BTLJ Podcast: This Week in Tech Law – October 6th, 2020
Hosts Matt Sardo ’23 and Meg Sullivan ‘ 23 follow up on last week’s coverage of TikTok’s request for an injunction to the ban of its app, and cover Epic Games’ lawsuit against Apple following the companies’ dispute over banning Fortnite from Apple’s App Store, the EU’s draft of antitrust regulations for large tech companies, Seattle’s recently-passed minimum wage legislation for Uber, Lyft, and other rideshare drivers, and Anthem’s multi-million dollar settlement with over forty state attorneys general.
[MEG] You’re listening to the Berkeley Technology Law Journal Podcast. I’m Meg Sullivan.
[MATT] And I’m Matt Sardo.
[MEG] Here’s what’s been happening This Week in Tech Law.
[MATT] Today we’ll be following up on TikTok’s request for an injunction to the White House’s ban of its app, and we’ll also be covering Epic Games’ antitrust suit against Apple, the European Commission’s leaked draft of antitrust regulations for large tech companies, Seattle’s recently-passed minimum pay rate legislation for rideshare drivers, and Anthem’s $39.5 million data breach settlement.
[MATT] Last week, we covered TikTok’s request for an injunction to halt the Department of Commerce’s ban of their popular social media app. On Sunday, September 27th, a federal judge ruled in favor of TikTok, granting a preliminary injunction against the agency.[1] The Trump Administration justified the ban by citing national security concerns associated with the video-sharing app.[2] In his ruling, which came just hours before the ban was set to go into effect, Judge Carl Nichols of the U.S. District Court for the District of Columbia acknowledged that the Administration has legitimate national security interests at stake,[3] but that it failed to prove that a ban is the only way to mitigate those concerns.[4]
This is the second ruling against the Administration’s ban of two Chinese mobile apps. Prior to this injunction, a federal magistrate in San Francisco cited First Amendment issues in blocking a proposed ban of WeChat, the popular Chinese messaging app.[5] The Administration now has ninety days to appeal the TikTok injunction.[6]
[MEG] On Monday, September 28th, tech giant Apple and Epic Games, the creator and owner of the popular video game Fortnite, met at the U.S. District Court for the Northern District of California to litigate Epic Games’ antitrust suit against Apple.[7] Epic Games filed suit last month following a dispute between the two companies over in-app purchases in Fortnite.[8] During the hearing, Epic Games argued that Apple engaged in anticompetitive and monopolistic practices by forcing Epic Games and other app developers to use Apple’s payment system when selling their applications in the Apple App Store.[9] Apple disputed Epic Games’ characterization of its business practices, arguing that its management of the Apple App Store is fair and does not inappropriately constrain developers.[10]
This dispute began after a clash between the two companies in August, when Epic Games began encouraging Fortnite users to purchase in-app upgrades directly from Epic Games, as opposed to through Apple or Google-run marketplaces.[11] By directly collecting its payments from customers, Epic Games circumvented the fees imposed by Apple in violation of guidelines that all apps must follow in order to be made available to users in the Apple App Store.[12] Apple reacted by banning Fortnite from its App Store, and Epic Games responded by suing Apple for antitrust law violations.[13] Epic Games also filed for a preliminary injunction, requesting that Fortnite be allowed back into the Apple App Store and that its developer account on the virtual marketplace be restored.[14]
This dispute reflects building tensions between marketplace owners, like Apple and Google, and app developers. Developers have long complained about the amount of control the two tech giants exercise over their respective app stores and operating systems.[15] Both companies charge a thirty percent commission fee on in-app purchases made through their systems.[16] Additionally, Apple and Google market their own competing apps against those of other developers.[17] Apple in particular has drawn the ire of app developers because its store is the only platform that developers can use to make their applications available to iPhone users.[18] In contrast, Google’s Android operating system allows developers to provide applications to users outside Google Play.[19]
