Why Washington will become the epicenter of Big Tech in 2023

But let’s be honest: Who the heck knows what will happen in the next 12 months? We’re entering a period of great economic uncertainty, with economists and money managers sharply divided over the odds of a recession. The geopolitical landscape remains rocky at best, as Russia slogs through a nearly yearlong invasion and China grapples with a suddenly emboldened Western world. And for all of the excitement about the metaverse, A.I., and Web3, those technologies still feel years away from becoming an indispensable part of consumers’ everyday life. 

Plus, I thought this time last year that low earth orbit satellites and social media mogul Donald Trump would be major story lines of 2022. Whoops.

With all that said, I’ll send you into the New Year with one not-all-that-bold prophecy: Washington will be the epicenter of Big Tech in 2023.

While the Federal City routinely occupies a sizable role in the tech ecosystem, the upcoming year is set up for a particularly frenetic period, with all three branches of government flexing their authority over the industry.

President Joe Biden’s administration stands poised to build on its flurry of tech-centric activity to close the year, including aggressive semiconductor export controls targeting China and the move to stop Microsoft’s $68.7 billion acquisition of Activision Blizzard.

While it remains to be seen whether the White House’s campaign of economic nationalism extends much beyond chip restrictions and domestic manufacturing subsidies, China’s flaccid response (so far…) to the president’s hostile moves should only embolden Biden. An early sign of his tolerance for combativeness could arrive early in the year, when data privacy negotiations between the federal bureaucracy and TikTok’s Chinese parent, ByteDance, are expected to crescendo.

A few blocks down Pennsylvania Avenue, the Federal Trade Commission and its leader, Big Tech foil Lina Khan, are officially rocking and rolling after securing a Democratic majority midway through 2022. The agency signaled this year that the era of unfettered mergers and acquisitions is over, suing to halt Meta’s modest purchase of a virtual reality developer and Microsoft’s blockbuster deal for the video game outfit.

The courts ultimately could stymie Khan’s crusade, but her commitment to “bringing the hard cases” doesn’t figure to waver in 2023 (and don’t forget the agency’s ongoing effort to break up Meta, which could go to trial as early as late next year). Even if the judiciary deals setbacks on the antitrust front, the FTC could still flex its muscles on the data privacy enforcement and online safety fronts.

Up on Capitol Hill, it’s been a while since the tech industry has had so few friends to lean on.

Democrats remain a thorn in Silicon Valley’s side, pushing legislation designed to foster more competition and generally reduce the power of Big Tech titans. What’s new in 2023, however, is the amount of animus emanating from the GOP, which is making hay on claims (some fair, some overblown) that the industry’s left-leaning workforce is pushing a liberal agenda through platform censorship. 

Tech executives will certainly find themselves deep in the political muck next year. Look no further than this week’s letter to five tech giants from the House Judiciary Committee’s projected incoming leader, Republican Jim Jordan, who demanded documents detailing their “collusion with the Biden administration.” 

The question, however, is whether Congress defaults to its tried-and-true passion for political mudslinging or actually passes legislation that hurts Big Tech’s bottom line. Major tech companies staved off legislative intrusion in 2022 (Apple and Google owe Chuck Schumer a nice holiday gift basket), but they might not be so lucky next year.

Finally, across the street from the Capitol, the Supreme Court will play an unusually large part in tech’s story of 2023.

The nine justices are scheduled sometime next year to decide on a case testing the limits of Section 230, a foundational law of the modern-day internet that shields tech companies from liability when users post harmful content. The justices could waive the challenge or issue a narrow ruling that causes relatively little consternation, but a sweeping judgment against the industry could fundamentally alter the digital ecosystem. 

Things could get even spicier in the Marble Palace if the justices decide to mediate a dispute between two federal appellate courts over the legality of two state laws that limit tech platforms’ ability to moderate content. While the justices haven’t moved yet on the matter, Justice Samuel Alito wrote in a procedural ruling this year that the issue “will plainly merit this court’s review.”

Piece it all together, and you’ve got a doozy of a year ahead in the District.

Want to send thoughts or suggestions to Data Sheet? Drop me a line here.

Jacob Carpenter

NEWSWORTHY

In the clear—for now. Some of China’s largest tech companies are no longer at imminent risk of delisting from New York stock exchanges after U.S. officials gained access to their audits through a long-negotiated deal with the republic’s government, Bloomberg reported Thursday. The U.S. Public Company Accounting Oversight Board confirmed about 200 firms can keep their listings for now, including Alibaba, JD.com, and Pinduoduo. Officials in Washington and Beijing spent more than a decade sparring over U.S. access to financial audits of Chinese companies before finally ending the standoff this year.

