Edward Snowden has brought in a health $1.25m in speaking fees ever since he jumped on a plane to Hong Kong with a treasure trove of NSA secrets, a new court filing [PDF] has revealed.

The whistleblower, who exposed mass surveillance of American citizens and foreigners by the US government by handing over top-secret documents to journalists before escaping to Moscow, earns an average of $18,745 per engagement. And Uncle Sam wants it – all of it.

The Feds subpoenaed Snowden’s booking agent, American Program Bureau, based in Massachusetts, insisting on a full rundown of engagements it had booked him for. The prosecution has added the list of 67 speeches, complete with fees and clients, to its lawsuit seeking to strip Snowden of any money earned through his actions.

[…]

With the monetary value of Snowden’s speaking tours now laid out of the table, it’s hard not to imagine that Donald Trump doesn’t have a figure in mind.

The US government has already won the right to claim all royalties from Snowden’s book and speeches after a district court awarded it all proceeds. The lawyers are now trying to figure out what those sums are.

Snowden has refused formal requests to provide all relevant information about his earnings, resulting in a magistrate deciding that the government can effectively decide what he had earned. His publisher agreed to hand over royalties from his book, although not the advance it paid him to write it.

Source: Ed Snowden has raked in $1m+ from speeches – and Uncle Sam wants its cut, specifically, absolutely all of it • The Register

Amazingly though having revoked his passport you’d think they also revoked his tax paying requirements with it

Everyone is mad about Apple’s App Store guidelines right now, especially when it comes to cloud gaming services. Microsoft isn’t bringing Project xCloud to iOS. Google’s Stadia app can’t let iPhone users actually play games. Facebook also had to axe the ability to play games for its Facebook Gaming iOS app to be allowed in the App Store. And that doesn’t even take into account the number of smaller, non-gaming app developers who have had their apps kicked out of the App Store after seemingly arbitrary enforcement of Apple’s guidelines. But Fortnite developer Epic Games took a bold step toward telling Apple what it thinks of the company’s App Store policies, possibly attempting a loophole to get around things. Fortnite has now been kicked out of both Apple and Google’s stores, and Epic is now suing Apple.

Yesterday, Epic Games introduced the ability to pay the company directly for V-Bucks in the Fortnite app on the App Store and in Google Play store for Android, bypassing the in-app payment methods in both apps. On top of that, Epic Games is giving users a 20% discount for using the direct payment method. According to Apple, in a statement to the Verge, this is in violation of App Store guidelines, which states that apps offering in-game currency for real money cannot use a direct payment method.

[…]

Before removal, a screenshot of the Fornite app on iOS clearly showed that users have the option to either purchase V-bucks through the App Store or send a direct payment to Epic Games.

“Today, we’re also introducing a new way to pay on iOS and Android: Epic direct payment. When you choose to use Epic direct payments, you save up to 20% as Epic passes along payment processing savings to you,” Epic Games announced in a press release this morning.

Google’s policies also seem to prevent developers from using anything but an in-app payment system.

[…]

Epic Games pointed out that both Apple and Google collect a 30% fee, and that if users choose to pay through either store’s app they will not benefit from the 20% discount—hence the lower price on the direct payment option.

“If Apple or Google lower their fees on payments in the future, Epic will pass along the savings to you.”

Damn, Epic. Shots fired.

[…]

The problem for Apple is that both it and Google have policies related to purchases that are consumed outside of their respective app stores. Both allow users to make payments outside of the app.

[…]

Fortnite is available on multiple platforms: PC, Mac, Xbox, PlayStation, Nintendo Switch, Android, and iOS, and users can link their profiles together so they can play with the same account across all platforms. This means that someone could purchase V-Bucks through the Android and iOS apps and spend them at a later date from their console or PC. So technically those users appear to be purchasing “goods or services” that can be consumed outside of the app.

[…]

Epic has taken legal action to end Apple’s anti-competitive restrictions on mobile device marketplaces. The papers are available to read here.

From the legal filing: “Rather than tolerate this healthy competition and compete on the merits of its offering, Apple responded by removing Fortnite from sale on the App Store, which means that new users cannot download the app, and users who have already downloaded prior versions of the app from the App Store cannot update it to the latest version. This also means that Fortnite players who downloaded their app from the App Store will not receive updates to Fortnite through the App Store, either automatically or by searching the App Store for the update. Apple’s removal of Fortnite is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the iOS In-App Payment Processing Market.”

Source: Fortnight Has Laid a Perfect Antitrust Trap for Apple

And the fallout has been some compelling entertainment in these quarantine times: Apple swiftly kicked Fortnite from its store, then Epic struck back with a lawsuit and arranged an in-game event to screen a video satirizing Apple’s iconic 1984 commercial to mobilize its fanbase against the company, throwing in a #FreeFortnite hashtag to boot.

[…]

ust as it did with Apple, Epic Games has now filed a lawsuit against Google over alleged antitrust violations just hours after Fortnite was dropped from the Play Store. The suit alleges that Google’s stipulations about in-app purchases constitute a monopoly in clear violation of both the Sherman Act and California’s Cartwright Act.

Epic’s complaint is nearly identical to the lawsuit against Apple that it filed earlier today following Fortnite’s removal from the company’s app store. Only the lawsuit’s introductions differ significantly, with the one against Apple referencing its aforementioned 1984 ad and the one against Google recalling the infamous “Don’t Be Evil” mantra the company was founded upon.

“Twenty-two years later, Google has relegated its motto to nearly an afterthought, and is using its size to do evil upon competitors, innovators, customers, and users in a slew of markets it has grown to monopolize,” the suit argues.

Source: Fortnite Booted from Google’s App Store Too [Update: Now Epic’s Suing Google Along With Apple]

Following a year-long investigation into the company, Reuters reports Russia’s Federal Antimonopoly Service (FAS) has found the iPhone-maker abused its dominant position in the mobile app marketplace and will order Apple to resolve multiple regulatory breaches.

The agency started investigating the tech giant after developer Kaspersky Lab filed a complaint over the rejection of its Safe Kids app from the App Store. At the time, Apple said the software put “user’s safety and privacy at risk.” The agency ruled Apple forces developers to distribute to their apps through the App Store and then unlawfully blocks them. A spokesperson for Apple told Reuters the company plans to appeal the ruling.

The decision comes as Apple faces increasing scrutiny over its gatekeeping of the App Store in both the US and EU. When Tim Cook testified before the House Judiciary Antitrust Subcommittee at the end of July, lawmakers asked the executive about the company’s decisions to block some competitors from its digital marketplace. Cook was also asked about the ongoing 30 percent cut the company takes from third-party app sales, a rate many developers argue is too high. Apple was again in the spotlight earlier this month after it said it would not allow Microsoft’s Project xCloud on iOS since its App Store guidelines require developers to submit games individually for review.

