Market strategy for boosting regional competitiveness.

Its aim is to remove barriers to the sharing of non-personal data within the single market. The Commission has previously worked on regulation to ban most data localization, as well as setting out measures to encourage the reuse of public sector data and open up access to scientific data.

Healthcare data sharing has also been in its sights, with policies to foster interoperability around electronic health records, and it’s been pushing for more private sector data sharing — both b2b and business-to-government.

“Every organisation should be able to store and process data anywhere in the European Union,” it wrote in 2018. It has also called the plan a “common European data space“. Aka “a seamless digital area with the scale that will enable the development of new products and services based on data”.

The focus on freeing up the flow of non-personal data is intended to complement the bloc’s long-standing rules on protecting personal data. The General Data Protection Regulation (GDPR), which came into force in 2018, has reinforced EU citizens’ rights around the processing of their personal information — updating and bolstering prior data protection rules.

The Commission views GDPR as a major success story by merit of how it’s exported conversations about EU digital standards to a global audience.

But it’s fair to say that back home enforcement of the GDPR remains a work in progress, some 21 months in — with many major cross-border complaints attached to how tech and adtech giants are processing people’s data still sitting on the desk of the Irish Data Protection Commission where multinationals tend to locate their EU HQ as a result of favorable corporate tax arrangements.

The Commission’s simultaneous push to encourage the development of AI arguably risks heaping further pressure on the GDPR — as both private and public sectors have been quick to see model-making value locked up in citizens’ data.

Already across Europe there are multiple examples of companies and/or state authorities working on building personal data-fuelled diagnostic AIs for healthcare; using machine learning for risk scoring of benefits claimants; and applying facial recognition as a security aid for law enforcement, to give three examples.

There has also been controversy fast following such developments. Including around issues such as proportionality and the question of consent to legally process people’s data — both under GDPR and in light of EU fundamental privacy rights as well as those set out in the European Convention of Human Rights.

Only this month a Dutch court ordered the state to cease use of a blackbox algorithm for assessing the fraud risk of benefits claimants on human rights grounds — objecting to a lack of transparency around how the system functions and therefore also “insufficient” controllability.

The von der Leyen Commission, which took up its five-year mandate in December, is alive to rights concerns about how AI is being applied, even as it has made it clear it intends to supercharge the bloc’s ability to leverage data and machine learning technologies — eyeing economic gains.

Commission president, Ursula von der Leyen, visiting the AI Intelligence Center in Brussels (via the EC’s EbS Live AudioVisual Service)

The Commission president committed to publishing proposals to regulate AI within the first 100 days — saying she wants a European framework to steer application to ensure powerful learning technologies are used ethically and for the public good.

But a leaked draft of the plan to regulate AI last month suggested it would step back from imposing even a temporary ban on the use of facial recognition technology — leaning instead towards tweaks to existing rules and sector/app specific risk-assessments and requirements.

It’s clear there are competing views at the top of the Commission on how much policy intervention is needed on the tech sector.

Breton has previously voiced opposition to regulating AI — telling the EU parliament just before he was confirmed in post that he “won’t be the voice of regulating AI“.

While Vestager has been steady in her public backing for a framework to govern how AI is applied, talking at her hearing before the EU parliament of the importance of people’s trust and Europe having its own flavor of AI that must “serve humans” and have “a purpose” .

“I don’t think that we can be world leaders without ethical guidelines,” she said then. “I think we will lose it if we just say no let’s do as they do in the rest of the world — let’s pool all the data from everyone, no matter where it comes from, and let’s just invest all our money.”

At the same time Vestager signalled a willingness to be pragmatic in the scope of the rules and how they would be devised — emphasizing the need for speed and agreeing the Commission would need to be “very careful not to over-regulate”, suggesting she’d accept a core minimum to get rules up and running.

Today’s proposal steers away from more stringent AI rules — such as a ban on facial recognition in public places. On biometric AI technologies Vestager described some existing uses as “harmless” during today’s press conference — such as unlocking a phone or for automatic border gates — whereas she stressed the difference in terms of rights risks related to the use of remote biometric identification tech such as facial recognition.

“With this white paper the Commission is launching a debate on the specific circumstance — if any — which might justify the use of such technologies in public space,” she said, putting some emphasis on the word ‘any’.

The Commission is encouraging EU citizens to put questions about the digital strategy for Vestager to answer tomorrow, in a live Q&A at 17.45 CET on Facebook, Twitter and LinkedIn — using the hashtag #DigitalEU

Platform liability

There is more to come from the Commission on the digital policy front — with a Digital Services Act in the works to update pan-EU liability rules around Internet platforms.

That proposal is slated to be presented later this year and both commissioners said today that details remain to be worked out. The possibility that the Commission will propose rules to more tightly regulate online content platforms already has content farming adtech giants like Facebook cranking up their spin cycles.

During today’s press conference Breton said he would always push for what he dubbed “shared governance” but he warned several times that if platforms don’t agree an acceptable way forward “we will have to regulate” — saying it’s not up for European society to adapt to the platforms but for them to adapt to the EU.

“We will do this within the next eight months. It’s for sure. And everybody knows the rules,” he said. “Of course we’re entering here into dialogues with these platforms and like with any dialogue we don’t know exactly yet what will be the outcome. We may find at the end of the day a good coherent joint strategy which will fulfil our requirements… regarding the responsibilities of the platform. And by the way this is why personally when I meet with them I will always prefer a shared governance. But we have been extremely clear if it doesn’t work then we will have to regulate.”

Internal market commissioner, Thierry Breton

 


0

Facebook pushes EU for dilute and fuzzy Internet content rules

18:28 | 17 February

Facebook founder Mark Zuckerberg is in Europe this week — attending a security conference in Germany over the weekend where he spoke about the kind of regulation he’d like applied to his platform ahead of a slate of planned meetings with digital heavyweights at the European Commission.

“I do think that there should be regulation on harmful content,” said Zuckerberg during a Q&A session at the Munich Security Conference, per Reuters, making a pitch for bespoke regulation.

He went on to suggest “there’s a question about which framework you use”, telling delegates: “Right now there are two frameworks that I think people have for existing industries — there’s like newspapers and existing media, and then there’s the telco-type model, which is ‘the data just flows through you’, but you’re not going to hold a telco responsible if someone says something harmful on a phone line.”

“I actually think where we should be is somewhere in between,” he added, making his plea for Internet platforms to be a special case.

At the conference he also said Facebook now employs 35,000 people to review content on its platform and implement security measures — including suspending around 1 million fake accounts per day, a stat he professed himself “proud” of.

The Facebook chief is due to meet with key commissioners covering the digital sphere this week, including competition chief and digital EVP Margrethe Vestager, internal market commissioner Thierry Breton and Věra Jourová, who is leading policymaking around online disinformation.

The timing of his trip is clearly linked to digital policymaking in Brussels — with the Commission due to set out its thinking around the regulation of artificial intelligence this week. (A leaked draft last month suggested policymaker are eyeing risk-based rules to wrap around AI.)

More widely, the Commission is wrestling with how to respond to a range of problematic online content — from terrorism to disinformation and election interference — which also puts Facebook’s 2BN+ social media empire squarely in regulators’ sights.

Another policymaking plan — a forthcoming Digital Service Act (DSA) — is slated to upgrade liability rules around Internet platforms.

The detail of the DSA has yet to be publicly laid out but any move to rethink platform liabilities could present a disruptive risk for a content distributing giant such as Facebook.

Going into meetings with key commissioners Zuckerberg made his preference for being considered a ‘special’ case clear — saying he wants his platform to be regulated not like the media businesses which his empire has financially disrupted; nor like a dumbpipe telco.

On the latter it’s clear — even to Facebook — that the days of Zuckerberg being able to trot out his erstwhile mantra that ‘we’re just a technology platform’, and wash his hands of tricky content stuff, are long gone.

