Jurisdiction

EU decision gives X flexibility amid big tech regulations

The European Commission has determined that X, Elon Musk’s social media platform, does not qualify as a ‘gatekeeper’ under the Digital Markets Act (DMA), exempting it from additional compliance obligations. The Commission’s decision follows a May investigation initiated after X asserted it was not a key intermediary between businesses and consumers. While X meets user thresholds and turnover criteria, the Commission clarified that it does not significantly connect business users with end consumers.

Under the DMA, which took effect in 2023, companies must have at least 45 million end users and 10,000 business users in Europe, along with an annual turnover of €7.5 billion over the last three years, to be classified as gatekeepers. Major tech firms like Google, Amazon, Apple, Meta, Microsoft, and TikTok’s parent company ByteDance have already received gatekeeper status, imposing on them strict regulations to ensure fair competition and consumer choice.

Apple has faced penalties under the DMA, with the European Commission ruling in June that its App Store practices violated the regulations. While several companies, including Apple and Meta, have appealed their gatekeeper designations, X remains unaffected by these rules for now. This decision allows X more operational flexibility compared to its competitors, although it indicates that the Commission is closely monitoring the interactions between large platforms, businesses, and consumers in the digital marketplace.

DOJ issues warning on trade association Information exchanges

The US Department of Justice (DOJ) has released a significant Statement of Interest, urging scrutiny of surveys and information exchanges managed by trade associations. The DOJ expressed concerns that such exchanges may create unique risks to competition, particularly when competitors share sensitive information exclusively among themselves.

According to the DOJ, antitrust laws will evaluate the context of any information exchange to determine its potential impact on competition. Sharing competitively sensitive information could disproportionately benefit participating companies at the expense of consumers, workers, and other stakeholders. The department noted that advancements in AI technology have intensified these concerns, allowing large amounts of detailed information to be exchanged quickly, potentially heightening the risk of anticompetitive behaviour.

This guidance follows the DOJ’s withdrawal of long-standing rules that established “safety zones” for information exchanges, which previously indicated that certain types of sharing were presumed lawful. By retracting this guidance, the DOJ signals a shift toward a more cautious, case-by-case approach, urging businesses to prioritise proactive risk management.

The DOJ’s statement, made in relation to an antitrust case in the pork industry, has wider implications for various sectors, including real estate. It highlights the need for organisations, such as Multiple Listing Services (MLS) and trade associations, to evaluate their practices and avoid environments that could lead to price-fixing or other anticompetitive behaviours. The DOJ encourages trade association executives to review their information-sharing protocols, educate members on legal risks, and monitor practices to ensure compliance with antitrust laws.

Wales engineer takes legal action to retrieve lost Bitcoins worth $647 million

James Howells, a software engineer from Wales, has taken legal action against Newport City Council to recover a hard drive containing around 8,000 Bitcoin. The hard drive, which was accidentally discarded, is now worth approximately $514 million.

Howells has been repeatedly denied permission to excavate the landfill where the drive is believed to be located. In response, he filed a lawsuit seeking damages of £495 million, aiming to pressure the council into allowing the search. Howells has offered the council 10% of the recovered Bitcoin’s value if successful.

Despite these efforts, Newport Council remains firm in its refusal, citing potential environmental risks, and has dismissed the lawsuit as weak. The case is expected to be heard in December.

Uber and Postmates lose US Supreme Court bid in worker classification case

The US Supreme Court declined to hear an appeal from Uber Technologies Inc. and its subsidiary Postmates regarding California’s Assembly Bill 5 (AB5), effectively upholding a lower court ruling that mandates stricter worker classification standards. AB5 requires companies to classify their drivers as employees instead of independent contractors, which would significantly increase labour costs for these companies.