Source: Russia’s antitrust watchdog finds Apple abused App Store ‘dominance’ | Engadget

New York state is introducing a bill that would make it easier to sue big tech companies for alleged abuses of their monopoly powers.

New York is America’s financial center and one of its most important tech hubs. If successfully passed, the law could serve as a model for future legislation across the country. It also comes as a federal committee is conducting an anti-trust investigation into tech giants amid concerns that their unmatched market power is suppressing competition.

Bill S8700A, now being discussed by New York’s senate consumer protection committee, would update New York’s antiquated antitrust laws for the 21st century, said the bill’s sponsor, Senator Mike Gianaris.

“Their power has grown to dangerous levels and we need to start reining them in,” he said.

New York’s antitrust laws currently require two players to collaborate in a conspiracy to conduct anticompetitive behavior such as price setting. In other cases companies may underprice products to the point where they are even incurring a loss just to drive others out of the market – anticompetitive behavior that New York’s laws would currently struggle to prosecute.

“Our laws on antitrust in New York are a century old and they were built for a completely different economy,” said Gianaris. “Much of the problem today in the 21st century is unilateral action by some of these behemoth tech companies and this bill would allow, for the first time, New York to engage in antitrust enforcement for unilateral action.”

The bill will probably be discussed when New York’s senate returns to work in August but is unlikely to pass before next year. It has the support of New York’s attorney general, Letitia James.

Source: New York unveils landmark antitrust bill that makes it easier to sue tech giants | Technology | The Guardian

The attorney general of New York took action Thursday to dissolve the National Rifle Association following an 18-month investigation that found evidence the powerful gun rights group is “fraught with fraud and abuse.”

Attorney General Letitia James claims in a lawsuit filed Thursday that she found financial misconduct in the millions of dollars and that it contributed to a loss of more than $64 million over a three-year period.

The suit alleges that top NRA executives misused charitable funds for personal gain, awarded contracts to friends and family members, and provided contracts to former employees to ensure loyalty.

Seeking to dissolve the NRA is the most aggressive sanction James could have sought against the not-for-profit organization, which James has jurisdiction over because it is registered in New York. James has a wide range of authorities relating to nonprofits in the state, including the authority to force organizations to cease operations or dissolve. The NRA is all but certain to contest it.

The NRA said in a statement that the legal action was political, calling it a “baseless premeditated attack on our organization and the Second Amendment freedoms it fights to defend… we not only will not shrink from this fight – we will confront it and prevail.”

“The NRA’s influence has been so powerful that the organization went unchecked for decades while top executives funneled millions into their own pockets,” James said in a statement. “The NRA is fraught with fraud and abuse, which is why, today, we seek to dissolve the NRA, because no organization is above the law.”

James’ complaint names the National Rifle Association as a whole but also names four current and former NRA executives: Executive Vice President Wayne LaPierre, general counsel John Frazer, former Chief Financial Officer Woody Phillips and former chief of staff Joshua Powell.

Source: NRA Lawsuit: Fraud Investigation Moves New York AG To Seek Group’s Dissolution : NPR

Well, my thoughts and prayers go out to you, NRA and all your gun nut psycho killer friends.

Spotify CEO Daniel Ek discussed streaming and sustainability in a recent interview with Music Ally published on Thursday. Ek denied criticisms that Spotify pays insufficient royalties to artists, and insisted that the role of the musician had changed in today’s “future landscape.”

Ek claimed that a “narrative fallacy” had been created and caused music fans to believe that Spotify doesn’t pay musicians enough for streams of their music. “Some artists that used to do well in the past may not do well in this future landscape,” Ek said, “where you can’t record music once every three to four years and think that’s going to be enough.”

What is required from successful musicians, Ek insisted, is a deeper, more consistent, and prolonged commitment than in the past. “The artists today that are making it realize that it’s about creating a continuous engagement with their fans. It is about putting the work in, about the storytelling around the album, and about keeping a continuous dialogue with your fans.”

Source: Spotify CEO Daniel Ek says working musicians may no longer be able to release music only “once every three to four years” | The FADER

A business model where you work a few weeks a year untill you can just coast along on royalties is wrong on so many levels.

Apple has another antitrust charge on its plate. Messaging app Telegram has joined Spotify in filing a formal complaint against the iOS App Store in Europe — adding its voice to a growing number of developers willing to publicly rail against what they decry as Apple’s app “tax”.

A spokesperson for Telegram confirmed the complaint to TechCrunch, pointing us to this public Telegram post where founder, Pavel Durov, sets out seven reasons why he thinks iPhone users should be concerned about the company’s behavior.

These range from the contention that Apple’s 30% fee on app developers leads to higher prices for iPhone users; to censorship concerns, given Apple controls what’s allowed (and not allowed) on its store; to criticism of delays to app updates that flow from Apple’s app review process; to the claim that the app store structure is inherently hostile to user privacy, given that Apple gets full visibility of which apps users are downloading and engaging with.

This week Durov also published a blog post in which he takes aim at a number of “myths” he says Apple uses to try to justify the 30% app fee — such as a claim that iOS faces plenty of competition for developers; or that developers can choose not to develop for iOS and instead only publish apps for Android.

“Try to imagine Telegram or TikTok as Android -only apps and you will quickly understand why avoiding Apple is impossible,” he writes. “You can’t just exclude iPhone users. As for the iPhone users, the costs for consumers to switch from an iPhone to an Android is so high that it qualifies as a monopolistic lock-in” — citing a study done by Yale University to bolster that claim.

“Now that anti-monopoly investigations against Apple have started in the EU and the US, I expect Apple to double down on spreading such myths,” Durov adds. “We shouldn’t sit idly and let Apple’s lobbyists and PR agents do their thing. At the end of the day, it is up to us – consumers and creators – to defend our rights and to stop monopolists from stealing our money. They may think they have tricked us into a deadlock, because we’ve already bought a critical mass of their devices and created a critical mass of apps for them. But we shouldn’t be giving them a free ride any longer.”

Source: Telegram hits out at Apple’s app store ‘tax’ in latest EU antitrust complaint | TechCrunch

Rep. David Cicilline (D-R.I.), who ended Wednesday’s hearing by saying some Big Tech companies need to be broken up, told Axios that Facebook in particular lacks significant competitors and should not have been allowed to buy Instagram and WhatsApp.

Why it matters: Cicilline chairs the antitrust subcommittee, which has been looking into competition issues in the digital space.

“Mr. Zuckerberg acknowledged in this hearing that his acquisition of WhatsApp and Instagram were part of a plan to both buy a competitor and also maintain his money, power, or his dominance. That’s classic monopoly behavior.”

