Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by Bloomberg Intelligence, the investment research platform of Bloomberg LP.
Speaker 1: This podcast series examines the intersection of business policy and law.
Speaker 1: I'm Matt Chuttenhallmey, an analyst with Bloomberg Intelligence covering USTMT,
Speaker 1: litigation and policy, and I'm joined today by my colleaguess
Speaker 1: Tamlin Basin, who covers the same issues in Europe, and
Speaker 1: Jennifer Ree are a Bloomberg Intelligence expert on anti trust.
Speaker 2: This podcast is the third installment in the series. Matt
Speaker 2: and I have started earlier this year talking about the
Speaker 2: biggest legal questions in the US INAU, including our most
Speaker 2: recent episode which focused entirely on regulation of AI. Now,
Speaker 2: for this addition, we thought we'd do something a little
Speaker 2: bit different. We thought we zero in on one company
Speaker 2: and look at the legal and policy issues facing that company.
Speaker 2: We chose Meta formerly Facebook for the company to examine
Speaker 2: in this and we're going to look at their litigation
Speaker 2: and policy risks world wide, from antitrust to data privacy
Speaker 2: to concerns about how social media is harming children. Now,
Speaker 2: our plan today is to give an overview of the
Speaker 2: most material leal risks that the company faces.
Speaker 1: Yeah, and I think antitrust has really emerged as a
Speaker 1: major risk for a number of tech companies in recent years,
Speaker 1: including metas so I think it makes sense to start
Speaker 1: our conversation today with Jen with a focus on in antitrust.
Speaker 1: And Jen, you've said before that Meta's primary antitrust risk
Speaker 1: is an FTC lawsuit that's challenging its acquisitions of Intram
Speaker 1: and WhatsApp. Can you take us through the allegations in
Speaker 1: that case.
Speaker 3: Yes, sure, Thanks so much for having me, Matt and Tamlin.
Speaker 3: I'm happy to be joining your podcast, and I'll tell
Speaker 3: you it's kind of a nice change to be talking
Speaker 3: about Meta right now in Meta's anti trust risks, at
Speaker 3: least to me, probably not to Meta, because lately it's
Speaker 3: been all about Alphabet, So it's good to talk about
Speaker 3: another tech platform that also is in the anti trust crosshairs.
Speaker 3: The FDC has been quietly litigating against the company. You know,
Speaker 3: we haven't seen very much in the news about this,
Speaker 3: and as Matt, as you said, it's primarily over the
Speaker 3: company's acquisitions of Instagram and WhatsApp, and I think it's
Speaker 3: really this suit is the only significant anti trust risk
Speaker 3: that Meta faces at least in the US right now.
Speaker 3: And just by way of background, this suit was actually
Speaker 3: filed during the Trump administration, so some time ago, and
Speaker 3: then Biden's anti trust enforcers at the Federal Trade Commission
Speaker 3: picked it up and ran with it. And when this
Speaker 3: suit was filed, Meta was actually still called Facebook. So
Speaker 3: at least going forward, I'm going to refer to the
Speaker 3: defendant as Facebook. And what the FDCs alleged here is
Speaker 3: that Facebook unlawfully maintained a monopoly position it had attained
Speaker 3: lawfully in a personal social networking services market in the US,
Speaker 3: and they did this through a pattern of buying up
Speaker 3: companies that they deemed to present competitive threats. Now, the
Speaker 3: FDC also says Facebook imposed some restrictive policies that unjustifiably
Speaker 3: hindered other potential rivals. But that conduct has kind of ceased.
Speaker 3: That was highlighted, and it seesed many years ago. So
Speaker 3: really the primary issues here are the acquisitions. So what
Speaker 3: the FTC says is that there was this course of
Speaker 3: anti competitive conduct for years and the aim of it
Speaker 3: was to suppress serious competitive threats. So first one they
Speaker 3: highlight is Instagram, which Facebook bought in twenty twelve, and
Speaker 3: at the time, Instagram was a competitor in mobile photo sharing,
Speaker 3: which was becoming a really big deal right around then.
Speaker 3: And Facebook actually tried to do this on their own,
Speaker 3: this mobile photo sharing, but wasn't successful, And according to
Speaker 3: the FTC, it was quite worried that Google or Twitter
Speaker 3: or Apple would buy Instagram and then expanded into a
Speaker 3: bigger Facebook competitor, so it bought the company to prevent that.