Russia’s 2016 foray into digital campaigning in the US elections and sundry content horrors/scandals before and since have put paid to that — from nation-state backed fake news campaigns to livestreamed suicides and mass murder.

Facebook has been forced to increase its investment in content moderation. Meanwhile it announced a News section launch last year — saying it would hand pick publishers content to show in a dedicated tab.

The ‘we’re just a platform’ line hasn’t been working for years. And EU policymakers are preparing to do something about that.

With regulation looming Facebook is now directing its lobbying energies onto trying to shape a policymaking debate — calling for what it dubs “the ‘right’ regulation”.

Here the Facebook chief looks to be applying a similar playbook as the Google’s CEO, Sundar Pichai — who recently tripped to Brussels to push for AI rules so dilute they’d act as a tech enabler.

In a blog post published today Facebook pulls its latest policy lever: Putting out a white paper which poses a series of questions intended to frame the debate at a key moment of public discussion around digital policymaking.

Top of this list is a push to foreground focus on free speech, with Facebook questioning “how can content regulation best achieve the goal of reducing harmful speech while preserving free expression?” — before suggesting more of the same: (Free, to its business) user-generated policing of its platform.

Another suggestion it sets out which aligns with existing Facebook moves to steer regulation in a direction it’s comfortable with is for an appeals channel to be created for users to appeal content removal or non-removal. Which of course entirely aligns with a content decision review body Facebook is in the process of setting up — but which is not in fact independent of Facebook.

Facebook is also lobbying in the white paper to be able to throw platform levers to meet a threshold of ‘acceptable vileness’ — i.e. it wants a proportion of law-violating content to be sanctioned by regulators — with the tech giant suggesting: “Companies could be incentivized to meet specific targets such as keeping the prevalence of violating content below some agreed threshold.”

It’s also pushing for the fuzziest and most dilute definition of “harmful content” possible. On this Facebook argues that existing (national) speech laws — such as, presumably, Germany’s Network Enforcement Act (aka the NetzDG law) which already covers online hate speech in that market — should not apply to Internet content platforms, as it claims moderating this type of content is “fundamentally different”.

“Governments should create rules to address this complexity — that recognize user preferences and the variation among internet services, can be enforced at scale, and allow for flexibility across language, trends and context,” it writes — lobbying for maximum possible leeway to be baked into the coming rules.

“The development of regulatory solutions should involve not just lawmakers, private companies and civil society, but also those who use online platforms,” Facebook’s VP of content policy, Monika Bickert, also writes in the blog.

“If designed well, new frameworks for regulating harmful content can contribute to the internet’s continued success by articulating clear ways for government, companies, and civil society to share responsibilities and work together. Designed poorly, these efforts risk unintended consequences that might make people less safe online, stifle expression and slow innovation,” she adds, ticking off more of the tech giant’s usual talking points at the point policymakers start discussing putting hard limits on its ad business.

 


0

Will online privacy make a comeback in 2020?

23:15 | 8 January

Last year was a landmark for online privacy in many ways, with something of a consensus emerging that consumers deserve protection from the companies that sell their attention and behavior for profit.

The debate now is largely around how to regulate platforms, not whether it needs to happen.

The consensus among key legislators acknowledges that privacy is not just of benefit to individuals but can be likened to public health; a level of protection afforded to each of us helps inoculate democratic societies from manipulation by vested and vicious interests.

The fact that human rights are being systematically abused at population-scale because of the pervasive profiling of Internet users — a surveillance business that’s dominated in the West by tech giants Facebook and Google, and the adtech and data broker industry which works to feed them — was the subject of an Amnesty International report in November 2019 that urges legislators to take a human rights-based approach to setting rules for Internet companies.

“It is now evident that the era of self-regulation in the tech sector is coming to an end,” the charity predicted.

Democracy disrupted

The dystopian outgrowth of surveillance capitalism was certainly in awful evidence in 2019, with elections around the world attacked at cheap scale by malicious propaganda that relies on adtech platforms’ targeting tools to hijack and skew public debate, while the chaos agents themselves are shielded from democratic view.

Platform algorithms are also still encouraging Internet eyeballs towards polarized and extremist views by feeding a radicalized, data-driven diet that panders to prejudices in the name of maintaining engagement — despite plenty of raised voices calling out the programmed antisocial behavior. So what tweaks there have been still look like fiddling round the edges of an existential problem.

Worse still, vulnerable groups remain at the mercy of online hate speech which platforms not only can’t (or won’t) weed out, but whose algorithms often seem to deliberately choose to amplify — the technology itself being complicit in whipping up violence against minorities. It’s social division as a profit-turning service.

The outrage-loving tilt of these attention-hogging adtech giants has also continued directly influencing political campaigning in the West this year — with cynical attempts to steal votes by shamelessly platforming and amplifying misinformation.

From the Trump tweet-bomb we now see full-blown digital disops underpinning entire election campaigns, such as the UK Conservative Party’s strategy in the 2019 winter General Election, which featured doctored videos seeded to social media and keyword targeted attack ads pointing to outright online fakes in a bid to hack voters’ opinions.

Political microtargeting divides the electorate as a strategy to conquer the poll. The problem is it’s inherently anti-democratic.

No wonder, then, that repeat calls to beef up digital campaigning rules and properly protect voters’ data have so far fallen on deaf ears. The political parties all have their hands in the voter data cookie-jar. Yet it’s elected politicians whom we rely upon to update the law. This remains a grave problem for democracies going into 2020 — and a looming U.S. presidential election.

So it’s been a year when, even with rising awareness of the societal cost of letting platforms suck up everyone’s data and repurpose it to sell population-scale manipulation, not much has actually changed. Certainly not enough.

Yet looking ahead there are signs the writing is on the wall for the ‘data industrial complex’ — or at least that change is coming. Privacy can make a comeback.

Adtech under attack

Developments in late 2019 such as Twitter banning all political ads and Google shrinking how political advertisers can microtarget Internet users are notable steps — even as they don’t go far enough.

But it’s also a relatively short hop from banning microtargeting sometimes to banning profiling for ad targeting entirely.

Alternative online ad models (contextual targeting) are proven and profitable — just ask search engine DuckDuckGo . While the ad industry gospel that only behavioral targeting will do now has academic critics who suggest it offer far less uplift than claimed, even as — in Europe — scores of data protection complaints underline the high individual cost of maintaining the status quo.

Startups are also innovating in the pro-privacy adtech space (see, for example, the Brave browser).

Changing the system — turning the adtech tanker — will take huge effort, but there is a growing opportunity for just such systemic change.

This year, it might be too much to hope for regulators get their act together enough to outlaw consent-less profiling of Internet users entirely. But it may be that those who have sought to proclaim ‘privacy is dead’ will find their unchecked data gathering facing death by a thousand regulatory cuts.

Or, tech giants like Facebook and Google may simple outrun the regulators by reengineering their platforms to cloak vast personal data empires with end-to-end encryption, making it harder for outsiders to regulate them, even as they retain enough of a fix on the metadata to stay in the surveillance business. Fixing that would likely require much more radical regulatory intervention.

European regulators are, whether they like it or not, in this race and under major pressure to enforce the bloc’s existing data protection framework. It seems likely to ding some current-gen digital tracking and targeting practices. And depending on how key decisions on a number of strategic GDPR complaints go, 2020 could see an unpicking — great or otherwise — of components of adtech’s dysfunctional ‘norm’.

Among the technologies under investigation in the region is real-time bidding; a system that powers a large chunk of programmatic digital advertising.

The complaint here is it breaches the bloc’s General Data Protection Regulation (GDPR) because it’s inherently insecure to broadcast granular personal data to scores of entities involved in the bidding chain.

A

held by the UK’s data watchdog confirmed plenty of troubling findings. Google responded by removing some information from bid requests — though
it does not go far enough. Nothing short of removing personal data entirely will do in their view, which sums to ads that are contextually (not micro)targeted.

