Regulatory

You Gotta Fight for Your Right to Repair

Christopher Cerny, MJLST Staffer

Last spring, as the first wave of the coronavirus pandemic hit critical heights, many states faced a daunting reality. The demand for ventilators, an “external set of lungs” designed to breathe for a patient too weak or compromised to breathe on their own, skyrocketed. Hospitals across the United States and countries around the globe clamored for more of the life saving devices. In March and April of 2020, the increasing need for this equipment forced doctors in Washington State, New York, Italy, and around the world to make heartbreaking decisions to prioritize the scarce supply. With this emergency equipment operating at maximum capacity, any downtime meant another potential life lost. But biomeds, hospital technicians who maintain these crucial medical devices, were frequently unable to troubleshoot or repair out-of-service ventilators to return them to the frontlines. This failure to fix the much-needed equipment was not due to lack of time or training. Instead, it was because many manufacturers restrict access to repair materials, such as manuals, parts, or diagnostic equipment. According to one survey released in February 2021, 76% of biomeds said that manufacturers denied them access to parts or service manuals in the previous three months and 80% said they have equipment that cannot be serviced due to manufacturers’ restrictions to service keys, parts, or materials.

While the prohibition of repairs of life support equipment highlights the extreme danger this restriction creates, the situation is not unique to hospitals and emergency equipment. As technology becomes increasingly complex and proprietary, all manner of tech manufacturers are erecting more and more barriers that prevent owners and independent repair shops from working on their products. Tesla, for example, is adamant about restricting repairs to its vehicles. The electric vehicle auto maker will not provide parts or authorize repairs if performed at an uncertified, independent repair shop or end user. Tesla has gone so far as to block cars repaired outside of its network from using its Superchargers. Apple historically also prevented end users from performing their own repairs, utilizing specialized tools and restricting access to parts. John Deere requires farmers to comply with a software licensing agreement that is in appearance designed to protect the company’s proprietary software, but in practice prevents farmers from clearing error codes to start their farm equipment without an authorized technician.

In response to these obstructions to repair, the Right to Repair movement solidified around the simple proposition that end users and independent repair shops should be provided the same access to manuals and parts that many tech companies reserve solely to themselves or their subsidiaries. This proposition is catching on and the legislatures in twenty-five states are currently considering thirty-nine bills involving the right to repair. However, of the thirty-nine bills, only three address medical technology with the bulk of the proposals devoted to general consumer products—think appliances, iPads, and smart devices—and farm equipment.

Massachusetts is an early adopter of right to repair laws. Its legislature passed a law in 2012 specific to motor vehicles that, inter alia, standardized diagnostic and service information, mandated its accessibility by owners and independent or third-party repair shops, and established any violation of the provisions of the act as an unfair method of competition and an unfair trade practice. This past November, Massachusetts voters approved a ballot measure that expanded the scope of the 2012 right to repair law and closed a loophole that could circumvent the requirements imposed in the earlier statute. Automakers lobbied in force to oppose the measure, spending in excess of $25 million in advertising and other efforts. Taking into account the money spent by both sides of the ballot measure, the right to repair initiative was the most expensive measure campaign in Massachusetts history. The European Union is also taking steps to broaden access to repair materials and information. The European Parliament passed a resolution aimed at facilitating a circular economy. Acknowledging the finite nature of many of the rare elements used in modern technology, the European Union is aiming to make technology last longer and to create a second-hand market for older models. The resolution expanding repair access is a part of that effort by ensuring the ease of repair to prolong the life of the technology and delay obsolescence.

Some manufacturers are making concessions in the face of the Right to Repair Movement. Apple, notoriously one of the most restrictive manufacturers, did an about face in 2019 and expanded access to “parts, tools, training, repair manuals and diagnostics” for independent repair businesses working on out of warranty iPhones. Tesla opened its repair platform to independent repair shops in the European Union after the EU Commission received complaints, but the access can be prohibitively expensive at €125 per hour for the use of diagnostics and programming software. However, these minimal efforts are stop-gap measures designed to slow the tide of legislation and resolutions aimed at broadening access to the materials needed to perform repairs to break the monopolistic hold manufacturers are trying to exert over routine fixes.

The Right to Repair movement is clearly gaining ground as the implications of this anticompetitive status quo in the repair and second-hand market was brought into stark relief by the strains imposed by the COVID-19 pandemic, which strained not only hospitals but agriculture, infrastructure, and day-to-day life. The impact of these restrictions on independent repair shops, farmers, consumers, patients, and do-it-yourselfers more than ever became an obvious impediment to health, safety, and a less extractive economy. And as shown in Massachusetts, voters are responding by expanding the right to repair, even in the face of expensive lobbying and advertising campaigns. Legislators should continue to bring additional bills, especially addressing the restrictions on repairs of emergency medical equipment and should enact the existing proposals in the twenty-five states currently considering them.


It’s Not Always Greener on the Other Side: Challenges to Environmental Marketing Claims

Ben Cooper, MJLST Staffer

On March 16, 2021 a trio of environmental groups filed an FTC complaint against Chevron alleging that Chevron violated the FTC’s Green Guides by falsely claiming “investment in renewable energy and [Chevron’s] commitment to reducing fossil fuel pollution.” The groups claim that this complaint is the first to use the Green Guides to prevent companies from making misleading environmental claims. Public attention has supported companies that minimize their environmental impact, but this FTC complaint suggests that a critical regulatory eye might be in the future. If the environmental groups convince the FTC to enforce the Green Guides against Chevron, other companies should review the claims they make about their products and operations.