Speaker 3: And then the second acquisition that's highlighted is WhatsApp, acquired
Speaker 3: in twenty fourteen and at the time considered a potential competitor. So,
Speaker 3: I mean, as most people know, WhatsApp is a messaging app,
Speaker 3: But what the FTC says is that it really had
Speaker 3: all the ingredients it needed to move into social networking,
Speaker 3: and Facebook was worried that it would. So what the
Speaker 3: FTC says is that the harm caused by these i'll
Speaker 3: call them defensive acquisitions, that this has harmed users of
Speaker 3: personal social networking in the US because they're deprived of
Speaker 3: the benefits of competition, which could include increased choice, better quality,
Speaker 3: more innovation, things like that. And the FTC says this
Speaker 3: also impacts advertising prices because by suppressing and neutralizing the
Speaker 3: emergence and growth of personal social networking rivals also suppresses
Speaker 3: meaningful competition in the sale of advertising. So, in other words,
Speaker 3: more competition and personal personal social networking is likely to
Speaker 3: mean more competition in the provision of advertising. So essentially
Speaker 3: that Matt is the suit in a nutshell.
Speaker 1: Thanks Thanks Jen, that's a helpful overview. I understand the
Speaker 1: FTC is actually pushing for divestitures as part of this suit.
Speaker 1: Is that a real risk that Meta might be forced
Speaker 1: to divest these divisions?
Speaker 2: Yeah, it absolutely is.
Speaker 3: I think it's gunning hard for something like that, but
Speaker 3: I'll tell you, I think it's really unlikely that that's
Speaker 3: going to happen. I mean, at the outset, it's going
Speaker 3: to be really hard. I think for the FDC to
Speaker 3: win on liability, you know, they have to show that
Speaker 3: Facebook bought these rivals with the express purpose of killing
Speaker 3: off competition and there were no other pro competitive, legitimate
Speaker 3: business reasons for the deals. Now, they have some documents
Speaker 3: that tend to support that. Even Mark Zuckerberg had a
Speaker 3: document that said it's better to buy than compete. That's
Speaker 3: not helpful, but you know, they also then have to
Speaker 3: argue with theoretical that consumers and the social media market
Speaker 3: would have been better off if Facebook hadn't bought the companies.
Speaker 3: And I think that's where it could get tough, because
Speaker 3: Facebook didn't buy these companies and then just kill them off.
Speaker 3: Facebook devoted a lot of resources to them and developed
Speaker 3: them both into the popular products they are today. And
Speaker 3: there's no guarantee that either one of them would have
Speaker 3: thrived without those resources behind them. I mean, they were
Speaker 3: both really, really small when they were acquired, and Instagram
Speaker 3: had eight employees and had yet to be profitable at
Speaker 3: the time that Facebook picked it up, So who knows
Speaker 3: what would have happened there. And there is some precedent
Speaker 3: that's been set in the big antitrust case that a
Speaker 3: lot of people point to against Microsoft that in the
Speaker 3: two thousand early two thousand there was a decision and
Speaker 3: there's some helpful precedent from that case for the FTC
Speaker 3: that says that the FTC doesn't have to prove that
Speaker 3: these companies would actually have developed into viable platform substitutes,
Speaker 3: but just whether the exclusion of the threat contributed significantly
Speaker 3: to Facebook's continued monopoly power. But I still think that
Speaker 3: that's something that's very difficult to show when you think
Speaker 3: about the digital landscape and how it changes, including the
Speaker 3: rise of TikTok. Since this suit was filed, I think
Speaker 3: it's still hard to say, hey, because they bought these
Speaker 3: companies that contributed to their current dominant position in social networking.
Speaker 3: And I should just add on this, Matt that even
Speaker 3: if the FDC did win on liability, I think unwinding
Speaker 3: the deal is very unlikely, again because of Microsoft precedent.
Speaker 3: That court said it cautioned against what it called a
Speaker 3: drastic remedy because of the uncertainty about the long term
Speaker 3: efficacy of a business that gets carved out, And certainly
Speaker 3: I think a judge would really worry about that now,
Speaker 3: because these are two very popular products, and who knows
Speaker 3: what would happen if Facebook had to carve them out
Speaker 3: and sell them to somebody else. So, and the last
Speaker 3: thing I would say about remedies is that even if
Speaker 3: the FDC were to win on liability, there are less
Speaker 3: drastic remedies that could be imposed short of a breakup,
Speaker 3: like data sharing or interoperability requirements. So at the end
Speaker 3: of the day, I question even whether the FTC can
Speaker 3: win on liability, but even if it did, I highly
Speaker 3: doubt what will end up happening as a breakup.
Speaker 2: Now, Jena, what's the timeline? Where do things stand now
Speaker 2: in this litigation?