Powers that EU data protection watchdogs have at their disposal to deal with violations include not just big fines but data processing orders — which means corrective relief could be coming to take chunks out of data-dependent business models.

As noted above, the adtech industry has already been put on watch this year over current practices, even as it was given a generous half-year grace period to adapt.

In the event it seems likely that turning the ship will take longer. But the message is clear: change is coming. The UK watchdog is due to publish another report in 2020, based on its review of the sector. Expect that to further dial up the pressure on adtech.

Web browsers have also been doing their bit by baking in more tracker blocking by default. And this summer Marketing Land proclaimed the third party cookie dead — asking what’s next?

Alternatives and workarounds will and are springing up (such as stuffing more in via first party cookies). But the notion of tracking by background default is under attack if not quite yet coming unstuck.

Ireland’s DPC is also progressing on a formal investigation of Google’s online Ad Exchange. Further real-time bidding complaints have been lodged across the EU too. This is an issue that won’t be going away soon, however much the adtech industry might wish it.

Year of the GDPR banhammer?

2020 is the year that privacy advocates are really hoping that Europe will bring down the hammer of regulatory enforcement. Thousands of complaints have been filed since the GDPR came into force but precious few decisions have been handed down. Next year looks set to be decisive — even potentially make or break for the data protection regime.

 


0

Atomico Partner Tom Wehmeier reviews ‘The State of European Tech’ 2019 report

01:33 | 3 December

Atomico, the European venture capital firm founded by Skype’s Niklas Zennström, has released its latest annual The State of European Tech report, published in partnership with Slush and Orrick.

As part of the report, the authors surveyed 5,000 members of the ecosystem — including 1,000 founders — as well as pulling in robust data from other sources, such as Dealroom and the London Stock Exchange .

This year, the report reveals that the European tech ecosystem continues to mature and shows no sign of slowing — particularly highlighting the contrast from five years ago when the The State of European Tech report made its debut. Almost every key indicator is up and to the right, except, rather depressingly, diversity.

The data shows, for example, that competition for talent and access to the best founders has increased ferociously. And from a funding perspective, European founders have more choice than ever, especially with U.S. and Asian VC firms investing more and more in the region. Progress with gender diversity stalled, however, such as 92% of funding going to all-male teams.

I caught up with the report’s author Tom Wehmeier, Partner and Head of Insights at Atomico (also sometimes jokingly referred to as the “Mary Meeker of Europe”), where we discuss in more detail some of the key findings and why, it seems, that the rest of the world has finally woken up to Europe’s tech potential.

But first, a few headlines from the report:

  • European technology companies are on track to raise a record 30$B+ in funding in 2019, up from $25B the year before. (Source: Dealroom)
  • Despite failing to match the level of venture-backed exits of 2018, there was a record number of 40 $100M-plus deals as of September 2019, a size that many European tech sceptics did not believe was possible. (Source: Dealroom)
  • A number of multi-billion-dollar non-venture backed companies like Nexi and Trainline made their debut on the public markets.
  • European tech policymaking remains a mystery to many European founders.
  • When asked to describe the top priority of the European Commission in terms of tech policy, 40% of founders and startup employees say they don’t feel informed enough to comment. (Source: survey)
  • Despite this reported lack of awareness on policy issues, all respondents voted EU competition commissioner Margrethe Vestager as the person who had the most influence on European tech in 2019, good or bad. (Source: survey)
  • European parliamentarians aren’t talking about fintech and digital health, two sectors which investors poured a combined $12.7bn into last year (Source: Politico and Dealroom)
  • Europe’s diversity figures are still grim reading.
  • In 2019, 92% of funding went to all-male teams, a similar level to 2018. (Source: Dealroom)
  • There is still only one woman CTO in the 119 companies (<1%) based on a sample of executives in CxO positions at 251 European VC-backed tech companies that raised a Series A or B round between 1 October 2018 and 30 September 2019 with more than $10M funding, even though 7.5% of software engineers are women. (Source: Stack Overflow, Craft, Dealroom)
  • Looking beyond gender diversity, ethnic minorities in tech experienced discrimination at a much high rate than white peers. (Source: survey)
  • At least 80% of Black/African/Caribbean respondents who reported experiencing discrimination linked it to their ethnicity. (Source: survey)
  • 63% of women VCs reported increased focus on attending events with stronger participation from diverse founders. The corresponding number for men VCs was only 33% of female respondents suggested that their male counterparts are leaving female VCs to fix Europe’s diversity problem. (Source: survey)
  • European founders aren’t just aiming for commercial success — they are trying to solve some of the world’s largest problems.
  • One in five European founders states that their company is already measuring its societal and/or environmental impact. (Source: survey)
  • Only 14% of founders don’t believe it’s relevant for their company. Founders that are women are much more likely to be advanced in their approach to measuring impact. (Source: survey)
  • Employees are placing a greater emphasis on corporate social responsibility, with 57% citing its importance in the State of European Tech survey. (Source: survey)

Extra Crunch: It is 5 years since Atomico published the first The State of European Tech report, which really attempted to capture a data-driven snapshot of the entire ecosystem. What are some of the biggest changes you’ve seen within European tech in the intertwining years or in this year in particular?

Tom Wehmeier: If I think back to when we did the first report, people who believe that Europe could actually be an interesting player in global technology, were largely limited to people who were in the tech industry in Europe itself. If you then fast forward to today, what has clearly happened — and I think 2019 was the year where this really materialized and became part of the narrative — was that belief translating from people on the inside to a bunch of people that were on the outside.

Most obviously has been the strength of interest from from the U.S. and the number of top-tier U.S. funds that are not just increasing their level of investment activity but committing to spending more and more time here on the ground, hiring people, building teams, building a network, and getting to know companies. I think it probably surprises people to know that 19% of all rounds this year will involve at least one U.S. investor in Europe, which is more than double since since the first year we did the report.

I think the other thing, where I come back to this idea that now we have finally convinced a certain group of people about the role that Europe can play, is mainstream institutional investors. I know it is not going to be lost on you, [but] this is going to be another record year for VC fund raising from Europe. And whilst the headline numbers might not be a surprise, I think what should catch people’s attention is that the composition of the LP base here in Europe is now shifting. And finally, there’s an unlocking of institutional investors, [by which] I mean pension funds, funds of funds, insurance companies, sovereign wealth funds, who are committing to European VC at levels that are significantly increased and elevated from where they had been in the past. So, if you just take pension funds, we’re going to see close to a billion dollars invested which is up nearly three fold.

It’s a validation of what’s happening around European tech to see that now coming through and I think is ultimately something that helps to build a foundation for the next five years of success. As much as this is a report that’s looking back, it’s also about trying to understand where things go from here.

With regards to the pension funds, do you think that is driven by the general bullishness towards European tech, or do you think it’s more the macro economic reality that maybe other places where they could put their money aren’t very attractive at the moment?

I think it’s really a reflection that there’s a strong level of belief that European venture as an asset class is an attractive investment opportunity. And that is reflected by the numbers. One of the charts that we’ve got in the report is from Cambridge Associates who do the benchmarking for the VC indices… And when you look back over a 1, 3, 5, or even a 10 year horizon, the performance from European VC is demonstrating that this is a place where for anyone building a diversified portfolio, they should have some allocation. I think it’s fundamentally the strength of the investment opportunity. That is the single biggest driver for why you’re seeing this happen.

I think the biggest thing that Europe has been able to prove is that it can take a great idea and turn it into a great company and that company can scale to not just a billion dollar outcome but to a multi-billion dollar outcome and go all the way through into an IPO or into a large scale acquisition. What you’ve seen happen in 2019 is in part A reflection of what happened last year where it was obviously this record year with Spotify, Adyen, Farfetch, Elastic and others that really showed you can go full cycle from start all the way to finish. And that the magnitude of those outcomes can be at a scale that makes them globally relevant.

Are the pension funds shifting their allocation of VC away from other geographies or are they just doing more VC as a whole?