— Cicilline said on the “Axios Re:Cap” podcastCicilline’s criticisms weren’t limited to Facebook, pointing to the power Google and Amazon also hold in their respective markets.

• “I think what we saw today was confirmation that these large technology platforms have enduring monopoly power,” he said in the interview with Axios’ Dan Primack.

The big picture: A key issue remains whether existing antitrust law is broad enough to address the modern tech industry, especially companies that provide their products at no direct charge to consumers.

• “Congress is going to have to ‘think outside the box’ in a comprehensive way about what antitrust laws should look like in the 21st century,” Neguse told Axios’ Ashley Gold after the hearing.

What’s next: The committee plans to develop a set of recommendations and issue them in a final report as soon as late August, according to Cicilline.

You can listen to the podcast here.

Source: Top antitrust Democrat: There’s a case to break up Facebook – Axios

The antitrust session was quite bizarre – the CEOs were running with canned lines which made no sense in their context, they were stumbling, they refused to answer questions, even those which were favorible to their cause. Only one senator was clearly in the pocket of the big tech, the rest were firmly against. One male senator thought Google was targetting him personally and one male couldn’t understand why fake news sites didn’t get high search rankings and were banned by Facebook. It was a laugh if these companies didn’t wield such power. They raised almost all the points I raised in my talk last year.

When a customer gets refunded for an app they purchased, Apple doesn’t refund the 30% cut they took from the developer, says developer Simeon Saens of Two Lives Left. While [online] payment processors generally don’t refund fees on refunded payments, “the App Store doesn’t position itself as a payments processor the way Stripe does, so it sounds really weird that they would act like one,” writes HN user chadlavi. Epic Games CEO Tim Sweeney says in a tweet: This is a critical consideration in these 30% store fees. They come off the top, before funding any developer costs. As a result, Apple and Google make more profit from most developers’ games than the developers themselves. That is terribly unfair and exploitative. “If the app store took a 3% chunk and never refunded it regardless of the ongoing status of the transaction, that would put them right in line with other payment processors,” adds chadlavi. “It would also still net them billions of dollars, I think!”

Source: When a Customer Gets Refunded For a Paid App, Apple Doesn’t Refund the 30% Cut They Took From The Developer – Slashdot

Aside from that, 30% is an insane amount of cut to steal off someone with no other option but to use your marketplace.

A US House antitrust committee is getting set to grill tech’s biggest CEOs, but Microsoft wants them to focus on one in particular: Apple’s Tim Cook. Microsoft President Brad Smith met with the committee several weeks ago and relayed concerns about how Apple manages its App Store, according to the The Information (via Bloomberg).

Smith complained specifically about Apple’s arbitrary App Store approval policy which recently caused a ruckus over the rejection of Basecamp’s Hey email app. He also railed against Apple’s payment requirement that allows it to take as much as a 30 percent cut of developers’ revenue. That policy is currently the subject of an EU antitrust investigation launched at the behest of Spotify.

The antitrust committee originally called Smith to get Microsoft’s take on the current antitrust climate, given that the company was the subject of US investigations in the 2000s. Smith said that Apple’s App Store rules impede competition to a much higher degree than Microsoft did with Windows when it was found guilty of antitrust violations two decades ago. Smith didn’t criticize other tech companies during the interview.

Apple has largely avoided the privacy-related investigations faced by Google and Facebook, but now finds itself in the middle of antitrust probes on both sides of the Atlantic. With its old frenemy Microsoft adding to the complaints, Apple could face a lot of heat when the House Judiciary Antitrust hearings kick off next Monday on July 27th.

Source: Microsoft raised Apple’s app store with US house antitrust group | Engadget

After talking about this since early 2019 it’s nice to see stuff actually happening

Tim Sweeney, CEO of Fortnite developer Epic Games, criticized Apple and Google for having an “absolute monopoly” on app stores in a Friday interview with CNBC. There aren’t many viable options for distributing mobile software outside the Apple App Store and the Google Play Store, and Sweeney chides both for taking a 30 percent fee from in-app purchases.

Epic Games launched the Epic Games Store in late 2018 for Windows and Mac computers, and only charges other publishers a 12 percent fee on in-app purchases. The Epic Games Store hasn’t made it to the App Store because of Apple’s strict guidelines against competing software stores.

“They [Apple] are preventing an entire category of businesses and applications from being engulfed in their ecosystem by virtue of excluding competitors from each aspect of their business that they’re protecting,” Sweeney said.

Epic previously made Fortnite available to Android devices not by offering it on the Google Play Store, but instead through a launcher on the Fortnite website that downloaded the game. This allowed Epic to sidestep the 30 percent fee from Google. But the download process was too involved for many users, so Fortnite eventually launched on Google Play earlier this year. Sweeney said the company still plans to bring the Epic Games Store to Android. “Google essentially intentionally stifles competing stores by having user interface barriers and obstruction,” Sweeney said.

Epic isn’t the first company to speak out against Apple and Google’s 30 percent fee. In March of last year, Spotify CEO Daniel Ek filed an unfair competition complaint against Apple with the European Commission, citing the fee as forcing them to artificially inflate the price of its Spotify Premium membership. Last July, Tinder introduced a default payment process into its Android app meant to bypass the Google Play Store fee.

Source: Epic Games CEO speaks out against Apple, Google app store ‘monopoly’ | Engadget

I have been talking about the growing monopoly of the tech giants since beginning of 2019

The former head of DNS regulator ICANN has been named as co-CEO of a company that launched a controversial attempt to purchase the .org internet registry earlier this year. The news has again raised concerns over the revolving doors between regulators and those who need regulation.

In the past week, the website of Ethos Capital, the private equity firm that offered $1.13bn to take control of the popular .org registry, was updated to list ex-ICANN CEO Fadi Chehade as its joint head.

The change is significant because it was Chehade’s involvement in the attempted .org purchase that first alerted internet users that the deal deserved closer scrutiny.

The sale was ultimately vetoed several months later by ICANN, but only after the Attorney General of California got involved and sent a last-minute letter to LA-based ICANN telling it not to approve the deal in part due to the “lack of transparency” on Ethos Capital.

Part of that lack of transparency was who would actually own the .org registry after the sale: behind Ethos was a complex structure of no less than four shell companies that were all registered on the same day in Delaware with the prefix “Purpose Domains.” Ethos Capital refused to divulge who all the directors of those companies actually were despite repeat requests, including from ICANN, which had the power to refuse the sale.

Chehade’s close link to the proposed sale was only noticed because he had registered Ethos Capital’s .org domain name, EthosCapital.org, under his own name on May 7, 2019. The company Ethos Capital LLC was registered in Delaware one week later, on May 14, 2019.

All in the timing

That date is significant because May 13, 2019, the day before Ethos Capital was established, was the deadline for ICANN staff to publish a report on the controversial lifting of price caps on .org domains.

For the previous 20 years, the price of .org domains had been strictly limited by ICANN to a specific annual percentage increase. However, under reforms Chehade made as CEO of ICANN, prior to his departure in 2016, registries were allowed to request the caps be removed altogether when their current contract expired.

The company that runs .org, the Internet-Society-owned Public Internet Registry (PIR), had made that request for its contract expiring June 30, 2019, sparking a furious backlash from the internet community. ICANN public comment periods typically attract between five and 50 comments but when it came to the lifting of price caps on .org domains, there were over 3,200 responses of which more than 98 per cent were opposed to the idea.

That staff report of the comment period, due on May 13, was supposed to be an objective review of what the internet community has said; the internet community meanwhile, has long complained that ICANN’s staff frequently skew such reports to fit with a predetermined outcome.

The .org price cap issue was no exception, and despite overwhelming opposition, the staff report gave equal weight to the few comments in favor of the change as to the thousands opposed to it. It was clear that ICANN’s staff would recommend their board approve lifting the .org price caps: a decision that was potentially worth hundreds of millions of dollars over the course of the new ten-year contract.

There are just over 10 million .org domains, and the registry is one of the oldest and most stable in the market. In 2019, PIR reported [PDF] a 78.2 per cent renewal rate, meaning that the vast majority of existing domain holders automatically renewed their names for another year (you can register domains for multiple years but roughly 70 per cent of people renew a domain every year). To put it into hard numbers, there were 6.9 million .org renewals in 2019.

License to print money

That extraordinary loyalty rate, believed to be the highest in the domain industry, is what makes .org so valuable. Many organizations have built their websites and online reputation on .org domains for a decade or more, and domain names are incredibly cheap (roughly $10 a year) when compared to the enormous costs associated with moving to a different online home.

That makes the .org registry home to over eight million domain registrants who would likely pay many multiples of the current annual cost to keep their name. Even if PIR doubled its price from $10 to $20, the renewal rate would be unlikely to fall very much, resulting in an additional $69m in revenue, or thereabouts, just for that one year. In short, the .org registry without price caps was a money-printing machine.

Chehade was clearly following the issue closely, and the day after the staff report deadline, Ethos Capital – the private equity outfit that would a few months later approach the owner of the .org registry, the Internet Society – was registered in Delaware.

What makes this timeline all the more peculiar is that it isn’t clear that the staff report was actually published on Monday, May 13, 2019. Due to the volume of comments, ICANN’s staff asked for, and were granted, an extension. And so the final report that those outside the domain industry saw for the first time was published [PDF] three weeks later on June 3, 2019.

Did the former CEO of ICANN use his many connections with staff, many of whom he had hired and promoted, to get an early copy of the staff report? And is that why when Ethos Capital was named as the company trying to buy the .org registry there was no mention of Chehade’s close connection?

Despite the evidence and repeat requests, Ethos Capital refused to acknowledge Chehade’s involvement, even when he was spotted at the PIR offices, shortly after the deal was announced, with Ethos Capital CEO Erik Brooks, a former business partner, to discuss the acquisition.

Oh, that Chehade?

Eventually, Ethos Capital admitted its relationship with Chehade several months later in January in response to very specific questions posed by ICANN about the deal. On page 25 of a 27-page response [PDF] from Ethos, it answered a request that it name “former directors, officers or employees of ICANN that are or have been involved in, have advised on or otherwise have an interest in the transaction.”

And it named Nora Abusitta-Ouri, Chehade’s former personal assistant who had worked with him at previous companies; Allen Grogan, whom Chehade had hired to be ICANN’s head of compliance, and Fadi Chehade himself. They were “acting as advisors to Ethos Capital,” the company insisted, and provided no more details. Grogan, incidentally, is now listed as an Ethos Capital “executive partner” on its website.

It’s possible that Chehade’s connections with the CEOs of PIR, Jon Nevett, and the Internet Society, Andrew Sullivan, that made the dot-org takeover even remotely possible. It was always going to be a hard sell – as was made clear from the response when the deal, which had been green-lit in secret and in record time by the Internet Society and PIR boards, was announced.

When the Internet Society revealed that it was not only selling .org to a private equity firm but would also change PIR’s status from a non-profit organization to a for-profit one as part of the deal, the internet community and .org registrants were stunned. And then outraged.

Chehade had had plenty of time to work out the details and he knew the key person, PIR CEO Jonathon Nevett, extremely well. Nevett was co-founder of registry operator Donuts and had been a persistent presence in the domain name industry for years, many of them when Chehade was head of the industry’s regulator. The connection continued after Chehade left ICANN.

When Nevett sold Donuts in 2018 to Abry Partners, it was in a deal that was brokered by… Fadi Chehade and Erik Brooks. Within a few months, Nevett became CEO of PIR. And his position at Donuts was taken by another long-term Chehade business associate Akram Atallah, who had taken over as interim CEO of ICANN after Chehade left.

Contractual terms

As for the also-new CEO of the Internet Society, Andrew Sullivan, he had previously worked at Afilias, which runs the technical back-end of .org for the Internet Society’s PIR, and was the person responsible more than any other of helping the Internet Society win the contract to run .org 20 years previously. More than 80 per cent of the Internet Society’s annual revenue comes from the sale of .org domains.

Chehade was the connection between all these men who pushed through a proposal that the internet community, .org registrants, the internet society chapters, not to mention a former CEO and the former chair of ICANN, and US senators all condemned in the strongest terms.

Eventually it took the Attorney General of California, and an explicit threat to audit the notoriously secretive non-profit organization based in Los Angeles, to push ICANN off the .org sell-off and refuse it.

As for why Chehade persisted in only being an advisor to Ethos Capital when he almost certainly helped establish the company, filled it with his old staff, and was the point person for the entire deal, the answer to that may be in responses to questions put to the Internet Society and PIR about when they were first approached about a possible sale of .org.

“The Internet Society was first approached by Ethos Capital in September,” the organization told us in an official statement in response to our questions about interactions and timing of the deal. When PIR was asked the same question, its CEO Jon Nevett answered that he had no knowledge of any planned sale to Ethos Capital when he took over the CEO job in December 2018, or when his organization decided to formally ask for pricing caps to be lifted.

But of course, Ethos Capital only formally existed in May 2019. And Fadi Chehade was not a representative of Ethos Capital, merely an advisor, until last week when he suddenly became co-CEO. As to conversations Chehade may have had with his former staff to smooth the path of the billion-dollar sale, ICANN continues to refuse to supply records of staff or board communications, citing confidentiality.