Speaker 3: Yeah, it's been moving pretty slowly, but I think theoretically
Speaker 3: it might be able to get to trial next year
Speaker 3: or early twenty twenty five. Discovery finished up, motions to
Speaker 3: dismiss have finished up. The parties are going to meet
Speaker 3: meeting with the judge in early one Q to discuss
Speaker 3: schedules for summery judgment briefing. So really that's just the
Speaker 3: last thing that has to happen before it can go
Speaker 3: to trial. And I think that can get done in
Speaker 3: twenty twenty four, and assuming met is unsuccessful, because I
Speaker 3: think they have a shot actually possibly a disposing of
Speaker 3: the case on summary judgment. But if they don't, that
Speaker 3: could probably get done next year, which could put trial
Speaker 3: in early twenty twenty five.
Speaker 2: Okay, And sort of beyond this case, what are some
Speaker 2: other antitrust risks that might be out there for Meta? Now?
Speaker 2: I think in the last Congress there was a big
Speaker 2: push for some legislation that would regulate some tech platforms.
Speaker 2: Are there any still bills still on the table that
Speaker 2: might impact Meta on the competition side.
Speaker 3: Yeah, Tamlin, You're absolutely right. I mean there was sort
Speaker 3: of a really there were bills last year that really
Speaker 3: had a lot of momentum, and I think some people
Speaker 3: thought they had a real shot, but that's absolutely faded. Now.
Speaker 3: There are bills that have been reintroduced in this current
Speaker 3: Congress with the goal in mind to regulate big tech.
Speaker 3: Some of them would impact Facebook Meta for sure, but
Speaker 3: they really haven't gotten any traction, and I don't really
Speaker 3: think they will, given that Congress is divided, and I
Speaker 3: think there are other matters that are likely higher on
Speaker 3: the priority list for those that are in a decision
Speaker 3: making position in the House of Representatives. But I'm just
Speaker 3: laying out what's out there right now that would impact
Speaker 3: META if it went forward. You do have proposals for
Speaker 3: a Digital Platform Commission that would establish a commission to
Speaker 3: regulate digital platforms, and it would give that commission pretty
Speaker 3: broad authority to issue rules and recommend standards for how
Speaker 3: large tech platforms should operate. But honestly, that kind of
Speaker 3: expansion of the administrative state is unlikely in this Congress,
Speaker 3: particularly given current efforts in some quarters to actually reduce
Speaker 3: the authority of the FTC. A couple of bills that
Speaker 3: would impact Meta. One would require data portability and interoperability
Speaker 3: buying among platforms. Another one would provide any anti exemption
Speaker 3: for news organizations that would allow collective bargaining by those
Speaker 3: organizations against the platform that use their new stories. So
Speaker 3: certainly that would impact Meta. But again, these bills have
Speaker 3: kind of been around for several years, they haven't really
Speaker 3: gained traction, so I don't see the threat of new
Speaker 3: laws as a significant one right now. I think the
Speaker 3: FTC's lawsuit is the more immediate risk with respect to
Speaker 3: antitrust at least, and then I think to close up.
Speaker 3: The only other thing I should add is that for
Speaker 3: acquisition activity, I think, you know, Meta should continue to
Speaker 3: expect a skeptical and difficult FTC, at least in this administration,
Speaker 3: to throw up some hurdles. You know, we already saw
Speaker 3: the FTC challenging Meta's acquisition within it was unsuccessful and
Speaker 3: Meta has bought the company. But I think going forward,
Speaker 3: if Meta tries to do other small deals or big deals,
Speaker 3: the FDC is probably going to carefully scrutinize those and
Speaker 3: throw some hurdles up in its way.
Speaker 1: Great, thanks, Jen. I think that's a great way to
Speaker 1: kick things off today, touching on the antitrust risks and
Speaker 1: that FTC case. But I want to turn shift gears
Speaker 1: a little bit. Another legal risk for the company has
Speaker 1: been the EU and sort of the rise of regulation there.
Speaker 1: And Tamlin, you're really our expert on that. Can you
Speaker 1: give us a high level overview of what that sort
Speaker 1: of new regulatory landscape looks like in the EU?
Speaker 2: Yeah? Sure, thanks Matt. So let's go back a little bit.