 


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US search market needs a ‘choice screen’ remedy now, says DuckDuckGo

15:48 | 30 October

US regulators shouldn’t be sitting on their hands while the 50+ state, federal and congressional antitrust investigations of Google to grind along, search rival DuckDuckGo argues.

It’s put out a piece of research today that suggests choice screens which let smartphone users choose from a number of search engines to be their device default — aka “preference menus” as DuckDuckGo founder Gabe Weinberg prefers to call them — offer an easy and quick win for regulators to reboot competition in the search space by rebalancing markets right now.

“If designed properly we think [preference menus] are a quick and effective key piece in the puzzle for a good remedy,” Weinberg tells TechCrunch. “And that’s because it finally enables people to change the search defaults across the entire device which has been difficult in the past… It’s at a point, during device set-up, where you can promote the users to take a moment to think about whether they want to try out an alternative search engine.”

Google is already offering such a choice to Android users in Europe, following an EU antitrust decision against Android last year.

Google Android choice screen

DuckDuckGo is concerned US regulators aren’t thinking pro-actively enough about remedies for competition in the US search market — and is hoping to encourage more of a lean-in approach to support boosting diversity so that rivals aren’t left waiting years for the courts to issue judgements before any relief is possible.

In a survey of Internet users which it commissioned, polling more than 3,400 adults in the US, UK, Germany and Australia, people were asked to respond to a 4-choice screen design, based on an initial Google Android remedy proposal, as well as an 8-choice variant.

“We found that in each surveyed country, people select the Google alternatives at a rate that could increase their collective mobile market share by 300%-800%, with overall mobile search market share immediately changing by over 10%,” it writes [emphasis its].

Survey takers were also asked about factors that motivate them to switch search engines — with the number one reason given being a better quality of search results, and the next reason being if a search engine doesn’t track their searches or data.

Of course DuckDuckGo stands to gain from any pro-privacy switching, having built an alternative search business by offering non-tracked searches supported by contextual ads. Its model directly contrasts with Google’s, which relies on pervasive tracking of Internet users to determine which ads to serve.

But there’s plenty of evidence consumers hate being tracked. Not least the rise in use of tracker blockers.

“Using the original design puzzle [i.e. that Google devised] we saw a lot of people selecting alternative search engines and we think it would go up from there,” says Weinberg. “But even initially a 10% market share change is really significant.”

He points to regulatory efforts in Europe and also Russia which have resulted in antitrust decisions and enforcements against Google — and where choice screens are already in use promoting alternative search engine choices to Android users.

He also notes that regulators in Australia and the UK are pursuing choice screens — as actual or potential remedies for rebalancing the search market.

Russia has the lead here, with its regulator — the FAS — slapping Google with an order against bundling its services with Android all the way back in 2015, a few months after local search giant Yandex filed a complaint. A choice screen was implemented in 2017 and Russia’s homegrown Internet giant has increased its search market share on Android devices as a result. Google continues to do well in Russia. But the result is greater diversity in the local search market, as a direct result of implementing a choice screen mechanism.

“We think that all regulatory agencies that are now considering search market competition should really implement this remedy immediately,” says Weinberg. “They should do other things… as well but I don’t see any reason why one should wait on not implementing this because it would take a while to roll out and it’s a good start.”

Of course US regulators have yet to issue any antitrust findings against Google — despite there now being tens of investigations into “potential monopolistic behavior”. And Weinberg concedes that US regulators haven’t yet reached the stage of discussing remedies.

“It feels at a very investigatory stage,” he agrees. “But we would like to accelerate that… As well as bigger remedial changes — similar to privacy and how we’re pushing Do Not Track legislation — as something you can do right now as kind of low hanging fruit. I view this preference menu in the same way.”

“It’s a very high leverage thing that you can do immediately to move market share and increase search competition and so one should do it faster and then take the things that need to be slower slower,” he adds, referring to more radical possible competition interventions — such as breaking a business up.

There is certainly growing concern among policymakers around the world that the current modus operandi of enforcing competition law has failed to keep pace with increasingly powerful technology-driven businesses and platforms — hence ‘winner takes all’ skews which exist in certain markets and marketplaces, reducing choice for consumers and shrinking opportunities for startups to compete.

This concern was raised as a question for Europe’s competition chief, Margrethe Vestager, during her hearing in front of the EU parliament earlier this month. She pointed to the Commission’s use of interim measures in an ongoing case against chipmaker Broadcom as an example of how the EU is trying to speed up its regulatory response, noting it’s the first time such an application has been made for two decades.

In a press conference shortly afterwards, to confirm the application of EU interim measures against Broadcom, Vestager added: “Interim measures are one way to tackle the challenge of enforcing our competition rules in a fast and effective manner. This is why they are important. And especially that in fast moving markets. Whenever necessary I’m therefore committed to making the best possible use of this important tool.”

Weinberg is critical of Google’s latest proposals around search engine choice in Europe — after it released details of its idea to ‘evolve’ the search choice screen — by applying an auction model, starting early next year. Other rivals, such as French pro-privacy engine Qwant, have also blasted the proposal.

Clearly, how choice screens are implemented is key to their market impact.

“The way the current design is my read is smaller search engines, including us and including European search engines will not be on the screen long term the way it’s set up,” says Weinberg. “There will need to be additional changes to get the effects that we were seeing in our studies we made.

“There’s many reasons why us and others would not be those highest bidders,” he says of the proposed auction. “But needless to say the bigger companies can weigh outweigh the smaller ones and so there are alternative ways to set this up.”

 


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Europe issues interim antitrust order against Broadcom as probe continues

14:23 | 16 October

Europe has ordered chipmaker Broadcom to stop applying exclusivity clauses in agreements with six of its major customers — imposing so called ‘interim measures’ based on preliminary findings from an ongoing antitrust investigation.

The move follows a formal statement of objections issued by the Competition Commission in June. At the time the regulator said it would seek to order Broadcom to halt its behaviour while the investigation proceeds — “to avoid any risk of serious and irreparable harm to competition”.

Today Broadcom has been ordered to unilaterally stop applying “anticompetitive provisions” in agreements with six customers, and to inform them it will no longer apply such measures.

It is also barred from agreeing provisions with the same or similar effect, and from taking any retaliatory practices intended to punish customers with an equivalent effect.

Commenting in a statement, antitrust chief Margrethe Vestager, said: “We have strong indications that Broadcom, the world’s leading supplier of chipsets used for TV set-top boxes and modems, is engaging in anticompetitive practices. Broadcom’s behaviour is likely, in the absence of intervention, to create serious and irreversible harm to competition. We cannot let this happen, or else European customers and consumers would face higher prices and less choice and innovation. We therefore ordered Broadcom to immediately stop its conduct.”

We’ve reached out to Broadcom for comment.

The chipmaker has 30 days to comply with the interim measures, though it can choose to challenge the order in court.

Should the order stand it will apply for up to three years — or the date of adoption of a final competition decision on the case (whichever is earlier).

The Commission began investigations into Broadcom a year ago.

“We have reached the conclusion that in first sight — or in legal lingo, prima facie — Broadcom is currently infringing competition rules by abusing its dominant position in the system on a chip market in TV set-top boxes, fiber modems and xDSL modems,” said Vestager today, speaking during a press conference setting out the interim measures decision.

In June, when the Commission issued formal objections, it said it believes the chipmaker holds a dominant position in markets for the supply of systems-on-a-chip for TV set-top boxes and modems — identifying clauses in agreements with manufacturers that it suspected could harm competition.

At the time it flagged seven agreements. That’s now been reduced to six as the scope of the investigation has been limited to three markets, following submissions from Broadcom after the Statement of Objections.

Vestager said the slight reduction in scope is “a reflection of a process having heard Broadcom’s arguments” over the past few months.

The use of interim measures is noteworthy — as a sign of how the EU regulator is seeking to evolve competition enforcement to keep up with market activity. It’s the first time in 18 years the commission has sought to use the tool.