A Morning Consult poll released in early December 2020 showed that nearly half of U.S. adults supported expanding the use of carbon removal practices and technologies. Only six percent of survey respondents opposed carbon removal practices. In response to the overwhelming public support for carbon reduction, hundreds of major companies are making some type of commitment to reduce their carbon footprint and curb climate change. One popular program, the Science Based Targets initiative, has over 1,200 participants who made various pledges to decarbonize (or offset the carbon within) their operations.

International and non-governmental organizations took the reins of climate change policy, especially once the Trump Administration withdrew the United States from the Paris Agreement in 2017. “Climate change seems to be the leading fashion statement for business in 2019,” declared a Marketplace story in October of 2019. Yet, as with fashion, style only gets one so far. Substance is key—and often lacking. One of the founders of the Science Based Targets initiative criticized fashionable but flimsy voluntary corporate commitments: “[T]here is not a lot of substance behind those [voluntary corporate] commitments or the commitments are not comprehensive enough.”

The voluntary commitments placated environmental groups when the alternative was the Trump Administration’s silence—but the Biden Administration presents an eager environmental partner: the FTC complaint “is the first test to see if [the Biden Administration] will follow through with their commitment to hold big polluters accountable,” said an environmental group spokesperson according to a Reuters report. The consensus of environmental groups, industry commentators, and regulatory observers appears to be that government oversight is imminent to encourage consistency and accountability—and to avoid “greenwashing.”

Should organizations that make environmental claims be concerned about enforcement action?  It is too early to tell if the Chevron FTC complaint portends future complaints. In the Green Guides, the FTC declared that it seeks to avoid placing “the FTC in the inappropriate role of setting environmental policy,” which might suggest that it will stick to questions of misrepresentation and avoid wading into questions of evaluating environmental claims. It is also worth noting that the FTC is missing one of its five commissioners and Commissioner Rohit Chopra is expected to resign in anticipation of his nomination to head the Consumer Financial Protection Bureau. While the FTC might not be in a position at the moment to enforce the Green Guides, organizations that make environmental claims in marketing materials should monitor this complaint and ensure their compliance with FTC guidance as well as any policy changes from the Biden Administration.


Clawing Back the “Jackpot” Won During the Texas Blackouts

Isaac Foote, MJLST Staffer

For most Texans, the winter storm in February 2021 meant cold temperatures, uncertain electricity at best, and prolonged blackouts at worst. For some energy companies, however, it was like “hitting the jackpot.” We here at MJLST (in Madeline Vavricek’s excellent piece) have already discussed the numerous historical factors that made Texas’s power system so vulnerable to this storm, but in the month after power was restored to customers, a new challenge has emerged for regulators to address: who will pay the estimated $50 billion in electricity transactions carried out during the week of blackouts. A number estimated to eclipse the total sales on the system over the previous three years!

At the highest level, the Texas blackouts were a result of the electric grid’s need to be ‘balanced’ in real time, i.e. always have sufficient electricity supply to meet demand. As the winter storm hit Texas, consumers increased demand for electricity, as they turned up electric heaters, while simultaneously a lack of winterization drove natural gas, wind, and nuclear electricity producers offline. So, to “avoid a catastrophic failure that could have left Texans in the dark for months,” Texas grid operator, the Electric Reliability Council of Texas (ERCOT), needed to find a way to drastically increase electricity supply and reduce electricity demand. Blackouts were the tool-of-last-resort to cut demand, but ERCOT also attempted to increase supply through authorizing an extremely high wholesale price of electricity. Specifically, ERCOT and the Texas Public Utility Commission (PUC) authorized a price of $9,000 per megawatt hour (MWh), over 340 times the annual average price of $26/MWh.

These high prices may have kept some additional generation online, but they also resulted in devastating impacts for consumers (especially those using the electric provider Griddy) and electric distributors (like Brazos Electric Power Cooperative that has already filed for Chapter 11 bankruptcy protection). Now, the Independent Market Monitor (IMM)for the PUC is questioning whether the $9,000/MWh electricity price was maintained for too long after the storm hit: specifically, the 32 hours following the end of controlled blackouts between February 17th and 19th. The IMM claims that the decision to delay reducing the price of electricity “resulted in $16 billion in additional costs to ERCOT’s market” that will eventually need to be recovered from consumers.

The IMM report on the issue has created a showdown in Texas Government between the State Senate, House, and the PUC. Former Chair of the PUC, Arthur D’Andrea, argued against repricing as “it’s just nearly impossible to unscramble this sort of egg,” while the State Senate passed a bill that would require ERCOT to claw back between $4.2 billion and $5.1 billion in from generators for the inflated prices. D’Andrea’s opposition to the clawback has already resulted in his resignation, but it appears unlikely this conflict will be resolved as the State House may concur with the PUC’s position.

There is further confusion over whether such a clawback would be legal in the first place. Before his resignation, D’Andrea implied such a clawback was beyond the power of the PUC. However, Texas Attorney General Ken Paxton issued an opinion that: “the Public Utility Commission has complete authority to act to ensure that ERCOT has accurately accounted for electricity production and delivery among market participants in the region. Such authority likely could be interpreted to allow the Public Utility Commission to order ERCOT to correct prices for wholesale electricity and ancillary services during a specific timeframe . . . provided that such regulatory action furthers a compelling public interest.”

Going forward it appears that the Texas energy industry will be facing a wave of lawsuits and bankruptcies, whatever the decisions made by the PUC or legislators. However, it is important to remember that someone will end up bearing responsibility for the billions of dollars in costs incurred during the crisis. While most consumers will not see this directly on their electricity bill, like those using Griddy had the misfortune to experience, these costs will eventually be transferred onto consumers in some ways. Managing this process in conjunction with rebuilding a more resilient energy system will be a challenge that Texas energy system stakeholders, policymakers, and regulators will have to take on.


