The customary rapport between Republican presidents and big business is nowhere in evidence now.
Image credit: Jim Watson | AFP | Getty Images
Attorneys at Sheppard, Mullin, Richter & Hampton LLP
A man, his brother, and some friends take up a cutting-edge company in his home. Within a couple of years, the business grows exponentially and dominates the American economy. Within some more years, the federal government takes notice and begins to modify the company also to limit its power.
No, we’re not discussing a 21st century technology company; we’re describing Standard Oil over a century ago.
The more things change, the more they stay the same. As yesterday’s tiny tech startups grow into today’s economic behemoths – Amazon, Google, Apple, and others – they are facing greater government scrutiny. Whether over encryption, usage of users’ stored data, or notice to users of government data requests, the examples are multiplying daily, and in a few sense, they echo the typical Oils of days gone by.
Furthermore with their skyrocketing growth, these businesses have begun to expand into more conventional industries – Uber’s entry in to the transportation industry and Airbnb’s in to the hotel industry are but two examples. The general public is welcoming this expansion. A recently available poll showed that 1/3 of global banking and insurance customers would consider switching their accounts to Silicon Valley giants if indeed they offered such services. As this “tech creep” accelerates, government’s interest keeps growing.
Large tech companies have known that is coming for quite a while, and have prepared. This past year alone, tech firms spent near $50 million on lobbyists. Generally a liberal industry, tech companies enjoyed an amicable relationship with the NATIONAL GOVERNMENT, but most are wondering what things to expect given that the 45th President has taken office.
“A Different Sort of Republican”
On the campaign trail, President Trump became referred to as “a different sort of Republican,” staking out a far more protectionist stand on trade, and a far more interventionist stance on antitrust policy compared to the typical Republican candidate. Sometimes, however, he articulated a far more traditionally Republican, small government, laissez-faire method of regulation, promising to “no more regulate our companies and our jobs out of existence”
Related: 97 Tech Companies Including Apple and Google File Brief Against Trump Travel Ban
A stormy relationship with tech.
The partnership between President Trump and the tech sector has been rocky. Technology companies largely supported Secretary Clinton in 2016 (along with Obama in 2008 and 2012). President Trump fueled this divide by repeatedly siding against the tech industry in the campaign — from supporting the FBI in the encryption debate to opposing among the industry’s most crucial proposed mergers. Apple, subsequently, declined to greatly help fund the 2016 Republican National Convention, though it had done so previously.
President Trump attemptedto mend fences in a December ending up in tech executives but any détente that created has quickly faded. This week, a lot of tech companies filed papers supporting the task to the President’s executive order limiting immigration. Google’s CEO recently referreding to the President’s actions as “evil things."
Beyond the already-storming immigration debate, listed below are six the areas where tech’s entanglement with government will be noteworthy through the Trump Administration:
Related: Trump Team Says Twitter Too Small to Be Contained in Tech Meeting
Sorry, Apple, the encryption debate isn’t over.
In February 2016, President Trump needed an “Apple boycott” before company decided to help the FBI unencrypt San Bernardino shooter Syed Farook’s iPhone. Ultimately the FBI could break right into the iPhone without Apple’s help (paying an unnamed company over $1 million dollars to take action).
The encryption issue isn’t going away, though. The technology used to break right into Farook’s phone only works on older iPhones. Moreover, encryption is spreading fast available on the market, rendering it a barrier to police on more devices daily. Congress has generally sided with tech. On December 20, 2016, a bipartisan House Committee released a written report criticizing the usage of a “backdoor” to permit police to bypass encryption on devices. THE HOME report figured “[a]ny measure that weakens encryption works against the national interest.” Subsequently, Apple CEO Tim Cook has managed to get clear that he views this matter as crucial to privacy and the tech industry, so he’s not likely to back off.
