Will the European Union Break Up Google and Should They Include YouTube?

November 22, 2014 Leave a comment

When Kim Dot Com was arrested, a reporter asked me if I was surprised.  This reaction completely went against the mood of the moment about the fellow.  You’re not? (Incredulous)  Why not? (Scandalized).

Because if you get down on your knees and beg to be punished, don’t be surprised if you are.

I have the same reaction to news that the European Parliament is considering a resolution that Google should be treated as a monopoly in Europe and be “broken up” or required to divest itself of its search business.  According to Reuters:

The European Parliament is preparing a non-binding resolution that proposes splitting Google Inc’s search engine operations in Europe from the rest of its business as one possible option to rein in the Internet company’s dominance in the search market.

European politicians have grown increasingly concerned about Google’s and other American companies’ command of the Internet industry, and have sought ways to curb their power. A public call for a break-up would be the most far-reaching action proposed and a significant threat to Google’s business.

The draft motion does not mention Google or any specific search engine, though Google is by far the dominant provider of such services in Europe with an estimated 90 percent market share.

So how did this come to pass?  It’s simple:  Once again, Google overplayed their hand.  Supposedly the master of public relations and behind the scenes play, Google–and in particular Eric Schmidt (call sign “Uncle Sugar”)–dragged out the European Commission’s antitrust investigation for four years.  But oopsie–that also coincided with the term of the antitrust official of the EC with whom Schmidt had become BFFs.  Uncle Sugar left out the closing part.  When you spend four years working on a deal with a guy, you want to be thinking in terms of that closing bit.  Especially when you know going in that the guy you’re schmoozing is LEAVING ON A DATE CERTAIN.

What Google was truing to avoid was/is something called a “Statement of Objections” that is an administrate proceeding in EC law that allows the imposition of a fine for violating the EC competition law.  That should be a huge amount of money–in Google’s case some estimates are $10 Billion–and it comes with service after the sale, meaning regulatory oversight.

What has become apparent in the not one, not two, not three but an unprecedented four settlement negotiations with the OUTGOING competition commissioner, is that Google has in fact violated the laws that they are avoiding prosecution under.  And even if Google is prosecuted now, they’ve still had an extra four years of operating profits, an extra four years of expanding their control over European governments and an extra four years of extending what Public Citizen called Google’s “soft power”.

However, what has also happened in the intervening four years is hockey stick increase in the public distrust of Google and extreme dissatisfaction with the way the EC was handling the Google investigation.  All the supposed “settlement” proposals that Google made were that special kind of “we think you’re an idiot” approach that anyone who has dealt with Google will immediately recognize.  A fish rots from Uncle Sugar down, don’t you know.

What has happened instead is that there is a full throated movement now among Members of the European Parliament to do what’s worse for Google than paying almost any fine:  Divestiture.

It is possible for governments to require extremely large (check), arrogant (check) and unrepentant (check) violators of antitrust law to divest themselves of certain assets.  This is a relatively normal process with mergers (we’ve even seen record companies required to do this as a condition of approving the merger), and that’s a different breed of cat altogether as it’s part of an overall negotiation.

But to cause divestiture with a company that has violated the antitrust laws is far less common.  We saw this with the break up of the Bell system in the US (United States v. AT&T, 552 F.Supp. 131 (D.D.C. 1982) for those reading along).  The reason for the AT&T case was that the FCC accused the company of using monopoly profits from its Western Electric subsidiary to subsidize the costs of its network.  Sound familiar? I’ll come back to this.

It’s important to note that the way that this break up would be accomplished is not through the European Parliament as Deutche Welle reports:

While the European Parliament lacks the authority to break up corporations and has no power to initiate legislation, such a resolution would increase the pressure on the European Commission to take action against Google.

“It’s a strong expression of the fact that things are going to change,” Gary Reback, a United States attorney who has filed complaints against Google on behalf of companies said, adding “The parliament doesn’t bind the commission for sure, but they have to listen.”

According to Reuters, the resolution was co-sponsored by German center-right Christian Democrat lawmaker Andreas Schwab and Spanish centrist Ramon Tremosa earlier this week. Schwab told Reuters it was “very likely” to be adopted by his own parliamentary group and it was also supported by the main center-left group.