Decode 16 tons (of bitcoin), what do you get? Nevada considers redefining the phrase “corporate governance”

Jesse Smith, MJLST Staffer

On January 16, 2020, Nevada Governor Steve Sisolak, as part of his state of the state address, announced a new legislative proposal allowing certain types of private companies to essentially purchase the ability to govern as public entities. The proposal applies specifically to tech firms operating within the fields of blockchain, autonomous technology, the internet of things, robotics, artificial intelligence, wireless technology, biometrics, and renewable resources technology. Those that purchase or own at least 50,000 contiguous acres of undeveloped and uninhabited land within a single county can apply to create  “innovation zones” within the property, or self-governed cities structured around the technology the company develops or operates. The company must apply to Nevada’s Office of Economic Development and provide a preliminary capital investment of at least $250 million, along with an additional $1 billion invested over ten years. Upon approval by the state, the area would become an “innovation zone,” initially governed by a three-member board appointed by the governor, two members of which would be picked from a list provided by the company creating the zone. This board would be able to levy taxes and create courts, school districts, police departments, and other offices empowered to carry out various municipal government functions.

One of the main companies lobbying for the passage of the bill, and the likely its first candidate or adopter, is Blockchains LLC, a Nevada based startup that designs blockchain based software in the areas of “digital identity, digital assets, connected devices and a stable means of digital payment.” The company purchased 67,000 acres of largely undeveloped land near Reno in 2018 for $170 million, in pursuit of building what it calls a “sandbox city,.” There, the company would further develop and use its blockchain technology to store records and administer various public and private functions, including “banking and finance, supply chains, ID management, loyalty programs, digital security, medical records, real estate records, and data sharing.”

Natural and rightful criticism of the legislation has mounted since the announcement. Many pointed out that Jeffrey Berns, the founder of Blockchains LLC, is a large donor to both Sisolak and Democratic PACs in Nevada. Furthermore, months before the proposal was unveiled, Blockchains purchased water rights hundreds of miles away to divert to its Nevada land, prompting various outcries from water rights and indigenous activists. From a broader perspective, skeptics conjured up dystopian images of zone residents waking up to “focus group tested alarm[s]” in constantly monitored “corporate apartments.” Others reflected on the history of company-controlled towns in the U.S. and the various problems associated with them.

Proponents of the plan seem fixated on two particular arguments. First, they note that the bill in its current incarnation requires an innovation zone to hold elections for the offices it sets up once its population hits 100. This allegedly demonstrates that while any company behind the zone “retains significant control over the jurisdiction early on, that entity’s control quickly recedes and democratic mechanisms are introduced.” Yet this argument ignores the fact that there is no requirement that a zone ever reach 100 residents. Additionally, even where this threshold is met, the board still retains significant control over election administration, and may divide or consolidate various types of municipal offices as it sees fit, and dismiss officials for undefined “malfeasance or nonfeasance” (§ 20 para. 2). Such powers provide ripe opportunity for gaming how an innovation zone’s government operates and avoiding true democratic control through consolidation of various powers into strategic elected offices.

Second is the more traditional argument that these zones will attract new businesses to the state and bestow an influx of money and jobs upon the citizens of Nevada. Setting aside various studies and arguments that question this assumption, this argument is yet another tired talking point that ignores the damage large businesses already wreak on the local communities they take over. Many overuse the limited resources of various departments. Others use the “value” that big businesses supposedly bring to communities to pit local governments against each other in bidding wars to see who can offer more tax breaks and subsidies to bring the business to their town, money and revenue that could and likely should be used to fund other local programs. Thus, the ability to actually govern appears to be the logical end in a progression of demands big businesses expect from the cities they set up shop in. Perhaps the best argument in favor of innovation zones is also the saddest, in that they allow big businesses to, as is said in corporate speak, “cut out the middleman” by directly collecting the tax dollars they already consume by the billions and directly controlling the municipal resources they already monopolize.

Sisolak, Berns, and other proponents of the proposal fight back against the idea that innovation zones will become the equivalent of “company towns” and argue that it will make Nevada a tech capital of the world by attracting the businesses specified in the bill. They would be well suited to remember two maxims that summarize the criticism of their idea: that history repeats itself and the road to hell is paved with good intentions. There is a reason these phrases are overused cliches. Last week’s MJLST blog post left us with the sweet sounds of Billy Joel to close out its article. As suggested by Tony Tran of “The Byte,” I’ll end mine with the classic, yet unknowingly cyberpunk ballad “16 tons” (the Tennessee Ernie Ford version), and leave the reader thinking about the future plight of the Nevada Bitcoin miner, owing her or his uploaded cloud soul to the company store, aka Blockchains LLC, in their innovation zone job.


Everything’s Bigger in Texas, Including Power Outages

Madeline Vavricek, MJLST Staffer

On last week’s episode of “now what?”, Texas was experiencing massive power shortages following a winter storm, leaving hundreds of thousands of Texans without power and water. An estimated 4.3 million Texans were rendered without power for up to a week as the cold snap that swept the nation caused Texas’s power grids to fail. Though the power grid is back up and Texas has returned to its regularly scheduled spring temperatures, last month’s empty grocery store shelves and power shortages have yet to melt from many Texans’ memories. As massive electric bills arrive in citizens’ mailboxes (hello, surge pricing!), lawsuits levied against power companies, and bankruptcies filed by energy companies, one might ask why Texas, far from being the coldest part of the United States that week, was so thoroughly and singularly felled by the winter weather. The answer, perhaps unsurprisingly, is both political and economic, and requires a history lesson as well.