Police is not more likely to back off, either. The Trump Administration should be expected to spotlight empowering police and intelligence agencies with the resources and legal authority to gain access to encrypted data, whether through offensive hacking or enforced back doors. This process will be supported by Trump’s Attorney General, Jeff Sessions, who’s pro-law enforcement on encryption issues. Moreover, FBI Director James Comey, whom President Trump has invited to stay in office, stated in August that he intends to re-ignite the encryption battle in 2017 and force tech companies to permit police in through back doors, declaring that “there is absolutely no such thing as absolute privacy in the us.” The trifecta of the President, the FBI Director, and a lawyer General on a single page will put the Justice Department in a fighting mood upon this issue.
Related: Some Apple Engineers Threaten to give up if Forced to Break iPhone Encryption
“Closing that internet up.”
On the campaign trail, President Trump spoke of the damage being done to American security through usage of the web by terrorists and their supporters. He decried this trend and publicly pondered “closing that internet up in a few ways,” i.e., getting (or forcing) internet providers to filter malicious or threatening content. The statement drew immediate criticism from the tech community, which includes long opposed such policies. Several tech giants were criticized in the tech community in 2005 after assisting foreign governments with internet filtering efforts. When U.S. government officials have significantly more recently attemptedto engage tech leaders on cooperative internet filtering, they have already been rebuffed.
Restricting terrorist usage of the internet isn’t a novel concept, neither is it a partisan policy. A 2010 Senate report by Senator Lieberman affirmed the President’s authority during war, risk of war, or “circumstances of public peril” to “dominate wire communications in america” and “shut a network down” under Section 606 of the Communications Act of 1934. Foreign democracies including the UK operate government centers specialized in such work. President Trump’s campaign rhetoric on radical Islamic extremism, his emphasis of the problem in his inaugural address, make this effort increasingly likely. Expect the tech community to keep to resist, citing the First Amendment and the need for a free of charge internet.
Related: Appeals Court Backs Landmark Net Neutrality Rules
THE WEB Neutrality battle returns
The advent of a Republican administration, and particularly President Trump’s appointment of FCC Commissioner Ajit Pai to chair the Commission, imply that the web neutrality fight will be reignited. This struggle over whether online sites providers should enable equal usage of all content and applications whatever the source, without favoring or blocking particular products or websites, or alternatively be permitted to differentiate the purchase price for a few (e.g., high volume) users over others, ‘s been around for quite a while. In the NATIONAL GOVERNMENT, the fight was just about settled and only net neutrality, particularly with the FCC’s 2015 rulemaking treating internet providers as public utilities. Incoming Chairman Pai, however, opposed those rules and has promised to “have a weed whacker” to the FCC’s “regulatory underbrush.” The fight is on again.
Related: A SHORT, Unfolding History of Net Neutrality (Infographic)
“Trust-busting” involves tech.
After President Trump promised to fight the biggest merger announced in 2016, two questions have loomed large: Will he? And, if he does, what does which means that for all of those other tech industry? Tech giants, who are in the habit of shopping for up smaller companies, along with trying to tie customers with their platforms, keep a close watch on antitrust policy. In 2013, Google — like Microsoft before it — was threatened with a potentially costly legal battle when the Federal Trade Commission staff said the business “unlawfully maintained its monopoly” over internet searches, although 20-month probe was eventually closed. What action President Trump takes regarding mergers in the tech sector, and the Administration’s method of antitrust enforcement more generally, depends on whom he appoints to the Antitrust Division of the Justice Department and the Federal Trade Commission (FTC). Attorney General Jeff Sessions testified during his confirmation hearing that he’d enforce antitrust law, however the question of course is from what extent?
Two factors support a conclusion a Trump Administration won’t enforce antitrust laws aggressively. First, Trump’s focus in working with the organization world is preserving American jobs, while antitrust policy is more about the buyer compared to the worker (even though some argue that workers reap the benefits of aggressive antitrust enforcement because mergers seek corporate streamlining, resulting in fewer jobs). Therefore President Trump may care less about industry consolidation given that it generally does not cost Americans their livelihoods. Second, antitrust is one field in which a President’s appointees traditionally have significant autonomy, and it seems this President will probably appoint traditional laissez-faire Republicans to DOJ and the FTC. This, however, will not necessarily mean hanging around for companies hoping to merge. As you folks has written elsewhere, in the lack of scrutiny at DOJ or the FTC, the Senate might part of to supply vigorous oversight.