The new anti-trust chief for Europe, European Competition Commissioner Margrethe Vestager, said she would take some time to decide on the next step in a long-running investigation into Google, after her predecessor, Joaquin Almunia, had rejected a proposed settlement with Google which would have ended the matter.

Regardless of whether the European Parliament has the authority to break up Google, it is not a good thing on many levels for even a nonbinding resolution to be adopted in favor of that result.  It’s like the Parliament is telling the public we don’t like Google, we’re keeping an eye on Google and we really don’t trust Google.  And the signal it sends to the new European Competition Commissioner is–go for it.

But that’s not really the end of it.  What about YouTube?  Extremely large (check), arrogant (check) and unrepentant (check) violators of antitrust law.

If Google dominates search in Europe, YouTube is just another search vertical–video search.  And we know that Google used its monopoly profits from search advertising to subsidize YouTube for years.  We’ve seen in the indie label case filed against YouTube with the same European Competition Commission that YouTube certainly behaves like a monopolist–because YouTube is a monopoly.  So Google used its monopoly profits to create a new search monopoly with YouTube and then used its monopoly control to try to bully independent labels.

It also appears that YouTube was unable to use the brass knuckle negotiation tactics it’s so famous for to bully the indie labels into dropping their complaint in Brussels as a condition of closing the Music Key license.  But the case stands out as a prime example of what should be done if the divestment train gets rolling.  Google search and YouTube are just two sides of the same coin.

And of course what it all comes down to is that Google uses its monopoly position to dominate smaller players, all the while harvesting data to profile Google’s search users and music fans on YouTube.  And we all are contributing to Google’s ultimate monopoly–data.

Google shares data across all its platforms which itself a kind of monopoly subsidy across all it’s platforms.  So you can’t really accomplish the goal if all you do is divest the search platform.  YouTube itself must also be spun off with separate management and transparency in data sharing.

As Garth Brooks said, “I’m telling you, [YouTube is] the devil.”  Who never would have survived without subsidies from Google’s monopoly profits.

Sirius Must Go To Trial with Flo & Eddie–”Baffling” Request to Appeal Denied in California

November 20, 2014 Leave a comment

Order Denying Sirius Certification

While the Court is largely unpersuaded and sometimes baffled by Sirius XM’s repetitive or off-point theories about how reasonable jurists might read an unwritten exclusion into §980(a)(2), the Court will not analyze the potential grounds for difference of opinion because certification of this Order suffers from an even more basic deficiency. At this stage in the litigation and under the operative scheduling order governing the case, certification of the Order for immediate appeal would delay rather than materially advance the termination of the litigation; therefore, the Court denies the motion.

This case is moving swiftly toward trial and a final resolution that will be appealable to the Ninth Circuit in the customary manner allowed by the Federal Rules of Civil Procedure. The Court has already ruled on liability as to Sirius XM’s wrongful conduct – publicly performing Flo & Eddie’s sound recordings without its permission.

Rut ro.

Is Irving Azoff sending a signal to all digital services and is Pandora receiving 5×5?

November 20, 2014 Leave a comment

Is Irving sending a signal to all digital services?  Oh, I just betcha he is.

There’s actually a pretty simple answer to the very public demand letter to YouTube from Irving’s Global Music Rights.  If Irving’s GMR has the public performance rights to these high profile songwriters it’s probably because the writers transferred their songs to GMR from wherever they were.  The songs had to start somewhere.

If those songs transferred out of the ASCAP, BMI and SESAC environment, then it’s likely that none of them are subject to blanket licenses granted by those societies.  That also means that those songs aren’t part of the US government’s iron fisted control over songwriters, either.  Which means that unlike at least ASCAP and BMI, GMR is under no obligation to license anything to anybody.

That means that it’s possible that anyone who had a blanket license with the societies now has to also have a deal with GMR.  If you think that is unusually fragmented, send your thank you note to the U.S. Department of Justice, followed closely by Pandora.  The dynamic duo of DOJ and Pandora have been doing their best to screw up collective licensing in the U.S. for years.

Well, Pandora, now you’ve got it.

Here’s how it could work.  Even though artists are subject to the compulsory license for sound recordings that is the backbone of Pandora’s business, songwriters that are not subject to the Department of Justice are free to say no.  That would include GMR songwriters, you know, the ones who write the hits.