Speaker 2: So Meta has been by far the top target for
Speaker 2: general data protection regulation finds since those privacy rules took
Speaker 2: effect in twenty eighteen, and Meta is likely to remain
Speaker 2: in the EU regulators crosshairs as the attention shifts enforcing
Speaker 2: new content moderation and new competition rules. Now, the content
Speaker 2: rules which were brought in by the Digital Services Act
Speaker 2: do face an early test that that poses some risk
Speaker 2: if regulators managed to sort of broaden the scope of
Speaker 2: a platform's duties in connections with in relation to sort
Speaker 2: of harmful harmful content on the networks. Now, the competition rules,
Speaker 2: which are contained in the Digital Markets Act take effect
Speaker 2: in March, and those will focus further attention on how
Speaker 2: Meta separates data across its various platforms. Now, the DMA
Speaker 2: looks to significantly the market dominance of large tech platforms,
Speaker 2: and it would do this by sort of erecting barriers
Speaker 2: to the practices that Meta and other large tech firms
Speaker 2: have used to build those dominant market positions. And then meanwhile,
Speaker 2: in the back of all this, it is sort of
Speaker 2: assumed to be finalized AI regulation that could coultail Meta's
Speaker 2: roll out of sort of large language model systems in
Speaker 2: the U. So, yeah, I think I think it's fair
Speaker 2: to say there's a lot going on in Europe that
Speaker 2: could potentially throw throw up some more blocks to Meta
Speaker 2: over the near term.
Speaker 1: Yeah, okay, interesting, let let's let's let's dig in a
Speaker 1: little deeper on on on some of that. So it
Speaker 1: sounds like the Digital Markets Act could pose disruption over
Speaker 1: the medium term. How might Meta adjust to comply with
Speaker 1: with it?
Speaker 2: Yeah? Sure, so the Digital Markett Act or the dm A.
Speaker 2: So enforcement really began with that in September when the
Speaker 2: European Commission designated a number of gatekeeper platforms. Now, Meta
Speaker 2: was named a gatekeeper and the services subject to the
Speaker 2: rules include the Facebook platform, Instagram, WhatsApp, Messenger, and Meta Marketplace. Now,
Speaker 2: I should note that Meta has sued challenging those marketplace
Speaker 2: and messager designations as of now, though they're still being
Speaker 2: regulated as a gatekeeper. Now, there is a long list
Speaker 2: of dues and don'ts that gatekeepers will need to comply
Speaker 2: with by March of next year. Now, the DMA restricts
Speaker 2: preferential display and ranking. It prohibits the exclusive pre installation
Speaker 2: of apps, and there's also an obligation to share a
Speaker 2: click and query data and searches with rivals. And there's
Speaker 2: also the prohibition of wide parity clauses. Now, non compliance
Speaker 2: is going to be pretty stiff because the European Commission
Speaker 2: is going to be able to assess a spine of
Speaker 2: up to ten percent of a gate keeper's annual global revenue,
Speaker 2: and then multiple infractions can lead to the possibility for
Speaker 2: structural remedies such jet the breakup. Now, Meta, I think
Speaker 2: is going to rely on user consent to mitigate a
Speaker 2: lot of the risks from the DNA, and I think
Speaker 2: what regulators are going to focus on is whether users
Speaker 2: data is being shared across platforms as well as how
Speaker 2: Meta is obtaining consent for the use of third party data,
Speaker 2: and finally, whether it's tying its marketplace to its dominant
Speaker 2: social media networks for Instagram, Facebook. So I think we're
Speaker 2: going to buy as twenty twenty four goes along, we're
Speaker 2: going to see Meta in the sort of regulatory crosshairs
Speaker 2: of DMA enforcement makes sense.
Speaker 1: How about how about the dssay there's been there's been noise,
Speaker 1: there at any tangible risk from that one?
Speaker 2: Yeah, in short, probably nothing tangible, but we are going
Speaker 2: to get an early test for how broadly these rules
Speaker 2: are going to be construed. So the DSA brings nuke
Speaker 2: transparency and content moderation rules to social media platforms. The
Speaker 2: reason we don't see any huge risk overhang is that
Speaker 2: the DSA retained the liability shield for third party content,
Speaker 2: and it also didn't impose a general duty on a
Speaker 2: platform to monitor for illegal content. So instead the platform
Speaker 2: is just required to quickly remove objectionable content once it
Speaker 2: is made aware of it. However, there is going to
Speaker 2: be this general duty to mitigate against systemic risks, and
Speaker 2: here's where things might get a little bit tricky. Now
Speaker 2: that mitigation obligation isn't going to kick in for a while,
Speaker 2: but the European Commission, which has direct DSA enforcement powers,
Speaker 2: has already raised this mutigation issue in the wake of
Speaker 2: the violence in the Middle East. So after the violence erupted,
Speaker 2: there was an optick and objectionable content posted across social
Speaker 2: media platforms. So what we're going to see is is
Speaker 2: how broadly this mitigate these midilgation rules are stretched here.
