Dear all,

Last week’s meeting between US President Joe Biden and Chinese President Xi Jinping was momentous not so much for what was said (see outcomes further down), but for the fact that it happened at all. 

Over the weekend, the news of Sam Altman’s ousting from OpenAI caused quite a stir. He didn’t need to wait long to find a new home: Microsoft.

Lots more happened, so let’s get started.

Stephanie and the Digital Watch team

// HIGHLIGHT //

Biden-Xi Summit cools tensions after long tech standoff

Last week’s meeting between US President Joe Biden and Chinese President Xi Jinping, in San Francisco on the sidelines of the Asia-Pacific Economic Cooperation’s (APEC) Leaders’ Meeting, marked a significant step towards reducing tensions between the two countries. 

Implications for tech policy. Tensions, especially about technology, have been escalating for months and years. For instance, in August, the US government issued a new executive order banning several Chinese-owned software and apps from its market. This order was met with some trepidation by tech companies operating in both countries as it was unclear how this would affect their businesses. But now, after Biden and Xi’s meeting, there is hope that tensions between the two countries will ease and that this softening will cover many aspects, including tech cooperation and policy. At least, so we hope.

Responsible competition. Prior to their closed-door meeting, the two leaders pragmatically acknowledged that the USA and China have contrasting histories, cultures, and social systems. Yet, President Xi said, ‘As long as they respect each other, coexist in peace, and pursue win-win cooperation, they will be fully capable of rising above differences and find the right way for the two major countries to get along with each other’. Biden earlier had said, ‘We have to ensure that competition does not veer into conflict. And we also have to manage it responsibly.’

Cooperation on AI. Among other topics, the two presidents agreed on the need ‘to address the risks of advanced AI systems and improve AI safety through US-China government talks,’ the post-summit White House readout said. It’s unclear what this means exactly, given that both China and the USA have already introduced the first elements of an AI framework. The fact that they brought this up, however, means that the USA certainly wants to stop any trace of AI technology theft in its tracks. But what’s in it for China?

US investment. A high-level diplomat suggested to Bloomberg that Xi’s address asking US executives to invest more in China was a signal that China needs US capital because of mistakes at home that have hurt China’s economic growth. If US Ambassador to Japan Rahm Emanuel is right, that explains why cooperation is a win-win outcome.

Tech exports. There’s a significant ‘but’ to the appearance of a thaw. Cooperation will continue as long as advanced US technologies are not used by China to undermine US national security. The readout continued: ‘The President emphasised that the United States will continue to take necessary actions’ to prevent this from happening, at the same time ‘without unduly limiting trade and investment’.

Unreported? Undoubtedly, there were other undisclosed topics discussed by the two leaders during their private meeting. For instance, what happened to the ‘likely’ deal on banning AI from autonomous weapon systems, including drones, which a Chinese embassy official hinted at before the meeting and on which the USA took a new political stand just two days prior?

Although it’s early days to see any significant positive ripple waves after the meeting, we’ll let the fact that Biden and Xi met face to face sink in a little bit. After all, as International Monetary Fund managing director Kristalina Georgieva told Reuters, the meeting was a badly needed signal that the world can cooperate more.

// AI //

Sam Altman ousted from OpenAI, joins Microsoft

Sam Altman, the CEO of OpenAI, who was fired on Friday in a surprise move by the company’s board, will now be joining Microsoft. Altman will lead a new AI innovation team at Microsoft, CEO Satya Nadella announced today (Monday). Fellow OpenAI co-founder Greg Brockman, who was removed from the board, will also join Microsoft.

Although Twitch co-founder Emmett Shear has been appointed as interim CEO, OpenAI’s future is far from stable: A letter signed by over 700 OpenAI employees has demanded the resignation of the board and the reinstatement of Altman (which might not even be possible at this stage).

Why is it relevant? First, Altman was the driving force behind the company – and its technology – which pushed the boundaries in AI and machine learning in such a short and impactful time. More than that, Altman was OpenAI’s main fundraiser; the new CEO will have big shoes to fill. Second, Microsoft has been a major player in the world of AI for many years; Altman’s move will further increase Microsoft’s already significant influence in this field. Third, tech companies can be as volatile as stock markets.

US Senate’s new AI bill to make risk assessments and AI labels compulsory

A group of US senators have introduced a bill to establish an AI framework for accountability and certification based on two categories of AI systems – high-impact and critical-impact ones. The AI Research, Innovation, and Accountability Act of 2023 – or AIRIA – will also require internet platforms to implement a notification mechanism to inform the users when the platform is using generative AI. 

Joint effort. Under the bill, introduced by members of the Senate Commerce Committee, the National Institute of Standards and Technology (NIST) will be tasked with developing risk-based guidelines for high-impact AI systems. Companies using critical-impact AI will be required to conduct detailed risk assessments and comply with a certification framework established by independent organisations and the Commerce Department.

Why is it relevant? The bipartisan AIRIA is the latest US effort to establish AI rules, closely following President Biden’s Executive Order on Safe, Secure, and Trustworthy AI. It’s also the most comprehensive AI legislation introduced in the US Congress to date.

// IPR //

Music publishers seek court order to stop Anthopic’s AI models from training on copyrighted lyrics

A group of music publishers have requested a US federal court judge to block AI company Anthropic from reproducing or distributing their copyrighted song lyrics. The publishers also want the AI company to implement effective measures that would prevent its AI models from using the copyrighted lyrics to train future AI models. 

The publishers’ request is part of a lawsuit they filed on 18 October. The case continues on 29 November.

Why is it relevant? First, although the lawsuit is not new, the music publishers’ request for a preliminary injunction shows how impatient copyright holders are with AI companies allegedly using copyrighted materials. Second, the case raises once more the issue of fair use: In a letter to the US Copyright Office last month, Anthropic argued that its models use copyrighted data only for statistical purposes and not for copying creativity.

Case details: Concord Music Group, Inc. v Anthropic PBC, District Court, M.D. Tennessee, 3:23-cv-01092.

// CONNECTIVITY //

Amazon’s Project Kuiper’s successful Protoflight mission

The team behind Amazon’s Project Kuiper, a satellite network developed by Amazon, has successfully tested the prototype satellites, which were launched on 6 October. Watch this video to see the Project Kuiper team testing a two-way video call from an Amazon site in Texas. The next step is to start mass producing the satellites for deployment in 2024.

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// DMA //

Meta and others challenge DMA gatekeeper status

A number of tech companies are challenging the European Commission’s label of digital gatekeepers, which places them into the scope of the new Digital Markets Act. Among the companies: 

• Meta (Case T-1078/23): The company disagrees with the Commission’s decision to designate its Messenger and Marketplace services under the new law, but does not challenge the inclusion of Facebook, Whatsapp, or Instagram.
• Apple (Cases T-1079/23 & T-1080/23): Details aren’t public but media reports said the company was challenging the inclusion of its App Store on the list of gatekeepers.
• TikTok (Case (T-1077/23): The company said its designation risked entrenching the power of dominant tech companies.