“Interim measures are one way to tackle the challenge of enforcing our competition rules in a fast and effective manner,” said Vestager. “This is why they are important. And especially that in fast moving markets. Whenever necessary I’m therefore committed to making the best possible use of this important tool.”

During a recent hearing in front of the EU parliament — as the commissioner heads towards another five years as Europe’s competition chief combined with an expanded role as an EVP setting digital policy — she suggested she will seek to make greater use of interim orders as an enforcement tool.

Asked today whether she has already identified other cases where interim measures could be applied, she said she hasn’t but added: “The tool is on the table. And if we find cases that live up to the two things that have to be fulfilled at the same time, yes we will indeed use interim measures more often.

“We don’t have a line up of cases [where interim measures might be applied],” she added. “Two quite substantial conditions will have to be met. One we have to prove that it’s likely there will be serious and irreparable harm to competition, and second we’ll have to find that there is an infringement at first sight.

“[It’s] an instrument, a tool, where we still will have to be careful and precise,” she went on, noting that the Broadcom investigation has taken a full year’s investigation work up to this point. “We are careful and we will not compromise on the right for the company in question to defend themself.”

Responding to a question about whether interim measures might be more difficult to apply in digital vs traditional markets, she said the regulator will need to be able to identify harm.

“The thing is for an interim measures case to work obviously you will have to be able to identify the harm. And that of course when markets are fast moving — that is the first sort of port of call. Can we identify harm in this market?” she said. “But… we do a lot of different things to fully grasp how competition works in fast moving, platform-driven, network-driven markets in order to be able to do that. And to be able to use the instrument if we find a case where this would be the thing to do in order to prevent irreparable and serious harm to competition.”

 


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Europe’s recharged antitrust chief makes her five year pitch to be digital EVP

00:30 | 9 October

Europe’s competition commissioner Margrethe Vestager, set for a dual role in the next Commission, faced three hours of questions from members of four committees in the European Parliament this afternoon, as MEPs got their chance to interrogate her priorities for a broader legislative role that will shape pan-EU digital strategy for the next five years.

As we reported last month Vestager is headed for an expanded role in the incoming European Commission with president-elect Ursula von der Leyen picking her as an executive VP overseeing a new portfolio called ‘Europe fit for the digital age’.

She is also set to retain her current job as competition commissioner. And a question she faced more than once during today’s hearing in front of MEPs, who have a confirming vote on her appointment, was whether the combined portfolio wasn’t at risk of a conflict of interest?

Or whether she “recognized the tension between objective competition enforcement and industrial policy interests in your portfolio” as one MEP put it, before asking whether she would “build Chinese walls” within it to avoid crossing the streams of enforcement and policymaking.

Vestager responded by saying it was the first question she’d asked herself on being offered the role — before laying out flat reasoning that “the independence in law enforcement is non-negotiable”.

“It has always been true that the commissioner for competition has been part of the College. And every decision we take also in competition is a collegial decision,” she said. “What justifies that is of course that every decision is subject to not one but 2x legal scrutiny if need be. And the latest confirmation of this set up was two judgements in 2011 — where it was looked into whether this set up… is in accordance with our human rights and that has been found to be so. So the set up, as such, is as it should be.”

The commissioner and commissioner-designate responded capably to a wide range of questions reflecting the broad span of her new responsibilities — fielding questions on areas including digital taxation; platform power and regulation; a green new deal; AI and data ethics; digital skills and research; and small business regulation and funding, as well as queries around specific pieces of legislation (such as ePrivacy and Copyright Reform). 

Climate change and digital transformation were singled out in her opening remarks as two of Europe’s biggest challenges — ones she said will require both joint working and a focus on fairness.

Europe is filled with highly skilled people, we have excellent infrastructure, fair and effective laws. Our Single Market gives European businesses the room to grow and innovate, and be the best in the world at what they do,” she said at the top of her pitch to MEPs. “So my pledge is not to make Europe more like China, or America. My pledge is to help make Europe more like herself. To build on our own strengths and values, so our society is both strong and fair. For all Europeans.”

Building trust in digital services

In her opening remarks Vestager said that if confirmed she will work to build trust in digital services — suggesting regulation on how companies collect, use and share data might be necessary to ensure people’s data is used for public good, rather than to concentrate market power.

It’s a suggestion that won’t have gone unnoticed in Silicon Valley.

“I will work on a Digital Services Act that includes upgrading our liability and safety rules for digital platforms, services and products,” she pledged. “We may also need to regulate the way that companies collect and use and share data – so it benefits the whole of our society.”

“As global competition gets tougher we’ll need to work harder to preserve a level playing field,” she also warned.

But asked directly during the hearing whether Europe’s response to platform power might include breaking up overbearing tech giants, Vestager signalled caution — saying such an intrusive intervention should only be used as a last resort, and that she has an obligation to try less drastic measures first. (It’s a position she’s set out before in public.)

“You’re right to say fines are not doing the trick and fines are not enough,” she said in response to one questioner on the topic. Another MEP complained fines on tech giants are essentially just seen as an “operating expense”.

Vestager went on to to cite the Google AdSense antitrust case as an example of enforcement that hasn’t succeeded because it has failed to restore competition. “Some of the things that we will of course look into is do we need even stronger remedies for competition to pick up in these markets,” she said. “They stopped their behavior. That’s now two years ago. The market hasn’t picked up. So what do we do in those kind of cases? We have to consider remedies that are much more far reaching.

“Also before we reach for the very, very far reaching remedy to break up a company — we have that tool in our toolbox but obviously it is very far reaching… My obligation is to ensure that we do the least intrusive thing in order to make competition come back. And in that respect, obviously, I am willing to explore what do we need more, in competition cases, for competition to come back.”

Competition law enforcers in Europe will have to consider how to make sure rules enforce fair competition in what what Vestager described as a “new phenomenon” of “competition for a market, not just in a market” — meaning that whoever wins the competition becomes “the de facto rule setter in this market”.

Regulating platforms on transparency and fairness is something European legislators have already agreed — earlier this year. Though that platform to business regulation has yet to come into force. “But it will also be a question for us as competition law enforcers,” Vestager told MEPs.

Making use of existing antitrust laws but doing so with greater speed and agility, rather than a drastic change of competition approach appeared to be her main message — with the commissioner noting she’d recently dusted off interim measures in an ongoing case against chipmaker Broadcom; the first time such an application has been made for 20 years.

“It’s a good reflection of the fact that we find it a very high priority to speed up what we do,” she said, adding: “There’s a limit as to how fast law enforcement can work, because we will never compromise on due process — on the other hand side we should be able to work as fast as possible.”

Her responses to MEPs on platform power favored greater regulation of digital markets (potentially including data), markets which have become dominated by data-gobbling platforms — rather than an abrupt smashing of the platforms themselves. So not an Elizabeth Warren ‘existential’ threat to big tech, then, but from a platform point of view Vestager’s preferred approach might just sum to death by a thousand legal cuts.

“One of course could consider what kind of tools do we need?” she opined, talking about market reorganization as a means of regulating platform power. “[There are] different ways of trying to re-organize a marketplace if the competition authority finds that the way it’s working is not beneficial for fair competition. And those are tools that can be considered in order to sort of re-organize before harm is done. Then you don’t punish because no infringement is found but you can give very direct almost orders… as to how a market should be organized.”

Artificial intelligence with a purpose

On artificial intelligence — which the current Commission has been working on developing a framework for ethical design and application — Vestager’s opening remarks contained a pledge to publish proposals for this framework — to “make sure artificial intelligence is used ethically, to support human decisions and not undermine them” — and to do so within her first 100 days in office.

That led one MEP to question whether it wasn’t too ambitious and hasty to rush to control a still emerging technology. “It is very ambitious,” she responded. “And one of the things that I think about a lot is of course if we want to build trust then you have to listen.