Speaker 2: And while we don't think it's going to lead to
Speaker 2: this general duty to monitor, it could nonetheless result in
Speaker 2: some additional content moderation guidelines for metas platforms over medium term.
Speaker 2: Near term though DSA is mostly going to pose headline
Speaker 2: risk for Meta and for other social media platforms.
Speaker 1: Got it.
Speaker 2: Thanks?
Speaker 1: And another another law we heard about a lot a
Speaker 1: couple of years back was was GDPR, And I know
Speaker 1: Meta has racked up some fines there more recently is
Speaker 1: that over Now where do things stand on the GDPR?
Speaker 2: Yeah, so just put some numbers on those fines that's
Speaker 2: wracked up. So Meta has been fined over two point
Speaker 2: five billion euros under GDPR. That represents fifty eight percent
Speaker 2: of the total penalties that have been assessed under the
Speaker 2: Privacy law. Now there are a few inquiries still pinning,
Speaker 2: but I think those relate mostly to data breaches, So
Speaker 2: there might be a little bit of financial risk, but
Speaker 2: we see very limited risk of operational disruptions. And also
Speaker 2: Meta's decision recently to offer a subscription model in Europe
Speaker 2: for users that do not want the free ad space accounts,
Speaker 2: and that's going to offer for Instagram and Facebook users.
Speaker 2: I think that removes some of the GDPR scrutiny now,
Speaker 2: although the move will almost certainly be challenged by privacy advocates.
Speaker 2: I think these further inquiries are going to focus sort
Speaker 2: of on how content is structured. I think on the
Speaker 2: whole these are going to be much less disruptive than
Speaker 2: the GDPR inquiries that Meta has weathered today is I
Speaker 2: do think it's moving beyond GDPR as being a persistent risk.
Speaker 1: Okay, And sort of wrapping up on the EU side, Meta,
Speaker 1: like most of the big tech platforms, is investing heavily
Speaker 1: in AI, and there was recent news that Europe has
Speaker 1: just finalized an agreement on a broad regulatory package on AI.
Speaker 1: Can we say anything specific to Meta in that development?
Speaker 2: Yeah? Sure, And so you're right, the EU recently reached
Speaker 2: a provisional agreement to regulate AI. Now, the rules on
Speaker 2: general purpose AI systems could be relevant to Meta. Now,
Speaker 2: these rules, if they were enacted, would impose some transparency
Speaker 2: obligations on the systems that Meta is developing, that Google's developing,
Speaker 2: the chat GPTs that open ai has developed. Now, these
Speaker 2: transparency obligations would include requiring information on how the models
Speaker 2: were trained, a summary of what data was used to
Speaker 2: train them, and it would require these systems to have
Speaker 2: a copyright policy. Now, of course, there's been a lot
Speaker 2: of copyright noise for a lot of these systems because
Speaker 2: a lot of the right holders are worried about the
Speaker 2: ways that they were changed trained and are seeking compensation
Speaker 2: for that. Now, I should note that these still rules
Speaker 2: are still a long way from taking effect, and there's
Speaker 2: a chance that the obligations are going to be watered down.
Speaker 2: I think in the meantime, it's safe to say that
Speaker 2: Meta and pretty much any other tech platform investing in
Speaker 2: AI is going to have to pay attention to how
Speaker 2: the regulatory framework shapes up. But I think let's leave
Speaker 2: it there for Europe and let's go back to the US. Now,
Speaker 2: Matt in the US after the Cambridge Analytica Meta matter.
Speaker 2: Meta entered into a five million dollar settlement with FDC
Speaker 2: back in twenty twenty. I don't think that's the end
Speaker 2: of Meta's leader risk in the issue. So what is
Speaker 2: happening now?
Speaker 1: Yeah. You would think when you do a five billion
Speaker 1: dollars settlement, you would think, Okay, I think we're done
Speaker 1: with that, right, But apparently not. In May of this year,
Speaker 1: the Federal Trade Commission, which is now under democratic leadership
Speaker 1: under under Lena Khan, announced that it was looking to
Speaker 1: start a process to change the terms of that settlement.