In response to these long-standing antitrust sticking points, thirteen large app developers, including Epic Games, Spotify, and Match Group, the parent company of dating apps Tinder and Hinge, have recently formed a nonprofit group to challenge Apple and Google’s app store policies, called the Coalition for App Fairness.[20] The group advocates for what it considers to be fairer app practices, including preventing app store owners from self-preferencing their own apps and services, and argues that developers should not be required to pay unreasonable commission fees.[21] Many tech industry experts agree, however, that the success of the Apple App Store is, in part, due to the tight control that Apple exercises over its platform by way of its strict quality control guidelines.[22]
In the coming days, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California is expected to rule on whether Apple must reinstate Fortnite into its app store.[23] According to the Wall Street Journal, if the judge rules in Epic Games’ favor, it would be a “significant blow” to Apple and likely lead to a settlement agreement.[24] This agreement would likely include significant concessions to Epic Games.[25] However, if Judge Gonzalez Rogers allows Apple to keep Fortnite out of the Apple App Store, the case could continue far into next year.[26]
[MATT] On September 30th, POLITICO reported the leaked disclosure of three of the European Commission’s internal documents relating to the European Union’s Digital Services Act.[27] These documents shed light on legislation expected to be introduced by the European Commission to the European Parliament in December.[28] The proposed Digital Services Act seeks to prohibit perceived anticompetitive behavior by tech companies and to compel tech companies to protect users against illegal content and activities on their platforms.[29]
Specifically, the documents identify how the European Union may attempt to limit perceived unfair behavior, such as tech companies pre-installing their own applications on devices or “preferencing their own services in search rankings.”[30] The legislation the European Union is slated to introduce focuses on bans on the aforementioned behavior, and it also specifies obligations such as requiring companies to share data collected with their business users and to notify E.U. authorities of mergers and acquisitions.[31]
According to the European Commission’s impact assessment on the potential legislation, “due to the ‘winner-take-all’ dynamics of the platform economy, big online platforms have grown and gained gatekeeper power.”[32] The European Commission would like to pass further legislation to limit large tech companies’ control over businesses and developers that depend on their services.[33] Laura Kayali at POLITICO specifically uses the example of the Epic Games complaint regarding Apple’s alleged antitrust violations to illustrate the anticompetitive practices of large tech companies.[34] The Digital Services Act is meant to curb the ability of tech giants to engage in the same anticompetitive practices alleged in the Epic Games suit.[35]
Kate Cox at Ars Technica identified aspects in the draft legislation that big tech companies will likely object to. For example, she notes that Apple and Google will likely take issue with the regulations that limit their ability to pre-install apps on hardware.[36] She further notes that Google, Facebook, and Amazon are likely to object to the requirement of sharing data they collect on their platforms with smaller, rival companies.[37]
Google has urged the European Union to not yet consider new regulations and has submitted a 135-page consultation on September 3rd, arguing that the “gatekeeper” designation would be misguided because the digital ecosystem is extremely diverse and evolving rapidly.[38] Other tech companies have yet to comment.
