Tag Archives: FTC

The FTC Is Probing Reddit’s AI Licensing Deals

Reddit,

The Federal Trade Commission is looking into Reddit’s AI licensing deals, the company disclosed in paperwork filed with the Securities and Exchange Commission. The company, which is in the midst of its Initial Public Offering, said that the regulator notified Reddit officials that it “intended to request information and documents” about the company’s AI deals, Engadget reported.

According to Engadget, it’s not clear why the FTC is probing Reddit’s relatively new licensing business, but it seems to be in the early stages of its inquiry. “On March 14, 2024, we received a letter from the FTC advising us that the FTC’s staff is conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models,” Reddit wrote in a filing. “Given the novel nature of these technologies and commercial arrangements, we are not surprised that the FTC has expressed interest in this area. We do not believe that we have engaged in any unfair or deceptive trade practice.”

CNBC reported that Reddit said on Friday that the Federal Trade Commission sent a letter to the company about its data-licensing business related to the training of artificial intelligence systems.

According to CNBC, the 19-year-old company has filed to sell shares in it’s IPO at $31 to $34 each of an offering that would value the business at close to $6.5 billion. Reddit is trying to hit the public market during a historically slow period for tech IPOs. There hasn’t been a notable venture-backed tech debut since Instacart and Klaviyo in September. Before that, the market had been largely shuttered since late 2021.

Reddit’s revenue rose 20% last year to $804 million. About 98% of its sales came from advertising. The remaining 2% includes data licensing.

The Hill reported the Federal Trade Commission (FTC) is probing Reddit’s plan to let artificial intelligence (AI) firms to utilize user-generated content to train their software, according to the social media company’s Securities and Exchange Commission (SEC) filing Friday.

The inquiry comes just days before Reddit is slated to complete its initial public offering, after filing for it last month.

According to The Hill, Reddit announced in February that it would allow Google to train its AI models. The deal was announced in February, is worth $60 billion and would let Google use its data application programming interface (API).

Axios reported Reddit isn’t the only company receiving these so-called “hold letters,” according to a former FTC official who spoke with Axios on background.

According to Axios, this suggests that the commission is trying to get a handle on a rapidly changing industry and how that could affect both competition and consumer data privacy. It does not mean a formal investigation will be launched into Reddit or any other company.

In my opinion, it sounds like the FTC is very interested in what Reddit wants to do with the sale, licensing, or sharing of user-generated content to train AI models. I’m not sure that’s something the FTC will allow.

Twitter Security Staff Kept Firm In Compliance By Disobeying Musk

Twitter, ,

Twitter employees prevented Elon Musk from violating the company’s privacy settlement with the US government, according to the Federal Trade Commission Chair Lina Khan, ArsTechnica reported.

After Musk bought Twitter in late 2022, he gave Bari Weiss and other journalists access to company documents in the so-called “Twitter Files” incident. The access given to outside individuals raised concerns that Twitter (which is currently named X) violated a 2022 settlement with the FTC, which has requirements designed to prevent repeats of previous security failures.

However, based on a concern that such an arrangement would risk exposing nonpublic user information in potential violation of the FTC’s order, longtime information security employees at Twitter intervened and implemented safeguards to mitigate the risks. Ultimately, the third-party individuals did not receive direct access to Twitter’s systems, but instead worked with other company employees who accessed the systems on the individual’s behalf.”

Here are some key parts of the letter the FTC sent to Chairman Jim Jordan:

“I am writing in further response to your April 12, 2023, letter requesting documents and information related to Twitter, in an additional effort to be responsive to your request. This letter addresses your questions regarding the Federal Trade Commission’s investigation of potential third-party access to the information of Twitter users. It also addresses your inquiry regarding the FTC’s review of Twitter’s numerous employee terminations and resignations…

…In early December 2022, media reports indicated Twitter had granted certain third-party individuals broad access to the company’s systems, communications, and other information. For example, one individual tweeted on December 8, 2022, “Our team was given extensive, unfiltered access to Twitter’s internal communications and systems.” Around the same time, another individual tweeted that “the authors have broad and expanding access to Twitter’s files.” Moreover, that same individual was reportedly given access to Twitter’s employee systems, to its Slack channel(s), and given a company laptop…