Microsoft and Google decided not to challenge their gatekeeper status.

Why is it relevant? The introduction of the Digital Markets Act has far-reaching implications for the operations of tech giants. This legal challenge is a first attempt to block its effective implementation. The outcomes of these cases could establish a precedent for the future regulation of digital markets in the EU.

20 November–15 December: The ITU’s World Radiocommunication Conference, which starts today (Monday) in Dubai, UAE, will review the international treaty governing the use of the radio-frequency spectrum and the geostationary-satellite and non-geostationary-satellite orbits. Download the agenda and draft resolutions.

21–23 November: The 8th European Cyber Week (ECW) will be held in Renne, France, and will bring together cybersecurity and cyber defence experts from the public and private sectors.

27–29 November: The 12th UN Forum on Business and Human Rights will be held in a hybrid format next week to discuss effective change in implementing obligations, responsibilities, and remedies.

Copyright lawsuits: Who’s really protected?

Microsoft, OpenAI, and Adobe are all promising to defend their customers against intellectual property lawsuits, but that guarantee doesn’t apply to everyone. Plus, those indemnities are narrower than the announcements suggest. Read the article.

Guarding artistic creations by polluting data

Data poisoning is a technique used to protect copyrighted artwork from being used by generative AI models. It involves imperceptibly changing the pixels of digital artwork in a way that ‘poisons’ any AI model ingesting it for training purposes, rendering it functionally useless. While it has been primarily used by content creators against web scrapers, it has many other uses. However, data poisoning is not as straightforward and requires a targeted approach to pollute the datasets. Read the article.

Dear all,

The ongoing Middle East conflict has made us realise how dangerous and divisive hate speech can be. With illegal content on the rise, governments are putting on pressure and launching new initiatives to help curb the spread. But can these initiatives truly succeed, or are they just another drop in the ocean?

In other news, policymakers are working towards semantic alignment in AI rules, while tech companies are offering indemnity for legal expenses related to copyright infringement claims originating from AI technology.

Let’s get started.

Stephanie and the Digital Watch team

// HIGHLIGHT //

Governments ramp up pressure on tech companies to tackle fake news and hate speech

Rarely have we witnessed a week quite like the last one, where so much scrutiny was levelled at social media platforms over the rampant spread of disinformation and hate speech. You can tell that leaders are worried about AI’s misuse by terrorists and violent extremists for propaganda, recruitment, and the orchestration of attacks. The fact that so many elections are around the corner raises the stakes even more.

Christchurch Call. In a week dominated by high-stakes discussions, global leaders, including French President Emmanuel Macron and former New Zealand leader Jacinda Ardern, gathered in Paris for the annual Christchurch Call meeting. The focal point was a more concerted effort to combat online extremism and hate speech, a battle that has gained momentum since the far-right shooting at a New Zealand mosque in 2019.

Moderation mismatch. In Paris, Macron seized the opportunity to criticise social media giants. In an interview with the BBC, he slammed Meta and Google for what he termed a failure to moderate terrorist content online. The revelation that Elon Musk’s X platform had only 2,294 content moderators, significantly fewer than its counterparts, fueled concerns about the platforms’ efficacy.

UNESCO’s battle cry. Meanwhile, UNESCO’s Director-General, Audrey Azoulay, sounded an alarm about the surge in online disinformation and hate speech, labelling it a ‘major threat to stability and social cohesion’. UNESCO unveiled an action plan (in the form of guidelines), backed by global consultations and a public opinion survey, emphasising the urgent need for coordinated action against this digital scourge. But while the plan is ambitious, its success hinges on adherence to non-binding recommendations. 

Political ads. On another front, EU co-legislators reached a deal on the transparency and targeting of political advertising. Stricter rules will now prohibit targeted ad-delivery techniques involving the processing of personal data in political communications. A public repository for all online political advertising in the EU is set to be managed by an EU Commission-established authority. ‘The new rules will make it harder for foreign actors to spread disinformation and interfere in our free and democratic processes. We also secured a favourable environment for transnational campaigning in time for the next European Parliament elections,’ lead MEP Sandro Gozi said. In the EU’s case, success hinges not on adherence, but on effective enforcement. 

Use of AI. Simultaneously, Meta, the parent company of Facebook and Instagram, published a new policy in response to the growing impact of AI on political advertising (after it was disclosed by the press). Starting next year, Meta will require organisations placing political ads to disclose when they use AI software to generate part or all of those ads. Meta will also prohibit advertisers from using AI tools built into Meta’s ad platform to generate ads under a variety of categories, including housing, credit, financial services, and employment. Although we’ve come to look at self-regulation with mixed feelings, the new policy – which will apply globally – is ‘one of the industry’s most significant AI policy choices to come to light to date’, to quote Reuters.

Crack-down in India. Even India joined the fray, with its Ministry of Electronics and Information Technology issuing a stern statement on the handling of misinformation. Significant social media platforms with over 5 million users must comply with strict timeframes for identifying and deleting false content.

As policymakers and tech giants grapple with the surge of online extremism and disinformation, it’s clear that much more needs to happen. The scale of the problem demands a tectonic change, one that goes beyond incremental measures. The much-needed epiphany could lie in the shared understanding and acknowledgement of the severity of the problem. While it might not bring about an instant solution, collective recognition of the problem could serve as a catalyst for a significant breakthrough.

// AI //

OECD updates its definition of AI system

The OECD’s council has agreed to a new definition of AI system, which reads: ‘An AI system is a machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that [can] influence physical or virtual environments. Different AI systems vary in their levels of autonomy and adaptiveness after deployment.’

Compared with the 2019 version, it has added content as one of the possible outputs, referring to generative AI systems. 

Why is it relevant? First, the EU, which aligned its AI Act with the OECD’s 2019 definition, is expected to integrate the revised definition into its draft law, presently at trilogue stage. As yet, no documents reflecting the new definition have been published. Second, the EU’s push towards semantic alignment extends further. The EU and USA are currently working on a common taxonomy, or classification system, for key concepts, as part of the EU-US Trade and Technology Council’s work. The council is seeking public input on the draft taxonomy and other work areas until 24 November.

Hollywood actors and studios reach agreement over use of AI 

Hollywood actors have finally reached a (tentative) deal with studios, bringing an end to a months-old strike. One of the disagreements was on the use of AI: Under the new deal, producers will be required to get consent and compensate actors for the creation and use of digital replicas of actors, whether created on set or licensed for use. 

