Jurisdiction

PayPal hit with $27.3 million fine in Poland

Poland’s antitrust and consumer protection watchdog, UOKiK, has fined PayPal Europe 106.6 million zlotys ($27.3 million) for failing to clearly outline activities that could incur penalties in its contractual clauses. UOKiK stated that PayPal’s descriptions of prohibited activities could have been more precise, making it difficult for users to understand what actions were not allowed and the potential consequences.

UOKiK’s head, Tomasz Chrostny, criticised PayPal’s clauses as general, ambiguous, and incomprehensible, giving the company excessive discretion to determine whether a user has committed a prohibited act and what penalties to impose. That could include actions like blocking money on accounts.

PayPal responded by emphasising its commitment to fair treatment and transparent communication with customers. The company stated that it has been cooperating with UOKiK during the investigation and is reviewing the decision. PayPal also noted that the decision is not final and that it has the opportunity to appeal in court.

Elon Musk seeks dismissal of lawsuit over delayed Twitter stake disclosure

Elon Musk is seeking to dismiss a lawsuit filed by former Twitter shareholders, alleging that he delayed revealing his large ownership stake in the company in early 2022. The shareholders claim Musk and his wealth manager, Jared Birchall, knew they were required by SEC rules to disclose when Musk’s stake exceeded 5% by 24 March 2022 but waited another 11 days. The delay, they argue, allowed Musk to buy more shares at lower prices, saving over $200 million.

In a filing in Manhattan federal court, Musk argued that the delay was a mistake rather than an attempt to defraud shareholders. He contended it was implausible to believe he intended to deceive investors who were unaware of his 9.2% stake and who missed out on significant gains by selling their shares prematurely. Musk claimed he initially planned to disclose his stake at the end of 2022 but did so earlier after realising he had misunderstood the SEC disclosure rule.

An Oklahoma public pension fund is leading the lawsuit. Despite Musk’s defence, a US District Judge had previously refused to dismiss the case, citing evidence that Musk understood the SEC’s disclosure requirements. Musk eventually bought Twitter, now known as X, for $44 billion in October 2022, and the SEC has also investigated his stock purchases.

Apple challenges EU Commission’s App Store decision

On 16 May 2024, Apple Inc. and Apple Distribution International Ltd filed a case against the European Commission, contesting a decision regarding their App Store practices, particularly concerning music streaming services. Represented by a team of lawyers, Apple is seeking the annulment of the Commission’s decision from 4 March 2024, which imposed fines and remedies on the tech giant.

Apple’s legal action is based on five main arguments. Firstly, they argue that the European Commission made errors in defining the market and Apple’s dominance within it. Secondly, Apple claims the Commission wrongly deemed its anti-steering provisions as abusive. The third point of contention is the calculation and imposition of fines, which Apple believes were erroneous. Additionally, Apple contends that the remedies imposed were disproportionate and inadequately justified. Lastly, they argue that the decision infringed on their rights of defence.

The case highlights the ongoing tension between major tech companies and regulatory bodies over market practices and competition rules. Apple aims to overturn or mitigate the Commission’s decision, which could significantly affect how digital marketplaces operate within the European Union.

US Supreme Court declines Snapchat case

The US Supreme Court decided not to review a case involving a Texas teenager who sued Snapchat, alleging the platform did not adequately protect him from sexual abuse by a teacher. The minor, known as Doe, accused Snap Inc. of negligence for failing to safeguard young users from sexual predators, particularly a teacher who exploited him via the app. Bonnie Guess-Mazock, the teacher involved, was convicted of sexually assaulting the teenager.

Lower courts dismissed the lawsuit, citing Section 230 of the Communications Decency Act, which shields internet companies from liability for content posted by users. With the Supreme Court declining to hear the case, Snapchat retains its protection under this law. Justices Clarence Thomas and Neil Gorsuch expressed concerns about the broad immunity granted to social media platforms under Section 230.

Why does this matter?

The case has sparked wider debate about the responsibilities of tech companies in preventing such abuses and whether laws like Section 230 should be revised to hold them more accountable for content on their platforms. Both US political parties have called for reforms to ensure internet companies can be held liable when their platforms are used for harmful activities.