Taking some time off. Mazars Group, one of the crypto industry’s go-to accounting firms, is suspending ties with its digital assets clients amid criticism over a lack of transparency in the sector, CNBC reported Friday. The announcement follows the release of Mazars-produced reports documenting “proof of reserves” at several crypto exchanges, which some industry skeptics said were not detailed enough to evaluate the companies’ financial health. Mazars officials said the decision to suspend crypto activities stemmed from “concerns regarding the way these reports are understood by the public.”

Not gonna cool his jets. Twitter suspended the accounts of several tech journalists and social media rival Mastodon on Thursday, further stoking frustrations over Elon Musk’s approach to content moderation on the platform. The suspensions stemmed from posts by Mastodon and the journalists related to @ElonJet, an account recently banned by Twitter for sharing public information that shows the movements of Musk’s private plane. Musk said the posts violated Twitter’s new doxing policy and endangered his family, while critics of the suspensions argued the decisions smacked of hypocrisy given Musk’s professed commitment to free speech.

Cruising for a bruising? Federal transportation regulators are investigating the extent of crash and safety issues tied to autonomous robotaxis produced by General Motors’ Cruise unit, the Associated Press reported Friday. The probe follows three rear-end collisions reportedly caused by Cruise vehicles unexpectedly braking. The National Highway Traffic Safety Administration will examine the safety record of roughly 250 Cruise cars on the road, giving the agency information needed to make enforcement decisions, including a possible recall.

FOOD FOR THOUGHT

Some interesting discoveries. The Federal Trade Commission’s case against Meta’s acquisition of virtual reality app developer Within might be tenuous, but it’s giving the public new insights on the tech giant’s VR strategy. The Washington Post reported Friday that testimony presented at an ongoing trial over the legality of Meta’s purchase has produced compelling evidence about the Facebook and Instagram parent’s ambitions for the VR space. For example, Meta’s interest in Within, the developer of a moderately popular VR fitness app called Supernatural, stemmed in part from executives’ belief that more women and older people would buy Meta Quest headsets if they featured workout programs. In late 2019, only about 7% of Meta Quest users were female.

From the article:

Meta also saw VR fitness as a strategy to expand its revenue model. Currently, many VR game-makers make money when users first purchase the game and sometimes through ad hoc in-app purchases. 

Meta executives thought that fitness apps could adopt a subscription model, which could deter game makers from overcharging their customers while also offering the social media giant a steady income stream, according to testimony. Meta usually takes a 30 percent cut from app purchases made on its Quest headsets.

IN CASE YOU MISSED IT

The college student Elon Musk kicked off Twitter for tracking his jet says giving up now would mean ‘letting the big guy win,’ by Steve Mollman

TikTok and other Tencent apps banned on Georgia and New Hampshire state devices, by Jeff Amy and the Associated Press

Is ChatGPT the end of trust? Will the college essay survive? by Jeremy Kahn

Shaq appears to not know what being a corporate spokesperson means as he distances himself from crypto, by Alena Botros

Jeff Bezos will star in a cartoon series for kids about his space company Blue Origin, by Chris Morris

Friends don’t slap tariffs on friends. Here are the strategies that will ensure the U.S. wins the race for chips and tech supremacy, according to the Consumer Technology Association, by Gary Shapiro

eBay CEO: ‘I supported the American Rescue Plan—but a little-known provision will hurt millions of Americans who buy and sell used goods online,’ by Jamie Iannone

BEFORE YOU GO

Cheers before the New Year. As I mentioned at the top, today is the final Data Sheet of 2022 (we’ll return on Jan. 4). With the year winding to a close, I wanted to take a moment to thank all of you who make Data Sheet part of your daily routine. It’s never lost on me that you could spend your time anywhere on the internet, and so many of you choose to take a few minutes each day to hang out with us. A special shoutout, too, to everyone at Fortune who made Data Sheet go this year, including Alexei Oreskovic, Verne Kopytoff, Ashley Sylla, and Jack Long (I swear they didn’t tell me to write this). As we look ahead to 2023, we’re interested to hear from you about what we’re doing right, what we’re royally screwing up, and the issues you think deserve more or less attention. As always, feel free to drop me a line with all your thoughts, suggestions, and constructive/destructive criticism. Happy holidays to you all, and we’ll see you again next year.