The film and television industry faced significant disruptions due to a strike that began in May. The underlying rationale was this: While it’s impossible to halt the progress of AI, actors and writers could fight for more equitable compensation and fairer terms. Hollywood’s film and television writers reached an agreement in October, but negotiations between studios and actors were at an impasse until last week’s deal.

Why is it relevant? First, it’s a prime example of how AI has been disrupting creative industries and drawing concerns from actors and writers, despite earlier scepticism. Second, as The Economist thinks, AI could make a handful of actors omnipresent, and hence, eventually boring for audiences. But we think fans just want a good storyline, regardless of whether the well-loved artist is merely a product of AI.

OpenAI’s ChatGPT hit by DDoS attack

OpenAI was hit by a cyberattack last week, resulting in a major outage to its ChatGPT and API. The attack was suspected to be a distributed denial of service (DDoS) attack, which is meant to disrupt access to an online service by flooding it with too much traffic. When the outage first happened, OpenAI reported that the problem was identified, and a fix was deployed. But the outage continued the next day, with the company confirming that it was ‘dealing with periodic outages due to an abnormal traffic pattern reflective of a DDoS attack’.

Responsible. Anonymous Sudan claimed responsibility for the attack, which the group said was in response to OpenAI’s collaboration with Israel and the OpenAI CEO’s willingness to invest more in the country.

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// COMPETITION //

G7 ready to tackle AI-driven competition risks; more discussion on genAI needed

Competition authorities from G7 countries believe they already have the legal authority to address AI-driven competitive harm, which power could be further complemented by AI-specific policies, according to a communiqué published at the end of last week’s summit in Tokyo.

When it comes to emerging technologies such as generative AI, however, the G7 competition authorities say that ‘further discussions among us are needed on competition and contestability issues raised by those technologies and how current and new tools can address these adequately.’

Why is it relevant? Unlike other areas of AI governance, competition issues are not a matter of which new laws to enact, but rather how to interpret existing legal frameworks. How could this be done? Competition authorities have suggested that government departments, authorities, and regulators should (a) give proper consideration to the role of effective competition alongside other issues and (b) collaborate closely with each other to tackle systemic problems consistently.

// COPYRIGHT //

OpenAI launches Copyright Shield to cover customers’ legal fees for copyright infringement claims

Sam Altman, the CEO of OpenAI, has announced that the company will cover the legal expenses of business customers faced with copyright infringement claims stemming from using OpenAI’s AI technology. The decision responds to the escalating concern that industry-wide AI technology is being trained on protected content without the authors’ consent. 

This initiative, called Copyright Shield, was announced together with a host of other improvements to ChatGPT. Here’s the announcement: ‘OpenAI is committed to protecting our customers with built-in copyright safeguards in our systems. Today, we’re going one step further and introducing Copyright Shield – we will now step in and defend our customers, and pay the costs incurred, if you face legal claims around copyright infringement. This applies to generally available features of ChatGPT Enterprise and our developer platform.’

Why is it relevant? The offer of covering legal costs has become a trend, after Microsoft, in September, announced legal protection to users of its Copilot AI services faced with copyright infringement lawsuits, with Google following suit a month later by adding a second layer of indemnity to also cover AI-generated output. Details of how these services will be implemented are not yet entirely clear.

// PRIVACY //

Meta tells Europeans: Pay or Okay

Meta has rolled out a new policy for European users: Allow Facebook and Instagram to show personalised ads based on user data, or pay a subscription fee to remove ads. But there’s a catch – even if subscribers sign up to remove ads, the company will still gather their data – it just won’t use that data to show them ads. Privacy experts have seen this coming. A legal fight is definitely on the horizon.

// TAXATION //

Apple suffers setback over sweetheart tax case involving Ireland

The Apple-Ireland state aid case, which has been ongoing for almost a decade, is set to be decided by the EU’s Court of Justice, and things don’t look too good for Apple. The current chapter of the case involves a decision by the European Commission, which found that Apple owed Ireland EUR 13 billion (USD 13.8 billion) in unpaid taxes over an alleged tax arrangement granted to Apple, which amounted to illegal state aid. In 2020, the General Court annulled that decision, and the European Commission appealed.

Last week, the Court of Justice’s advocate general said the General Court made legal errors, and the annulment should be set aside. Advocate General Giovanni Pitruzzella advises the court to refer the case back to the lower court for a new decision.

Why is it relevant? First, the new opinion confirms the initial reaction of the European Commission, which at the time had said that the General Court made legal errors. Second, although the advocate general’s opinion is non-binding, it is usually given considerable weight by the court. 

Case details: Commission v Ireland and Others, C-465/20 P

13–16 November: Cape Town, South Africa, will host the Africa Tech Festival, a four-day event that is expected to bring together around 12,000 participants from the policy and technology sectors. There are 3 tracks: AfricaCom is dedicated to telecoms, connectivity, and digital infrastructure; AfricaTech explores innovative and disruptive technologies; AfricaIgnite is dedicated to entrepreneurs.

15 November: The much-anticipated meeting between US President Joe Biden and Chinese President Xi Jinping will take place on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting in San Francisco. Both sides will be looking for a way to smooth relations, not least on technology issues.

20 November–15 December: The ITU’s World Radiocommunication Conference, taking place in Dubai, UAE, will review the international treaty governing the use of the radio-frequency spectrum and the geostationary-satellite and non-geostationary-satellite orbits. Download the agenda and draft resolutions.

Dear readers,

Last week’s AI Safety Summit, hosted by the UK government, was on everyone’s radar. Despite coming just days after the US President’s Executive Order on AI and the G7’s guiding principles on AI, the summit served to initiate a global process on establishing AI safety standards. The week saw a flurry of other AI policy developments, making it one of the busiest weeks of the year for AI.

Let’s get started.

Stephanie and the Digital Watch team

// HIGHLIGHT //

Landmark agreement on AI safety-by-design reached by UK, USA, EU, and others

The UK has secured a landmark commitment with leading AI countries and companies to test frontier AI models before releasing them for public use. That’s just one of the initiatives agreed on during last week’s AI Safety Summit, hosted by the UK at Bletchley Park.

Delicate timing. The summit came just after US President Joe Biden announced his executive order on AI, the G7 released its guiding principles, and China’s President Xi Jinping announced its Global AI Governance Initiative. With such a diverse line-up of developments, there was a risk that the UK’s summit would be outshined, and its initiatives overshadowed. But judging by how the UK successfully avoided turning the summit into a marketplace (at least, not publicly), it managed to launch not just a product but a process.

Signing the Bletchley Declaration. The group of countries signing the communique on Day 1 of the summit included Australia, Canada, China, France, Germany, India, Korea, Singapore, the UK, and the USA for a total of 28 countries plus the EU.