Nearly half a century after Thomas Edison’s 1880 invention of the light bulb, the advent of the power grid was gaining traction in the nation’s cities and becoming less of a luxury and more of a necessity. This created a highly profitable market for electricity where previously no market had existed, and the expansion of the industry only shed light on ways that electric companies were utilizing the novel market to their advantage. This expansion eventually lead to the passage of the 1935 Public Utility Holding Company Act (PUHCA) under President Franklin D. Roosevelt. The Act outlawed the “pyramidal structure” of interstate utility holding companies, preventing holding companies from being more than twice removed from their operating subsidiaries, and required companies with a ten percent stake or greater in a utilities market to register with the Securities and Exchange Commission for monitoring. Essentially, this legislation was to prevent energy companies from operating as monopolies in the relatively new energy market, a move met with vehement opposition by the utility companies themselves; the bitter feeling was mutual, with FDR notably calling the holding companies “evil” in his 1935 State of the Union address.

While PUHCA inconvenienced these villainous utility companies’ interstate operations, there was one loophole left available to them: their “evil” was left unregulated within the state, allowing holding companies that operated within a single state unregulated under PUHCA.  While the Act was effective, decreasing the number of holding companies from 216 to 18 between 1938 and 1958, creating a “a single vertically-integrated system which served a circumscribed geographic area regulated by either the state or federal government.” It was following the 1935 passage of PUHCA that Texas power companies decided to band together within the state rather than submit to the federal regulation at hand. By only operating within state lines, Texas companies effectively skirted federal regulation and interference, politically maneuvering itself to an energy independence largely made possible through Texas’s energy-rich natural resources.

In the late sixties, the federal government created two main power grids to serve the country: the Eastern Interconnection and the Western Interconnection. Texas opted out of this infrastructure, choosing instead to form its own grid operator, called the Electric Reliability Council of Texas, or ERCOT. The ERCOT grid “remains beyond the jurisdiction of the Federal Energy Regulatory Commission,” the federal entity that regulates the power grid for the rest of the nation. ERCOT took on additional power following the 1999 move to deregulate the energy economy in Texas, an effort to create a completely free market for electricity in the state to benefit both consumers and companies. This independence had most Texans’ ardent approval . . . until the cold front rolled in late February 2021, obstructing the flow of the state’s natural gas and leading to the failure of 356 electric generators state-wide. While other Southern states relied on the national power grid to maintain their electricity, Texas had no one but itself to fall back on, and was quite literally left out in the cold.

While some argue that the independent electrical grid was not to blame for Texas’s misfortunes, insisting that the cold temperatures in the rest of the nation meant there wouldn’t be much energy to spare anyway, it is undeniable that the deep freeze has called attention to many cons of Texas’s pro-deregulation energy market. Though there is what could be considered an “instinctive aversion to federal meddling” in avoiding federal regulation, as well as sensible reasons for a state of Texas’s size and natural resources to remain separate from the other 47 continental United States, the reality remains that many Texans suffered at the hands of its own power grid. As the bills pile up and Texans increase the water bottles they have in their pantry at any given time, one can see how some might favor the security of a more regulated system over the freedom that lead to surge pricing, dry faucets, and dark homes.  However, as with all government regulation, there is a price to pay, and perhaps the Lone Star State prefers to stay “lone” for that very reason. Either way, Texas, now warmer and well-lit, is no doubt grateful to return to our 2021 definition of “normal” and hoping that their lives stop sounding like a verse of a beloved Bill Joel song (no, not Piano Man).


Intellectual Property in Crisis: Does SARS-CoV-2 Warrant Waiving TRIPS?

Daniel Walsh, MJLST Staffer

The SARS-CoV-2 virus (which causes the disease COVID-19) has been a massive challenge to public health causing untold human suffering. Multiple vaccines and biotechnologies have been developed to combat the virus at a record pace, enabled by innovations in biotechnology. These technologies, vaccines in particular, represent the clearest path towards ending the pandemic. Governments have invested heavily in vaccine development. In May 2020 the United States made commitments to purchase, at the time, untested vaccines. These commitments were intended to indemnify the manufacture of vaccines allowing manufacturing to begin before regulatory approval was received from the Food and Drug Administration. The United States was not alone. China and Germany, just to name two, contributed heavily to funding the development of biotechnology in response to the pandemic. It is clear that both private and public institutions contributed heavily to the speed with which biotechnology has been developed in the context of the SARS-CoV-2 pandemic. However, there are criticisms that the public-private partnerships underlying vaccine manufacturing and distribution have been opaque. The contracts between governments and manufacturers are highly secretive, and contain clauses that disadvantage the developing world, for example forbidding the donation of extra vaccine doses.

Advanced biotechnology necessarily implicates intellectual property (IP) protections. Patents are the clearest example of this. Patents protect what is colloquially thought of as inventions or technological innovations. However, other forms of IP also have their place. Computer code, for example, can be subject to copyright protection. A therapy’s brand name might be subject to a trademark. Trade secrets can be used to protect things like clinical trial data needed for regulatory approval. IP involved in the pandemic is not limited to technologies developed directly in response to the emergence of SARS-CoV-2. Moderna, for example, has a variety of patents filed prior to the pandemic that protect its SARS-CoV-2 vaccine. IP necessarily restricts access, however, and in the context of the pandemic this has garnered significant criticism. Critics have argued that IP protections should be suspended or relaxed to expand access to lifesaving biotechnology. The current iteration of this debate is not unique; there is a perennial debate about whether it should be possible to obtain IP which could restrict access to medical therapies. Many nations have exceptions that limit IP rights for things like medical procedures. See, e.g., 35 U.S.C. 287(c).