Tech giants clash over California AI legislation

California lawmakers are poised to vote on groundbreaking legislation aimed at regulating AI to prevent potential catastrophic risks, such as manipulating the state’s electric grid or aiding in the creation of chemical weapons. Spearheaded by Democratic state Sen. Scott Wiener, the bill targets AI systems with immense computing power, setting safety standards that apply only to models costing over $100 million to train.

Tech giants like Meta (Facebook) and Google strongly oppose the bill, arguing that it unfairly targets developers rather than those who misuse AI for harmful purposes. They contend that such regulations could stifle innovation and drive tech companies away from California, potentially fracturing the regulatory landscape.

While highlighting California’s role as a leader in AI adoption, Governor Gavin Newsom has not publicly endorsed the bill. His administration is concurrently exploring rules to combat AI discrimination in employment and housing, underscoring the dual challenges of promoting AI innovation while safeguarding against its misuse.

The proposed legislation has garnered support from prominent AI researchers and would establish a new state agency to oversee AI development practices and enforce compliance. Proponents argue that California must act swiftly to avoid repeating past regulatory oversights in the social media sector, despite concerns over regulatory overreach and its potential economic impact.

Microsoft restructures China retail strategy

Microsoft is restructuring its retail strategy in mainland China, consolidating its retail channels amid reports of closing its network of authorised physical retailers. The tech giant did not confirm the closures or specify the number of stores affected but emphasised the need to adapt to changing customer needs.

Microsoft assured its products would remain available in China through retail partners and its website despite not operating physical stores directly in the region. However, the company did not detail which partners would continue to stock its products.

The change of strategy reflects Microsoft’s ongoing efforts to optimise its retail strategy in one of the world’s largest markets, ensuring accessibility and customer satisfaction through diverse channels, despite diplomatic and political challenges and restrictions.

US Department of Justice charges Russian hacker in cyberattack plot against Ukraine

The US Department of Justice has charged a Russian individual for allegedly conspiring to sabotage Ukrainian government computer systems as part of a broader hacking scheme orchestrated by Russia in anticipation of its unlawful invasion of Ukraine.

In a statement released by US prosecutors in Maryland, it was disclosed that Amin Stigal, aged 22, stands accused of aiding in the establishment of servers used by Russian state-backed hackers to carry out destructive cyber assaults on Ukrainian government ministries in January 2022, a month preceding the Kremlin’s invasion of Ukraine.

The cyber campaign, dubbed ‘WhisperGate,’ employed wiper malware posing as ransomware to intentionally and irreversibly corrupt data on infected devices. Prosecutors asserted that the cyberattacks were orchestrated to instil fear across Ukrainian civil society regarding the security of their government’s systems.

The indictment notes that the Russian hackers pilfered substantial volumes of data during the cyber intrusions, encompassing citizens’ health records, criminal histories, and motor insurance information from Ukrainian government databases. Subsequently, the hackers purportedly advertised the stolen data for sale on prominent cybercrime platforms.

Stigal is moreover charged with assisting hackers affiliated with Russia’s military intelligence unit, the GRU, in targeting Ukraine’s allies, including the United States. US prosecutors highlighted that the Russian hackers repeatedly targeted an unspecified US government agency situated in Maryland between 2021 and 2022 before the invasion, granting jurisdiction to prosecutors in the district to pursue charges against Stigal.

In a subsequent development in October 2022, the same servers arranged by Stigal were reportedly employed by the Russian hackers to target the transportation sector of an undisclosed central European nation, which allegedly provided civilian and military aid to Ukraine post-invasion. The incident aligns with a cyberattack in Denmark during the same period, resulting in widespread disruptions and delays across the country’s railway network.

The US government has announced a $10 million reward for information leading to the apprehension of Stigal, who is currently evading authorities and believed to be in Russia. If convicted, Stigal could face a maximum sentence of five years in prison.