Yes, China too. We’ve got to hand it to Prime Minister Rishi Sunak for bringing everyone around the table, including China: ‘Some said, we shouldn’t even invite China… others that we could never get an agreement with them. Both were wrong. A serious strategy for AI safety has to begin with engaging all the world’s leading AI powers.’ And he’s right. On his part, Wu Zhaohui, China’s vice minister of science and technology, told the opening session that Beijing was ready to increase collaboration on AI safety. ‘Countries regardless of their size and scale have equal rights to develop and use AI’, he added, possibly referring to China’s latest efforts to help developing nations build their AI capacities.

Like-minded countries testing AI models. The countries agreeing on the plan to test frontier AI models were actually a smaller group of like-minded countries – Australia, Canada, the EU, France, Germany, Italy, Japan, Korea, Singapore, the USA, and the UK – and ten leading AI companies – Amazon Web Services, Anthropic, Google, Google DeepMind, Inflection AI, Meta, Microsoft, Mistral AI, Open AI, and xAI. 

No China this time. China (and others) were not part of this smaller group, even though China’s representative reportedly attended Day 2. Why China did not sign the AI testing plan remains a mystery (we do have a theory or 2, though).

// AI //

Big Tech accused of exaggerating AI risks to eliminate competition

On today’s AI landscape, there are a few dominant Big Tech companies, alongside a vibrant open-source community, which is driving significant advancements in AI. The latter is posing a challenging competition to Big Tech, according to Google Brain founder Andrew Ng, leading giant companies to exaggerate the risks of AI in the hope of triggering strict regulation that would stymie the open-source community.

‘It’s been a weapon for lobbyists to argue for legislation that would be very damaging to the open-source community,’ Ng said.

Why is it relevant? Firstly, this statement echoes the cautionary note expressed in a leaked internal Google document from last May, which said that open-source AI would outcompete Google and OpenAI. Second, it paralyses open-source’s ability to resolve governance issues due to Big Tech’s control over data and knowledge.

UN advisory body to tackle gaps in AI governance initiatives  

The UN’s newly formed High-Level Advisory Body on AI, comprising 39 members, will assess governance initiatives worldwide, identify existing gaps, and find out how to bridge them, according to UN Tech Envoy Amandeep Singh Gill. He said the UN provides ‘the avenue’ for governments to discuss AI governance frameworks.

The advisory body will publish its first recommendations by the end of this year, and final recommendations next year. They will be discussed during the UN’s Summit of the Future, to be held in September next year.

Why is it relevant? It appears that the advisory body will not release another set of AI principles. Instead, they will focus on closing gaps rather than adding to the growing number of principles.

// MIDDLE EAST //

Third internet blackout in Gaza

The Gaza Strip was disconnected from internet, mobile, and telephone networks over the weekend – the third time since the start of the conflict. NetBlocks, a global internet monitoring service, said: ‘We’ve tracked the gradual decline of connectivity, which has corresponded to a few different factors: power cuts, airstrikes, as well as some amount of connectivity decline due to population movement.’

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// DATA PROTECTION //

Facebook and Instagram banned from running behavioural advertising in EU

The European data regulator has ordered the Irish data regulator to impose a permanent ban on Meta’s behavioural advertising across Facebook and Instagram. According to the EU’s GDPR, companies need to have a good reason for collecting and using someone’s personal information; Meta had none.

Ireland is where Meta’s headquarters are located. The ban imposed on the company, which owns Facebook and Instagram, covers all EU countries and those in the European Economic Area.

Why is it relevant? There are six different reasons, or legal bases, that a company can use to process data. One of them, based on consent (meaning that a person has given their clear and specific agreement for their information to be used), is Meta’s least favourite, as the chance of users refusing consent is high. Yet, it may soon be the only basis Meta can actually use – a development which will surely make Austria-based NGO noyb quite happy.

7-8 November: The 2023 Conference on International Cyber Security takes place at The Hague, the Netherlands. The theme is ‘War and Peace. Conflict, Behaviour and Diplomacy in Cyberspace’

8 November: The International AI Summit, organised by ForumEurope and EuroNews in Brussels and online, will ask whether a global approach to AI regulation is possible.

10-11 November: The annual Paris Peace Forum will tackle trust and safety in the digital world, among other topics.

13–16 November: The Web Summit, dubbed Europe’s biggest tech conference, meets in Lisbon.

Dear readers,

The stage is set for some major AI-related developments this week. Biden’s executive order on AI, and the G7’s guiding principles and code of conduct, are out. On Wednesday and Thursday, the UK will host the much-anticipated AI Safety Summit, where political leaders and CEOs will focus squarely on AI risks. In other news, the landscape for children’s online safety is changing, while antitrust lawsuits and investigations show no signs of easing up.

Let’s get started.

Stephanie and the Digital Watch team

// HIGHLIGHT //

Biden issues AI executive order; G7 adopts AI principles and code of conduct

You can tell how much AI is on governments’ minds by how many developments take place in a week – or in this case, one day.

Today’s double bill – Biden’s new executive order on AI, and the G7’s guiding principles on AI and code of conduct for developers – was highly anticipated. The White House first announced plans for the executive order in July; more recently, Biden mentioned it again during a tech advisors’ meeting. As for the G7, Japan Prime Minister Fumio Kishida has been providing regular updates on the Hiroshima AI Process for months. 

Executive order targets federal agencies’ deployment of AI

Biden’s executive order represents the government’s most substantial effort thus far to regulate AI, providing actionable directives where it can, and calling for bipartisan legislation where needed (such as data privacy). There are three things that stand out:

AI safety and security. The order places heavy emphasis on safety and security by requiring, for instance, that developers of the most powerful AI systems share their safety test results and other critical information with the US government. It also requires that AI systems used in critical infrastructure sectors be subjected to rigorous safety standards.

Sectoral approach. Apart from certain aspects that apply to all federal agencies, the order employs a somewhat sectoral approach to federal agencies’ use of AI (in contrast with other emerging laws such as the EU’s AI Act). For instance, the order directs the US Department of Health and Human Services to advance the responsible use of AI in healthcare, the Department of Commerce to develop guidelines for content authentication and watermarking to clearly label AI-generated content, and the Department of Justice to address algorithmic discrimination. 

Skills and research. The order directs authorities to make it easier for highly skilled workers to study and work in the country, an attempt to boost the USA’s technological edge. It will also heavily promote AI research through funding, access to AI resources and data, and new research structures.