In response to these concerns the waiver of a variety of IP protections has been proposed at the World Trade Organization (WTO). In October 2020 India and South Africa filed a communication proposing “a waiver from the implementation, application and enforcement of Sections 1, 4, 5, and 7 of Part II of the TRIPS Agreement in relation to prevention, containment or treatment of COVID-19.” The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) sets minimum standards for IP standards, acquisition, and enforcement and creates an intergovernmental dispute resolution process for member states. Charles R. McManis, Intellectual Property and International Mergers and Acquisitions, 66 U. Cin. L. Rev. 1283, 1288 (1998). It is necessary to accede to TRIPS in order to join the WTO, but membership in the WTO has significant benefits, especially for developing nations. “Sections 1, 4, 5, and 7 . . .” relate to the protection of copyrights, industrial designs, patents, and trade secrets respectively. Waiver would permit nation states to provide intellectual property protections “in relation to prevention, containment or treatment of COVID-19” that fall below the minimum standard set by the TRIPs Agreement. At time of writing, 10 nations have cosponsored this proposal.

This proposal has been criticized as unnecessary. There is an argument that patents will not enter effect until after the current crisis is resolved, implying they will have no preclusive effect. However, as previously mentioned, it is a matter of fact that preexisting patents apply to therapies that are being used to treat SARS-CoV-2. Repurposing is common in the field of biotechnology where existing therapies are often repurposed or used as platforms, as is the case with mRNA vaccines. However, it is true that therapies directly developed in response to the pandemic are unlikely to be under patent protection in the near future given lag between filing for and receiving a patent. Others argue that if investors perceive biotech as an area where IP rights are likely to be undermined in the event of an emergency, it will reduce marginal investment in vaccine and biotech therapies. Finally, critics argue that the proposal ignores the existing mechanisms in the TRIPS Agreement that would allow compulsory licensing of therapies that nations feel are unavailable. Supporters of the status quo argue that voluntary licensing agreements can serve the needs of developing nations while preserving the investments in innovation made by larger economies.

The waiver sponsors respond that a wholesale waiver would permit greater flexibility in the face of the crisis, and be a more proportionate response to the scale of the emergency. They also assert that the preexisting compulsory licensing provisions are undermined by lobbying against compulsory licensing by opponents of the waiver, though it is unlikely that this lobbying would cease even if a waiver were passed. The sponsors also argue that the public investment implies that any research products are a public good and should therefore be free to the public.

It is unclear how the current debate on TRIPS will be resolved. The voluntary licensing agreements might end up abrogating the need for a wholesale waiver of IP protections in practice rendering the debate moot. However, the WTO should consider taking up the issue of IP protections in a crisis after the current emergency is over. The current debate is a reflection of a larger underlying disagreement about the terms of the TRIPS Agreement. Further, uncertainty about the status of IP rights in emergencies can dissuade investment in the same way as erosion of IP rights, implying that society may pay the costs of decreased investment without reaping any of the benefits.

 


Ways to Lose Our Virtual Platforms: From TikTok to Parler

Mengmeng Du, MJLST Staffer

Many Americans bid farewell to the somewhat rough 2020 but found the beginning of 2021 rather shocking. After President Trump’s followers stormed the Capitol Building on January 6, 2021, major U.S. social media, including Twitter, Facebook, Instagram, and Snapchat, moved fast to block the nation’s president on their platforms. While everybody was still in shock, a second wave hit. Apple’s iOS App stores, Google’s Android Play stores, Amazon Web Services, and other service providers decided to remove Parler, an app used by Trump supporters in the riot and mostly favored by conservatives. Finding himself virtually homeless, President Trump relocated to TikTok, a Chinese owned short-video sharing app   relentlessly sought to ban ever since July 2020. Ironically but not unexpected, TikTok banned President Trump before he could even ban TikTok.

Dating back to June 2020, the fight between TikTok and President Trump germinated when the app’s Chinese parent company ByteDance was accused of discreetly accessing the clipboard content on their users’ iOS devices. Although the company argued that the accused technical feature was set up as an “anti-spam” measure and would be immediately stopped, the Trump administration signed Executive Order 13942 on August 6, 2020, citing national security concerns to ban the app in five stages. TikTok responded swiftly , the District Court for the District of Columbia issued a preliminary injunction on September 27, 2020. At the same while, knowing that the root of problem lies in its “Chinese nationality,” ByteDance desperately sought acquisition by U.S. corporations to make TikTok US-owned to dodge the ruthless banishment, even willing to give up billions of dollars and, worse, its future in the U.S. market. The sale soon drew qualified bidders including Microsoft, Oracle, and Walmart, but has not advanced far since September due to the pressure coming from both Washington and Beijing.

TikTok, in the same Executive Order was another Chinese app called WeChat. If banning TikTok means that American teens will lose their favorite virtual platform for life-sharing amid the pandemic, blocking WeChat means much more. It heavily burdens one particular minority group––hundreds and thousands of Chinese Americans and Chinese citizens in America who use WeChat. This group fear losing connection with families and becoming disengaged from the social networks they have built once the vital social platform disappears. For more insight, this is a blog post that talks about the impact of the WeChat ban on Chinese Students studying in the United States.