Speaker 1: The FTC said that that they've conducted the first assessment
Speaker 1: under Meta's privacy program that it promised as part of
Speaker 1: that settlement, and the FDC found non compliance there So,
Speaker 1: instead of bringing a new action for non compliance, the
Speaker 1: FTC looked into its book of statutory Powers and it
Speaker 1: found that it had the power to modify previous consent decrees,
Speaker 1: and so in May, the FTC proposed a number of
Speaker 1: changes to that settlement, including a total ban on monetizing
Speaker 1: data from user users under eighteen. The FDC would also
Speaker 1: bar Meta from releasing any new products, any new features,
Speaker 1: any new services until an Assessor confirms that that medicine
Speaker 1: compliance with this privacy program. And so this is kind
Speaker 1: of a big deal for the company when when you
Speaker 1: have a federal agency imposing bans like that. Meta raised
Speaker 1: this on its last earnings calls as a material risk
Speaker 1: in the near term, and now the company's sort of
Speaker 1: throwing the kitchen sink of its litigation resources at trying
Speaker 1: to stop it. Earlier this fall, the company ran into
Speaker 1: the court that that blessed this twenty twenty settlement agreement,
Speaker 1: and it asked the court stop, you need to stop this,
Speaker 1: stop the FTC process before it can start. This is
Speaker 1: your jurisdiction, Court, It's not the FTC's role to come
Speaker 1: in and change an agreement that you already endorsed. But
Speaker 1: in November, the court refused to do so. It rejected
Speaker 1: Meta's request. The court said it didn't think it has jurisdiction.
Speaker 1: And so now we're sort of at the next step
Speaker 1: of Meta's efforts to try to stop the FTC process
Speaker 1: before it starts. Meta filed a new lawsuit just a
Speaker 1: week or two ago in federal court, saying the FTC
Speaker 1: is unconstitutional and it's using an unconstitutional process. It seeks
Speaker 1: a stay or an injunction to stop the process based
Speaker 1: on that claim. It also has has appealed the other
Speaker 1: judges ruling when he refused to stop the FDC, and
Speaker 1: it just a day or two ago filed another stay
Speaker 1: related to that, asking that court to hit pause on
Speaker 1: the FDC's proceeding. So the FTC's response, I mean, Meta's
Speaker 1: response to the FTC is due at the end of January,
Speaker 1: and metas sort of fighting hard to not even let
Speaker 1: that process start. I think what we should see two
Speaker 1: rulings from courts in January and whether it will hit
Speaker 1: whether those courts will hit pause on the process. I'm skeptical.
Speaker 1: I think that that's a hard thing for META to win.
Speaker 1: To stop the FTC process before it starts, Meta will
Speaker 1: have to show that it both that it's likely to
Speaker 1: prevail and that it's irreparably harmed. And I think that's
Speaker 1: going to be tough to do both because some of
Speaker 1: its constitutional theories are sort of novel. They're not necessarily losers,
Speaker 1: but they're not slammed dunks. But the show it's a
Speaker 1: reparably harmed will be tough because anything the FTC does,
Speaker 1: Meta can challenge it after the fact it can file
Speaker 1: a lawsuit in an appeals court and then overturn it
Speaker 1: so it can remedy the harm to it, at least
Speaker 1: in some respect. I think for that reason, most likely
Speaker 1: Meta loses has a tough January. Loses in these two
Speaker 1: courts where where it's seeking an immediate stay, the FDC
Speaker 1: moves ahead with its process, modifies the settlement agreement. Meta
Speaker 1: sues then in an appeals court, and then I think
Speaker 1: it's going to have a very strong case because the
Speaker 1: FDC really is using its powers in a novel way,
Speaker 1: and this is not a good time for agencies to
Speaker 1: be stretching their powers in novel ways. I think a
Speaker 1: court is very likely to strike this down. So look
Speaker 1: for a bumpy road for Meta in the near term
Speaker 1: on this early in twenty twenty four. But I think
Speaker 1: in the end it's not going to be a material
Speaker 1: risk for the company.
Speaker 2: Great sounds like it might be an interesting January coming up,
Speaker 2: I guess pivoting a little bit to somewhere where things
Speaker 2: might not be developing as quickly. It's on sort of
Speaker 2: data privacy in the US. Now, I know you said
Speaker 2: before that there's very little risk of sort of a
Speaker 2: GDPR like rule sticking effect at the federal level. Is
Speaker 2: that still your take or how are things developing?
Speaker 1: Yeah? I mean it's really been very little progress made
Speaker 1: this year in terms of a comprehensive data privacy bill.
Speaker 1: We we talked earlier about how last year there was
Speaker 1: some actual momentum as a House bill had advanced. This
Speaker 1: year was a lot of distraction. There was a big
Speaker 1: talk on the TikTok ban, and they had a big
Speaker 1: hearing on that in March, and that sort of derailed
Speaker 1: I think the efforts to move anything forward. And so
Speaker 1: I think there's, you know, in theory that could be
Speaker 1: a big deal if they ever got their act together
Speaker 1: on limiting how the companies use data for advertising. I
Speaker 1: just don't really see a path, especially as we head
Speaker 1: into an election year, for Congress to do anything comprehensive there.