“You cannot just say I have a brilliant idea, I make it happen all over. You have to listen to people to figure out what would be the right approach here. Also because there is a balance. Because if you’re developing something new then — exactly as you say — you should be very careful not to over-regulate.

“For me, to fulfil these ambitions, obviously we need the feedback from the many, many businesses who have taken upon them to use the assessment list and the principles [recommended by the Commission’s HLEG on AI] of how to create AI you can trust. But I also think, to some degree, we have to listen fast. Because we have to talk with a lot of different people in order to get it right. But it is a reflection of the fact that we are in hurry. We really need to get our AI strategy off the ground and these proposals will be part of that.”

Europe could differentiate itself — and be “a world leader” — by developing “AI with a purpose”, Vestager suggested, pointing to potential applications for the tech such as in healthcare, transportation and combating climate change which she said would also work to further European values.

“I don’t think that we can be world leaders without ethical guidelines,” she said of AI. “I think we will lose it if we just say no let’s do as they do in the rest of the world — let’s pool all the data from everyone, no matter where it comes from, and let’s just invest all our money. I think we will lose out because the AI you create because you want to serve humans. That’s a different sort of AI. This is AI with a purpose.”

On digital taxation — where Vestager will play a strategic role, working with other commissioners — she said her intention is to work towards trying to achieve global agreement on reforming rules to take account of how data and profits flow across borders. But if that’s not possible she said Europe is prepared to act alone — and quickly — by the end of 2020.

“Surprising things can happen,” she said, discussing the challenge of achieving even an EU-wide consensus on tax reform, and noting how many pieces of tax legislation have already been passed in the European Council by unanimity. “So it’s not undoable. The problem is we have a couple of very important pieces of legislation that have not been passed.

“I’m still kind of hopeful in the working way that we can get a global agreement on digital taxation. If that is not the case obviously we will table and push for a European solution. And I admire the Member States who’ve said we want a European or global solution but if that isn’t to be we’re willing to do that by ourselves in order to be able to answer to all the businesses who pay their taxes.”

Vestager also signalled support for exploring the possibility of amending Article 116 of the Treaty on the Functioning of the EU, which relates to competition based distortion of the internal market, in order to enable tax reform to be passed by a qualified majority, instead of unanimously — as a potential strategy for getting past the EU’s own current blocks to tax reform.

“I think definitely we should start exploring what would that entail,” she said in response to a follow up question. “I don’t think it’s a given that it would be successful but it’s important that we take the different tools that the treaty gives us and use these tools if need be.”

During the hearing she also advocated for a more strategic use of public procurement by the EU and Member States — to push for more funding to go into digital research and business innovation that benefits common interests and priorities.

“It means working together with Member States on important projects of common European interest. We will bring together entire value chains, from universities, suppliers, manufacturers all the way to those who recycle the raw material that is used in manufacturing,” she said.

“Public procurement in Europe is… a lot of money,” she added. “And if we also use that to ask for solutions well then we can have also maybe smaller businesses to say I can actually do that. So we can make an artificial intelligence strategy that will push in all different sectors of society.”

She also argued that Europe’s industrial strategy needs to reach beyond its own Single Market — signalling a tougher approach to market access to those outside the bloc.

And implying she might favor less of a free-for-all when it comes to access to publicly funded data — if the value it contains risks further entrenching already data-rich, market-dominating giants at the expense of smaller local players.

“As we get more and more interconnected, we are more dependent and affected by decisions made by others. Europe is the biggest trading partner of some 80 countries, including China and the US. So we are in a strong position to work for a level global playing field. This includes pursuing our proposal to reform the World Trade Organization. It includes giving ourselves the right tools to make sure that foreign state ownership and subsidies do not undermine fair competition in Europe,” she said.

“We have to figure out what constitutes market power,” she went on, discussing how capacity to collect data can influence market position, regardless of whether it’s directly linked to revenue. “We will expand our insights as to how this works. We have learned a lot from some of the merger cases that we have been doing to see how data can work as an asset for innovation but also as a barrier to entry. Because if you don’t have the right data it’s very difficult to produce the services that people are actually asking for. And that becomes increasingly critical when it comes to AI. Because once you have it then you can do even more.

“I think we have to discuss what we do with all the amazing publicly funded data that we make available. It’s not to be overly biblical but we shouldn’t end up in a situation where ‘those who have shall more be given’. If you have a lot already then you also have the capabilities and the technical insight to make very good use of it. And we do have amazing data in Europe. Just think about what can be assessed in our supercomputers… they are world class… And second when it comes to both [EU sat-nav] Galileo and [earth observation program] Copernicus. Also here data is available. Which is an excellent thing for the farmer doing precision farming and saving in pesticides and seeds and all of that. But are really happy that we also make it available for those who could actually pay for it themselves?

“I think that is a discussion that we will have to have — to make sure that not just the big ones keep taking for themselves but the smaller ones having a fair chance.”

Rights and wrongs

During the hearing Vestager was also asked whether she supported the controversial EU copyright reform.

She said she supports the “compromise” achieved — arguing that the legislation is important to ensure artists are rewarded for the work they do — but stressed that it will be important for the incoming Commission to ensure Member States’ implementations are “coherent” and that fragmentation is avoided.

She also warned against the risk of the same “divisive” debates being reopened afresh, via other pieces of legislation.

“I think now that the copyright issue has been settled it shouldn’t be reopened in the area of the Digital Services Act,” she said. “I think it’s important to be very careful not to do that because then we would loose speed again when it comes to actually making sure there is renumeration for those who hold copyright.”

Asked in a follow up question how, as the directive gets implemented by EU Member States, she will ensure freedom of speech is protected from upload filter technologies — which is what critics of the copyright reform argue the law effectively demands that platforms deploy — Vestager hedged, saying: “[It] will take a lot of discussions and back and forth between Member States and Commission, probably. Also this parliament will follow this very closely. To make sure that we get an implementation in Member States that are similar.”

“One has to be very careful,” she added. “Some of the discussions that we had during the adoption of the copyright directive will come back. Because these are crucial debates. Because it’s a debate between the freedom of speech and actually protecting people who have rights. Which is completely justified… Just as we have fundamental values we also have fundamental discussions because it’s always a balancing act how to get this right.”

The commissioner also voiced support for passing the ePrivacy Regulation. “It will be high priority to make sure that we’re able to pass that,” she told MEPs, dubbing the reform an important building block.

“One of the things I hope is that we don’t just always decentralize to the individual citizens,” she added.  “Now you have rights, now you just go and force them. Because I know I have rights but one of my frustrations is how to enforce them? Because I am to read page after page after page and if I’m not tired and just forget about it then I sign up anyway. And that doesn’t really make sense. We still have to do more for people to feel empowered to protect themselves.”

She was also asked for her views on adtech-driven microtargeting — as a conduit for disinformation campaigns and political interference — and more broadly as so-called ‘surveillance capitalism’. “Are you willing to tackle adtech-driven business models as a whole?” she was asked by one MEP. “Are you willing to take certain data exploitation practices like microtargeting completely off the table?”

Hesitating slightly before answering, Vestager said: “One of the things I have learned from surveillance capitalism and these ideas is it’s not you searching Google it is Google searching you. And that gives a very good idea about not only what you want to buy but also what you think. So we have indeed a lot to do. I am in complete agreement with what has been done so far — because we needed to do something fast. So the Code of Practice [on disinformation] is a very good start to make sure that we get things right… So I think we have a lot to build on.

“I don’t know yet what should be the details of the Digital Services Act. And I think it’s very important that we make the most of what we have since we’re in a hurry. Also to take stock of what I would call digital citizens’ rights — the GDPR [General Data Protection Regulation] — that we can have national authorities enforce that in full, and hopefully also to have a market response so that we have privacy by design and being able to choose that. Because I think it’s very important that we also get a market response to say well you can actually do things in a very different way than just to allow yourself to feel forced to sign up to whatever terms and conditions that are put in front of you.

