EU Announces E-Commerce Sector Inquiry

Competition Commissioner Margrethe Vestager announced today during a speech at the Bundeskartellamt (German Competition Authority) International Conference on Competition her intention to launch a sector inquiry in the e-commerce sector. The sector inquiry will be formally proposed to the Commission in May. Preliminary findings on the sector inquiry could be ready in mid-2016. Commissioner Vestager stressed:

It is high time to remove remaining barriers to e-commerce, which is a vital part of a true Digital Single Market in Europe. The envisaged sector inquiry will help the Commission to understand and tackle barriers to e-commerce to the benefit of European citizens and business.

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FCC Plans Maximum Fine for Television Broadcast of Indecent Material

The Federal Communications Commission today announced its intent to fine a television station $325,000 — the maximum penalty available — for airing less than three seconds of a pornographic video on a small portion of the screen during an evening newscast.  The Notice of Apparent Liability is a reminder of the FCC’s continued vigorous enforcement of its obscenity and indecency rules.

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AT&T Challenges FTC Jurisdiction Over Non-Common Carrier Activities of Common Carriers

As we previously reported, in October 2014 the Federal Trade Commission (FTC) filed a complaint against AT&T in federal court alleging that AT&T’s “throttling” practices for mobile broadband subscribers who were “grandfathered” into the company’s unlimited mobile data plan were unfair and deceptive in violation of Section 5 of the FTC Act.  On Monday, AT&T filed a Motion to Dismiss this lawsuit on the basis that it is a common carrier subject to the Communications Act and thus exempt from Section 5 of the FTC Act.

The Motion to Dismiss requests that the court dismiss the complaint because the FTC lacks authority to bring suit against AT&T.  Section 5 of the FTC Act exempts from the Act’s coverage “common carriers subject to” the Communications Act.  The motion asserts that AT&T falls within this exception because “it offers its mobile voice plans to customers on an indiscriminate basis without modifying the content of the information that traverses its network” and thus is a common carrier under the Communications Act.  According to AT&T, that its mobile data services are not regulated as common-carrier services under the Communications Act is irrelevant.  AT&T’s motion argues that the FTC is wrong to assume that Section 5 does not prohibit the agency from regulating the non-common carrier activities of common carriers, because Section 5 defines the FTC’s jurisdiction in terms of specific entities (namely, “persons, partnerships, or corporations”) and thus the exemption turns on “the status of the regulated entity, not the particular activity in which it is engaged.”

In addition, AT&T asserts that the mobile data activities that the FTC is seeking to regulate are already regulated by the Federal Communications Commission (FCC).  According to the motion, the same practices at issue in the FTC’s complaint (i.e., reducing mobile data speeds after users reach certain monthly thresholds) were the subject of an October 2014 FCC Letter of Inquiry and the FCC is considering whether to issue a Notice of Apparent Liability alleging that AT&T’s public disclosures about these practices failed to satisfy transparency rules imposed by the FCC’s 2010 Open Internet Order.  Thus, according to AT&T, whether its throttling practices were “unfair” and whether its disclosures were “inadequate” are issues for the FCC to decide and the FTC’s complaint must be dismissed so as to avoid overlapping regulatory jurisdiction.

FCC Extends Deadline for Compliance with Television Closed Captioning Quality Rules

The FCC announced in a recent Public Notice that it will extend the deadline for compliance with its new television closed captioning quality rules until March 16, 2015.

Previously scheduled to go into effect on January 15, 2015, the quality rules establish standards for television closed captioning concerning (1) accuracy, (2) synchronicity, (3) completeness, and (4) placement.  The rules also require video programming distributors (e.g., broadcast stations and cable systems) to seek certain certifications from video programmers concerning closed captioning quality.

In addition to the quality rules, the extension applies to certain related rules that also will now take effect on March 16, 2015, including:

  • Recordkeeping requirements concerning distributors’ monitoring and maintenance of closed captioning equipment and signals; and
  • Procedures concerning informal complaints in connection with the use of Electronic Newsroom Technique (ENT).  The extension does not affect eligible stations’ obligations to comply with the FCC’s ENT Best Practices, which took effect on June 30, 2014.

The FCC is still considering whether to impose direct obligations for compliance with the quality rules on programmers as well as distributors.

FCC Tentatively Concludes that Certain Online Video Distributors are MPVDs

On December 19, the FCC released a Notice of Proposed Rulemaking (NPRM) relating to the designation of certain online video programming distributors as “multichannel video programming distributors” (MVPDs) under the Communications Act.  This NPRM raises important and complex issues for the content community and has implications for other statutory regimes as well as existing program licensing and distribution agreements.

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FCC Seeks Comment on Requiring Video Programmers to File Contact Information, Closed Captioning Certifications

In a recent Further Notice of Proposed Rulemaking (FNPRM), the FCC announced that it is seeking comment on proposals that would require video programmers to file contact information and closed captioning certifications with the FCC.  Specific topics on which the FCC is seeking comment include the following:

  • Whether video programmers should be required to file contact information for the resolution of closed captioning complaints with the FCC.  The FNPRM also seeks comment on whether programmers should be required to place such contact information on their websites.
  • Whether the FCC should alter its requirements regarding closed captioning quality certifications by video programmers, such as by requiring programmers to file such certifications with the FCC.
  • Whether programming suppliers or video programmers should be required to file compliance certifications with the FCC concerning the provision of closed captioning.  As a reminder, the FCC’s current rules allow video programming distributors (VPDs) to rely upon such certifications from programming suppliers, but do not require programming suppliers to provide such certifications.
  • If video programmers are required to file closed captioning certifications with the FCC, whether VPDs should be required to alert programmers to this requirement when arranging to carry the programmer’s programming.

Comments on these topics are due 20 days after publication of the FNPRM in the Federal Register, and reply comments are due 30 days after publication.

Competition in digital markets: head of the CMA urges to separate the signal from the noise

Speaking at last week’s CRA Competition Conference in Brussels, Alex Chisholm, Chief Executive of the UK Competition and Markets Authority (“CMA”), suggested that competition authorities confronted with antitrust allegations against tech giants should “separate the signal from the noise and the sound from the fury”.  His remarks were made against the backdrop of the ongoing European Commission investigation into Google, and the European Parliament resolution to break up the US company.  So what is the role of competition authorities when confronted with these antitrust allegations?

Four types of problems, four different reactions

Chisholm posits that there are four types of problems, each of which warrants a different reaction from competition authorities.

  • Special pleading – Often competition authorities are confronted with complaints from competitors, and the challenge is to remain objective in their assessment: “In these cases, the role of competition authorities is first and foremost to separate the signal from the noise. To ask: is this complaint a genuine concern that impacts the public good? Or is it the desperate plea of a special private interest? If the latter, then the competition regulator needs to be robust enough to let Schumpeterian competition run its course.”  In other words, regulators should not allocate resources to cases only because new comers and new technologies make established business models obsolete.
  • Big societal questions – Disruptive innovation can throw up questions “which can be couched in competition terms but actually are much, much bigger”, like questions about the commercial use of personal data.  These questions can only be addressed once social and political processes have played their role, i.e.,we have developed a new social contract around privacy.”
  • Regulatory barriers to disruption – There are still many new business models to come in the new digital world.  Competition authorities need to make sure that those business models are not impeded by regulatory barriers from a different age, because they may no longer be necessary to enhance consumer welfare.  For instance, smart meters allow customers to adopt their behavior in response to changes in the energy market in real time, instead of having to wait for the electricity company technician to visit once in a year.  This may arguably affect the way energy markets should be regulated.

Competition authorities should try to stimulate creation of new businesses, as the OFT did in recommending open sourcing some public information, a suggestion that Transport of London followed.

  • Bread and butter competition issues – Do tech giants tend towards dominance, and if so, what is to be done?  Today there is intense competition between platforms, at least on certain parameters.  The platforms argue that this competition creates value and drives further innovation.  On the other hand, these new business models do seem to have a tendency towards natural monopoly or natural oligopoly, on both sides of the platform.  Tech giants might stir up competition on one side of the market, but fail to pass on the benefits to consumers. “What if – hypothetically – one of the digital giants were to come to exercise market power for its own account?  We can imagine a scenario where consumers come to them and there is the appearance of a competitive marketplace, with a multitude of offers for goods and their close substitutes.  But in reality, the platform is extracting all the rent from that competition through an unchallenged control over listing fees and sales commissions.”  Price parity clauses, restrictive agencies, bundling, foreclosure and predation should be considered on a case-by-case basis with a view to maintaining vigorous inter-platform competition. “…it must be remembered that an economy in the throes of creative destruction needs to be kept on a knife-edge (…) Markets need to contain enough promise of profit to spur innovation, while being competitive enough to keep strong incentives to continue to innovate and serve customers.”

Chisholm concluded that markets should reward innovation and investment, and that competition authorities must be vigilant and agile, “with the ability to sort real market distress signals from all the noise of creative destruction; and to tell the sound of actual market failure, from the fury of the out-competed.”

Please click here to read to full text of the speech.

STELAR (STELA Reauthorization) Enacted

The STELA Reauthorization Act (“STELAR”) has been signed into law by the President.  STELAR extends the statutory copyright license for satellite carriage of distant signals for another five years (through December 31, 2019).  It also extends through January 1, 2020 the statutory good faith negotiation requirement imposed on broadcasters and MVPDs for retransmission consent negotiations.  As discussed below, it makes several other changes to the Communications Act and to the Copyright Act.

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Advocate General’s Opinion in Case C-170/13 – Huawei Technologies Co. Ltd v ZTE Corp., ZTE Deutschland GmbH

On 5 April 2013, the Landgericht Düsseldorf referred questions relating to injunctive relief over standard-essential patents (“SEPs”) to the Court of Justice (“CJEU”) in connection with a patent dispute between Huawei and ZTE relating to an alleged infringement by ZTE of a patent owned by Huawei and declared to be essential in connection with the LTE standard. As the Advocate General (“AG”) put it in his 20 November Opinion, the CJEU “is called for the first time to answer whether seeking an injunction by the holder of SEP, committed to grant licences on FRAND terms, against a candidate-licensee may amount to an abuse of dominant position and which conditions apply.”

Covington published an alert on 25 November 2014 that summarises the opinion and the potential implications.   Please click here to view the alert.

D.C. Circuit Extends Stay in Battle Over Access to Content Companies’ Confidential Information

By Nicholas Dashman

This morning the U.S. Court of Appeals for the D.C. Circuit granted a stay of an FCC order that would have made hundreds of thousands of pages of highly confidential unredacted programming distribution and negotiation strategy documents available for inspection by third parties.  The disclosure of these materials would have occurred as part of the FCC’s review of the Comcast-Time Warner Cable and AT&T-DIRECTV mergers.  The stay was granted in response to a petition filed by a coalition of broadcast and cable programmers (the “Content Companies”) represented by Covington & Burling.  The stay will remain in effect pending the D.C. Circuit’s consideration of the merits of the Content Companies’ petition for review of the FCC order.  See our previous entry entitled D.C. Circuit Grants Stay in Battle Over Access to Content Companies’ Confidential Information for more information.

In issuing the order, the D.C. Circuit noted that the FCC itself already has access to the confidential documents and therefore can “continue to evaluate the proposed merger during the stay”.

The case is CBS Corporation, et al., v. Federal Communications Commission, No. 14-1242.  The full order can be found here.