The British are coming for Silicon Valley

Over the past three weeks, the UK government has taken three big steps toward proving it’s serious about regulating international companies based in the U.S., delivering a clear warning shot to domestic tech giants.

While these developments weren’t wholly unexpected—British lawmakers have been hollering about an antitrust crackdown since populist-primed voters opted in 2016 to leave the European Union—they signal the potential dawn of a new reality in Silicon Valley.

The shot heard ‘round the tech world came last month, when the UK’s top antitrust regulator, the Competition and Markets Authority, ordered Facebook to unwind its $400 million acquisition of GIF library company Giphy. CMA regulators determined that the deal could give Facebook undue power over limiting the GIF market and force companies into handing over user data in exchange for access to GIFs.

The mandate, which Facebook parent Meta is fighting, marked the first time that the UK has ordered two American tech companies to break up a nine-figure-plus deal.

Two more blows arrived this week. First, the CMA, citing concerns about a violation of British competition rules, announced a preliminary investigation into Microsoft’s planned $16 billion purchase of Massachusetts-based Nuance, an artificial intelligence and speech recognition company that helped develop Apple’s Siri technology. The CMA launched a similar inquiry in the lead-up to its Facebook-Giphy order, and most deals subjected to a full CMA investigation have been killed in the past few years.

Then, on Tuesday, the CMA issued a preliminary report bashing Apple and Google for holding a “vise-like grip” on the smartphone sector via their software and app stores. While the CMA isn’t ordering any immediate changes by Apple and Google, “previous reports have laid the foundation for more specific action and legislative proposals by regulators in the UK and Europe,” The Wall Street Journal reported.

The UK certainly could back off Microsoft, Apple, and Google in the coming months and years, particularly if the political winds shift. But momentum is gathering in Europe and the U.S. for increased antitrust enforcement, with London leading the way.

Naturally, the British invasion of American Big Tech has prompted backlash from free-market evangelists. In response to the Facebook-Giphy mandate, the U.S.’ Competitive Enterprise Institute and the UK’s Adam Smith Institute wrote that the order “amounts to an assertion by the CMA that it intends to act as the world’s policeman of mergers and acquisition activity—a role that is clearly outside the scope of the CMA.”

But legal experts contend that the CMA is, in fact, within its rights to police mergers that impact British customers—even if they make up a small market share.

“In the UK, we have an unusual regime that gives the CMA quite a broad set of powers to intervene in a lot of transactions, and it has been using those powers, following Brexit in particular, to respond to smaller deals,” Richard Pepper, a partner specializing in competition law for the UK law firm Macfarlanes, told Wired earlier this month.

Domestic policymakers haven’t raised much of a fuss about CMA overreach into America’s tech industry yet. If current trends continue, however, the possibility of a Silicon Valley Tea Party will only grow.

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Jacob Carpenter

NEWSWORTHY

Feds sounding the Log4j alarm. The Biden administration’s top cybersecurity official issued a stark warning Monday to top business and government leaders, calling a new software vulnerability, known as Log4j, “one of the most serious I’ve seen in my entire career, if not the most serious,” CyberScoop reported. Jen Easterly, the director of the U.S. Cybersecurity and Infrastructure Security Agency, said in a conference call that she expects the vulnerability will be “widely exploited by sophisticated actors” capable of taking control of virtual systems. If successful, those hackers could steal customers’ personal and financial data, hold networks hostage for ransom, and destabilize cryptocurrency markets. Hundreds of millions of devices and countless organizations are at risk from the flaw in an open-source, Java-based tool that lets developers track activity in a web application.

Critics can’t stop the Insta train. Instagramreached a milestone this fall by topping 2 billion monthly active users as the social media platform continued to grow despite recent scrutiny of its impact on children and use of algorithms, CNBC reported. While Instagram hasn’t promoted its user totals, in part due to growing criticism over its massive market share, company insiders told CNBC that they reached the 2 billion total around the time Instagram parent Facebook changed its name to Meta in October. Instagram hit the 1 billion monthly user mark in eight years, then added another billion users within three years.

Amazon primed for Instacart battle. Amazon is expected to build out its U.S. grocery delivery service in 2022, adding another player looking to compete with industry leader Instacart, The Information reported Monday. The e-commerce giant will look to expand on the success of its grocery delivery partnerships this year in the U.K., potentially adding yet-to-be-named grocery chains that would allow ordering through the Amazon platform. However, Amazon could struggle to lure grocers given its ownership of competitor Whole Foods and concerns about its use of customers’ order data. Amazon would join UberEats, DoorDash, Getir, and several other companies looking to take a bite out of Instacart’s market share, which totaled nearly 85% in grocery delivery in 2020.

A very meta deal. Who says you can’t put a price on your good name? South Dakota-based banker Meta Financial Group is selling its trademark assets to Facebook parent Meta for $60 million, the two companies disclosed Monday, according to Reuters. The deal comes two months after Facebook announced that it would change its name to Meta, a reflection of CEO Mark Zuckerberg’s big bet on the future of virtual reality in a so-called metaverse. Publicly traded Meta Financial Group has a market cap of about $1.7 billion.

FOOD FOR THOUGHT

A Chinese quid pro quo? Pro-China Western influencers on YouTube and social media have received money and benefits from China’s ruling Communist party, part of its campaign to quell criticism of human rights violations, religious oppression, and other abuses, The New York Times reported Monday. The influencers, who hail from the U.S., Canada, and Israel, among other countries, have sought to cast doubt on the imprisonment of Uighur Muslims in China’s Xinjiang region and suggested that the novel coronavirus pandemic started in the U.S. While critics argue the influencers are being used as propaganda tools, the Internet stars often claim they serve as tourism promoters.

From the article:

The videos have a casual, homespun feel. But on the other side of the camera often stands a large apparatus of government organizers, state-controlled news media and other official amplifiers—all part of the Chinese government’s widening attempts to spread pro-Beijing messages around the planet.

State-run news outlets and local governments have organized and funded pro-Beijing influencers’ travel, according to government documents and the creators themselves. They have paid or offered to pay the creators. They have generated lucrative traffic for the influencers by sharing videos with millions of followers on YouTube, Twitter and Facebook.

With official media outlets’ backing, the creators can visit and film in parts of China where the authorities have obstructed foreign journalists’ reporting.

IN CASE YOU MISSED IT

Dogecoin soars as other cryptos sink—and it’s all thanks to Elon Musk, by Chris Morris

An ex-engineer says she was harassed and groped at Elon Musk’s SpaceX ‘bros’ club’, by Emma Hinchliffe

Elon Musk has now sold almost $13 billion in Tesla shares—and he’s far from done, by Cecile Vannucci and Bloomberg

Nike doubles down on the metaverse by buying a virtual sneaker company, by Kim Bhasin and Bloomberg

Bitcoin slide brings its loss since record high to more than 30%, by Vildana Hajric and Bloomberg

The metaverse, explained: Everything you need to know about the (rapidly expanding) new world, by Lee Clifford and Marco Quiroz-Gutierrez

BEFORE YOU GO

Consider it your digital will. Just in time for the happy holidays, Apple is rolling out a new feature that is all about death. Apple’s iOS 15.2 update, available Monday, contains an option called Digital Legacy, which allows users to pick five people who can access their account upon their untimely demise. Customers have called for easier access to their deceased family members’ phones in recent years, angling to more easily retrieve passwords, emails, photos, and other data. I can’t wait for stories of squabbling families battling over who make the cut of five.