The Digital Services Act is expected to be introduced by the European Commission in December, yet the draft legislation requires agreement from all of the bloc’s member states and the European Parliament before it is to be enforced, which could take years to obtain.[39]
[MEG] On September 29th, the Seattle City Council unanimously passed a minimum wage law for Uber and Lyft drivers.[40] The Council approved new regulations that will guarantee that rideshare drivers earn a wage that is roughly equivalent to Seattle’s $16.39 hourly minimum wage.[41] The ordinance will require Uber and Lyft to compensate drivers based on a formula that accounts for the amount of time a driver has passengers in the car, as well as the amount of time a driver spends waiting for rides or driving to pick up passengers.[42] The goal of the Council is to motivate ride-hailing companies to keep drivers busy, as opposed to flooding the market with drivers to reduce passengers’ wait times.[43] The legislation also includes tip protection, which stipulates that Uber and Lyft must give all tips to drivers and that tips cannot count towards their minimum pay.[44] Lastly, the legislation mandates that companies provide drivers with personal protective equipment like masks, or compensate drivers for those costs.[45]
Seattle is the second major U.S. city to pass a minimum wage standard.[46] New York City passed a minimum pay law for rideshare drivers in 2018, and its formula served as the model for Seattle’s legislation.[47] New York City’s law set a wage floor of $17.22 per hour for drivers in the city.[48] In 2019, Uber and Lyft responded to the legislation by restricting the number of drivers who can be active on their apps in an attempt to avoid having drivers collect wages while not completing trips.[49] The restrictions have resulted in drivers being locked out of the app and preference being given to drivers who drive the most.[50]
Despite the challenges facing rideshare drivers in New York City, Seattle drivers welcome the new pay standard.[51] Peter Kuel, an Uber and Lyft driver and the President of the Teamsters-associated Drivers Union, said that, “Seattle is once again leading the nation by passing fair pay for Uber and Lyft drivers . . . . Historic victories like this should serve as an inspiration for all gig workers around the country of what is possible through organizing together as a Union to demand fair treatment.”[52] CJ Macklin, a Lyft spokesperson, said, “[t]he city’s plan is deeply flawed and will actually destroy jobs for thousands of people — as many as 4,000 drivers on Lyft alone — and drive rideshare companies out of Seattle.”[53] The law will take effect on January 21, 2021.[54]
[MATT] On September 30th, Anthem reached a settlement with more than forty state attorneys general to pay $39.5 million following an investigation into a 2014 cyberattack that compromised the sensitive personal data of close to eighty million customers.[55] Following disclosure of the breach in February 2015, state attorneys general began investigating whether Anthem broke state law and the federal Health Insurance Portability and Accountability Act, or HIPAA, by failing to encrypt customers’ personal information.[56]
Hackers targeted the Anthem network through an email phishing attack, and gained access to an unencrypted database containing customer names, dates of birth, Social Security numbers, healthcare identification numbers, home addresses, email addresses, phone numbers, and employment information.[57] At the time of the breach, Anthem claimed the attackers did not access customer credit card numbers or medical information, and the company offered customers complimentary credit monitoring and identity theft protection for two years.[58] In a statement regarding the recent settlement, Anthem maintained the position that it did not violate any laws in connection with this data breach.[59]
Attorney General of California Xavier Becerra has also been running an independent investigation into Anthem parallel to the multistate investigation which resulted in a settlement last week.[60] On September 30th, Attorney General Becerra also announced an $8.69 million settlement relating to allegations against Anthem for violating consumer protection and privacy laws, leading the state to close its investigation.[61] Additionally, the California settlement included an injunction requiring Anthem to improve its information security, which California claims contained numerous deficiencies in basic security, such as failing to “monitor network activity to detect malicious actors” and “not updating security tools.”[62]
In his statement, Attorney General Becerra said, “[w]hen consumers must disclose confidential personal information to health insurers, these companies owe their customers the duty to protect their private data.”[63] He continued, stating, “[c]onsumers are left with little choice but to trust that their personal health information will be safe and secure. Anthem failed in that duty to its customers. Anthem’s lax security and oversight hit millions of Americans. Now Anthem gets hit with a penalty, in the millions, in return.”[64]
Both the California settlement and injunction point to the growing commitment by California to enforce individual privacy through civil prosecution.[65]
The state attorneys general involved in the larger Anthem settlement celebrated the culmination of the matter, with Attorney General of New York Letitia James stating, “[t]his agreement signals that Anthem is committed to protecting consumers’ private information.”[66]
[MEG] Thank you for listening! The BTLJ Podcast is brought to you by Podcast Editors Andy Zachrich and Haley Broughton. Today’s episode was written by Meg Sullivan, Matt Sardo, and Jonathan Baer, and was produced by Matt Sardo.
[MATT] We are committed to bringing you interesting news at the intersection of technology and law. If you enjoyed our podcast, please support us by subscribing and rating us on Apple Podcasts, Spotify, or wherever you listen to your podcasts.
[MEG] If you have any questions, comments, or suggestions, write us at btljpodcast@gmail.com.