If GMR songwriters decide they don’t want to be in Pandora, then Pandora can’t use the songs.

So YouTube may stumble around trying to come up with a theory other than Lex Google Sum, but they, too, are on notice that they don’t have rights to these songs.  That’s called “red flag knowledge” in the trade.  And red flag knowledge of infringement trumps the DMCA safe harbors.

Just in case you thought that 100,000,000 take down notices didn’t do the trick.

So Irving Azoff is broadcasting his intentions if you ask me.  Is anyone listening?

Music Fan Survey Preliminary Results: What is Bit Torrent?

November 19, 2014 Leave a comment

Well, we thought about this.  Here’s another preliminary snapshot from the Music Fan Survey, this time about Bit Torrent.  (Take the survey here.)

bit torrent prelim

bit torrent answer choices

Music Fan Survey Preliminary Results

November 18, 2014 2 comments

As some of you may have noticed, we are conducting a casual survey of music fans.  While we are still collecting data, here’s an interim look at a couple of the results.

I have to say that I’m not surprised by any of these results, but it is worth noting that some are wildly opposite to what some companies would have you believe (Pandora, Google, Sirius, Spotify).

Primary Source Interim

recommendation

Monthly Streaming Spend Interim

streaming spend

Artists on Social Media Interim

social media detail

Public Citizen’s List of Examples of “Third Party” Groups to Which Google Provides Support

November 17, 2014 1 comment
AARP Gay & Lesbian Victory Institute
Access Now George Mason University Law School Law and Econ. Center
American Action Forum Global Network Initiative
American Antitrust Institute Global Voices
American Association of People with Disabilities Heritage Action
American Conservative Union Heritage Foundation
American Constitution Society for Law and Policy Human Rights Campaign
American Council of the Blind Information Technology and Innovation Foundation
American Enterprise Institute for Public Policy Research International Center for Law and Economics
American Foundation for the Blind Internet Education Foundation
American Library Association Institute for IP and Social Justice at Howard Law School
Americans for Tax Reform iKeepSafe
Asian American Justice Center Joint Center for Political and Economic Studies
Asian Pacific American Institute for Congressional Studies The Latino Coalition
APAICS Leadership Network Leadership Conference on Civil and Human Rights
Aspen Institute League of United Latin American Citizens
American University Program on Information Justice and IP Mercatus Center
Boys & Girls Clubs of America National Association for the Advancement of Colored People
The Brookings Institution Nat’onal Assoc. of Latino Elected and Appointed Officials
California State University Northridge Foundation National Association of the Deaf
Capital Factory National Center for Missing & Exploited Children
CATO Institute National Consumers League
Center for a New American Security National Congress of American Indians
Center for American Progress Action Fund National Council of La Raza
Center for Democracy and Technology National Cyber Security Alliance
Center for the Rule of Law National Federation of the Blind
Center for Strategic and International Studies National Hispanic Media Coalition
Committee to Protect Journalists National League of Cities
Common Sense Media National Network to End Domestic Violence
Competitive Enterprise Institute National Taxpayers Union
Congressional Black Caucus Foundation National Urban League
Congressional Black Caucus Institute New America Foundation
Congressional Hispanic Caucus Institute Searle Center on Law, Regulation, and Economic Growth
Congressional Hispanic Leadership Institute PEN American Center
Congressional Institute People for the American Way
ConnectSafely Progressive Policy Institute
Constitution Project Public Knowledge
Consumer Action Reporters Without Borders
Consumer Federation of America Ripon Society
Council of Better Business Bureaus Inc. R Street Institute
Creative Commons Small Business Majority Foundation
Digital 4th TDI
Electronic Frontier Foundation TechFreedom
Engine Advoacy Technology Policy Institute
Enough is Enough Transparency International
Family Online Safety Institute U.S. Black Chamber Inc.
Federalist Society U.S. Conference of Mayors
Free State Foundation U.S. Hispanic Chamber of Commerce
Freedom House Washington Legal Foundation
Future of Music Coalition Wired Safety
Future of Privacy Forum Women’s High Tech Coalition

Timing is Everything: Sirius May be Barred from Appealing California Loss to Turtles #irespectmusic

November 15, 2014 1 comment

Rut ro.  For those of you following along, remember that Flo & Eddie won a tremendous victory against SiriusXM on a motion for summary judgement in federal court before U.S. District Judge Philip Gutierrez in California in a putative class action on behalf of all pre-72 recordings.

