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German antitrust office limits Facebooks data gathering

February 9, 2019 by Blockchain Interchange Leave a Comment

A lengthy antitrust probe into how Facebook gathers data on users has resulted in Germany’s competition watchdog banning the social network giant from combining data on users across its own suite of social platforms without their consent.

The investigation of Facebook data-gathering practices began in March 2016.

The decision by Germany’s Federal Cartel Office, announced today, also prohibits Facebook from gathering data on users from third party websites — such as via tracking pixels and social plug-ins — without their consent.

Although the decision does not yet have legal force and Facebook has said it’s appealing. The BBC reports that the company has a month to challenge the decision before it comes into force in Germany.

In both cases — i.e. Facebook collecting and linking user data from its own suite of services; and from third party websites — the Bundeskartellamt asserts that consent to data processing must be voluntary, so cannot be made a precondition of using Facebook’s service.

The company must therefore “adapt its terms of service and data processing accordingly”, it warns.

“Facebook’s terms of service and the manner and extent to which it collects and uses data are in violation of the European data protection rules to the detriment of users. The Bundeskartellamt closely cooperated with leading data protection authorities in clarifying the data protection issues involved,” it writes, couching Facebook’s conduct as “exploitative abuse”.

“Dominant companies may not use exploitative practices to the detriment of the opposite side of the market, i.e. in this case the consumers who use Facebook. This applies above all if the exploitative practice also impedes competitors that are not able to amass such a treasure trove of data,” it continues.

“This approach based on competition law is not a new one, but corresponds to the case-law of the Federal Court of Justice under which not only excessive prices, but also inappropriate contractual terms and conditions constitute exploitative abuse (so-called exploitative business terms).”

Commenting further in a statement, Andreas Mundt, president of the Bundeskartellamt, added: “In future, Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts.

“The combination of data sources substantially contributed to the fact that Facebook was able to build a unique database for each individual user and thus to gain market power. In future, consumers can prevent Facebook from unrestrictedly collecting and using their data. The previous practice of combining all data in a Facebook user account, practically without any restriction, will now be subject to the voluntary consent given by the users.

“Voluntary consent means that the use of Facebook’s services must not be subject to the users’ consent to their data being collected and combined in this way. If users do not consent, Facebook may not exclude them from its services and must refrain from collecting and merging data from different sources.”

“With regard to Facebook’s future data processing policy, we are carrying out what can be seen as an internal divestiture of Facebook’s data,” Mundt added. 

Facebook has responded to the Bundeskartellamt’s decision with a blog post setting out why it disagrees. The company did not respond to specific questions we put to it.

One key consideration is that Facebook also tracks non-users via third party websites. Aka, the controversial issue of ‘shadow profiles’ — which both US and EU politicians questioned founder Mark Zuckerberg about last year.

Which raises the question of how it could comply with the decision on that front, if its appeal fails, given it has no obvious conduit for seeking consent from non-users to gather their data. (Facebook’s tracking of non-users has already previously been judged illegal elsewhere in Europe.)

The German watchdog says that if Facebook intends to continue collecting data from outside its own social network to combine with users’ accounts without consent it “must be substantially restricted”, suggesting a number of different criteria are feasible — such as restrictions including on the amount of data; purpose of use; type of data processing; additional control options for users; anonymization; processing only upon instruction by third party providers; and limitations on data storage periods.

Should the decision come to be legally enforced, the Bundeskartellamt says Facebook will be obliged to develop proposals for possible solutions and submit them to the authority which would then examine whether or not they fulfil its requirements.

While there’s lots to concern Facebook in this decision — which, it recently emerged, has plans to unify the technical infrastructure of its messaging platforms — it isn’t all bad for the company. Or, rather, it could have been worse.

The authority makes a point of saying the social network can continue to make the use of each of its messaging platforms subject to the processing of data generated by their use, writing: “It must be generally acknowledged that the provision of a social network aiming at offering an efficient, data-based business model funded by advertising requires the processing of personal data. This is what the user expects.”

Although it also does not close the door on further scrutiny of that dynamic, either under data protection law (as indeed, there is a current challenge to so called ‘forced consent‘ under Europe’s GDPR); or indeed under competition law.

“The issue of whether these terms can still result in a violation of data protection rules and how this would have to be assessed under competition law has been left open,” it emphasizes.

It also notes that it did not investigate how Facebook subsidiaries WhatsApp and Instagram collect and use user data — leaving the door open for additional investigations of those services.

On the wider EU competition law front, in recent years the European Commission’s competition chief has voiced concerns about data monopolies — going so far as to suggest, in an interview with the BBC last December, that restricting access to data might be a more appropriate solution to addressing monopolistic platform power vs breaking companies up.

In its blog post rejecting the German Federal Cartel Office’s decision, Facebook’s Yvonne Cunnane, head of data protection for its international business, Facebook Ireland, and Nikhil Shanbhag, director and associate general counsel, make three points to counter the decision, writing that: “The Bundeskartellamt underestimates the fierce competition we face in Germany, misinterprets our compliance with GDPR and undermines the mechanisms European law provides for ensuring consistent data protection standards across the EU.”