In response to the WeChat ban, several Chinese American lawyers led the creation of U.S. WeChat Users Alliance. Supported by thousands of U.S. WeChat users, the Alliance is a non-profit organization independent of Tencent, the owner of WeChat, and was formed on August 8, 2020 to advocate for all that are affected by the ban. Subsequently, the Alliance brought suit in the United States District Court for the Northern District of California against the Trump administration and received its first victory in court on September 20, 2020 as Judge Laurel Beeler issued a preliminary injunction against Trump’s executive order.

Law is powerful. Article Two of the United States Constitution vested the broad executive power in the president of this country to discretionally determine how to enforce the law via issuance of executive orders. Therefore, President Trump was able to hunt a cause that seemed satisfying to him and banned TikTok and WeChat for their Chinese “nationality.” Likewise, the First Amendment of the Constitution and section 230 of the Communication Decency Act empowers private Internet forum providers to screen and block offensive material. Thus, TikTok, following its peers, finds its legal justification to ban President Trump and Apple can keep Parler out of reach from Trump supporters. But power can corrupt. It is true that TikTok and WeChat are owned by Chinese companies, but an app, a technology, does not take on nationality from its ownership. What happened on January 6, 2021 in the Capitol Building was a shame but does not justify removal of Parler. Admittedly, regulations and even censorship on private virtual platforms are necessary for national security and other public interest purposes. But the solution shouldn’t be simply making platforms unavailable.

As a Chinese student studying in the United States, I personally felt the of the WeChat ban. I feel fortunate that the judicial check the U.S. legal system puts on the executive power saved WeChat this time, but I do fear for the of internet forum regulation.

 


Becoming “[COVID]aware” of the Debate Around Contact Tracing Apps

Ellie Soskin, MJLST Staffer

As COVID-19 cases continue to surge, states have ramped up containment efforts in the form of mask mandates, business closures, and other public health interventions. Contact tracing is a vital part of those efforts: health officials identify those who have been in close contact with individuals diagnosed with COVID-19 and alert them of their potential exposure to the virus, while withholding identifying information. But traditional contact tracing for a true global pandemic requires a lot of resources. Accordingly, a number of regions have looked to smartphone-based exposure notification technology as an innovative way to both supplement and automate containment efforts.

Minnesota is one of the latest states to adopt this approach: on November 23rd, the state released “COVIDaware” a phone application designed to notify individuals if they’ve been exposed to someone diagnosed with COVID-19. Minnesota’s application utilizes a notification technology developed jointly by Apple and Google, joining sixteen other states and the District of Columbia, with more expected to roll out in the coming weeks. The nature of the technology raises a number of complex concerns over data protection and privacy. Additionally, these apps are more effective the more people use them and lingering questions remain as to compliance and the feasibility of mandating use.

The joint Apple/Google notification software used in Minnesota is designed with an emphasis on privacy. The software uses anonymous identifying numbers (“keys”) that change rapidly, does not solicit identifying information, does not provide access to GPS data, and only stores data locally on each user’s phone, rather than in a server. The keys are exchanged via localized Bluetooth connection operating in the background. It can also be turned off and relies wholly on self-reports. For Minnesota, accurate reports come in the form of state-issued verification codes provided with positive test results. The COVIDaware app checks daily to see if any keys contacted within the last 14 days have recorded positive test results. Minnesota policymakers, likely aware of the intense privacy concerns triggered by contact tracing apps, have emphasized the minimal data collection required by COVIDaware.

The data privacy regulatory scheme in the United States is incredibly complex, as there is no single unified federal data protection policy. Instead, the sphere is dominated by individual states. Federal law enters into the picture primarily via the Health Insurance Portability and Accountability Act (“HIPAA”), which does not apply to patients voluntarily giving health information to third parties. In response to concerns over contact tracing app data, multiple data privacy bills were introduced to Congress, but even the bipartisan “Exposure Notification Privacy Act” remains unpassed.

Given the decentralized nature of the internet, applications tend to be designed to comply with all 50 states’ policies. However, in this case, state-created contact tracing applications are designed for local use, so from a practical perspective states may only have to worry about compliance with neighboring states’ data privacy acts. The Minnesota Government Data Practices Act passed in 1974 is the only substantive Minnesota state statute affecting data collection and neighboring states’ (Wisconsin, Iowa, North Dakota, and South Dakota) laws have similarly limited or dated schemes. In this specific case, the privacy-focused Apple/Google API that forms the backbone of COVIDaware and the design of the app itself, described briefly above, likely keep it complaint. In fact, some states have expressed frustration at the degree of individual privacy afforded by the Apple/Google API, saying it can stymie coordinated public health efforts.

Of course, one solution to even minimal data privacy concerns is simply not to use the application. But the efficacy of contact tracing apps depends entirely on whether people actually download and use them. Some countries have opted for degrees of mandatory use: China has mandated adoption of its contact tracing app for every citizen, utilizing unprecedented government surveillance to flag individuals potentially exposed, and India has made employers responsible for ensuring every employee download its government-developed contact tracing app. While a similar employer-based approach is not legally impossible in the United States, any such mandate would be legally complex, and anyone following the controversy over mask mandates should instinctively recognize that a mandated government tracking app is a hard sell (to put it lightly).

But mandates may not even be necessary. Experts have emphasized that universal compliance isn’t necessary for an app to be effective: every user helps. Germany and Ireland have not mandated use, but have download rates of 20% and 37% respectively. Some have proposed small, community-focused launches of tracking apps, similar to successful start-ups. With proper marketing and transparency, states need not even enter the sticky legal mess that is mandating compliance.