G7’s principles place risk-based responsibility on developers

The G7 has adopted two texts: The first is a list of 11 guiding principles for advanced AI. The second – a code of conduct for organisations developing advanced AI – repeats the principles but expands on some of them with details on how to implement them. Our three main highlights:

Risk-based. One notable similarity with the EU’s AI Act is the risk-based element, which places responsibility on developers of AI to adequately assess and manage the risks associated with their systems. The EU promptly welcomed the texts, saying they will ‘complement, at an international level, the legally binding rules that the EU co-legislators are currently finalising under the EU AI Act’.

A step further. The texts build on the existing OECD AI Principles, but in some instances they go a few steps further. For instance, they encourage developers to develop and deploy reliable content authentication and provenance mechanisms, where technically feasible, such as watermarking or other techniques to enable users to identify AI-generated content. 

(Much) softer approach. Differing viewpoints on AI regulation exist among the G7 countries, ranging from strict enforcement to more innovation-friendly guidelines. The documents allow jurisdictions to adopt the code in ways that align with their individual approaches. But despite this flexibility, a few other provisions are overly vague. Take the provision on privacy and copyright, for instance: ‘Organisations are encouraged to implement appropriate safeguards, to respect rights related to privacy and intellectual property, including copyright-protected content.’ That’s probably not specific enough to provoke change.

Amid mounting concerns about the risks associated with AI, today’s double bill begs the question: Will these developments succeed in changing the security landscape for AI? Biden’s executive order has the most significant strength: Although it lacks enforcement teeth, it carries the constitutional weight to manage federal agencies. But on a global scale, perspectives vary so greatly that their influence is limited. And yet, today’s developments are just the beginning this week.

// MIDDLE EAST //

Musk’s Starlink to provide internet access to Gaza for humanitarian purposes

Elon Musk confirmed on Saturday that his SpaceX’s Starlink will provide internet connectivity to ‘internationally recognised aid organisations’ in Gaza. This prompted Israel’s communication minister, Shlomo Karhi, to express strong opposition about the Starlink’s potential exploitation by Hamas.

Responding to Karhi’s tweet, Musk replied: ‘We are not so naive. Per my post, no Starlink terminal has attempted to connect from Gaza. If one does, we will take extraordinary measures to confirm that it is used *only* for purely humanitarian reasons. Moreover, we will do a security check with both the US and Israeli governments before turning on even a single terminal.’

A telephone and internet blackout isolated people in the Gaza Strip on Saturday, which added to Israel’s weeks-long suspension of electricity and fuel to Gaza.  

Why is it relevant? First, it shows how internet connectivity is increasingly being weaponised during conflicts. Second, the world half-expected Starlink to intervene, given the role it played during the Ukraine conflict, and in other countries affected by natural disasters. But its (public) promise to get go-aheads from both governments could expose the company to new dimensions of responsibility and risks, and could be counterproductive to the aid organisations who so desperately need access to coordinate their relief efforts.

// KIDS ONLINE //

Meta sued by 33 US states over children’s mental health

Meta, Instagram and Facebook’s parent company, is facing a new legal battle from over 30  US states, which are alleging that the company engaged in deceptive practices and contributed to a mental health crisis among young users of its social media platforms. 

The lawsuit claims that Meta intentionally and knowingly used addictive features while concealing the potential risks of social media use, violating consumer protection laws, and breaching privacy regulations concerning children under 13. 

Why is it relevant? The concerns raised in this lawsuit have been simmering for quite some time. Two years ago, Meta’s former employee Frances Haugen catapulted them into the public consciousness after leaking thousands of internal documents to the press and testifying to the US Senate about the company’s practices. Since then, the issue  even showed up on US President Joe Biden’s radar earlier this year. Biden called for tighter regulation ‘to stop Big Tech from collecting personal data on kids and teenagers online’.

Case details: People of the State of California v. Meta Platforms, Inc. et al., District Court, Northern District of California, 4:23-cv-05448

UK implements Online Safety Act, imposing child safety obligations on companies

The UK’s Online Safety Act, which imposes new responsibilities on social media companies, came into effect last week after the law received royal assent. 

Among other obligations, social media platforms will be required to swiftly remove illegal content, ensure that harmful content (such as adult pornography) is inaccessible to children, enforce age limits and verification measures, provide transparent information about risks to children, and offer easily accessible reporting options for users facing online difficulties. As is to be expected, there are harsh fines – up to GBP 18 million (USD 21.8 million) or 10% of global annual revenues – in store for non-compliance.

Why is it relevant? For many years, the UK relied on companies’ self-regulated efforts to keep children safe from harmful content. The industry’s initially well-intentioned efforts gradually yielded to alternate choices that prioritised financial interests – the self-regulation experiment is now over, as one child safety expert put it.

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// CYBERWARFARE //

US official: North Korea and other states using AI in cyberwarfare

US Deputy National Security Advisor Anne Neuberger has confirmed that North Korea is using AI to escalate its cyber capabilities. In a recent press briefing (held on the sidelines of Singapore International Cyber Week), Neuberger explained: ‘We have observed some North Korean and other nation-state and criminal actors try to use AI models to help accelerate writing malicious software and finding systems to exploit.’ Although experts have often spoken about the risks of AI in cyberwarfare, it’s the first time there’s been an open acknowledgement of its use in offensive cyberattacks. There will be lots to talk about in London this week.

// ANTITRUST //

Google paid billions of dollars to be default search engine

Alphabet’s Google paid USD 26.3 billion (EUR 24.8 billion) to other companies in 2021 to ensure its search engine was the default on web browsers and mobile phones. This was revealed by a company executive testifying during the US Department of Justice’s (DOJ) antitrust trial and in a court record, which the presiding judge refused to redact.

The case, filed in 2020, concerns Google’s search business, which the DOJ and state attorneys-general consider ‘anticompetitive and exclusionary’ sustaining its monopoly on the digital advertising market. 

Why is it relevant? First, the original complaint had already indicated that ‘Google pays billions of dollars each year to distributors… to secure default status for its general search engine’. The exact figures have now been made known. Second, this will make it even more difficult for Google to argue against the implications of its exclusionary agreements with other companies.

Case details: USA v. Google LLC, District Court, District of Columbia, 1:20-cv-03010

Japan’s competition authority investigating Google’s practices

The Japan Fair Trade Commission (JFTC) is seeking information on Google’s suspected anti-competitive behaviour in the Japanese market, as part of an investigation still in its early stages.

The commission will determine whether Google excluded or restricted the activities of its competitors by entering into exclusionary agreements with other companies.

Why is this relevant? If it all sounds too familiar, that’s because the Japan case is very similar to the US DoJ’s ongoing case against Google.