On the competition point, Facebook claims in the blog post that “popularity is not dominance” — suggesting the Bundeskartellamt found 40 per cent of social media users in Germany don’t use Facebook. (Not that that would stop Facebook from tracking those non-users around the mainstream Internet, of course.)

Although, in its announcement of the decision today, the Federal Cartel Office emphasizes that it found Facebook to have a dominant position in the Germany market — with (as of December 2018) 23M daily active users and 32M monthly active users, which it said constitutes a market share of more than 95 per cent (daily active users) and more than 80 per cent (monthly active users).

It also says it views social services such as Snapchat, YouTube and Twitter, and professional networks like LinkedIn and Xing, as only offering “parts of the services of a social network” — saying it therefore excluded them from its consideration of the market.

Though it adds that “even if these services were included in the relevant market, the Facebook group with its subsidiaries Instagram and WhatsApp would still achieve very high market shares that would very likely be indicative of a monopolisation process”.

The mainstay of Facebook’s argument against the Bundeskartellamt decision appears to fix on the GDPR — with the company both seeking to claim it’s in compliance with the pan-EU data-protection framework (although its business faces multiple complaints under GDPR), while simultaneously arguing that the privacy regulation supersedes regional competition authorities.

So, as ever, Facebook is underlining that its EU regulator of choice is the Irish Data Protection Commission.

“The GDPR specifically empowers data protection regulators – not competition authorities – to determine whether companies are living up to their responsibilities. And data protection regulators certainly have the expertise to make those conclusions,” Facebook writes.

“The GDPR also harmonizes data protection laws across Europe, so everyone lives by the same rules of the road and regulators can consistently apply the law from country to country. In our case, that’s the Irish Data Protection Commission. The Bundeskartellamt’s order threatens to undermine this, providing different rights to people based on the size of the companies they do business with.”

The final plank of Facebook’s rebuttal focuses on pushing the notion that pooling data across services enhances the consumer experience and increases “safety and security” — the latter point being the same argument Zuckerberg used last year to defend ‘shadow profiles’ (not that he called them that) — with the company claiming now that it needs to pool user data across services to identify abusive behavior online; and disable accounts linked to terrorism; child exploitation; and election interference.

So the company is essentially seeking to leverage (you could say ‘legally weaponize’) a smorgasbord of antisocial problems — many of which have scaled to become major societal issues in recent years at least in part as a consequence of the size and scale of Facebook’s social empire — as arguments for defending the size and operational sprawl of its business. Go figure.

In a statement provided to us last month ahead of the ruling, Facebook said: “Since 2016, we have been in regular contact with the Bundeskartellamt and have responded to their requests. As we outlined publicly in 2017, we disagree with their views and the conflation of data protection laws and antitrust laws, and will continue to defend our position.”

Separately, a 2016 privacy policy reversal by WhatsApp to link user data with Facebook accounts, including for marketing purposes, attracted the ire of EU privacy regulations — and most of these data flows remain suspended in the region.

An investigation into the WhatsApp-Facebook data-sharing by the UK’s data watchdog was only closed last year after Facebook committed not to link user data across the two services until it could do so in a way that complies with the GDPR. Although the company does still share data for business intelligence and security purposes — which has drawn continued scrutiny from the French data watchdog.

On the links between privacy and competition law, the EU’s data protection supervisor, Giovanni Buttarelli, also told us last fall that the bloc is looking to evolve its regulatory regime to respond to the rise of digital monopolies — suggesting joint enforcement and increased co-operation between privacy and competition regulators will be a key part of the change.

Read more: https://techcrunch.com/2019/02/07/german-antitrust-office-limits-facebooks-data-gathering/

Filed Under: ICO Tagged With: antitrust, competition law, data processing, data protection law, Europe, european commission, european union, facebook, General Data Protection Regulation, Germany, instagram, LinkedIn, Mark Zuckerberg, snapchat, Social Media, Social Network, whatsapp

As Bitcoin sinks, industry startups are forced to cut back

December 27, 2018 by Blockchain Interchange Leave a Comment

Around this time last year, the price of Bitcoin hit an all-time high of nearly $20,000. Cryptocurrency enthusiasts everywhere boasted about the wealth 2018 would bring, initial coin offerings exploded and startups continued to pull in record amounts of venture capital. Fast-forward one year: Bitcoin is down 75 percent to a meager $3,700, sinking as quickly as its meteoric rise, and industry startups are paying the price.

The latest victim is Bitmain, a provider of bitcoin mining hardware that very recently submitted its IPO prospectus to the Stock Exchange of Hong Kong. The company confirmed to CoinDesk this week that cutbacks would begin imminently: “There has been some adjustment to our staff this year as we continue to build a long-term, sustainable and scalable business,” a spokesperson for Bitmain told CoinDesk . “A part of that is having to really focus on things that are core to that mission and not things that are auxiliary.”

