Digital Transformation

Maryland became the first U.S. state to create a digital advertising tax on February 12, 2021. The Digital Advertising Gross Revenue Tax (DAGRT) was originally passed in March of 2020, but subsequently vetoed by Maryland Governor, Larry Hogan. Maryland’s legislature voted to override the Governor’s veto, however. The contentious journey for DAGRT passage is likely to be overshadowed by a litigious future.

DAGRT (full text here) imposes a progressive tax on the sale of digital advertising services’ gross revenue within the state. DAGRT focuses on large providers of digital advertising services; entities with revenue exceeding $100 million. The rate of the tax imposed, based on global revenue, is 2.5% for annual global gross receipts of $100 million to $1 billion, 5% for gross receipts of $1 billion to $5 billion, 7.5% for gross receipts of $5 billion to $15 billion, and 10% for gross receipts exceeding $15 billion. The rate then applies to digital advertising services’ gross revenue in Maryland. However, DAGRT does require all entities with an annual gross revenue derived from digital advertising services within the state over $1 million to file a specialized tax return. DAGRT’s focus on large providers of digital advertising services might incentivize these providers to find avenues to avoid the tax by changing their digital advertising strategies. For example, more companies may offer advertisement-free subscription options. It’s also possible that the companies faced with paying the tax may simply pass the cost on to the smaller businesses purchasing the advertisements and to consumers.
Continue Reading Maryland’s Digital Advertising Tax: A Contentious Start, and an Uncertain Future

On December 15, 2020, the European Commission (EC) presented its long-awaited proposal for a Digital Services Act (DSA), together with a proposal for a Digital Markets Act (DMA), which we discussed in a previous alert. Whereas the DMA aims to promote competition by ensuring fair and contestable markets in the digital sector, the DSA proposal intends to harmonize the liability and accountability rules for digital service providers in order to make the online world a safer and more reliable place for all users in the EU.

Most notably, the DSA would impose far-reaching due diligence obligations on online platforms, with the heaviest burdens falling on “very large” online platforms (i.e., those with more than 45 million average monthly active users in the EU), due to the “systemic” risks such platforms are deemed to pose in terms of their potential to spread illegal content or to harm society. In this day and age when the perceived power of online platforms to independently control content publication and moderation is headline news daily, with governments throughout the globe grappling with different legislative and regulatory proposals, the DSA stands out as an ambitious effort by the EC to create a consistent accountability framework for these platforms, while striking a balance between safeguarding “free speech” and preserving other values and interests in a democratic society. Like the parallel DMA proposal, the DSA proposal has been criticized for targeting mainly U.S.-based companies, which would make up most of the “very large” platforms. Given the huge commercial interests at stake, the passage of both laws will no doubt be the subject of intense debate and lobbying, including with respect to the asymmetric nature of the proposed regulation and the powerful role that the EC reserves to itself in both proposals.
Continue Reading Digital Services Act: The European Commission Proposes An Updated Accountability Framework For Online Services

On December 15, 2020, the European Commission (EC) published its proposal for a Digital Markets Act (DMA). The proposal aims to promote fair and contestable markets in the digital sector. If adopted, it could require substantial changes to the business models of large digital platform service providers by imposing new obligations and prohibiting existing market practices. These changes not only would create significant new obligations on “gatekeeper” platforms, but also opportunities for competitor digital service providers and adjacent firms. Further, the proposed requirements of the DMA have the potential to transform the way that businesses engage with “gatekeeper” providers – including, for example, companies that sell goods and services, distribute apps, and/or purchase advertising on large platforms.

Digital Markets Act Proposal: Main Takeaways

  • Proposes new rules intended to promote fair and contestable markets in the digital sector, which would apply only to providers of “core platform services” designated as “gatekeepers”.
  • Defines “core platform services” to include online search engines, online marketplaces, social networks, messaging and chat apps, video-sharing platforms, operating systems, cloud computing services, and advertising networks and exchanges.
  • Defines “Gatekeepers” as providers of core platform services which have a significant impact on the EU internal market, serve as an important gateway for business users to reach customers, and have an entrenched and durable position.
  • Provides quantitative thresholds based on turnover or market value, and user reach, as a basis to identify presumed gatekeepers. Also empowers the Commission to designate companies as gatekeepers following a market investigation.
  • Prohibits gatekeepers from engaging in a number of practices deemed unfair, such as combining personal data across platforms, ‘wide’ MFN clauses, misusing non-public data about the activities of business users and their customers to gain a competitive advantage, blocking users from uninstalling pre-installed applications, self-preferencing in ranking, etc.
  • Imposes certain affirmative obligations on gatekeepers, including measures to promote interoperability, data access, data portability, and transparency regarding advertising services.
  • Requires gatekeepers to notify below-threshold mergers and to accept independent audits of profiling practices.
  • Puts the Commission in charge of enforcement with extensive investigative powers, including the power to require access to databases and algorithms, and the ability to impose fines of up to 10% of the gatekeeper’s worldwide annual turnover.
  • Empowers the Commission to impose structural remedies, potentially including the divestiture of businesses, for recurring non-compliance.
  • Authorizes the Commission to carry out market investigations to assess whether new gatekeeper practices and services need to be regulated.