1–2 November: The UK will host its much-anticipated AI Safety Summit in the historic Bletchley Park, Milton Keynes. British Prime Minister Rishi Sunak will welcome CEOs of leading companies and political leaders, including US Vice President Kamala Harris, European Commission President Ursula von der Leyen, and UN Secretary-General Antonio Guterres. In addition to discussing AI capabilities, risks, and cross-cutting challenges, the UK government is expected to announce an AI Safety Institute, which ‘will advance the world’s knowledge of AI safety and it will carefully examine, evaluate and test new types of AI’, the Prime Minister said. Here’s the discussion paper and the two-day programme.

1–2 November: The Global Cybersecurity Forum gathers in Riyadh, Saudi Arabia, for its annual event, which will this year be dedicated to ‘charting shared priorities in cyberspace’.

3–4 November: The 4th AI Policy Summit takes place in Zurich, Switzerland (at the ETH Zurich campus) and online. Diplo (publisher of this newsletter) is a strategic partner.

4–10 November: The Internet Engineering Task Force (IETF) is gathering in Prague, Czechia and online for its 118th annual meeting. 

6 November: Deadline for very large online platforms and search engines to publish their first transparency reports under the EU’s Digital Services Act. A handful of platforms have already published theirs: Amazon, LinkedIn, Pinterest, Snapchat, Zalando, Bing, and yes, TikTok.

Exploring the state of AI in 2023

The topic of AI safety, which appears for the first time in the annual State of AI report, has gained widespread attention and spurred governments and regulators worldwide into action, the 2023 report explains. Yet, beneath this flurry of activity lie significant divisions within the AI community and a lack of substantial progress towards achieving global governance, with governments pursuing conflicting approaches. Read the report.

How to manage AI risks

A group of AI experts has summed up the risks of upcoming, advanced AI systems in a seven-page open letter that urges prompt action, including regulations and safety measures by AI companies. ‘Large-scale social harms and malicious uses, as well as an irreversible loss of human control over autonomous AI systems are looming’, they warn. 

AI and social media: Driving us down the rabbit hole

Harvard professor Lawrence Lessig holds a critical stance on the impact of AI and social media, and an even more critical perspective on the human capacity for critical thinking. ‘People have a naïve view: They open up their X feed or their Facebook feed, and [they think] they’re just getting stuff that’s given to them in some kind of neutral way, not recognizing that behind what’s given to them is the most extraordinary intelligence that we have ever created in AI that is extremely good at figuring out how to tweak the attitudes or emotions of the people they’re engaging with to drive them down rabbit holes of engagement.’ Read the interview.

Dear all,

The spread of illegal content and fake news linked to the Middle East conflict has been worrying EU and US policymakers, who are putting more pressure on social media companies to step up their efforts. The USA-China trade war is escalating with tighter restrictions on US chip exports to China and retaliation by China. As other updates confirm, it’s been anything but blue skies as of late. But let’s get started.

Stephanie and the Digital Watch team

// HIGHLIGHT //

China unveils Global AI Governance Initiative as part of Belt and Road

In a significant stride towards shaping the trajectory of AI on a global scale, China’s President Xi Jinping announced the Global AI Governance Initiative (GAIGI) during the opening speech of last week’s Third Belt and Road Forum. 

The initiative is expected to bring together all 155 countries that make up the Belt and Road Initiative. This will make it one of the largest global AI governance forums.

Key tenets. Releasing additional details, the Foreign Ministry’s spokesperson said the strategic initiative will focus on five aspects. It will ensure that AI development remains synonymous with human progress, which is quite a noble aim. It will promote mutual benefit, and ‘oppose drawing ideological lines or forming exclusive groups to obstruct other countries from developing AI’ – a clear dig at Western allies. It would establish a testing and assessment system to evaluate and mitigate AI-related risks, which reminds us of the risk-based approach the EU is taking in its upcoming AI Act. It will also support efforts to develop consensus-based frameworks, ‘with full respect for policies and practices among countries,’ and provide vital support to developing nations to build their AI capacities.

First-mover advantage. In recent months, China has been moving swiftly to regulate its homegrown AI industry. Its interim measures on generative AI, effective since August, were a world first; it introduced rules for the ethical application of science and tech (including AI).  China is now looking at basic security requirements for generative AI. Very few acknowledge that despite its deeply ideological approach, China was the first to regulate generative AI, giving itself a significant advantage and mileage in the race to influence global standards. So much so that even US experts are now suggesting that the USA and its allies should engage with China ‘to learn from its experience and explore whether any kind of global consensus on AI regulation is possible’.

China’s approach. Interestingly, the interim measures are a watered-down version – or at least, a less robust version compared to its initial draft – a signal that China was favouring a more industry-friendly approach. A few weeks after the measures came into effect, eight major Chinese tech companies obtained approval from the Cyberspace Administration of China (CAC) to deploy their conversational AI services. In between the USA’s underwhelming progress on AI regulation, and the EU’s strict approach, China’s approach could easily gain appeal on the international stage.

Quasi-global. The international audience watching that stage is very large. With over 150 countries forming part of the Belt and Road Initiative, China’s Global AI Governance Initiative will be one of the largest AI governance forums. But the coalition’s size is not the only reason why the initiative will be highly influential. As the Belt and Road Initiative celebrates its 10th anniversary, China is extolling its success in stimulating nearly USD 1 trillion in investment, forming more than 3,000 cooperative projects, creating 420,000 jobs, and lifting 40 million people out of poverty. All of this gives China geopolitical clout and leverage.

Showtime. China’s Global AI Governance Initiative will undoubtedly influence other processes. Of the coalitions that have launched their own vision or process for regulating AI, the most recent is the draft guide to AI ethics, which the Association of Southeast Asian Nations (ASEAN) is working on. The unveiling of China’s initiative comes a few weeks before the UK’s AI Safety Summit (see programme), which China is set to attend (even though it’s still unclear who will represent China – the decision will indicate the level of significance China gives to the UK process). 

Xi’s speech conveys a willingness to engage: ‘We stand ready to increase exchanges and dialogue with other countries and jointly promote the sound, orderly and secure AI development in the world’. But as China’s Global Times writes, ‘China is already a very important force in global AI development… there is no way the USA and its Western allies can set up a system of AI management and regulation while squeezing China out.’

// DISINFORMATION //

EU formally asks Meta, TikTok for details on anti-disinformation measures

As the Middle East conflict unfolds, ‘the widespread dissemination of illegal content and disinformation linked to these events carries a clear risk of stigmatising certain communities and destabilising our democratic structures’, to quote European Commission Thierry Breton.

Last week, we wrote how Breton personally reached out to X’s Elon Musk, TikTok’s Shou Zi Chew, Alphabet’s Sundar Pichai, and Meta’s Mark Zuckerberg, urging them to promptly remove illegal content from their platforms. Two days later, X received a formal request for information.