Beijing-based Bitmain hasn’t clarified just how many of its employees will be impacted, though rumors — which Bitmain has since denied — on Maimai, a Chinese LinkedIn-like platform, suggest as many as 50 percent of the company’s headcount could be laid off. This news comes after the crypto mining giant confirmed it had shuttered its Israeli development center, Bitmaintech Israel, laying off 23 employees in the process.

Bitmain employs at least 2,000 people, up from 250 in 2016, according to PitchBook, as the company’s growth has skyrocketed.

The decreasing value of Bitcoin.

“The crypto market has undergone a shake-up in the past few months, which has forced Bitmain to examine its various activities around the globe and to refocus its business in accordance with the current situation,” Bitmaintech Israel head Gadi Glikberg reportedly told his employees at the time of the layoffs.

Bitmain has raised more than $800 million in venture capital funding from Sequoia, Coatue Management, SoftBank and more. At a valuation of $12 billion, it quickly soared to become the most valuable crypto startup in the world, surpassing Coinbase, which itself garnered an $8 billion valuation this fall.

In its IPO filing, Bitmain reported more than $2.5 billion in revenue last year, up nearly 10x on the $278 million it claimed for 2016. As for the first half of 2018, Bitmain said it surpassed $2.8 billion in revenue. These are astonishing numbers, yes, but whether Bitmain can sustain this kind of momentum has been called into question, especially as it gears up to go public in what would be the largest crypto-related IPO to date. The crypto market, by nature, is unpredictable — a characteristic that’s less than favorable to public market investors.

Startups sacrifice staff

Meanwhile, Huobi Group, a crypto trading platform also headquartered in Beijing, is laying off a portion of its 1,000 employees, too, according to a report from the South China Morning Post.

Huobi, which is backed by Sequoia and ZhenFund, didn’t immediately respond to a request for comment.

Moreover, Brooklyn-based ConsenSys earlier this month confirmed it was laying off 13 percent of its 1,200-person staff. The company, active in the crypto ecosystem, incubates and invests in decentralized applications built on the Ethereum blockchain.

“Excited as we are about ConsenSys 2.0, our first step in this direction has been a difficult one: we are streamlining several parts of the business including ConsenSys Solutions, spokes, and hub services, leading to a 13% reduction of mesh members,” ConsenSys founder and crypto billionaire Joseph Lubin wrote in a letter to employees regarding the layoffs.

Finally, Steemit, a distributed app designed to reward content creators, laid off 70 percent of its staff just days earlier, citing poor market conditions.

“We still believe that Steem can be by far the best, and lowest cost, blockchain protocol for applications and that the improvements that will result from this new direction will make it far better for application sustainability,” founder and chief executive officer Ned Scott wrote in a statement. “However, in order to ensure that we can continue to improve Steem, we need to first get costs under control to remain economically sustainable. There’s nothing that I want more now than to survive, to keep steemit.com operating, and keep the mission alive, to make great communities.”

Downsizing following periods of rapid growth — which many crypto startups experienced during the Bitcoin boom — is only natural, but can these businesses continue to endure periods of extreme volatility without crashing completely? One thing is certain: If the price of Bitcoin sinks further and further, “staff adjustments” at crypto startups large and small will be unavoidable.

WTF is happening to crypto?

Read more: https://techcrunch.com/2018/12/26/as-bitcoin-sinks-industry-startups-are-forced-to-cut-back/

Filed Under: ethereum Tagged With: bitcoin, Bitmain, Coatue Management, coinbase, CoinDesk, consensys, Huobi, joseph lubin, LinkedIn, Softbank

Tiger Global is in talks to invest in cryptocurrency unicorn Coinbase at $8B valuation

October 9, 2018 by Blockchain Interchange Leave a Comment

Days after reports emerged that Tiger Global had led the $245 million round for payments platform Stripe, the firm has set its sights on cryptocurrency trading platform Coinbase.

The six-year-old company is in negotiations with Tiger Global to raise up to $500 million at an $8 billion valuation, per Recode.

Coinbase declined to comment on the deal.

Coinbase was most recently valued at $1.6 billion following a $100 million round in August 2017, though the company had previously valued itself at $8 billion amid acquisitions talks with cryptocurrency startup Earn, for which it paid $120 million in April.

Capital from the upcoming deal may be used to buy out shareholders. San Francisco-based Coinbase, a leading digital currency exchange, is backed by Andreessen Horowitz, Ribbit Capital, Union Square Ventures, IVP, Spark Capital, Greylock Partners, Battery Ventures, Section 32, Draper Associates and several others. It’s raised $225 million in equity funding to date.

Tiger Global Management is killing it right now

Tiger Global, for its part, is a hedge fund known for its crossover investments in emerging technology companies. The 16-year-old New York-based firm often writes sizable checks in late-stage companies like Spotify, Ola and Flipkart. