??AI&Tech Legal Digest || November 8, 2024
Anita Yaryna
Senior IP & Tech Legal Counsel | US-EU Product, Privacy, and Policy Counsel | AI Advisor | Commercial Counsel
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South Korea Hits Meta with €14M Fine Over Facebook Privacy Violations
South Korea's Personal Information Protection Commission has imposed a €14 million fine on Meta following a four-year investigation into privacy violations on Facebook. The investigation revealed that Meta illegally collected and shared sensitive personal data of approximately 980,000 Facebook users with 4,000 advertisers between July 2018 and March 2022. The data included highly protected information such as religious beliefs, political views, and sexual orientation, which under South Korean privacy law requires explicit user consent.
The case highlights significant security lapses in Meta's operations, including inadequate protection of inactive pages that led to identity theft and unauthorized password resets affecting South Korean users. This enforcement action follows a broader pattern of regulatory scrutiny in South Korea, where Meta and Google were previously fined €66 million in 2022 for privacy violations related to tracking users' online behavior. The timing is particularly notable as it comes shortly after Meta faced a €91 million penalty from European regulators over a 2019 password security incident, signaling intensifying global regulatory pressure on tech giants' data practices.
Ireland Unveils Landmark Online Safety Code for Video-Sharing Platforms
Ireland's media regulator, Coimisiún na Meán, has introduced a comprehensive online safety code that will impose binding regulations on major video-sharing platforms with European headquarters in Ireland. The code, set to take effect next month, targets platforms including TikTok, Facebook, Instagram, LinkedIn, Reddit, X, and YouTube, establishing strict content moderation requirements.
The new framework introduces mandatory safeguards against harmful content, including specific prohibitions on cyberbullying, child sex abuse material, content promoting self-harm, eating disorders, terrorism, and discriminatory material. A key focus of the regulation is protecting children from inappropriate content such as pornography and gratuitous violence, with requirements for enhanced parental controls.
The regulation comes with significant enforcement power, allowing fines of up to €20 million or 10% of a platform's annual turnover for non-compliance. Platforms will receive an implementation period of up to nine months for provisions requiring substantial IT work to achieve compliance. The code forms part of Ireland's broader Online Safety Framework, which operates alongside the EU Digital Services Act (DSA).
Facebook Challenges Securities Fraud Lawsuit Over Cambridge Analytica in Supreme Court
The US Supreme Court heard arguments in Meta's appeal to dismiss a 2018 class action securities fraud lawsuit brought by shareholders, led by Amalgamated Bank, over Facebook's handling of the Cambridge Analytica data breach. The lawsuit centers on whether Facebook violated securities law by failing to disclose a 2015 data breach affecting over 30 million users while presenting such risks as hypothetical in subsequent business disclosures.
The case, expected to be decided by June, raises crucial questions about corporate disclosure obligations under the Securities Exchange Act of 1934. Facebook argues it wasn't required to reveal that warned-of risks had already materialized, claiming reasonable investors understand risk disclosures as forward-looking statements. The Supreme Court's conservative and liberal justices engaged in detailed questioning about whether omitting past incidents from risk disclosures could mislead investors.
The stakes are particularly high given Facebook's previous settlements over the Cambridge Analytica incident, including a $100 million SEC enforcement action and a $5 billion FTC penalty. The case, alongside an upcoming Nvidia hearing, could significantly impact how companies are held accountable for securities fraud, with the Supreme Court's 6-3 conservative majority showing varying perspectives on whether reasonable investors would interpret risk factor disclosures as indicating both past and potential future events.
Australia Sets 16 as Minimum Age for Social Media Access
The Australian government has announced plans to introduce legislation mandating a minimum age of 16 for social media access, with Communications Minister Michelle Rowland confirming penalties for non-compliant platforms. The proposed law, expected to be introduced to parliament this month, will require social media companies to "take reasonable steps" to prevent underage access, though specific enforcement mechanisms remain undefined.
The legislation places enforcement responsibility with the eSafety Commissioner, who will oversee platform compliance and impose enhanced penalties exceeding the current sub-$1 million fines. Prime Minister Anthony Albanese emphasized the law's focus on platform accountability rather than user penalties, citing concerns about social media's impact on young people, including exposure to harmful content related to misogyny and body image.
The government faces significant implementation challenges, as it has yet to complete its trial of age-assurance technologies. While potential verification methods could include bank checks, facial estimation technology, or photo ID matching - similar to UK approaches - the government acknowledges that no country has implemented age verification without complications. Meta has indicated willingness to comply with the requirements, though technical feasibility remains uncertain across the approximately 40 affected apps.
Apple Faces Historic First Fine Under EU's Digital Markets Act
The European Union is preparing to impose its first-ever fine on Apple under the Digital Markets Act (DMA), targeting the company's failure to allow app developers to inform users about alternative payment options outside the App Store. This enforcement action follows closely on the heels of the €1.8 billion fine imposed on Apple in the Spotify case under traditional EU competition rules.
The upcoming penalty could be accompanied by periodic penalty payments until Apple achieves compliance with the DMA requirements. Under the new legislation, regulators can impose fines of up to 10% of global annual sales, increasing to 20% for repeated violations, with additional daily penalties of up to 5% of average daily revenue possible.
The case represents a significant escalation in the EU's regulatory approach to Big Tech, with Competition Commissioner Margrethe Vestager potentially issuing the fine before leaving office this month. This action adds to a series of regulatory challenges Apple faces in Europe, including previous interventions forcing the company to open its iPhone payment chip to third parties and the €13 billion tax case involving Ireland.
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Meta Faces Major UK Class Action Over Facebook Data Exploitation
The UK Court of Appeal has rejected Meta's attempt to challenge a class action lawsuit alleging Facebook abused its dominant market position by exploiting user data. The lawsuit, representing 44 million British Facebook users, claims the platform conditioned access to its services on users surrendering personal data that generated billions in revenue for the company.
The court's refusal to permit Meta and Facebook UK's appeal upholds the Competition Appeal Tribunal's earlier decision to proceed with a revised version of the lawsuit. Competition expert Liza Lovdahl Gormsen, who brought the collective claim, estimates potential damages could reach at least ￡2.3 billion ($3.2 billion).
The case represents a significant legal challenge to Meta's data practices in the UK, with the Court of Appeal stating definitively that "there is no basis upon which permission to appeal should be granted." This ruling clears the way for the class action to move forward, potentially setting a precedent for how social media platforms can leverage user data in exchange for service access.
FTC Takes Legal Action Against Dave Over Deceptive Cash Advance Marketing
The U.S. Federal Trade Commission has filed a lawsuit against fintech company Dave Inc., alleging the company misled users about its cash advance services. The lawsuit, filed in federal court, claims Dave advertised cash advances of up to $500 while failing to disclose that very few users qualify for the full amount, and many receive no advance at all.
According to the FTC's complaint, Dave's app targets financially vulnerable users without transparently disclosing its fee structure, including a $25 instant transfer fee and a monthly $1 service charge. The regulatory body also alleges that Dave misrepresented its tipping system, falsely claiming that these contributions would be used to purchase meals for children in need.
The case highlights increasing regulatory scrutiny of fintech companies' marketing practices, particularly those targeting financially vulnerable consumers. Dave Inc. has responded to the allegations, stating that many of the FTC's claims are incorrect and announcing its intention to mount a legal defense.
Google Wins Dismissal of Gift Card Fraud Class Action Lawsuit
A federal judge in San Jose has dismissed a proposed class action lawsuit against Google that alleged the company illegally profited from Google Play gift card scams. The lawsuit, brought by Indiana resident Judy May who lost $1,000 to scammers, claimed Google wrongfully retained commissions of 15% to 30% on purchases made with fraudulently obtained gift cards.
U.S. District Judge Beth Labson Freeman ruled that May failed to demonstrate Google caused her losses or knew it was receiving stolen funds. The judge determined that Google's commission retention was unrelated to the original fraud, as May's losses stemmed from scammers inducing her to purchase the gift cards rather than from Google's actions.
The case highlights the growing issue of gift card fraud in the United States, with Americans losing $217 million to such scams in 2023 according to the Federal Trade Commission. Google Play cards reportedly account for approximately 20% of all gift card scams, though actual losses are likely higher as the data only includes reported cases.
FTC Cracks Down on Sitejabber Over AI-Enabled Review Platform Deception
The Federal Trade Commission has charged Sitejabber (GGL Projects, Inc.) with deceiving consumers through its AI-enabled review platform by misrepresenting ratings and reviews. The agency alleges that Sitejabber collected and published ratings from customers at the point of sale, before they had received or experienced the products or services, artificially inflating business ratings and review counts.
According to the FTC's complaint, Sitejabber enabled clients to display pre-fulfillment feedback as product reviews on their websites, asking customers questions like "Why did you choose the [product] today?" and requesting star ratings before product delivery. These ratings were then displayed in Google search results and presented as legitimate post-purchase reviews, misleading potential customers about actual user satisfaction.
Under the proposed consent order, which received unanimous Commission approval (5-0), Sitejabber will be prohibited from misrepresenting customer ratings and reviews or assisting others in doing so. The order specifically bars the company from presenting point-of-sale feedback as post-purchase reviews and requires compliance with future actions, with potential civil penalties of up to $51,744 per violation.
In this fast-paced, ever-changing world, it can be challenging to stay updated with the latest legal news in the AI and tech sectors. I hope you found this digest helpful and were able to free up some time for the real joys of life.
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Anita
Great update on the latest tech regulation and digital rights developments! It's interesting to see how different countries are approaching social media age verification, with Ireland mandating age 16 and other countries considering similar measures.