Chinese AI companies respond to OpenAI restrictions

Chinese AI companies are swiftly responding to reports that OpenAI intends to restrict access to its technology in certain regions, including China. OpenAI, the creator of ChatGPT, is reportedly planning to block access to its API for entities in China and other countries. While ChatGPT is not directly available in mainland China, many Chinese startups have used OpenAI’s API platform to develop their applications. Users in China have received emails warning about restrictions, with measures set to take effect from 9 July.

In light of these developments, Chinese tech giants like Baidu and Alibaba Cloud are stepping in to attract users affected by OpenAI’s restrictions. Baidu announced an ‘inclusive Program,’ offering free migration to its Ernie platform for new users and additional Ernie 3.5 flagship model tokens to match their OpenAI usage. Similarly, Alibaba Cloud provides free tokens and migration services for OpenAI API users through its AI platform, offering competitive pricing compared to GPT-4.

Zhipu AI, another prominent player in China’s AI sector, has also announced a ‘Special Migration Program’ for OpenAI API users. The company emphasises its GLM model as a benchmark against OpenAI’s ecosystem, highlighting its self-developed technology for security and controllability. Over the past year, numerous Chinese companies have launched chatbots powered by their proprietary AI models, indicating a growing trend towards domestic AI development and innovation.

ByteDance challenges US TikTok ban in court

ByteDance and its subsidiary company TikTok are urging a US court to overturn a law that would ban the popular app in the USA by 19 January. The new legal act, signed by President Biden in April, demands ByteDance divest TikTok’s US assets or face a ban, which the company argues is impractical on technological, commercial, and legal grounds.

ByteDance contends that the law, driven by concerns over potential Chinese access to American data, violates free speech rights and unfairly targets TikTok while ‘ignores many applications with substantial operations in China that collect large amounts of US user data, as well as the many US companies that develop software and employ engineers in China.’ They argue that the legislation represents a substantial departure from the US tradition of supporting an open internet and sets a dangerous precedent.

The US Court of Appeals for the District of Columbia will hear oral arguments on this case on 16 September, a decision that could shape the future of TikTok in the US. ByteDance claims lengthy negotiations with the US government, which ended abruptly in August 2022, proposed various measures to protect US user data, including a ‘kill switch’ for the government to suspend TikTok if necessary. Additionally, the company made public a 100-plus page draft national security agreement to protect US TikTok user data and claims it has spent more than $2 billion on the effort. However, they believe the administration prefers to shut down the app rather than finalise a feasible agreement.

The Justice Department, defending the law, asserted that it addresses national security concerns appropriately. Moreover, the case follows a similar attempt by former President Trump to ban TikTok, which was blocked by the courts in 2020. This time, the new law would prohibit app stores and internet hosting services from supporting TikTok unless ByteDance divests it.

Meta to face US lawsuit by Australian billionaire over scam crypto ads on Facebook

A US judge has denied Meta Platforms’ attempt to dismiss a lawsuit filed by Australian billionaire Andrew Forrest. The lawsuit accuses Meta of negligence for allowing scam advertisements featuring Forrest’s likeness, promoting fake cryptocurrency and fraudulent investments, to appear on Facebook. Judge Casey Pitts ruled that Forrest could proceed with claims that Meta’s actions breached its duty to operate responsibly and that Meta misappropriated Forrest’s name and likeness for profit.

Meta had argued that it was protected under Section 230 of the Communications Decency Act, which typically shields online platforms from liability for third-party content. However, the judge determined that Forrest’s allegations raised questions about whether Meta’s advertising tools actively contributed to the misleading content rather than simply hosting it neutrally.

Forrest alleges that over 1,000 fraudulent ads featuring him appeared on Facebook in Australia from April to November 2023, resulting in millions of dollars in losses for victims. The lawsuit marks a significant step, challenging the usual immunity social media companies claim under Section 230 for their advertising practices. Forrest is seeking compensatory and punitive damages from Meta.

The following decision follows Australian prosecutors’ refusal to pursue criminal charges against Meta over similar scam ads. Forrest, the executive chairman of Fortescue Metals Group, considers the judge’s ruling a strategic victory in holding social media companies accountable for fraudulent advertising.