Source: Ex-boss of ICANN shifts from ‘advisor’ to co-CEO of private equity biz that tried to buy .org for $1bn+ • The Register

Workplace messaging software company Slack is accusing Microsoft of monopoly behavior in an antitrust complaint filed today to European Union regulators. Unsurprisingly, the accusations hinge on the same practice that helped make Microsoft rich in the first place.

Bill Gates, Windows, innovation, yes, yes, OK—undoubtedly Microsoft had a lot to contribute to the early years of home computing. But what helped it grow to mammoth scale was software bundling: specifically, the practice of getting its products pre-installed on brand new machines built by third parties—and making it hard to delete those programs and replace them with competitors.

You might remember this refrain from such hits as United States v. Microsoft Corporation, and Microsoft Corp. vs. Commission, the latter of which eventually cost the company over a billion dollars after it became “the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision,” according to the European Commission’s then-Competition Commissioner Neelie Kroes.

Kind of makes you wonder how Apple still gets away with setting Safari as the default browser on iOS devices, but I digress…

While those early cases against Microsoft focused on software like Internet Explorer and Windows Media Player, Slack’s new legal salvo concerns the company’s bundling of competing chat app Teams with its ubiquitous productivity suite Microsoft Office. In a press release, Slack accused its rival of “force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers,” which Slack believes to be an “illegal and anti-competitive practice.”

“We’re confident that we win on the merits of our product, but we can’t ignore illegal behavior that deprives customers of access to the tools and solutions they want,” said Jonathan Prince, vice president of communications and policy at Slack. “Slack threatens Microsoft’s hold on business email, the cornerstone of Office, which means Slack threatens Microsoft’s lock on enterprise software.”

Reached for comment, a Microsoft spokesperson sniped that “we created Teams to combine the ability to collaborate with the ability to connect via video, because that’s what people want. With COVID-19, the market has embraced Teams in record numbers while Slack suffered from its absence of video-conferencing. We’re committed to offering customers not only the best of new innovation, but a wide variety of choice in how they purchase and use the product.”

The merits of the case will be decided by the Commission, but the existence of the suit is a smart play for Slack, which has seen its stock slip recently, perhaps as a result of Teams’s encroachment on its market share. The EU has consistently had a greater appetite to pursue antitrust concerns compared to the U.S., where both companies are headquartered, making it a doubly clever play for the considerably smaller and more vulnerable party.

Source: Microsoft’s Doing the Monopoly Thing Again, Slack Says

When Amazon.com’s venture-capital fund invested in DefinedCrowd, it gained access to the technology startup’s finances and other confidential information. Nearly four years later, in April, Amazon’s cloud-computing unit launched an artificial-intelligence product that does almost exactly what DefinedCrowd does, said DefinedCrowd founder and Chief Executive Daniela Braga. The new offering from Amazon Web Services, called A2I, competes directly “with one of our bread-and-butter foundational products” that collects and labels data, said Ms. Braga. After seeing the A2I announcement, Ms. Braga limited the Amazon fundâ(TM)s access to her company’s data and diluted its stake by 90% by raising more capital. Ms. Braga is one of more than two dozen entrepreneurs, investors and deal advisers interviewed by The Wall Street Journal who said Amazon appeared to use the investment and deal-making process to help develop competing products.

In some cases, Amazon’s decision to launch a competing product devastated the business in which it invested. In other cases, it met with startups about potential takeovers, sought to understand how their technology works, then declined to invest and later introduced similar Amazon-branded products, according to some of the entrepreneurs and investors. An Amazon spokesman said the company doesn’t use confidential information that companies share with it to build competing products. Dealing with Amazon is often a double-edged sword for entrepreneurs. Amazon’s size and presence in many industries, including cloud-computing, electronic devices and logistics, can make it beneficial to work with. But revealing too much information could expose companies to competitive risks.

Source: Amazon Met With Startups About Investing, Then Launched Competing Products – Slashdot

I have been talking about the vast market powers of the monopolists and exactly this case with Amazon since early 2019

we’re advancing our plans to make it free for merchants to sell on Google. Beginning next week, search results on the Google Shopping tab will consist primarily of free listings, helping merchants better connect with consumers, regardless of whether they advertise on Google. With hundreds of millions of shopping searches on Google each day, we know that many retailers have the items people need in stock and ready to ship, but are less discoverable online.

For retailers, this change means free exposure to millions of people who come to Google every day for their shopping needs. For shoppers, it means more products from more stores, discoverable through the Google Shopping tab. For advertisers, this means paid campaigns can now be augmented with free listings. If you’re an existing user of Merchant Center and Shopping ads, you don’t have to do anything to take advantage of the free listings, and for new users of Merchant Center, we’ll continue working to streamline the onboarding process over the coming weeks and months.

These changes will take effect in the U.S. before the end of April, and we aim to expand this globally before the end of the year. Our help center has more details on how to participate in free product listings and Shopping ads.

We’re also kicking off a new partnership with PayPal to allow merchants to link their accounts. This will speed up our onboarding process and ensure we’re surfacing the highest quality results for our users. And we’re continuing to work closely with many of our existing partners that help merchants manage their products and inventory, including Shopify, WooCommerce, and BigCommerce, to make digital commerce more accessible for businesses of all sizes.

Source: List your products on Google Shopping for free – The Keyword

The companies that do most to develop and evolve the LibreOffice productivity suite, both for desktop and cloud, say the project’s business model is “beyond utterly broken” and that The Document Foundation (TDF), the charity that hosts the project, has to change its approach.

The matter is a subject of intense debate within the board of the foundation, set up in 2010 to oversee LibreOffice, a fork of Oracle’s OpenOffice. It touches on a question that crops up repeatedly in various contexts: as usage of open-source software continues to grow, what is the right business model to fund its development?

The TDF’s manifesto promises “to eliminate the digital divide in society by giving everyone access to office productivity tools free of charge.” The document adds that “we encourage corporate participation” but there is nothing about providing an incentive for such companies.

Michael Meeks, managing director at Cambridge-based Collabora, the company that contributes most full-time developers to LibreOffice, has set out the situation in (opinionated) detail here and here.

Meeks is an open-source veteran, having worked on GNOME, OpenOffice, and other prominent projects. Everything was fine at LibreOffice to begin with, and he calls 2012-2014 “the flourishing years.”

Alongside Collabora, there were 15 developers from SUSE, five from Red Hat, one from Canonical, seven from the city of Munich (part of its embrace of open source), and some 40 others from various companies. Many of those have now dropped out, or reduced their commitment, leaving around 40 paid developers in total – of whom Collabora provides 25 and CIB, a Munich-based specialist in document management, seven.