The Supreme Court’s decision upholds a ruling from the 9th US Circuit Court of Appeals, which determined that Uber and Postmates failed to demonstrate that AB5 unfairly targeted their services while exempting other industries. Although California voters approved Proposition 22 in 2020, allowing gig economy companies to classify drivers as independent contractors, this measure does not completely exempt them from AB5’s requirements. Recently, the California Supreme Court upheld Proposition 22, rejecting labour union claims that it violated the state constitution.

Theane Evangelis, an attorney for Uber, reiterated the company’s position, stating that Proposition 22 ensures drivers retain independence while receiving certain benefits. Critics argue that classifying workers as independent contractors allows companies to avoid providing essential protections, such as minimum wage and overtime pay. As debates over gig worker classification continue, the US Department of Labor has proposed a federal rule to tighten criteria for independent contractor status, which is also being challenged in court by business groups.

Coinbase demands SEC documents in crypto regulation dispute

Coinbase has filed a motion seeking partial summary judgment in its ongoing legal battle against the US Securities and Exchange Commission (SEC). The cryptocurrency exchange aims to access internal SEC documents, hoping to gain insight into the regulator’s approach toward the crypto industry. This stems from the SEC’s decision to deny requests under the Freedom of Information Act (FOIA) for crucial records on its enforcement strategies.

Coinbase, through History Associates, has been attempting to understand the SEC’s stance on digital assets, especially concerning the regulation of cryptocurrencies as securities. The SEC initially withheld documents under law enforcement exemptions but later acknowledged that these protections might no longer apply. Despite this, the regulator has delayed the document review process for three years, which Coinbase argues is unwarranted.

This motion is part of Coinbase’s broader efforts to challenge the SEC’s regulatory approach to the crypto sector, which many believe lacks clear guidelines. The case highlights the need for transparency regarding how the SEC enforces securities laws in the rapidly growing digital asset space.

Legal tech firm DISCO launches AI platform across Europe

CS Disco, Inc. has officially launched its AI-driven Cecilia platform in the European Union and the United Kingdom. The Cecilia AI Platform helps legal professionals review large datasets faster, allowing for quicker identification and analysis of crucial documents. The platform offers tools like Cecilia Q&A, which answers fact-based questions from a user’s document set, streamlining the review process.

The company’s generative AI capabilities are designed to boost efficiency in legal work, with features such as single document Q&A and document summaries helping attorneys quickly navigate complex or lengthy documents. The platform also supports documents in multiple languages, offering significant time savings compared to traditional methods.

Early adopters in the United States have already reported success with Cecilia’s tools, praising their speed and accuracy. CS Disco is focusing on enabling legal teams to handle large volumes of data with greater precision, as it expands its services to the European market.

The Cecilia platform is expected to grow further, with additional AI features planned for release in the EU and UK by 2025. DISCO aims to continue its role as a leader in AI-enabled legal technology, improving outcomes for clients across different markets.

Big Tech’s AI models fall short of new EU AI Act’s standards

A recent assessment of some of the top AI models has revealed significant gaps in compliance with the EU regulations, particularly in cybersecurity resilience and preventing discriminatory outputs. The study by Swiss startup LatticeFlow in collaboration with the EU officials, tested generative AI models from major tech companies like Meta, OpenAI, and Alibaba. The findings are part of an early attempt to measure compliance with the EU’s upcoming AI Act, which will be phased in over the next two years. Companies that fail to meet these standards could face fines of up to €35 million or 7% of their global annual turnover.

LatticeFlow’s ‘Large Language Model (LLM) Checker’ evaluated the AI models across multiple categories, assigning scores between 0 and 1. While many models received respectable scores, such as Anthropic’s ‘Claude 3 Opus,’ which scored 0.89, others revealed vulnerabilities. For example, OpenAI’s ‘GPT-3.5 Turbo’ received a low score of 0.46 for discriminatory output, and Alibaba’s ‘Qwen1.5 72B Chat’ scored even lower at 0.37, highlighting the persistent issue of AI reflecting human biases in areas like gender and race.