[MATT] The information presented here does not constitute legal advice and is only up-to-date as of Friday, October 2nd. This podcast is intended for academic and entertainment purposes only.
[1] Rachel Lerman, Judge suggests Trump administration overreached in TikTok case, Wash. Post (Sept. 28, 2020), https://www.washingtonpost.com/technology/2020/09/28/tiktok-injunction-court-decision/.
[2] Ana Swanson, David McCabe & Jack Nicas, Trump Administration to Ban TikTok and WeChat From U.S. App Stores, N.Y. Times (Sept. 18, 2020), https://www.nytimes.com/2020/09/18/business/trump-tik-tok-wechat-ban.html.
[3] Tiktok Inc. v. Trump, 2020 U.S. Dist. LEXIS 177250, at *24 (D.D.C. Sept. 27, 2020).
[4] Id., at *24-25.
[5] Lerman, supra note 1.
[6] Kari Paul, Trump’s bid to ban TikTok and WeChat: where are we now?, The Guardian (Sept. 29, 2020), https://www.theguardian.com/technology/2020/sep/29/trump-tiktok-wechat-china-us-explainer.
[7] Erin Griffith, Apple and Epic Games Spar Over Returning Fortnite to the App Store, N.Y. Times (Sept. 28, 2020), https://www.nytimes.com/2020/09/28/technology/apple-epic-app-court.html.
[8] Id.
[9] Id.
[10] Sarah E. Needleman, Hearing in ‘Fortnite’ Maker’s Apple Lawsuit Tests Antitrust Claims, Wall Street J. (Sept. 28, 2020), https://www.wsj.com/articles/hearing-in-fortnite-makers-apple-lawsuit-to-test-antitrust-claims-11601285401.
[11] Jim Verdonik, Epic Games vs Apple Inc.: Why Apple may win this legal skirmish but lose the war, WRAL TechWire (Sept. 28, 2020), https://www.wraltechwire.com/2020/09/28/epic-games-vs-apple-inc-why-apple-may-win-this-legal-skirmish-but-lose-the-war/; see also Jack Nicas, Kellen Browning & Erin Griffith, Fortnite Creator Sues Apple and Google After Ban From App Stores, N.Y. Times (Aug. 13, 2020), https://www.nytimes.com/2020/08/13/technology/apple-fortnite-ban.html?action=click&module=RelatedLinks&pgtype=Article
[12] Griffith, supra note 7.
[13] Id.
[14] Trilby Beresford, Epic Games Files Injunction Urging Apple to Restore Developer Account, Hollywood Rep. (Sept. 5, 2020), https://www.hollywoodreporter.com/thr-esq/epic-games-files-injunction-urging-apple-to-restore-developer-account
[15] Erin Griffith, To Fight Apple and Google, Smaller App Rivals Organize a Coalition, N.Y. Times (Sept. 24, 2020), https://www.nytimes.com/2020/09/24/technology/apple-google-coalition-epic-match-spotify.html.
[16] Id.
[17] Id.
[18] Nicas, supra note 11.
[19] Id.
[20] Our Vision for the Future, Coalition for App Fairness, https://appfairness.org/our-vision/ (last visited Sept. 30, 2020).
[21] Id.
[22] Sarah Perez, App makers band together to fight for App Store changes with new ‘Coalition for App Fairness’, TechCrunch (Sept. 24, 2020), https://techcrunch.com/2020/09/24/app-makers-band-together-to-fight-for-app-store-changes-with-new-coalition-for-app-fairness/.
[23] Griffith, supra note 7.
[24] Needleman, supra note 10.
[25] Id.
[26] See Katie Collins, Apple’s battle with Epic over Fortnite could reach jury trial next July, CNET (Sept. 28, 2020), https://www.cnet.com/news/apples-battle-with-epic-over-fortnite-could-reach-jury-trial-next-july/.