Meeks believes “LibreOffice is at serious risk,” though the matter is complex. TDF has around €1.5m in the bank, Meeks said, but something that may surprise outsiders is that the foundation cannot and does not use that money to employ developers.

Thorsten Behrens, IT lead for LibreOffice at CIB, told The Register: “The TDF is a charity; it’s not in the business of developing software and actually cannot, because that would put it in competition with the commercial ecosystem,” as well as threatening its charitable status.

Most donations go to TDF so if the commercial providers of developers reduce their commitment, TDF remains but the development effort diminishes.

This also means that contributing to LibreOffice by paying for support is currently more effective than donating money to TDF.

Could LibreOffice succeed without paid-for developers?

Behrens pointed to Apache OpenOffice as an example of why this does not work. “It is limping,” he said. “Every two years they release a new version, but everyone who cares moved on to LibreOffice. OpenOffice is the best argument that we have that we need a commercial ecosystem. If we don’t have that, we will end up like them.”

[…]

Source: Company that contributes majority of LibreOffice code complains ecosystem is ‘beyond utterly broken’ • The Register

In 2017 I spoke about this – it’s a tough nut to crack, because there are open source fanatics – who just happen to be paid to develop and promote open source – who keep holding onto a definition of “open source” developed in the 70s. Open source projects are much more complex than they were then, have a much larger user base and require much more coordination from people who aren’t being paid (by a university or foundation) to develop them.

On July 27th, the CEOs of Apple, Facebook, Amazon and Google — the “GAFA” companies — will testify in front of the House Judiciary Antitrust Subcommittee. Getting those four people into the same room — even virtually — on the same day is something of a feat and it speaks to how seriously these companies are taking the committee’s long-standing investigation into their practices.

In June last year, the House Judiciary Committee launched a bipartisan investigation into competition in “digital markets.” It said that a “small number of dominant, unregulated platforms,” hold “extraordinary power” over e-commerce, online communication and digital information. It added that this power has a stifling effect on competition and entrepreneurship in both the US and the wider world.

Each CEO will need to explain how their monolithic platforms, like Facebook’s social network, Google’s advertising business and Apple’s App Store, do not violate antitrust law. “Antitrust” is shorthand for the rules around businesses stifling competition in a free and fair market. That includes blocking powerful companies from buying up, copying or pricing out their rivals to the detriment of competition. Regulators are now turning their beady eye toward what ‘big tech’ has been up to for all of these years.

“Both Democrats and Republicans do seem to believe that there’s something wrong with how these big tech companies are operating.” Joel Mitnick is an antitrust lawyer at Cadwalader in New York who began his career as a trial lawyer at the Federal Trade Commission. He says that lawmakers suspect that there’s “something abusive going on terms of their market power.” He added that there’s a belief that these companies are blocking, or excluding, competitors.

As well as these hearings, it’s likely that Google is going to face a separate antitrust lawsuit that’ll be filed towards the end of 2020.  The Wall Street Journal said a cadre of attorneys general want to scrutinize Google’s online advertising business. Apple looks like it’ll be next on the block, with a Politico report from last month saying that Apple’s “easy ride” from lawmakers is coming to an end. It contends that Apple’s control of the app store, and how it treats competing apps from rival developers within its ecosystem, is under quiet scrutiny.

News of a potential US probe into Apple came roughly a week after the European Union began its own investigation. EU officials are investigating whether Apple’s control of the app store “violate EU competition rules,” because you can only buy system apps from the App Store. The fact that apps that offer in-app purchases can only do so through Apple’s system, earning the latter 30 percent commission, is also under scrutiny.

The ultimate goal of any antitrust investigation is to promote competition that will, it’s hoped, benefit the consumer. Critics believe that Apple’s control of the App Store stifles competition and, by extension, is ultimately harmful to consumers. They believe that Apple is essentially creating a market that forces people to use Apple’s own products and services.

The obvious example is the App Store, which is the only way for developers to get their software onto people’s iOS, iPad OS and Watch OS devices. But look at HomePod, the Apple speaker that can only directly access Apple Music. If you want to play from Spotify or other services, you’ll have to use your phone to cast to the speaker. In late June, however, Apple said that it would open HomePod up to third-party services in the coming months as it opens up its products.

Mitnick explained that rather than simply examining companies through the lens of being a “monopolist,” you need to look at “market power.” Apple has historically eschewed being the biggest player in town in favor of catering to a smaller, premium segment of the market. And in consumer technology, there is a wide variety of cheaper products available from its bigger, albeit potentially less profitable, rivals.

But that’s not the case with the iOS ecosystem.  In the US, StatCounter says that iOS has around 58 percent of the market compared to Android’s 41 percent. iPad OS, the tablet-friendly version of iOS, is even more dominant in the US, with StatCounter reporting close to 65 percent of the market. It’s not a monopoly, but Apple appears to be the dominant player in the US.

And, says Mitnick, when a company gets that big “they lose the right to be so exclusionary,” essentially that with great power comes an obligation to be even more scrupulous. After all, if officials can demonstrate in a court that the App Store rules are boxing out developers and stifling competition, they could insist on radical changes. Or, they could decide that buying an Android phone offers enough of an alternative, and that Apple isn’t doing anything wrong.

Apple’s counter-argument to this is that it has done plenty to create a level playing field for its rivals. It charges just a $99 flat fee to any app developer and only asks for a 30-percent cut of any qualifying transaction. (That includes digital goods within the app or subscriptions, although that fee falls to 15 percent in subsequent years.) So long as apps don’t contravene Apple’s own rules, or break the law then developers have carte blanche to do whatever they want. And, right now, the arrangement benefits iPhone/iPad/Watch users who can count on secure apps that have been vetted by Apple.

[…]

Source: Big tech’s reckoning starts with an antitrust committee | Engadget

Let’s be clear – a 30% cut AND a flat fee is a mafia type ripoff only monopolies and the taxman can pull off.

I spoke about this in Zagreb in 2019 and it’s fun to see it all happening.

I’ve used a Samsung Galaxy smartphone almost every day for nearly 4 years. I used them because Samsung had fantastic hardware that was matched by (usually) excellent software. But in 2020, a Samsung phone is no longer my daily driver, and there’s one simple reason that’s the case: Ads.

Ads Everywhere

Ads in Samsung phones never really bothered me, at least not until the past few months. It started with the Galaxy Z Flip. A tweet from Todd Haselton of CNBC, embedded below, is what really caught my eye. Samsung had put an ad from DirectTV in the stock dialer app. This is really something I never would have expected from any smartphone company, let alone Samsung.