Speaker 1: There is still again, the Federal Trade Commission has started
Speaker 1: a rulemaking to say, Okay, Congress, you're not going to
Speaker 1: in this area, we'll do it. We'll use our power
Speaker 1: to address unfair and deceptive practices to make a bunch
Speaker 1: of rules on this stuff. That really hasn't advanced at
Speaker 1: all this year either. So I think that's more likely
Speaker 1: than not going to be a priority. If President Biden
Speaker 1: wins a second term, you could see the Federal Trade
Speaker 1: Commission speed up its efforts to try to make rules
Speaker 1: in this area. Traditionally, the FTC hasn't really acted through
Speaker 1: rulemaking very much, and so it's sort of a novel
Speaker 1: area for it to be acting there as well. But
Speaker 1: I would expect that won't be real busy in twenty
Speaker 1: twenty four. I expect it to heat up in a
Speaker 1: second Biden term most likely. So I placed that in
Speaker 1: the category of things to watch keep an eye in.
Speaker 1: Could be a big deal if they ever got some momentum,
Speaker 1: but so far not much moving.
Speaker 2: Okay, And you sort of mentioned TikTok there, and I
Speaker 2: know a lot of the concerns about TikTok have been
Speaker 2: the sort of the younger you or base that uses
Speaker 2: that platform. And over in Europe least, I think there
Speaker 2: has been some some momentum behind rules specifically to protect
Speaker 2: younger users. Is that the same over there in the
Speaker 2: US NFO? Is there any risks that might find the
Speaker 2: matter there?
Speaker 1: Yeah, this is the one area where Congress is sort
Speaker 1: of reaching some agreement and and and finding some consensus
Speaker 1: on across the aisle. There's a bill called the Kids
Speaker 1: Online Safety Act. I think it has now the last
Speaker 1: time I checked over forty co sponsors in the Senate,
Speaker 1: and you don't see many bills that have that that
Speaker 1: sort of support, and it's it's from both sides of
Speaker 1: the aisle. So it's still difficult to say that's likely
Speaker 1: to pass even because it really, you know, has sort
Speaker 1: of stalled at this point. And as I said, we're
Speaker 1: moving into an election year. But if anything's going to
Speaker 1: pass on data privacy related, it's going to be focused
Speaker 1: on kids, I would say, at least for the next
Speaker 1: for this year and next. I don't really see this
Speaker 1: as as you know, business model disruptive to to META.
Speaker 1: I see it as adding compliance costs. It would require
Speaker 1: them to to to take additional interests to to act
Speaker 1: in the best interests of kids. Uh that Federal Trade
Speaker 1: Commission could bring a lawsuit if they don't comply with it.
Speaker 1: It would add transparency duties and things along those lines.
Speaker 1: So added compliance risk and costs, those are things META
Speaker 1: can can bear. I think as long as you're not
Speaker 1: going after the business model, I think that's that's it's
Speaker 1: something the company can manage. And related to that, the
Speaker 1: the other key thing to watch for for kids here.
Speaker 1: There is litigation in the Northern District of California Federal
Speaker 1: court out there that has has multiple prongs, all focused
Speaker 1: on basically the claim that that social media is too
Speaker 1: addictive and it's harming kids. And so we've seen lawsuits
Speaker 1: out there brought by over i think forty attorneys general
Speaker 1: states across the United States saying that that that social media,
Speaker 1: that meta has misled about the risk to kids. You
Speaker 1: see lawsuits brought by school districts across the country saying
Speaker 1: that that social media has inflicted harm on youth and
Speaker 1: raised the cost of of of all the health issues
Speaker 1: related to that. And then you see lawsuits brought from
Speaker 1: by by children themselves saying that this is this is
Speaker 1: a defective product and using product liability law to go
Speaker 1: after the company. And we had an important development in
Speaker 1: that litigation that that product liability litigation that's really leading
Speaker 1: there on this issue in November when when when the
Speaker 1: social media companies acting together had had filed the motion
Speaker 1: to dismiss the case and the judge refused to do that.