…You also queried why the FTC was looking into personnel decisions made at Twitter. According to X Corporation (Twitter), in the fall of 2022, the company undertook a rapid series of terminations, layoffs, or other reductions in its workforce. Numerous employees resigned during this time. These workforce reductions significantly impacted the Twitter teams charged with protecting user data. Key data privacy and security executives were gone, including the Chief Privacy Officer, the Chief Information Officer, and the Chief Compliance Officer. Simply put, there was no one left at the company responsible for interpreting and modifying data policies and practices to ensure Twitter was complying with the FTC’s Order to safeguard Americans’ personal data…”

Engadget reported that The Federal Trade Commission (FTC) concluded Elon Musk ordered Twitter (now X) employees to take actions that would have violated an FTC consent decree regarding consumers’ data and privacy and security.

The FTC says it will continue to monitor X’s adherence to the order. “The order remains in place and the FTC continues to deploy the order’s tools to protect Twitter users’s data and ensures the company remains in compliance.”

In my opinion, it was an incredibly smart move for the Twitter employees to limit access for the journalists that Elon Musk selected for the “Twitter Files”. Imagine how bad Twitter would have become if those brave employees hadn’t stepped in!

Microsoft’s Xbox Plans Revealed In Emails Tied To FTC

Microsoft, ,

A huge collection of purported Xbox files related to the Federal Trade Commission’s case against Microsoft have been published online, spilling some of the company’s plans for the gaming console into public view, NBC News reported.

The files were uploaded Friday to a website hosted by the U.S. District Court for the Northern District of California, where the FTC is suing to block Microsoft’s acquisition of the video game company Activision Blizzard.

According to NBC News, the files include more than 100 documents, many of them partially redacted, related to Microsoft’s Xbox plans.

Douglas Farrar, director of the FTC’s office of public affairs, told NBC News that “Microsoft was responsible for the error in uploading these documents to the court.”

The files include emails from corporate executives like Microsoft Gaming CEO Phil Spencer and timetables for gaming releases.

Windows Central  reported that the FTC v. Microsoft case has the news cycle on fire right now with all the leaked plans coming out from both Microsoft and Bethesda, but a new diskless console and a Fallout 3 Remaster are just a few of the spicy leaks we’ve had this morning.

Documents have been published by The Verge that details Microsoft’s plans well into 2028 for a full amalgamation of cloud gaming and physical consoles to create a perfect hybrid device and “cloud hybrid games.”

According to Windows Central, the idea, pitched by Microsoft, is to create a platform that seamlessly combines the power of the cloud and device to enable gaming anywhere. This may already be in the works at Xbox HQ, and the presentation shows it planned to partner with AMD for the required chips by early 2023 to secure the Navi 5 graphics technology.

Other considerations were made like using Zen 6 CPU cores and Arm. Microsoft also anticipated using the power of AI to improve resolution, reduce latency and smooth frame rates.

The documents show a possible timeline for the technology that would have started hardware design in 2024, sent out the first dev kits in 2027, and created the first hybrid cloud games from 2024 to 2026.

Engadget reported that a massive leak from the FTC v. Microsoft court battle showed Microsoft’s roadmap for a mid-generation Xbox Series X console, but that wasn’t the only news.

The same document also revealed Microsoft’s tentative plans for the next-generation X-box – what it calls a “hybrid game platform.” The system would combine local hardware and cloud computing to create an “immersive game & app platform” arriving around 2028, according to a leaked May 2022 presentation hidden inside another PDF.

In my opinion, someone at Microsoft made a big mistake when they sent the documents to the FTC. Was this an accident? Or was it done intentionally? Either way, this is likely going to be problematic for Microsoft now that the FTC appears interested in those documents.