Now, the European Commission has sent formal requests for information about the measures they have taken to curb the spread of illegal content and disinformation to Meta and TikTok (Alphabet has been spared so far, it seems). Meta has been documenting the measures publicly.

Deadlines. The companies must provide the commission with information on crisis response measures by 25 October and measures to protect the integrity of elections by 8 November (plus in TikTok’s case, how it’s protecting kids online). As we mentioned previously, we don’t think this exchange will stop with just a few polite letters.

DSA not yet fully operational? Honour it just the same

The European Commission is applying pressure on EU member states to implement parts of the DSA months ahead of its full implementation on 17 February 2024. The ongoing wars and instabilities have led to an ‘unprecedented increase in illegal and harmful content being disseminated online’, it said.

The commission is appealing to the countries’ ‘spirit of sincere cooperation’ to go ahead and form the planned informal network once the DSA starts applying fully, to take coordinated action, and to assist it with enforcing the DSA.  

Why is it relevant? It shows the commission’s (or rather, Breton’s) eagerness to see the DSA applied. It’s the kind of pressure that one can hardly choose to ignore.

US senator urges social media platforms to curb deceptive news

Disinformation is not just a concern for European policymakers. US Senator Michael Bennett has also written to the CEOs of Meta, Google, TikTok, and X to take prompt action against ‘deceptive and misleading content about the Israel-Hamas conflict’, which he says is ‘spreading like wildfire’.

Bennett’s letter was quite critical: ‘In many cases, your platforms’ algorithms have amplified this content, contributing to a dangerous cycle of outrage, engagement, and redistribution… Your platforms have made particular design decisions that hamper your ability to identify and remove illegal and dangerous content.’ 

Why is it relevant? First, it shows that concerns about the spread of disinformation and illegal content in the context of the Middle East conflict are not limited to European policymakers alone (although the approach taken by both sides hasn’t been quite the same). Second, Bennett is drawing attention to the platforms’ algorithms (something that the EU did not mention), which have arguably played a significant role in inadvertently promoting misleading content and creating filter bubbles.

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// CHIPS //

USA tightens restrictions on semiconductor exports to China

The US Department of Commerce’s (DOC) Bureau of Industry and Security (BIS) has tightened export restrictions on advanced semiconductors to China and other countries that are subject to an arms embargo. In practice, this means that China will be unable to obtain high-end chips that are used to train powerful AI models and equipment that can enable the production of tiny chips that are used for AI.

China reacted strongly to the BIS decision, calling these measures ‘unilateral bullying’, and an abuse of export control measures. The measures are an expansion of semiconductor export restrictions implemented last year. 

Why is it relevant? This latest tit-for-tat is meant to close loopholes from the 2022 measures. US Secretary of Commerce Gina Raimondo says that the objective remains unchanged: to restrict China from advancements in AI that are vital for its military applications. But the Washington-based Semiconductor Industry Association cautions that export controls ‘could potentially harm the US semiconductor ecosystem instead of advancing national security’.

// CYBERSECURITY //

Five Eyes warn of China’s ‘innovation theft’ campaign

The heads of the Five Eyes security agencies – composed of the USA, UK, Australia, Canada and New Zealand – have warned of a sizeable Chinese espionage campaign to steal commercial secrets. The agency heads met publicly for the first time during a security summit held in Silicon Valley. Over 20,000 people in the UK have been approached online by Chinese spies, the head of the UK’s MI5 told the BBC.

// NET NEUTRALITY //

US FCC vote kicks off process to restore net neutrality rules

The US Federal Communications Commission (FCC) has voted in favour of starting the process to restore net neutrality rules in the USA. The rules were originally adopted by the Obama administration in 2015, but repealed a few years later under the Trump government.

The steps ahead. Although net neutrality proponents will have uttered a collective sigh of relief at this renewal, the process involves multiple steps, including a period for public comments. 

Why is it relevant? We won’t state the obvious about net neutrality, or how the FCC will broaden its reach. Rather, we’ll highlight what chairwoman Jessica Rosenworcel said last week: There are already several state-led open internet policies that providers are abiding by right now; it’s time for a national one.

// COMPETITION //

South Africa investigating competition in local news media and adtech market

South Africa’s Competition Commission has launched an investigation into the distribution of media content and the advertising technology (adtech) markets that link buyers and sellers of digital advertising. 

The investigation will also determine whether digital platforms such as Meta and Google are engaging in unfair competition with local news publishers by using their content to generate advertising revenue.

Why is it relevant? First, it shows how global investigations – most notably in Australia and Canada – are drawing attention to Big Tech’s behaviour in other markets, and are influencing the measures taken by other regulators. Second, it reflects rising concerns about the shift from print advertising to digital content and advertising – a trend that is not sparing anyone.

// DIGITAL EURO //

ECB launches prep phase for digital euro

The European Central Bank (ECB) has announced a two-year prep phase for the digital euro, which will work on its regulatory framework and the technical setup. The phase starts on 1 November, and comes after a two-year research phase. 

The ECB made it clear that the launch doesn’t mean that the digital euro is a certainty. But if there’s eventually a green light, the digital euro will function similarly to online wallets or bank accounts, and will be guaranteed by the ECB. It will only be available to EU residents.

Why is it relevant? Digital currencies issued by central banks (known as Central Bank Digital Currencies (CBDCs)) are in a rapidly developing phase worldwide. Last year, a BIS report said that two-thirds of the world’s central banks are considering introducing CBDC in the near future. Even though only a few countries – such as China, Sweden, and a handful of Caribbean countries – have launched digital currencies or pilot projects, the EU is treading slowly but surely, expecting the digital euro to coexist alongside physical cash and to introduce measures that would safeguard its existing commercial banking sector.

Dear all,

As the conflict in the Middle East unfolds, and the world watches closely, those relying on social media for updates are left confused over what’s real and what’s not. This may be just the beginning of an age dominated by mis- and disinformation. In other news, there are new AI guidelines in the pipeline, while the EU has unveiled plans for a Digital Networks Act (which we’ll cover when things solidify a bit more).

Let’s get started.

Stephanie and the Digital Watch team

PS. Due to a technical glitch, this issue has been published a bit later than usual. Our apologies.

// HIGHLIGHT //

How the Middle East crisis is being (mis-)reported online

In recent days, as people have been grappling with the violence unfolding in Israel and Gaza, social media platforms have become inundated with graphic images and videos of the conflict. Without diminishing the gravity of what’s happening in the Middle East and the need to make it known, the problem with such social media content is that some of it is fake.

What’s fake, exactly? There’s a distinction between reporting something that didn’t happen and repurposing visuals from other conflicts for stronger impact. From a production point of view, there’s something sinister and malicious in fabricating a lie; during wartime, this is meant to raise alarm and stir up animosity. Reporting the truth but attaching a fake image is theoretically less sinister – although it is still a lie, and can fuel confusion, hostility, public safety risks, and harmful civil discourse among those who consume it.

