The Big Story: Acquisitions, content moderation become focus of antitrust hearing. A Senate antitrust panel held a hearing this week to examine the impact of Google’s online advertising market on competition, but in what is becoming a routine occurrence, policymakers shifted their focus to other areas, spending considerable time airing unrelated and unsupported claims about Google’s supposed anti-conservative bias and the alleged harms of acquisitions.
Restricting mergers and acquisitions as a result of concerns about anti-competitive practices—particularly with so many startups struggling as a result of the pandemic—could close off a profitable exit strategy for many startups, and also make it harder for early-stage firms to attract outside investments. In light of claims by some venture investors that startup acquisitions typically involve larger companies purchasing struggling companies that would otherwise fail rather than putting vibrant competitors out of business, more research is needed in this area before policymakers take potentially drastic steps that could ultimately harm startup health and competition.
Despite several Republican committee members also using the hearing to express concerns that Google exhibits an anti-conservative bias, those kinds of claims lack any evidentiary support and only fuel long-simmering and politically motivated efforts—including by the Trump administration—to make it harder for companies to moderate problematic, though still legal, content on their platforms. The White House and some lawmakers have moved in recent months to roll back liability limitations that all Internet platforms rely on to host and moderate user-generated content. Changing the existing liability framework would open up early-stage startups to crippling lawsuits, in turn making it harder for them to compete against the largest, most financially secure companies.
Policymakers also used the hearing to raise concerns about Google’s collection and use of information. As we’ve long argued, policymakers interested in boosting the startup ecosystem and promoting competition should pass a federal data privacy framework. Startups have voiced their support for a uniform privacy framework that would protect user data while also creating much-needed certainty and consistency for entrepreneurs.
When it comes to promoting competition, policymakers should ensure that the legislative steps they take to rein in the power of tech giants do not impede the ability for startups to grow, innovate, and thrive. Responding to concerns about the market power of big tech firms with broad policy responses—without meaningful input from the startup community—could further cement the power of the nation’s largest companies.
Policy Roundup:
Trump administration is making it difficult for tech firms to access talent. In a new blog post, Engine examines how immigration steps taken by the Trump Administration—such as the White House’s suspension of visas for high-skilled foreign workers in June—have negatively affected tech firms that rely on the contributions of talented employees across the globe. Prior to the visa suspension announcement, U.S. tech firms were already seeing their denial rates for H-1B visas rise during Trump’s first term in office. According to data compiled by the National Foundation for American Policy, denial rates for new H-1B petitions rose to 29 percent in the second quarter of the 2020 fiscal year—up from six percent in fiscal year 2015. Rather than making the U.S. an inhospitable destination for high-skilled workers, the White House and policymakers should be working to increase access to qualified talent in order to ensure that U.S. tech firms and startups are poised to lead the nation’s post-COVID economic recovery.
Trump’s FCC nominee helped draft petition targeting Internet firms. The White House announced this week that President Donald Trump plans to nominate Nathan Simington, a senior adviser at the National Telecommunications and Information Administration (NTIA), to be a member of the Federal Communications Commission. The nomination comes after the Trump administration withdrew the renomination of FCC Republican Commissioner Mike O'Rielly—reportedly because of O'Rielly’s lack of support for President Trump’s May executive order on “preventing online censorship.” As part of the executive order’s requirements, NTIA petitioned the FCC to review Section 230 of the Communications Decency Act and consider changing the nature of the law in order to expose online companies that host and moderate user-generated content to new legal liability for their users’ posts. Simington reportedly played a major role in drafting the administration’s petition to the FCC.
EU threatens to impose digital services tax if global agreement is not reached. European Union President Ursula von der Leyen told the European Parliament this week that the bloc will pursue its own digital services tax (DST) next year if an international agreement is not reached by December. Most countries have held off imposing their own DSTs on large—and mostly U.S.-based—tech firms in order to give the Organisation for Economic Co-operation and Development (OECD) time to negotiate a global tech tax with almost 140 countries before the end of the year. Without an international agreement, countries are likely to pursue a patchwork of separate DSTs that will likely cause tech firms to pass the additional financial and administrative burdens on to the startups and users that use their services in the form of higher costs.
Trump calls for Republicans to pursue larger COVID relief package. President Donald Trump called on Twitter for congressional Republicans to support a coronavirus relief package with “much higher numbers” after the Senate was unable to advance a slimmed down $500 billion proposal last week. Trump also expressed support for a $1.5 trillion plan released this week by the House’s bipartisan Problem Solvers Caucus that would include another round of $1,200 stimulus checks to Americans and allocate an additional $240 billion for another round of Paycheck Protection Program loans for small businesses, although he stopped short of endorsing the proposal. House Speaker Nancy Pelosi (D-Calif.) announced earlier this week that the lower chamber will stay in session until a bipartisan agreement is reached on the next relief package.
EU proposal would weaken end-to-end encryption. The European Commission is reportedly considering a proposal to expand “targeted lawful access” of end-to-end encrypted messages by giving law enforcement officials access to encrypted services. While the plan would allegedly provide authorities with access to digitally encrypted services without weakening encryption or breaching privacy, efforts to implement this type of plan would likely require tech firms to build intentional vulnerabilities into their encrypted services—thereby forcing them to undermine privacy for all of their users. Weakening end-to-end encryption would disproportionately harm new and small startups that would have to create and then defend such a vulnerability.
Webinar to look at strategies for combating patent trolls. Video technology firm Bitmovin is holding a webinar next Tuesday at 12 noon ET on “defeating software-based patent trolls,” which will discuss how startups and other firms can protect and defend against patent trolls.
Startup Roundup:
#StartupsEverywhere: El Paso, Texas. Pioneers 21 in a nonprofit incubator working to unleash the potential of startups and small businesses along the U.S.-Mexico border. We recently spoke with Pioneers 21’s Executive Director, Carlos Martínez-Vela, to learn more about the organization’s work supporting local entrepreneurs, the El Paso startup ecosystem, and the importance of attracting talented workers.