FTC Rules TurboTax Maker Intuit Deceived Users With Offers of “Free” Tax Products

Information, ,

A Federal Trade Commission judge on Friday issued an initial ruling against Intuit, the maker of the popular tax filing software against Intuit, the maker of the popular tax filing software TurboTax, saying the company deceived consumers with ads for so-called “free” tax products. CNBC reported.

According to CNBC, Intuit violated Section 5 of the FTC Act by promoting “free” tax products and services for which many were ineligible, according to Chief Administrative Law Judge D. Michael Chappell. The full commission will review the judgement before delivering a final decision.

Intuit will appeal the ruling, said Rick Heineman, a spokesperson for the company.

The Verge reported the FTC’s ruling includes pages of commercials and online ads that advertised its “Free Edition” software. While the name implies that the service is, well, free, people wound up having to pay to use it – sparking a lawsuit from the FTC and a $141 million payout to affected users.

Meanwhile, Intuit’s actually no-cost Free File version, which it launched in partnership with with the IRS, remained exceedingly difficult to find. In 2021, Intuit exited the program after the IRS stopped letting companies hide their free filing services from search engines.

The FTC posted a release titled: “Administrative Law Judge Issues Initial Decision in FTC’s Case Against Intuit Inc”. From the release (which was issued on September 8):

In an initial decision announced today, the Federal Trade Commission’s Chief Administrative Law Judge (ALJ), D. Michael Chappell, ruled that Intuit Inc. (Intuit), the maker of the popular TurboTax tax filing software, “engaged in deceptive advertising in violation of Section 5 of the FTC Act” and deceived customers were ineligible.

In ruling in favor of complaint counsel – FTC staff in the Bureau of Consumer Protection – the ALJ also found that there is a “cognizant danger of a recurring violation” by Intuit, and issued an order requiring the company to cease-and-desist from engaging in the deceptive practices alleged in the complaint.

Under the terms of ALJ’s which can be appealed to the full Commission, Intuit is “prohibited from engaging in any deceptive practices in the future.” It is also barred from representing that any good or service is free, unless: 1) it is free for all consumers; 2) it clearly and conspicuously discloses any terms that would limit the offer and might be misunderstood by consumers; and 3) the good or service is not free “to a majority of U.S. taxpayers,” this also must be disclosed in a clear and conspicuous manner…

ArsTechnica reported that the FTC commissioners will likely rule against Intuit, which issued a statement indicating that it will take the matter to federal court. The order would be in effect for 20 years if it survives appeal.

According to ArsTechnica, the response from Intuit noted that the administrative law judge is “an employee of the FTC” and “ruled in favor of the FTC in the agency’s own lawsuit.” The FTC filed an administrative complaint against Intuit in March of 2022.

“Intuit will appeal this groundless and seemingly predetermined decision by the FTC to rule in its own favor and is confident that when the matter ultimately returns to a neutral body Intuit will prevail, as it has previously in this matter,” the company said.

In my opinion, I think Intuit probably could have avoided this problem if it had been honest in their commercials. The company should not have made seem as though consumers would be able to easily access the free version of their product.

FTC Loses Appeals Court Bid To Temporarily Block Microsoft-Activision Deal

Microsoft, , ,

In a victory for Microsoft, the U.S. Appeals Court for the 9th Circuit late on Friday denied the Federal Trade Commission’s motion to temporarily stop Microsoft from closing its $68.7 billion acquisition of video game publisher Activision Blizzard, CNBC reported.

Microsoft is still working to resolve concerns about the transaction from the United Kingdom’s Competition and Markets Authority. The two companies have been looking to close the deal by July 18.

“We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This bring us another step closer to the finish line in this marathon of global regulatory reviews,” Brad Smith, Microsoft’s president and vice chair, said in a statement.

A federal judge in San Francisco, after five days of court hearing, ruled against the FTC on Tuesday, and the federal filed its appeal on Wednesday…

…In an emergency motion filed with the 9th Circuit on Thursday, the FTC said the district judge “denied preliminary relief, applying the wrong legal standard: the court effectively required the FTC to prove its full case on the merits with the court as the arbiter of the merger’s legality.” The agency requested a temporary injunction while the court considered an appeal of the district court’s conclusion, CNBC reported.