Additionally complex. In some cases, the issue is more complex than this. Perpetrators go to the trouble of creating fake accounts, and of circulating uncaptioned imagery, leaving it to readers to draw their own conclusions. In this way, they can tap into biases and powerful emotions, such as fear, without having to take responsibility for the level of truthfulness of the content.

The worst part. Most parts of the world have taken sides. Polarisation has reached unprecedented heights. When individuals decide to condone a violent action (or not) based on whether an image really originates from their adversaries rather than their favoured faction, that brings out the worst in people. We won’t go into the gory details: Killing innocent children is an atrocity, regardless of who’s behind it – or whether a report has attached the correct image to it. 

Where it’s happening. Misinformation is as old as humanity and decades old in its current recognisable form, but social media has amplified its speed and scale. To say that online misinformation spreads like wildfire is an understatement. The challenge is compounded when shared by people with large followings. This could also happen if the press falls victim to the misinformation that’s flowing into newsrooms at a staggering scale.

Deprioritised. Earlier this year, Meta, Amazon, Alphabet, and Twitter laid off many of the team members focusing on misinformation and hate speech. This was part of a post-COVID-19-induced restructuring aimed at improving financial efficiency. 

The EU takes action: X, Google, Meta, TikTok ordered to remove fake content   

It didn’t take long for European Commissioner Thierry Breton to request that X, YouTube (Google), Facebook (Meta), and TikTok take down fake content.

In letters sent to X’s Elon Musk and to TikTok’s Shou Zi Chew, Breton wrote how their platforms had been used to disseminate fake content related to ‘the terrorist attacks carried out by Hamas against Israel’ (in his letter to Facebook’s Sundar Pichai and to Meta’s Mark Zuckerberg, Breton simply wrote about a surge in such content ‘via certain platforms’).

Each letter reminded the platforms of their obligations under the new Digital Services Act (DSA), including prompt responses to take-down requests by law enforcement. In X, Facebook, and TikTok’s case, the Commissioner gave the platforms 24 hours to respond.

The case of X. In TikTok and Microsoft’s case, things went more or less quiet. In X’s case, CEO Linda Yaccarino responded to complaints, confirming the removal of hundreds of Hamas-linked accounts and the removal or flagging of thousands of pieces of content – but this was either an unsatisfactory response or a predictable course of events that left the European Commission, just a day later, to send X a formal request for information. Breton tweeted the development as ‘a first step in our investigation to determine compliance with the DSA’, hinting that things will require more than just a handful of exchanged letters to be resolved. 

Elections in sight. The immediate worry may well be the Middle East conflict, but the longer-term worry is the numerous elections in 2024 – from the EU’s parliament and those in European countries, to the US presidential elections. It’s a concern that affects many countries.

The restructuring may prove costlier for those platforms laying off disinformation teams to save money.

// AI GOVERNANCE //

G7 to agree on AI guidelines by year’s end, Japan PM confirms

Japan confirmed that G7 leaders will agree on international guidelines for users by the end of the year, as well as non-binding rules and a code of conduct for developers of AI systems by the end of the year. This was announced by Prime Minister Fumio Kishida during last week’s Internet Governance Forum (IGF) in Kyoto. 

The texts form part of the Hiroshima AI Process, which was kickstarted during May’s G7 summit, held in Hiroshima. The upcoming summit will take place online.

Why is it relevant? There has been a lot of anticipation for the G7 rules on AI, even though they are non-binding. Japan, the current G7 president, will want to see its plans through by the end of the year, before it passes the baton to Italy.

ASEAN eyeing business-friendly AI rules

Southeast Asian countries are taking a business-friendly approach to AI regulation, according to a leaked draft text. The Association of Southeast Asian Nations (ASEAN) draft guide to AI ethics and governance asks companies to consider cultural differences and doesn’t prescribe categories of unacceptable risk. 

The guide is voluntary and meant to guide domestic regulations. ASEAN’s hands-off approach is seen as more business-friendly, as it limits the compliance burden and allows for more innovation. 

Why is it relevant? The EU has been discussing AI rules with countries in the region in a bid to convince them to follow its approach. But ASEAN’s approach clearly goes against the EU’s push for globally harmonised binding rules and is more aligned with other business-friendly frameworks.

// ANTITRUST //

Done deal: Microsoft’s acquisition of Activision Blizzard is approved

Microsoft has completed its USD68.7 billion acquisition of video games producer Activision Blizzard after the UK’s Competition and Markets Authority (CMA) approved the deal. The approval was granted after Microsoft presented the CMA with a restructured agreement in which the company said it would transfer the licensing rights for cloud streaming rights to Ubisoft, a proposed offer which the CMA had already said addressed their previous concerns.

The EU had already given the green light to the merger in May, but media reports said the European Commission was deciding whether it would look further into the restructured deal. Now it seems the European Commission won’t pursue this after all. However, the US Federal Trade Commission (FTC) intends to look into the licensing agreement Microsoft signed with Ubisoft.

Why is this relevant? Microsoft’s acquisition of Activision has been controversial. It’s the most expensive acquisition yet by Big Tech, so due to its scale, regulators feared it could hurt competition and give Microsoft too much power in the gaming market. European regulators are satisfied, but will these approvals solve the bigger problem of Big Tech accumulating ever more power? 

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// TAXATION //

IRS audit: Microsoft faces potential USD28.9 billion tax bill

The US Inland Revenue Service (IRS) has notified Microsoft that it owes USD28.9 billion in back taxes, penalties, and interest, covering the period 2004–2013 (which is nowhere near the USD160 million (GBP136 million) the company just paid the UK’s tax authority). The audit, which has been ongoing for over a decade, focuses on a deal where Microsoft transferred intellectual property to a factory in Puerto Rico for more favourable tax treatment. 

Microsoft says the taxes it has already paid could decrease the final tax owed under the audit by up to USD10 billion. The company plans to appeal the IRS’ conclusions, and the case is expected to continue for several more years.

Why is it relevant?

First, it’s the largest audit in US history. The IRS may be looking at the Microsoft case as a chance to prove the agency’s effectiveness in being more aggressive against corporations with endless resources. 

Second, it’s yet another example of Big Tech shifting income to low-tax jurisdictions specifically to lower their tax bill. 

Third, it coincides with the OECD’s latest inroad into its overhaul of global tax rules: The OECD has just published the text of a multilateral convention to implement the so-called Amount A of Pillar One. In simpler terms, this part of the new global rules will oblige some of the largest tech companies in the world to pay tax where their users are located, rather than where their corporate offices are based.