Sirius appealed the Turtles case.

Also recall that the major labels filed a separate case in California state court before California Superior Court Judge Mary H. Strobel.  The labels essentially won that case when California Judge Strobel followed similar reasoning to federal Judge Gutierrez .  However, the California judge handed down her opinion after Sirius filed its appeal in the federal case applying California law.

So because Sirius lost both cases, the Turtles may be able to stop the Sirius appeal in the band’s federal court case if they can rely on the decision in the major label State court case.

Two parallel cases in two different court systems, both interpreting California law.

Here’s where it gets interesting.

Before federal Judge Gutierrez decided the Turtles federal case, California Judge Strobel in the major label case issued a preliminary ruling that looked like the court was going to rule against the major labels.  Lucky for them, the artists got a favorable decision first, and lucky for everyone except Sirius, the California Judge Strobel in the major label case reversed her preliminary ruling tilting against the labels and adopted federal Judge Gutierrez’s argument as a matter of California law.

But–in its appeal, Sirius is essentially asking the 9th Circuit for rule on what the California law would be–except that after Sirius filed its appeal, we got California Judge Strobel ‘s ruling.  So we now know what the California law is in fact, after the appeal was filed with federal Judge Gutierrez, but before he ruled on the appeal.

Law360 explains further:

“The ‘tentative’ ruling in the [labels'] case which Sirius XM claimed reached an ‘opposite conclusion’ had ceased to be tentative and, more importantly, had ceased to be opposite,” the [Turtles] filing said.

“Sirius XM claimed not to know about the falsity of its representations when it filed its motion. However, even under its own explanation, it knew within minutes of its filing — and it also knew that the false statements were the foundation for its motion,” The Turtles said. “Yet, rather than withdrawing its motion, Sirius XM insisted on proceeding with it even though it had no factual basis and even less of a legal basis”….

To win an immediate appeal of that decision, Sirius is going to have to prove more than just a judicial conflict over the issue. It’ll also have to show that such a move would be likely to speed up the case — another hurdle The Turtles said [in their filing] that Sirius couldn’t meet.

“Although their music is timeless, the artists who created pre-1972 recordings are aging and depend on the royalties from a marketplace that has been ravaged by piracy,” the filing said. “The artists who hope to benefit from this litigation are necessarily going to suffer tremendously from the delay that would result from an interlocutory appeal.”

The split between Judge Gutierrez’s decision and the tentative ruling weeks prior from Judge Strobel was initially a kind of silver lining for Sirius after the sound defeat in federal court. That changed on October 15th, when Judge Strobel heavily cited Judge Gutierrez’s decision in reversing course.

So Sirius may not be able to appeal the ruling against them by Judge Gutierrez and may have to move on to the damages phase of the case.  (Sirius may be able to appeal later on a different basis.)  More intrepid lawyering by Henry Gradstein and Harvey Geller.  And when you find Google Shill Listers referring to Flo & Eddie as “the company that owns the Turtles recordings”, i.e., spinning a holding company solely owned by Mark Volman and Howard Kayman rather than acknowledging an artist victory, you know that artists are winning.

Also realize that Gradstein and Geller also sued Pandora on the same issues in the same federal court where they had just won a favorable ruling from federal Judge Gutierrez.  And it’s all just a brilliant bit of lawyering.

Why is Sirius continuing this scorched earth policy against old guys and dead cats?  Time to settle your case folks.

Also recall that SoundExchange backed the RESPECT Act that will almost certainly be reintroduced in the next Congress (i.e., after Congress returns in January).  The RESPECT Act would fix the pre-72 issue for digital performances.  Sirius and Pandora had both opposed the RESPECT Act on the bizarre grounds that the Congress intended to screw the creators of our legacy of recorded music out of royalties for webcasting and simulcasting.

Of course the most Orwellian part of especially Pandora’s opposition to the RESPECT Act is because they wanted to help artists.  Yes, that’s right.  They wanted to help artists with something called “full federalization”.  Well, they got full federalization alright, just not in the location they were expecting it.

As a great drummer used to say, it’s all in the wrist.

Here are links to the documents:

Turtles Opposition to Sirius Appeal CA 031120007391

Flo Eddie v Pandora

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