The Wall Street Journal reported that an appeals court on Friday denied a last-ditch bid by the Federal Trade Commission to halt Microsoft’s planned $75 billion acquisition of videogame publisher Activision Blizzard.

In a brief order, the Ninth Circuit Court of Appeals rejected the FTC’s request for a court order that would have blocked Microsoft and Activision from merging while the agency appeals a July 11 decision by a trial court judge.

Friday’s order helps clear the way for Microsoft and Activision to close the merger, and puts pressure on the FTC to drop its appeal of the July 11 ruling.

In the July decision, U.S. District Judge Jacqueline Scott Corley said the agency hadn’t shown that Microsoft’s ownership of Activision titles, including the hit shooter-game series “Call of Duty,” would hurt competition in the console or cloud-gaming markets.

According to The Wall Street Journal, the FTC declined to comment.

The Verge also reported the FTC appealed the decision by Judge Jacqueline Scott Corley, and now the Ninth Circuit Court of Appeals has denied its request for emergency relief to prevent Microsoft from closing the deal until the result of the FTC’s appeal is complete.

Microsoft welcomed the denial late on Friday. “We appreciate the Ninth Circuit’s swift response denying the FTC’s motion to further delay the deal. This brings us another step closer to the finish line in this marathon of global regulatory reviews,” says Brad Smith, Vice Chair and President of Microsoft, in a statement to The Verge.

According to The Verge, this means Microsoft is now free to close its Activision Blizzard deal after a temporary restraining order, part of Judge Corley’s order, expired at 11:59PM PT, Friday July 14. Microsoft has until July 18th to close its deal; otherwise, it may need to renegotiate terms with Activision Blizzard, pay $3 billion in breakup fees if Activision wants to walk away, or simply let the deal deadline naturally extend if both parties are happy to.

The Verge also reported that the UK’s Competitions and Market’s Authority blocked Microsoft’s deal earlier this year, citing competition fears in the emerging cloud gaming market. Both CMA and Microsoft have agreed to pause their legal battles to figure out how the transaction might be modified in order to address the CMA’s cloud gaming concerns.

In my opinion, I think Judge Corley, and the Ninth Circuit Court, made the right decision. Both appear to have determined that the FTC’s case was not enough for a judgement to be made in their favor, and have instead decided in favor of Microsoft.

FTC Says It Will Appeal To Block Microsoft-Activision Deal

Microsoft,

The Federal Trade Commission is not giving up on its bid to prevent Microsoft from closing its $68.7 billion acquisition of game publisher Activision Blizzard, CNBC reported. On Wednesday, the agency filed to appeal a federal judge’s decision to deny a request for a preliminary injunction that would have prevented the deal from closing.

The decision comes one day after Judge Jacqueline Scott Corley, at the U.S. District Court for the Northern District of California, ruled in favor of the two companies.

According to CNBC, on Wednesday Activision Blizzard CEO Bobby Kotick told CNBC’s Julia Boorstin, “I’d be surprised if they would waste taxpayer resources on something like that,” referring to an FTC appeal. Kotick said he didn’t think the appellate court would grant a stay.

The FTC declined to comment on its legal response to the judge’s decision.

“The District Court’s ruling makes crystal clear that this acquisition is good for both competition and consumers,” Brad Smith, Microsoft’s president and vice chair, said in a statement. “We’re disappointed that the FTC is continuing to pursue what has become a demonstrably weak case, and we will oppose further efforts to delay the ability to move forward.”

CNBC also reported that the software maker is also trying to secure approval for the deal in the United Kingdom. Microsoft executive Brad Smith said the company and Activision Blizzard have agreed with the country’s Competition and Markets Authority that a stay of litigation would be beneficial.

The Hollywood Reporter wrote that a temporary restraining order, which was granted before a weeklong mini trial to decide whether the FTC should be granted a preliminary injunction, was issued in June to keep Microsoft from closing the transaction. It’s set to expire on Friday at midnight US West Coast time unless the US 9th Circuit Court of Appeals grants an emergency stay.