“I myself find it very thought-provoking if you have the time just once in a while to read the T&Cs now when they are obliged, thanks to this parliament, to write in a way that you can actually understand that makes it even more scary. And very often it just makes me think thanks but no thanks. And that of course is the other side of that coin. Yes, regulation. But also us as citizens to be much more aware of what kind of life we want to live and what kind of democracy we want to have. Because it cannot just be digital. Then I think we will lose it.”

In her own plea to MEPs Vestager urged them to pass the budget so that the Commission can get on with all the pressing tasks in front of it. “We have proposed that we increase our investments quite a lot in order to be able to do all this kind of stuff,” she said.

“First things first, I’m sorry to say this, we need the money. We need funding. We need the programs. We need to be able to do something so that people can see that businesses can use funds to invest in innovation, so that researchers can make their networks work all over Europe. That they get the funding actually to get there. And in that respect I hope that you will help push for the multi-annual financial framework to be in place. I don’t think that Europeans have any patience for us when it comes to these different things that we would like to be real. That is now, that is here.”

 


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Europe’s antitrust chief, Margrethe Vestager, set for expanded role in next Commission

16:45 | 10 September

As the antitrust investigations stack up on US tech giants’ home turf there’s no sign of pressure letting up across the pond.

European Commission president-elect Ursula von der Leyen today unveiled her picks for the next team of commissioners who will take up their mandates on November 1 — giving an expanded role to competition commissioner Margrethe Vestager. The pick suggests the next Commission is preparing to dial up its scrutiny of big tech’s data monopolies.

Under the draft list of commissioners-designate, which still needs to be approved in full by the European Parliament, Vestager has been named executive VP overseeing a new portfolio called ‘Europe fit for the digital age’.

But, crucially, she will also retain the competition portfolio — which implies attention on growing Europe’s digital economy will go hand in glove with scrutiny of fairness in ecommerce and ensuring a level playing field vs US platform giants.

“Executive vice-president Margrethe Vestager will lead our work on a Europe fit for the digital age,” said von der Leyen at a press conference to announce her picks. “Digitalization has a huge impact on the way we live, we work, we communicate. In some fields Europe has to catch up — for example in the field of business to consumer but in other fields we’re excellent. Europe is the frontrunner, for example in business to business, when we talk about digital twins of products and procedures.

“We have to make more out of the field of artificial intelligence. We have to make our single market a digital single market. We have to use way more the big data that is out there but we don’t make enough out of it. What innovation and startups are concerned. It’s not only need to know but it’s need to share big data. We have to improve on cyber security. We have to work hard on our technological sovereignty just to name a few issues in these broad topics.

“Margrethe Vestager will co-ordinate the whole agenda. And be the commissioner for competition. She will work together with the commissioner for internal market, innovation and youth, transport, energy, jobs, health and justice.”

If tech giants were hoping for Europe’s next Commission to pay a little less attention to question marks hanging over the fairness of their practices they’re likely to be disappointed as Vestager is set to gain expanded powers and a broader canvas to paint on. The new role clearly positions her to act on the review of competition policy she instigated towards the end of her current mandate — which focused on the challenges posed by digital markets.

Since taking over as Europe’s competition chief back in 2014, Vestager has made a name for herself by blowing the dust off the brief and driving forward on a series of regulatory interventions targeting tech giants including Amazon, Apple and Google . In the latter case this has included opening a series of fresh probes as well as nailing the very long running Google Shopping saga inherited from her predecessor.

The activity of the department under her mandate has clearly catalyzed complainants — creating a pipeline of cases for her to tackle. And just last month Reuters reported she had been preparing an “intensive” handover of work looking into complaints against Google’s job search product to her successor — a handover that won’t now be necessary, assuming the EU parliament gives its backing to von der Leyen’s team.

While the competition commissioner has thus far generated the biggest headlines for the size of antitrust fines she’s handed down — including a record-breaking $5BN fine for Google last year for illegal restrictions attached to Android — her attention on big data holdings as a competition risk is most likely to worry tech giants going forward.

See, for example, the formal investigation of Amazon’s use of merchant data announced this summer for a sign of the direction of travel.

Vestager has also talked publicly about regulating data flows as being a more savvy route to control big tech versus swinging a break up hammer. And while — on the surface — regulating data might sound less radical a remedy than breaking giants like Google and Facebook up, placing hard limits on how data can be used has the potential to effect structural separation via a sort of regulatory keyhole surgery that’s likely to be quicker and implies a precision that may also make it more politically palatable.

That’s important given the ongoing EU-US trade friction kicked up by the Trump administration which is never shy of lashing out, especially at European interventions that seek to address some of the inequalities generated by tech giants — most recently Trump gave France’s digital tax plans a tongue-lashing.

von der Leyen was asked during the press conference whether Vestager might not been seen as a controversial choice given Trump’s views of her activity to date (Europe’s “tax lady” is one of the nicer things he’s said about Vestager). The EU president-elect dismissed the point saying the only thing that matters in assigning Commission portfolios is “quality and excellence”, adding that competition and digital is the perfect combination to make the most of Vestager’s talents.

“Vestager has done an outstanding job as a commissioner for competition,” she went on. “At competition and the issues she’s tackling there are closely linked to the digital sector too. So having her as an executive vice-president for the digital in Europe is absolutely a perfect combination.

“She’ll have this topic as a cross-cutting topic. She’ll have to work on the Digital Single Market. She will work on the fact that we want to use in a better way big data that is out there, that we collect every day — non-personalized data. That we should use way better, in the need for example to share with others for innovation, for startups, for new ideas.

“She will work on the whole topic of cyber security. Which is the more we’re digitalized, the more we’re vulnerable. So there’s a huge field in front of her. And as she’s shown excellence in the Commission portfolio she’ll keep that — the executive vice-presidents have with the DGs muscles to deal with their vast portfolios’ subject they have to deal with.”

In other choices announced today, the current commissioner for Digital Economy and Society, Mariya Gabriel, will be taking up a new portfolio called ‘Innovation and Youth’. And Sylvie Goulard was named as ‘Internal Market’ commissioner, leading on industrial policy and promoting the Digital Single Market, as well as getting responsibility for Defence Industry and Space.

Another executive VP choice, Valdis Dombrovskis, looks likely to be tackling thorny digital taxation issues — with responsibility for co-ordinating the Commission’s work on what’s been dubbed an “Economy that Works for People”, as well as also being commissioner for financial services. 

In prepared remarks on that role, von der Leyen said: We have a unique social market economy. It is the source of our prosperity and social fairness. This is all the more important when we face a twin transition: climate and digital. Valdis Dombrovskis will lead our work to bring together the social and the market in our economy.”

Frans Timmermans, who was previously in the running as a possible candidate for Commission president but lost out to von der Leyen, is another exec VP pick. He be focused on delivering a European Green Deal and managing climate action policy.

Another familiar face — current justice, consumer and gender affairs commissioner Věra Jourová — has also been named as an exec VP, gaining responsibility for “Values and Transparency” which suggests she’ll continue to be involved in EU efforts to combat online disinformation on platforms.

The rest of the Commission portfolio appointments can be found here.

There are 26 picks in all — 27 counting von der Leyen who has already been confirmed as president; one per EU country, with the UK having no representation in the next Commission given it is due to leave the bloc on October 31, the day before the new Commission takes up its mandate.

von der Leyen touted the team she presented today as balanced and diverse, including on gender lines as well as geographically to take account of the full span of European Union members.

“It draws on all the strength and talents, men and women, experienced and young, east and west, south and north, a team that is well balanced, a team that brings together diversity of experience and competence,” she said. “I want a Commission that is led with determination, that is clearly focused on the issues at hand — and that provides answers.”

Commissioners elect

“There’s one fundamental that connects this team: We want to bring new impetus to Europe’s democracy,” she added. “This is our joint responsibility. And democracy is more than voting in elections in every five years; it is about having your voice heard. It’s about having been able to participate in the way our society’s built. We gave to address some of the deeper issues in our society that have led to a loss of faith in democracy.”