Speaker 1: She led it advance. But I think there was an
Speaker 1: important win in that as well. The court said that
Speaker 1: both Section two thirty, the liability shield that protects these companies,
Speaker 1: and the First Amendment carves away cuts out a lot
Speaker 1: of these the claims in these lawsuits, and it cut
Speaker 1: out a lot of the claims about the most important
Speaker 1: functions to the company's business model. So things like the
Speaker 1: algorithm in terms of generating content that it's most likely
Speaker 1: to draw people to keep a youth to keep watching
Speaker 1: or keep scrolling, stuff like that that the court threw out.
Speaker 1: And so it was a loss for the company in
Speaker 1: the sense that, look, this litigation is going to continue
Speaker 1: and it you know, it could be could be significant
Speaker 1: down the road. But at the same time, the most
Speaker 1: business model disruptive elements of that case really got tossed
Speaker 1: in November. So in that sense, I think it's much
Speaker 1: less threatening to to Meta and to other social media companies.
Speaker 2: Okay, I guess last question. And I know federal in
Speaker 2: the sort of vacuum created by the federal government sort
Speaker 2: of hesitancy to enact any broad sweeping regulations. I know
Speaker 2: some states have tried to regulate the social media themselves,
Speaker 2: and I understand that's actually a Supreme Court case upcoming
Speaker 2: in the next term that's going to look at some
Speaker 2: of those states' efforts to regulate social media. Can can
Speaker 2: you walk us through that and maybe where there might
Speaker 2: be risks for risk for Meta there.
Speaker 1: Yeah, I expect this to draw a lot of headlines
Speaker 1: in the first half of twenty twenty four. So it's
Speaker 1: useful to understand it from Meta's perspective. The claims there.
Speaker 1: So this is basically about laws in Texas and Florida,
Speaker 1: and when you boil them down, they're fundamentally about control.
Speaker 1: Can the platforms themselves control the content on their platforms
Speaker 1: or can the states dictate that their platforms have to
Speaker 1: be opened to to all. There's a concern about the
Speaker 1: the the companies engaging in censorship of certain views that
Speaker 1: they may not favor, and and so there's a push
Speaker 1: to to take their ability to control the content away
Speaker 1: from the companies and and just make make the platforms open,
Speaker 1: you know, effectively common carriers and and you know, this
Speaker 1: is a risk for for the companies in the sense that, look,
Speaker 1: they make so much money that the key to their
Speaker 1: business is their digital ad business. And and if if
Speaker 1: if their platforms are overwhelmed by content that they themselves
Speaker 1: can't control. That risks causing advertisers or users to to
Speaker 1: to look elsewhere, and so control really is important. And
Speaker 1: and so the companies come back and say, look, we
Speaker 1: have we have a First Amendment right to control what
Speaker 1: is on our platform, just as a newspaper has the
Speaker 1: ability to control what stories it prints in its daily newspaper.
Speaker 1: And so that's really fundamentally the issue. Can states regulate
Speaker 1: the platforms to take away control or does the First
Speaker 1: Amendment right to free speech limit the state's ability to
Speaker 1: regulate in that space. So look for an argument here
Speaker 1: either in February or March that draws a lot of headlines.
Speaker 1: You would then see a decision from the Supreme Court,
Speaker 1: very likely in May or June. What's the outlook. I
Speaker 1: give the companies a slight edge to make that First
Speaker 1: Amendment argument and to strike down these state laws, this
Speaker 1: form of state regulation. I think there are three justices
Speaker 1: that are going to be pretty sympathetic to Texas and Florida. Here,
Speaker 1: Justices Thomas, Alito and Gorsic might be vote in their favor.
Speaker 1: I think that the states, though, are going to have
Speaker 1: a tougher time getting two more votes to get to
Speaker 1: a majority. I'm pretty confident that the Democratic pointed joint
Speaker 1: Justices Justices Soda, Mayor, Kagan, and Jackson will be on
Speaker 1: the company's side here, and that leaves Justices Roberts, Kavanaugh,
Speaker 1: and Barrett in the middle. And when you look at
Speaker 1: a vote that they took earlier in this case and
Speaker 1: whether to hit pause on the Texas law to let
Speaker 1: it not take effect now, they all voted to block
Speaker 1: that law from taking effect. I think that's the best
Speaker 1: indicator of how they're likely to evaluate this case. So
Speaker 1: going into it, I see that Texas and Florida the
Speaker 1: states as slight underdogs in this case.
Speaker 2: Great, thanks Bett, It's definitely gonna be interesting one to watch.
Speaker 2: I do think that about covers it for our overview
Speaker 2: of the key legal issues facing meta for Janry and
Speaker 2: Matt Shettenhelm. I'm Tamlin Basin and thank you for joining us,
Speaker 2: and please do look for future episodes of Boats and Verdicts.
Speaker 1: Yeah,