[27] Laura Kayali, Brussels’ Plan to Rein in Big Tech Takes Shape, POLITICO, (Sept. 30, 2020) https://www.politico.eu/article/digital-services-act-brussels-plan-to-rein-in-big-tech-takes-shape-thierry-breton-margrethe-vestager/.
[28] Id.
[29] Id.
[30] Natalia Drozdiak, Big Tech Faces Ban From Favoring Own Services Under EU Rules, Bloomberg Law, (Sept. 30 2020), https://news.bloomberglaw.com/antitrust/big-tech-faces-ban-from-favoring-own-services-under-eu-rules.
[31] Kayali, supra note 27.
[32] Id.
[33] Id.
[34] Id.
[35] Id.
[36] Kate Cox, Proposed EU Rule May Mean you can Finally Delete Some Apps from your Phone, Ars Technica (Sept. 30, 2020), https://arstechnica.com/tech-policy/2020/09/draft-eu-data-rules-target-apple-google-facebook-amazon/.
[37] Id.
[38] Natasha Lomas, Google pushes Europe to limit ‘gatekeeper’ platform rules, TechCrunch (Sept. 4, 2020, 3:28 PM), https://techcrunch.com/2020/09/04/google-pushes-europe-to-limit-gatekeeper-platform-rules/.
[39] Kayali, supra note 27.
[40] Monica Nickelsburg, Seattle adopts minimum wage for Uber and Lyft drivers, GeekWire (Sept. 29, 2020), https://www.geekwire.com/2020/seattle-adopts-minimum-wage-uber-lyft-drivers/#:~:text=Seattle%20became%20the%20second%20big,%2416.39%20per%20hour%20minimum%20wage.
[41] Id.
[42] Noam Scheiber, Seattle Passes Minimum Pay Rate for Uber and Lyft Drivers, N.Y. Times (Sept. 29, 2020), https://www.nytimes.com/2020/09/29/business/economy/seattle-uber-lyft-drivers.html.
[43] Id.
[44] Id.
[45] Id.
[46] Id.
[47] Id.
[48] Shirin Ghaffary, N.Y. City has set the nation’s first minimum pay rate for Uber and Lyft drivers, Vox (Dec. 4, 2018), https://www.vox.com/2018/12/4/18125789/uber-lyft-drivers-wage-minimum-new-york.
[49] Edward Ongweso, Jr., The Lockout: Why Uber Drivers in NYC Are Sleeping in Their Cars, Vice (Mar. 19, 2020), https://www.vice.com/en/article/pkewqb/the-lockout-why-uber-drivers-in-nyc-are-sleeping-in-their-cars; see also Tina Bellon, Uber to limit drivers’ app access to comply with NYC regulation, Reuters (Sept. 16, 2019), https://www.reuters.com/article/us-uber-new-york/uber-to-limit-drivers-app-access-to-comply-with-nyc-regulation-idUSKBN1W12OV.
[50] Bellon, supra note 49.
[51] Nickelsburg, supra note 40.
[52] Id.
[53] Scheiber, supra note 42.
[54] Id.
[55] Jake Holland, Anthem Settles Attorneys General Breach Probe for $39.5 Million, Bloomberg Law (Sept. 30 2020, 10:46 AM), https://news.bloomberglaw.com/privacy-and-data-security/anthem-settles-attorneys-general-breach-probe-for-39-5-million.
[56] Lauren Berg, Anthem To Pay $39.5M To End 42 States’ Data Breach Claims, Law360 (Sept. 30, 2020), https://www.law360.com/california/articles/1315373.
[57] Id.
[58] Id.
[59] Id.
[60] Press Release, Cal. Dep’t of Justice, Attorney General Becerra Announces $8.69 Million Settlement Against Anthem, Inc., Over Failure to Protect Patients’ Personal Data (Sept. 30, 2020), https://oag.ca.gov/news/press-releases/attorney-general-becerra-announces-869-million-settlement-against-anthem-inc.
[61] Id.
[62] Id.
[63] Id.
[64] Id.
[65] Id.
[66] Berg, supra note 56.