In a signal of her intention that the new Commission should “walk the talk” on making Europe fit for the digital age she announced that college meetings will be paperless and digital.

On lawmaking, she added that there will be a one-in, one-out policy — with any new laws and regulation supplanting an existing rule in a bid to cut red tape.

 


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Qualcomm hit with $271M EU fine over predatory pricing of baseband chips

15:22 | 18 July

A long-running European antitrust investigation into whether Qualcomm used predatory pricing when selling UMTS baseband chips about a decade ago has landed the chipmaker with a fine of €242 million (~$271M) — aka, 1.27% of its global revenue for 2018.

The EU regulator concluded Qualcomm used abusive pricing to force its main rival at the time, UK-based company Icera, out of the market — by selling certain quantities of three of its UMTS chipsets below cost to two strategically important customers: Chinese tech companies Huawei and ZTE.

Commenting on the decision in a statement, competition commissioner Margrethe Vestager, said: Baseband chipsets are key components so mobile devices can connect to the Internet. Qualcomm sold these products at a price below cost to key customers with the intention of eliminating a competitor. Qualcomm’s strategic behaviour prevented competition and innovation in this market, and limited the choice available to consumers in a sector with a huge demand and potential for innovative technologies. Since this is illegal under EU antitrust rules, we have today fined Qualcomm €242M.

Qualcomm has come out fighting in response — dismissing what it dubs as the Commission’s “novel theory” and saying it plans to appeal.

It also says it will provide a financial guarantee in lieu of paying the fine while this appeal is pending.

The case — which was triggered by a complaint filed by Icera — dates back to 2015, and relates to Qualcomm business practices between 2009 and 2011. The baseband chipsets in question were used over the period for connecting smartphones and tablets to cellular networks, including 3G networks, and for both for voice and data transmission.

The Commission says Icera had been offering advanced data rate performance vs Qualcomm’s chipsets, thereby posing a threat to the latter’s business.

The EU regulator found Qualcomm held a dominant position in the global market for UMTS baseband chipset between 2009 and 2011 — when it had a marketshare of around 60% (almost 3x that of its biggest competitor), as well as on the high barriers to entry to the market — such as significant initial investments in R&D for designing such chipsets  and IP barriers given the volume of related patents Qualcomm holds.

European competition rules mean those holding a dominant position in a market have a special responsibility not to abuse their powerful position by restricting competition.

The Commission says its conclusion that Qualcomm engaged in predatory pricing during the probe period is based on a price-cost test for the three Qualcomm chipsets concerned; and “a broad range of qualitative evidence demonstrating the anti-competitive rationale behind Qualcomm’s conduct, intended to prevent Icera from expanding and building market presence”.

“The results of the price-cost test are consistent with the contemporaneous evidence gathered by the Commission in this case,” it writes. “The targeted nature of the price concessions made by Qualcomm allowed it to maximise the negative impact on Icera’s business, while minimising the effect on Qualcomm’s own overall revenues from the sale of UMTS chipsets. There was also no evidence that Qualcomm’s conduct created any efficiencies that would justify its practice.

“On this basis, the Commission concluded that Qualcomm’s conduct had a significant detrimental impact on competition. It prevented Icera from competing in the market, stifled innovation and ultimately reduced choice for consumers.”

In May 2011 Icera was acquired for $367M by US tech company Nvidia — which the Commission notes then decided to wind down the baseband chipset business line in 2015.

In its press release responding to the decision, Qualcomm’s Don Rosenberg, executive vice president and general counsel, comes out throwing punches — claiming the Commission’s theory is without precedent and “inconsistent”.

“The Commission spent years investigating sales to two customers, each of whom said that they favored Qualcomm chips not because of price but because rival chipsets were technologically inferior.  This decision is unsupported by the law, economic principles or market facts, and we look forward to a reversal on appeal,” he writes. “The Commission’s decision is based on a novel theory of alleged below-cost pricing over a very short time period and for a very small volume of chips. There is no precedent for this theory, which is inconsistent with well-developed economic analysis of cost recovery, as well as Commission practice.

“Contrary to the Commission’s findings, Qualcomm’s alleged conduct did not cause anticompetitive harm to Icera, the company that filed the complaint. Icera was later acquired by Nvidia for hundreds of millions of dollars and continued to compete in the relevant market for several years after the end of the alleged conduct. We cooperated with Commission officials every step of the way throughout the protracted investigation, confident that the Commission would recognize that there were no facts supporting a finding of anti-competitive conduct.  On appeal we will expose the meritless nature of this decision.”

The size of the fine being issued to Qualcomm — which is dwarfed by the $1.23BN fine also handed out to the company by EU regulators a year ago (for iPhone LTE chipset related market abuse) — has been calculated on the basis of the value of its direct and indirect sales of UMTS chipsets in the European Economic Area, with the Commission also factoring in the duration of the infringement it found to have taken place.

In addition to being fined, the Commission decision orders Qualcomm not to engage in the same or equivalent practices in the future.

 


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Europe is now formally investigating Amazon’s use of merchant data

13:53 | 17 July

European regulators have announced a formal antitrust investigation of Amazon’s use of data from third parties selling on its ecommerce platform.

Commenting in a statement, competition commissioner, Margrethe Vestager said: European consumers are increasingly shopping online. Ecommerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don’t eliminate these benefits through anti-competitive behaviour. I have therefore decided to take a very close look at Amazon’s business practices and its dual role as marketplace and retailer, to assess its compliance with EU competition rules.

The move is not a surprise as Amazon was already on the radar of Vestager’s department.

Last fall it emerged the regulator was making preliminary enquiries about Amazon’s use of third party sellers’ data — to try to determine whether or not merchants selling on its platform are being placed at a competitive disadvantage vs the products Amazon also sells as a consequence of its access to their data.

Dual sided platforms — that both host sellers on a marketplace and sell stuff themselves — raise competition-related questions about what is done with third parties’ data, she said then.

Based on its preliminary fact-finding the Commission said today that Amazon “appears to use competitively sensitive information — about marketplace sellers, their products and transactions on the marketplace”. Although it’s worth emphasizing that this is a preliminary finding and does not prejudice the outcome of the formal probe.

The Commission said its in-depth investigation of Amazon’s practices will focus on:

  • the standard agreements between Amazon and marketplace sellers which allow its retail business to analyse and use third party seller data — saying that, in particular, it will focus on “whether and how the use of accumulated marketplace seller data by Amazon as a retailer affects competition”
  • the role of data in the selection of the winners of the ‘Buy Box’ and “the impact of Amazon’s potential use of competitively sensitive marketplace seller information on that selection”. The Commission notes that the ‘Buy Box’ is “displayed prominently” on Amazon and “seems key for marketplace sellers as a vast majority of transactions are done through it”

The Buy Box — an example of which can be seen in the below screengrab — refers to a coveted section of the Amazon website where consumers who are viewing a product can click to add it to their shopping cart.

Seller/s who win placement in the box likely gain an advantage over competing sellers of the product.

 

Screenshot 2019 07 17 at 12.25.32

Responding to the Commission’s announcement of a formal probe, an Amazon spokesperson sent us this statement: “We will cooperate fully with the European Commission and continue working hard to support businesses of all sizes and help them grow.”

Yesterday the ecommerce behemoth was among a number of tech giants being questioned by US lawmakers about antitrust concerns.

On both sides of the Atlantic regulators are fast dialling up their scrutiny of the tech sector.

Although Europe has led the charge — with Vestager spearheading a number of investigations into tech giants during her tenure as competition chief, including probes of Google, Apple and now Amazon.

Earlier this year EU institutions also reached agreement over new regulations designed to boost transparency around online platform businesses and curb unfair practices to support traders and other businesses that rely on digital intermediaries for discovery and sales.

The new fairness and transparency rules online platforms are likely to come into force in the EU next year.

 


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