According to The Hollywood Reporter, the merger, if it closes, will make Microsoft one of the largest video game developers in the world. It will absorb over 15,000 employees from Activision, though there will likely be layoffs. The company has promised to increase access to Activision titles, including a 10-year deal to bring Call of Duty to the Nintendo Switch.

It also agreed to license games to any competing cloud service providers to secure approval from European regulators. Notably, Microsoft made one of ZeniMax’s regulators most popular titles, Starfield, exclusive to Xbox and Windows after assuring competition regulators that it wouldn’t limit games on rival consoles to get a deal to acquire the video game publisher greenlit.

The Verge reported that The Federal Trade Commission says it is appealing a recent US federal court order that cleared the way for Microsoft to purchase Activision Blizzard. The FTC filed a notice that it’s appealing Judge Jacqueline Scott Corley’s decision, but we won’t know the regulator’s arguments until the full appeal is submitted to the Ninth Circuit Court of Appeals.

According to The Verge, if the preliminary block had been granted, it would have temporarily blocked Microsoft from closing its Activision Blizzard deal until the result of the FTC’s own administrative case against the company. That separate legal challenge is due to commence on August 2nd.

In my opinion, it is good that Judge Corley supported Microsoft instead of the FTC, who appears to have presented a rather flimsy case. Despite that, the FTC now wants to prolong this situation by trying to convince the 9th Circuit Court of Appeals to reverse the decision. That’s disappointing.

FTC Says Genetic Testing Company Failed To Protect User Privacy

Information, ,

The U.S. Federal Trade Commission posted a press release titled: “FTC Says Genetic Testing Company 1Health Failed to Protect Privacy and Security of DNA Data and Unfairly Changed Its Privacy Policy”. From the press release:

The Federal Trade Commission charged that the genetic testing firm 1Health.io left sensitive genetic and health data unsecured, deceived consumers about their ability to get their data deleted, and changed its privacy policy retroactively without without already notifying and obtaining consent from consumers whose data the company had the company had already collected.

As part of a proposed settlement with the FTC, 1Health will be required to strengthen protections for genetic information and instruct third-party contract laboratories to destroy all consumer DNA samples that have been retained for more than 180 days.

“Companies that try to change the rules by re-writing their privacy policy are on notice,” Said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC Act prohibits companies from unilaterally applying material privacy policy changes to previously collected data.”

California-based 1Health.io, Inc, also known as Vitagene, Inc. before changing its name in October 2020, has sold DNA health test kits and used DNA test results, along with information consumers supplied, to provide consumer with reports about their health, wellness, and ancestry as part of product packages that cost between $29 and $259. The health reports include personal information about a consumer’s health and genetics, such as their risk for developing health problems based on their genotype data…

…As part of the proposed order, 1Health.io, which Vitagene is now known as, must pay $75,000, which the FTC intends to use for consumer refunds. In addition to the DNA deletion requirement, under the proposed order the company:

  • Will be prohibited from sharing health data with third parties – including information provided by consumers before and after its 2020 privacy policy change – without obtaining consumers’ affirmative express consent;
  • Must ensure any company that purchases all or parts of 1Health’s business agrees by contract to adhere to provisions of the order;
  • Must notify the FTC about incidents of unauthorized disclosure of consumers’ personal health data; and
  • Must implement a comprehensive information security program addressing the security failures outlined in the complaint.

The Commission voted 3-0 to issue the proposed administrative complaint and to accept the consent agreement with the company…

The Federal Trade Commission wrote: …Vitagene, a San Francisco based DNA testing company, promised consumers that it exceeded industry-standard security practices for maintaining the privacy of people’s sensitive health and genetic information. But the FTC says the company didn’t keep that promise. In fact, the FTC says Vitagene use a well-known cloud service provider to store people’s confidential information but didn’t use built-in cloud security measures…

In my opinion, it sounds like Vitagene / 1Health.io lied to its customers about how secure their DNA information was. It seems fair that the FTC decided to crackdown on the company and make it pay a lot of money for its terrible choices.