Continue Reading Digital Markets Act: The European Commission Unveils Plans to Regulate Digital ‘Gatekeepers’

Last week, the President signed the Internet of Things (IoT) Cybersecurity Improvement Act into law, kicking off a multi-year process that will culminate in the first-ever federal requirements for IoT devices. Under the law, the National Institute of Standards & Technology (NIST) is now charged with drafting and finalizing security requirements for IoT devices, as

In the coming weeks or months, the European Commission is expected to table an ambitious set of draft legislation that, if adopted, will have a major impact on the business practices of digital service providers in the EU, including non-EU companies serving European users: the Digital Services Act (DSA) and the Digital Markets Act (DMA). The Commission’s legislative proposals aim to strengthen the responsibilities of online platforms and to support fair competition in digital markets.

1. The Digital Services Act (DSA): increasing responsibilities for digital service providers

The DSA’s main objective is to update the e-Commerce Directive. This is long overdue, as the legal framework for digital services has remained largely unchanged since the e-Commerce Directive was adopted in 2000. The update aims to clarify the liability regime for digital intermediaries active in the EU and to reinforce oversight and enforcement.

The DSA will require digital service providers to take more responsibility for dealing with harmful or illegal content and dangerous or counterfeit products. They will have to put in place clear and simple procedures to deal with notifications about harmful or illegal content or goods on their platforms. They will also have to verify the identity of traders before letting them on their platforms (“know your business customer”). At the same time, they will have to make available simple procedures for platform users to complain if they think the removal of their material was unwarranted.
Continue Reading New EU Proposals to Regulate Digital Markets – What to Expect

Blockchain is a digital, decentralized, distributed ledger that provides a way for information to be recorded, shared and maintained by a community. Below we review the impact blockchain can have on increasing product safety, reducing recall expense, combatting counterfeits and otherwise assisting retailers in managing risk and protecting customers. By allowing for near real time, immutable tracking that is easily accessible to suppliers, manufacturers and government entities, blockchain technology has the capacity to revolutionize the retail industry.

Key features of the blockchain include:

  • Near real time – enables almost instant settlement of recorded transactions, removing friction and reducing risk.
  • Reliable and available – as multiple participants share a blockchain, it has no single point of failure and is resilient in the face of outages and attacks.
  • Transparent – transactions are visible to all participants, with identical copies maintained on multiple computer systems, increasing the ability to audit and trust the information held.
  • Irreversible – it is possible to make transactions irreversible, which can increase the accuracy of records and simplify back-office processes.
  • Immutable – it is nearly impossible to make changes to a blockchain without detection, increasing confidence in the information it carries and reducing the opportunities for fraud.

Helping Product Safety, Reducing Recall Costs and Protecting Brands
Continue Reading Blockchain & the Retail Industry: Product Safety and Counterfeiting Use Cases

On April 8, 2020, the Federal Trade Commission (FTC) published a blog post titled, “Using Artificial Intelligence and Algorithms,” that offers important lessons about the use of AI and algorithms in automated decision-making.

The post begins by noting that headlines today tout rapid improvements in AI technology, and the use of more advanced

Crowell & Moring has released Litigation Forecast 2020: What Corporate Counsel Need to Know for the Coming Year. Retailers and consumer products company can benefit from the Forecast’s forward-looking insights from leading Crowell & Moring lawyers which will help legal departments anticipate and respond to challenges that might arise in the year ahead.

For

Crowell & Moring has issued its fifth annual report on regulatory trends for in-house counsel. “Regulatory Forecast 2019: What Corporate Counsel Need to Know for the Coming Year” explores a diverse range of regulatory developments coming out of Washington and other leading regulatory centers of power, and it takes a deep dive

Crowell & Moring has issued its seventh-annual Litigation Forecast 2019: What Corporate Counsel Need to Know for the Coming Year.”

The Forecast provides concise, forward-looking perspectives on technological developments that can help corporate counsel identify the many opportunities and challenges ahead as they harness the power of technology. The Forecast further explores the