Virtually every policy response to COVID in the United States has been met with heated controversy and tracking apps are no different. As these apps are in their infancy, legal challenges have yet to emerge, but the area in general is something of a minefield. The limited and voluntary nature of Minnesota’s COVIDaware app likely places it out of the realm of significant legal challenges and significant data privacy concerns, at least for the moment. The general conversation around contact tracing apps is a much larger one, however, and has helped put data privacy and end user control into the global conversation.

 

 

 

 

 


Extracting Favors: Fossil-Fuel Companies are Using the Pandemic to Lobby for Regulatory Rollbacks and Financial Bailouts

Christopher Cerny, MJLST Staffer

In the waning months of World War II, Winston Churchill is quoted, perhaps apocryphally, as saying, “[n]ever let a good crisis go to waste.” It seems fossil-fuel companies have taken these words to heart. While in the midst of one of the greatest crises of modern times, oil, gas, and coal companies are facing tremendous economic uncertainty, not only from the precipitous drop in demand for gasoline and electricity, but also from the rise of market share held by renewable energy. In response, industry trade groups and the corporations they represent are engaged in an aggressive lobbying campaign aimed at procuring financial bailouts and regulatory rollbacks. The federal government and some states seem inclined to provide assistance, but with the aforementioned rise of renewable energy, many see the writing on the wall for some parts of the fossil-fuel industry.

The ongoing COVID-19 pandemic continues to inflict immeasurable havoc on a global scale. The virus and the mitigation efforts designed to curb its spread have dramatically changed the way humankind interacts with each other and the world around us. In the United States, nearly all states at one time or another implemented mandatory shelter-at-home orders to restrict movement and prevent the further spread of the novel coronavirus. These orders have, in many ways, completely restructured society and the economy, with perhaps no sector being more impacted than transportation. At the peak of the virus in the United States, air travel was down 96% and, in April 2020, passenger road travel was down 77% from 2019. Similarly, the pandemic has altered America’s energy consumption. For example, the Midcontinent Independent System Operator reports a decrease in daily weekday demand in March and April of up to 13% and a national average decline of as much as 7% for the same time frame. A secondary impact of these market disruptions is on the fossil-fuel industry. The decrease in electricity demand has further diminished the already declining coal market, while the fall off in travel and transportation has radically impacted oil prices.

On April 20, a barrel of oil traded for a loss for the first time ever when demand fell so low that the cost storing oil exceeded its sale price. While the price of a barrel of oil, the world’s most traded commodity, has since improved, as of October 1st, the U.S. stock index for domestic oil companies remains down 57% in 2020. Similarly, coal consumption in the United States is projected to decline 23% this year. Natural gas remains resilient, with U.S. demand only dropping 2.8% between January and May of 2020. However, much of natural gas’s buoyancy comes at the expense of lower prices. These numbers are dire, especially for coal and oil, two domestic industries already on the decline due to the rise in renewable energy.

Fossil-fuel companies have gone on the offensive. The oil and gas industry is responding to these calamitous figures and grim financials by lobbying state and federal lawmakers for financial bailouts and the relaxation of environmental regulations. The California Independent Petroleum Association, an oil and gas trade group, requested an extension for compliance with an idle well testing plan that would push 100% program compliance from 2025 to 2029. Further, the trade group asked California to scale back on Gov. Gavin Newsom’s plan to increase the staff of the California Energy Management Division, the state agency charged with oversight of oil and gas drilling. In Texas, the Blue Ribbon Task Force on Oil Economic Recovery, created at the behest of the state oil and gas regulatory body and composed of representatives and leaders of Texas’s oil and gas trade groups, recommended the suspension of particular environmental testing and extensions for environmental reporting to the state agency. The Louisiana Oil and Gas Association asked Louisiana Gov. John Bel Edwards to suspend the state’s collection of severance taxes.

On the national stage, the Independent Petroleum Association of America asked the Chairman of the Federal Reserve to support changes to the Main Street Lending Program, a part of the CARES Act, to expand the eligibility requirements to include many oil and gas producers. The American Fuel and Petrochemical Manufacturers, a refiners trade association, called on the Trump administration and the Environmental Protection Agency (EPA) to waive biofuel policies that mandate the blending of renewable corn-derived ethanol in petroleum refining. The American Petroleum Institute also reached out to the Trump administration seeking the waiver of record keeping and training compliance.

Not to be left behind, the coal industry ramped up its lobbying as well. In an opinion piece, the CEO of America’s Power, a coal trade group extolled the virtues of the fleet of coal power plants and their necessity in the recovery from the COVID-19 pandemic. The National Mining Congress, the coal industry’s lobbying arm, sent a letter to the Trump administration and Congressional leaders asking for an end to the industry’s requirements to pay into funds for black lung disease and polluted mine clean-up

These lobbying efforts are being met with varied levels of success. In a move that garnered criticism from the Government Accountability Office, the Department of the Interior through the Bureau of Land Management cut royalties on oil and gas wells leased by the federal government, saving the industry $4.5 million. The EPA scaled back enforcement of pollution rules, instead relying on companies to monitor themselves. The Governors of Texas, Utah, Oklahoma, and Wyoming sent a letter asking the EPA to waive the biofuel blending regulations in support of the refiners trade group. In September, the EPA denied the request. The Governor of Louisiana agreed to delay the collection of the severance tax, a revenue source for the state that can normally bring in $40 million per month. The Louisiana state legislature later voted to reduce the severance tax on oil and gas from 12.5% to 8.5% for the next eight years. The EPA finalized a rule that it is not “appropriate and necessary” to regulate certain hazardous air pollutants, including mercury, emitted from coil and oil fired power plants.