Samsung has ads in the phone app — the app you open to place calls — on its $1,380 Galaxy Z Flip. 🙄 pic.twitter.com/tuWr2PxSYh

— Todd Haselton (@robotodd) February 18, 2020

It showed up in the “Places” tab in the dialer app, which is in partnership with Yelp and lets you search for different businesses directly from the dialer app so you don’t need to Google somewhere to find the address or phone number. I looked into it, to see if this was maybe a mistake on Yelp’s part, accidentally displaying an ad where it shouldn’t have, but nope. The ad was placed by Samsung, in an area where it could blend in so they could make money.

Similar ads exist throughout a bunch of Samsung apps. Samsung Music has ads that look like another track in your library. Samsung Health and Samsung Pay have banners for promotional ads. The stock weather app has ads that look like they could be news. There is also more often very blatant advertising in most of these apps as well.

Samsung Music will give you a popup ad for Sirius XM, even though Spotify is built into the Samsung Music app. You can hide the SiriusXM popup, but only for 7 days at a time. A week later, it will be right back there waiting for you. Samsung will also give you push notification ads for new products from Bixby, Samsung Pay, and Samsung Push Service.

Got this on my Note9. Not sure if it’s because my Note9 thinks it’s a Note10 or if it’s an ad. pic.twitter.com/CeD2KfmidE

— Max Weinbach (@MaxWinebach) August 9, 2019

Are you kidding me… pic.twitter.com/hRV0aU9B3H

— Max Weinbach (@MaxWinebach) June 21, 2020

If you’re wondering which Samsung apps have ads, I’ve listed all the ones I’ve seen ads in and ad-less alternatives to them below.

• Samsung Phone – Google Phone Port
• Galaxy Store – Aurora Store
• Samsung Health – Google Fit
• Samsung Pay – Google Pay
• Samsung Weather – Geometric Weather
• Bixby – Google Assistant
• Samsung Music – TimberX

Why are there even ads in the first place?

To really understand Samsung’s absurd and terrible advertising on its smartphones, you have to understand why big companies advertise. Google advertises because its “free services” still cost money to provide. The ads they serve you in Google services help cover the cost of that 15GB of storage, Google Voice phone number, unlimited Google Photos storage, and whatnot. That’s all to say there is a reason for it, you are getting something in return for those ads.

Websites and YouTube channels serve ads because the content they are providing to you for free is not free for them to make. They need to be compensated for what they are providing to you for free. Again, you are getting something for free, and serving you an ad acts as a form of payment. There was no purchase of a product, hardware or software, for you to have access to their content and services.

Even Samsung’s top-tier foldables come packed with ads.

Where it differs with Samsung is you are paying — for their hardware. My $1,980 Galaxy Fold is getting ads while using the phone as anyone normally would. While Samsung doesn’t tell us the profit margins on their products, it would not strain anybody’s imagination to suggest that these margins should be able to cover the cost of the services, tenfold. I could maybe understand having ads on the sub-$300 phones where margins are likely much lower, but I think we can all agree that a phone which costs anywhere near $1,000 (or in my case, far more) should not be riddled with advertisements. Margins should be high enough to cover these services, and if they don’t, Samsung is running a bad business.

These ads are showing up on my $1,980 Galaxy Fold, $1,380 Z Flip, $1,400 S20 Ultra, $1,200 S20+, $1,100 Note 10+, $1,000 S10+, and $750 S10e along with the $100 A10e. I can understand it on a $100 phone, but it is inexcusable to have them on a $750 phone, let alone a $1980 phone.

Every other major phone manufacturer provides basically the same services without requiring ads in their stock apps to subsidize them. OnePlus, OPPO, Huawei, and LG all have stock weather apps, payment apps, phone apps, and even health apps that don’t show ads. Sure, some of these OEMs include pre-installed bloatware, like Facebook, Spotify, and Netflix, but these can generally be disabled or uninstalled. Samsung’s ads can not (at least not fully).

When you consider that Samsung not only sells among the most expensive smartphones money can buy, but that it’s blatantly using them as an ad revenue platform, you’re left with one obvious conclusion: Samsung is getting greedy. Samsung is just being greedy. They hope most Samsung customers aren’t going to switch to other phones and will just ignore and deal with the ads. While that’s a very greedy and honestly just bad tactic, it was largely working until they started pushing it with more ads in more apps.

You can’t disable them

If you’re a Samsung user who’s read through all of this, you might be wondering “how do I shut off the ads?” The answer is, unfortunately, you (mostly) can’t.

You can disable Samsung Push Services, which is sometimes used to feed you notifications from Samsung apps. So disabling Push Services means no more push notification ads, but also no more push notifications at all in some Samsung apps.

Source: Ads are taking over Samsung’s Galaxy smartphones — and it needs to stop

Last Friday, it was reported that Canadian smart glasses startup North was on the verge of being snapped up by Alphabet, Google’s parent company. Today, it’s official.

North announced the acquisition on both Twitter and in an official blog. Details regarding the terms of the sale were scant, though a Globe and Mail scoop from Friday put the number at around $180 million. North’s remaining staff will, however, be staying in Kitchener-Waterloo, Canada and joining a Google team also based there.

“We couldn’t be more thrilled to join Google, and to take an exciting next step towards the future we’ve been focused on for the past eight years,” wrote North co-founders Stephen Lake, Matthew Bailey, and Aaron Grant in the blog.

[…]

Well, it looks like with the acquisition, we’ll never know if a Focals 2.0 would’ve fixed the problems of the original. North’s blog says the company will not only be winding down Focals 1.0, but that the Focals 2.0 will not ship. At the end of the blog, North provides an email for refund requests, and notes that customer support will continue through the end of 2020. And, if Twitter is any indication, refund emails to existing North customers have already begun hitting inboxes.

Source: Google Just Acquired Smart Glasses Startup North

Yup, this is how monopolies kill the competition.

Note, this article claims that Google was the first company with smart glasses, but I’m pretty sure that Recon Instruments would disagree – another company that was bought up.

I talked about this problem during DORS/CLUC in 2019

As advertisers pull away from Facebook to protest the social networking giant’s hands-off approach to misinformation and hate speech, the company is instituting a number of stronger policies to woo them back.

In a livestreamed segment of the company’s weekly all-hands meeting, CEO Mark Zuckerberg recapped some of the steps Facebook is already taking, and announced new measures to fight voter suppression and misinformation — although they amount to things that other social media platforms like Twitter have already enahatected and enforced in more aggressive ways.

At the heart of the policy changes is an admission that the company will continue to allow politicians and public figures to disseminate hate speech that does, in fact, violate Facebook’s own guidelines — but it will add a label to denote they’re remaining on the platform because of their “newsworthy” nature.