To the extent President Trump still ventures into antitrust, certain industries tend candidates. Furthermore to his general disaffection for Big Tech, the President’s dislike for the mainstream media established fact and has continued past his inauguration. This may bode ill for attempts by tech companies, a lot of which have become more associated with news and media, to obtain, be acquired, or merge.
Related: Tesla Wins U.S. Antitrust Approval to get SolarCity
The need for cybersecurity grows.
That is perhaps the easiest & most obvious prediction. Despite his protestations regarding alleged Russian interference in the election, the President has been steadfast in emphasizing the necessity for stronger cybersecurity, which is not more likely to change. Indeed, the Administration plans release a a significant report on cybersecurity within its first 3 months in office. Moreover, Congress is guaranteed to stay engaged on these issues, having signaled in a bipartisan way that cybersecurity is foremost on its mind. Three different Senate committees are investigating Russian interference in the election, including hacking. Perhaps more very important to tech companies, Senator John McCain announced in January the establishment of a fresh Senate Armed Services Subcommittee on Cybersecurity. It’ll join the home Homeland Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies, which legislates and oversees components of cybersecurity, infrastructure protection, and promoting security technologies. Tech companies are virtually certain to handle testimony in Congress, together with increased regulation and legislation associated with cybersecurity in the coming years.
A location of cybersecurity drawing increasing attention may be the security of Internet of Things (IoT) devices. These connected consumer products (e.g., wireless routers, webcams, baby monitors, web-connected thermostats) continue steadily to proliferate exponentially, while proving to be security risks, becoming robot armies for crippling distributed-denial-of-service (DDoS) attacks. Such attacks have brought many networks with their knees, temporarily taking down or slowing top destinations like Twitter, Amazon, Netflix, and Spotify by leveraging hacked IoT devices. However, as the burden of the attacks falls on innocent third parties, instead of price-conscious consumers or profit-conscious manufacturers, government may be the only entity willing and in a position to address these vulnerabilities. In a single sense, IoT presents a classic case for government regulation, where market participants haven’t any economic incentive to resolve the problem themselves. The case is even stronger where IoT vulnerabilities affect the critical infrastructure (e.g., Israeli researchers recently demonstrated that they could dominate all of the smart lightbulbs in a city how big is Paris by attacking only 1). Indeed, President Trump has indicated deregulation efforts won’t connect with areas compelled by public safety and has ordered an assessment of most U.S. cyber defenses and vulnerabilities, including critical infrastructure. But if that one is usually to be adequately addressed, it should take international cooperation. The web knows no national boundaries and neither does the web of Things. Mere regulation in the U.S. wouldn’t normally stop IoT abuse hobbling American companies. An integral question here’s whether President Trump’s criticism of our foreign trade partners will prevent the sort of international collaboration that might be required to address this issue.
Related: 5 Cybersecurity Tools You Company MUST HAVE
Tech moves into conventional industries, and faces conventional regulation.
The movement of technology companies into “non-traditional” sectors – including the taxi and hotel businesses – is forcing them to confront government’s long-standing regulation of the industries. The original skirmishes have already occurred in this battle. For instance, Maryland passed a law last July that extended taxi regulations to ride-sharing services such as for example Uber and Lyft. Recently, the state backed down when it agreed never to force Uber and Lyft to conduct the same security checks on its drivers that are required of taxi companies. Similarly, an increasing number of cities, including in NY and California, are imposing regulations on Airbnb’s internet hospitality business. While this fight will grow, chances are to stay in the cities and states, and for that reason be less suffering from the advent of the Trump Administration.
Just like the oil industry a century ago, the technology industry’s explosive growth and expansion have garnered increased governmental scrutiny. The ris