It is difficult to discern what impact these industry efforts and resulting government actions will have in the long term. The financial measures may have propped up an industry that otherwise would have suffered permanent damage and bankruptcies without the influx of relief and capital. However, environmental groups are more concerned with the regulatory rollbacks. For example, after the EPA chose to allow companies to self-monitor pollution, there was a year-over-year decline of 40% in air emissions tests at industrial facilities and over 16,500 facilities did not submit required water quality reports. The ramifications of the state and federal acquiescence to the fossil-fuel industry’s requested regulatory non-compliance may end up costing the American tax payers millions of dollars, causing irreparable immediate harm to the environment, and delaying critical action needed to mitigate anthropogenic climate change.


Zoinks! Can the FTC Unmask Advertisements Disguised by Social Media Influencers?

Jennifer Satterfield, MJLST Staffer

Social media sites like Instagram and YouTube are filled with people known as “influencers.” Influencers are people with a following on social media that use their online fame to promote products and services of a brand. But, with all that power comes great responsibility, and influencers, as a whole, are not being responsible. One huge example of irresponsible influencer activity is the epic failure and fraudulent music festival known as Fyre Festival. Although Fyre Festival promised a luxury, VIP experience on a remote Bahamian island, it was a true nightmare where “attendees were stranded with half-built huts to sleep in and cold cheese sandwiches to eat.” The most prominent legal action was against Fyre’s founders and organizers, Billy McFarland and Ja Rule, including a six-year criminal sentence for wire fraud against McFarland. Nonetheless, a class action lawsuit also targeted the influencers. According to the lawsuit, the influencers did not comply with Federal Trade Commission (“FTC”) guidelines and disclose they were being paid to advertise the festival. Instead, “influencers gave the impression that the guest list was full of the Social Elite and other celebrities.” Yet, the blowback against influencers since the Fyre Festival fiasco appears to be minimal.

According to a Mediakix report, “[i]n one year, a top celebrity will post an average of 58 sponsored posts and only 3 may be FTC compliant.” The endorsement guidelines specify that if there is a “material connection” between the influencer and the seller of an advertised product, this connection must be fully disclosed. The FTC even created a nifty guide for influencers to ensure compliance. While disclosure is a small burden and there are several resources informing influencers of their duty to disclose, these guidelines are still largely ignored.

Evens so, the FTC has sent several warning letters to individual influencers over the years, which indicates it is monitoring top influencers’ posts. However, a mere letter is not doing much to stop the ongoing, flippant, and ignorant disregard toward the FTC guidelines. Besides the letters, the FTC rarely takes action against individual influencers. Instead, if the FTC goes after a bad actor, “it’s usually a brand that[] [has] failed to issue firm disclosure guidelines to paid influencers.” Consequently, even though it appears as if the FTC is cracking down on influencers, it is really only going after the companies. Without actual penalties, it is no wonder most influencers are either unaware of the FTC guidelines or continue to blatantly ignore them.

Considering this problem, there is a question of what the FTC can really do about it. One solution is for the FTC to dig in and actually enforce its guidelines against influencers like it did in 2017 with CSGO Lotto and two individual influencers, Trevor Martin and Thomas Cassell. CSGO Lotto was a website in which users could gamble virtual items called “skins” from the game Counter-Strike: Global Offensive. According to the FTC’s complaint, Martin and Thomas endorsed CSGO Lotto but failed to disclose they were both the owners and officers of the company. CSGO Lotto also paid other influencers to promote the website. The complaint notes that numerous YouTube videos by these influencers either failed to include a sponsorship disclosure in the videos or inconspicuously placed such disclosures “below the fold” in the description box. While the CSGO Lotto action was a huge scandal in the video game industry, it was not widely publicized to the general population. Moreover, Martin and Cassell got away with a mere slap on the wrist—“[t]he [FTC] order settling the charges requires Martin and Cassell to clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.” Thus, it was not enough to compel other influencers into compliance. Instead, if the FTC started enforcement actions against big-name influencers, other influencers may also fear retribution and comply.

On the other hand, the FTC could continue its enforcement against the companies themselves, but this time with more teeth. Currently, the FTC is preparing to take further steps to ensure consumer protection in the world of social media influencers. Recently, FTC Commissioner Rohit Chopra acknowledged in a public statement that “it is not clear whether our actions are deterring misconduct in the marketplace, due to the limited sanctions we have pursued.” Although Chopra is not interested in pursuing small influencers, but rather the advertisers that pay them, it is possible that enforcement against the companies will cause influencers to comply as well.

Accordingly, Chopra’s next steps include: (1) “[d]eveloping requirements for technology platforms (e.g. Instagram, YouTube, and TikTok) that facilitate and either directly or indirectly profit from influencer marketing;” (2) “[c]odifying elements of the existing endorsement guides into formal rules so that violators can be liable for civil penalties under Section 5(m)(1)(A) and liable for damages under Section 19; 7;” and (3) “[s]pecifying the requirements that companies must adhere to in their contractual arrangements with influencers, including through sample terms that companies can include in contracts.” By pushing some of the enforcement duties onto social media platforms themselves, the FTC gains more monitoring and enforcement capabilities. Furthermore, codifying the guidelines into formal rules gives the FTC teeth to impose civil penalties and creates tangible consequences for those who previously ignored the guidelines. Finally, by actually requiring companies to adhere to these rules via their contract with influencers, influencers will be compelled to follow the guidelines as well. Therefore, under these next steps, paid advertising disclosures on social media can become commonplace. But only time will really tell if the FTC will achieve these steps.