It’s a watered-down version of the more muscular stance that Twitter has taken to limit the ability of its network to amplify hate speech or statements that incite violence.

Zuckerberg said:

A handful of times a year, we leave up content that would otherwise violate our policies if the public interest value outweighs the risk of harm. Often, seeing speech from politicians is in the public interest, and in the same way that news outlets will report what a politician says, we think people should generally be able to see it for themselves on our platforms.

We will soon start labeling some of the content we leave up because it is deemed newsworthy, so people can know when this is the case. We’ll allow people to share this content to condemn it, just like we do with other problematic content, because this is an important part of how we discuss what’s acceptable in our society — but we’ll add a prompt to tell people that the content they’re sharing may violate our policies.

The problems with this approach are legion. Ultimately, it’s another example of Facebook’s insistence that with hate speech and other types of rhetoric and propaganda, the onus of responsibility is on the user.

Source: As advertisers revolt, Facebook commits to flagging ‘newsworthy’ political speech that violates policy | TechCrunch

Apple has said it has decided not to implement 16 web APIs in its Safari browser’s WebKit engine in part because they pose a privacy threat. Critics of the iGiant, including competitors like Google, see Apple’s stance as a defense against a competitive threat.

These APIs, developed in recent years to allow web developers to have access to capabilities available to native mobile platform coders, have the potential to be abused for device fingerprinting, a privacy-violating technique for constructing a unique identifier out of readable device characteristics that can be used for tracking individuals across websites and can be correlated to follow people across devices.

“WebKit’s first line of defense against fingerprinting is to not implement web features which increase fingerprintability and offer no safe way to protect the user,” explains the WebKit team’s recently updated post on tracking prevention.

[…]

In a message to The Register, Lukasz Olejnik, an independent researcher and consultant, characterized the decision as a win for privacy, noting that research he co-authored in 2015 and subsequently on the privacy risks of the Battery Status API and other browser fingerprinting threats helped shape Apple’s policy.

Concern about abuse of the Battery Status API, which websites and browser-based apps can use to check the battery level of a visitor’s/user’s mobile device, prompted Mozilla to remove support in October 2016. Around the same time, Apple, which had implemented the API in code but never activated it, decided not ship it.

Google meanwhile shipped the Battery Status API in Chrome 45, which debuted on July 10, 2015. Rather than removing it, the web giant in May committed to modifying it by allowing developers to disable the API with their apps and in third-party components.

Apple, trying to control its market? No!

Google engineers coincidentally are among those expressing frustration with Apple for holding the web platform back.

Apple requires that all web browsers on iOS devices use Safari’s WebKit rendering engine, which has made mobile browsers on iOS something of a monoculture: Though users may choose to run Chrome on iOS, it’s essentially Safari under the hood.

Over the past few years, Apple’s leisurely (or cautious) pace of API deployment in Safari has meant that Progressive Web Apps (PWAs) – installable web apps that run offline – haven’t worked properly on iOS devices.

As a result, web developers, particularly those interested in PWA adoption, have accused Apple of trying to hamstring web apps to protect its financial stake in native iOS apps, for which it gets a 30 per cent share of revenue through its App Store rules. Those same rules are now the subject of an EU antitrust inquiry.

[…]

Or as Ben Thompson, tech analyst for Stratechery, put it in a blog post on Monday, “Making the web less useful makes apps more useful, from which Apple can take its share; similarly, it is notable that Apple is expanding its own app install product even as it is kneecapping the industry’s.”

Asked about whether these competitive concerns have substance, Olejnik acknowledged that some people see Apple’s technical decisions in that light.

“That said, some privacy concerns are legitimate,” he said.

And for what it’s worth, the technical barriers to PWAs have been falling.

Source: Apple: We’re defending your privacy by nixing 16 browser APIs. Rivals: You mean defending your bottom line • The Register

Google, Apple, Facebook, Amazon and a host of other tech giants will have to pay billions of dollars in extra tax after the Supreme Court refused to hear an appeal on a stock-option case.

America’s top court said [PDF] on Monday it will not review a decision by the Ninth Circuit of Appeals that stock-based compensation should be considered a US taxable asset.

The case concerns the tax years 2004-2007 and Intel-owned tech company Altera, which provided its employees with the ability to buy company shares at a set price in future – a common practice in the tech industry. But that benefit was not included in an accounting of an Altera subsidiary based in a Cayman Islands tax haven just prior to Intel’s purchase.

The shifting of intangible assets has become a common tax-reducing tactic by large tech companies and saves those companies billions of dollars every year that they would otherwise pay to US tax authorities.

However, the Internal Revenue Service (IRS) insisted that Altera’s stock-option compensation be taxed under US tax rules. Facing a massive tax bill- Altera refused to accept the rule and challenged it in court, arguing that “the amount of money at stake is enormous.”

The company accused the IRS of over-reach and claimed it had not provided sufficient evidence to prove its case. And Altera won with a unanimous decision in tax court.

But the IRS appealed and the Ninth Circuit then found in the IRS’ favor, arguing in its 2-1 decision [PDF] in June 2019 that it was “uncontroversial” that stock options should be treated as accounting costs. It then refused a request for the whole court to rehear the case. So Altera appealed the decision to the Supreme Court.

Big Tech weighs in

Among the companies that urged the Supreme Court to take up the case were Apple, Google and Facebook – all of which now face massive tax bills for having done exactly the same thing.

The tech giants argued that the Ninth Circuit decision threatened to ruin “the hard-won but fragile international consensus on treatment of hundreds of billions of dollars of intercompany payments.” In other words, land them with massive, unexpected tax bills.

Ranged against the tech giants were a clump of law professors who argued that the IRS was right to make stock-option compensation a taxable asset.

It’s hard to know the true impact on those companies but the bills are expected to run to billions of dollars, possibly tens of billions. But in a sign of just how big those companies have become the Supreme Court judgment had no impact on share prices this morning – Wall Street knows quite how much cash these companies are sitting on.

If that news wasn’t bad enough however, there is a bigger tax issue hovering over Big Tech: the so-called digital tax threatened by the European Union, which is also fed up with companies like Google, Apple and Facebook paying almost no tax in their countries because of creative accounting through subsidiaries.

That digital tax became more likely this month after the US walked away from discussions at the Organisation for Economic Co-operation and Development (OECD) that were focused on developing a global tax agreement for digital companies.

With the OECD approach faltering, the EU has already made it clear that it will introduce its own version of a digital tax that is likely to make tech giants pay much more to countries in which they operate. Those new taxes are expected to kick in at the start of 2021.

Source: Big Tech on the hook for billions in back taxes after US Supreme Court rejects Altera stock options case hearing • The Register