In cybersecurity testing, some models also struggled. Meta’s ‘Llama 2 13B Chat’ scored 0.42 in the ‘prompt hijacking’ category, a type of cyberattack where malicious prompts are used to extract sensitive information. Mistral’s ‘8x7B Instruct’ model fared similarly poorly, scoring 0.38. These results show the need for tech companies to strengthen security measures to meet the EU’s strict standards.

While the EU is still finalising the enforcement details of its AI Act, expected by 2025, LatticeFlow’s test provides an early roadmap for companies to fine-tune their models. LatticeFlow CEO Petar Tsankov expressed optimism, noting that the test results are mainly positive and offer guidance for companies to improve their models’ compliance with the forthcoming regulations.

The European Commission, though unable to verify external tools, has welcomed this initiative, calling it a ‘first step’ toward translating the AI Act into enforceable technical requirements. As tech companies prepare for the new rules, the LLM Checker is expected to play a crucial role in helping them ensure compliance.

X corp settles with Unilever in antitrust dispute

Elon Musk’s X, formerly known as Twitter, has dropped Unilever from its antitrust lawsuit that accused the company and others of conspiring to boycott the social media platform, leading to a loss in ad revenue. X’s filing in a Texas federal court confirmed the decision, though details of the agreement between the two companies were not disclosed.

Unilever, known for products like Dove and Hellmann’s, confirmed the settlement, stating that X has committed to meeting standards ensuring brand safety. Both X and Unilever expressed satisfaction with the resolution, with X noting its plans to continue working with the company.

The original lawsuit, filed in August, named several other companies and accused the World Federation of Advertisers of leading a boycott that withheld billions in ad revenue. X has stated that it will continue to pursue its claims against the remaining defendants. The boycott followed concerns about harmful content appearing next to ads after Musk’s acquisition of X in 2022.

FTX and Binance among firms hit by $32 billion in US fines

US regulators have imposed $32 billion in fines on crypto companies to resolve compliance disputes. A record $19.45 billion of that total came in 2024, primarily due to a $12.7 billion payment involving FTX and Alameda Research. In August, a judge ruled that the firms must pay $8.7 billion in restitution to those affected, along with a $4 billion fee for ill-gotten gains.

Terraform Labs also faced hefty fines in 2024, totalling $4.5 billion. Founder Do Kwon is required to pay $204.3 million in interest, fines, and compensation. Other significant fines include Binance’s $4.3 billion and Celsius’s $4.7 billion, both issued in 2023. Binance settled criminal charges, paying $1.81 billion in fines and $2.51 billion in compensation.

The surge in settlements reflects increased regulatory scrutiny following the FTX collapse in 2022. In 2023, US regulators settled eight lawsuits for $10.87 billion, a record-breaking 8,327% increase from the previous year. As of 2024, with eight more settlements totalling $19.45 billion, this year’s total has already surpassed 2023 by 78.9%.

Hundreds lose jobs as TikTok focuses on AI moderation

TikTok, owned by ByteDance, is cutting hundreds of jobs globally as it pivots towards greater use of AI in content moderation. Among the hardest hit is Malaysia, where fewer than 500 employees were affected, mostly involved in moderation roles. The layoffs come as TikTok seeks to improve the efficiency of its moderation system, relying more heavily on automated detection technologies.

The firm’s spokesperson explained that the move is part of a broader plan to optimise its global content moderation model, aiming for more streamlined operations. TikTok has announced plans to invest $2 billion in global trust and safety measures, with 80% of harmful content already being removed by AI.

The layoffs in Malaysia follow increased regulatory pressure on technology companies operating in the region. Malaysia’s government recently urged social media platforms, including TikTok, to enhance their monitoring systems and apply for operating licences to combat rising cybercrime.

ByteDance, which employs over 110,000 people worldwide, is expected to continue restructuring next month as it consolidates some of its regional operations. These changes highlight the company’s ongoing shift towards automation in its content management strategy.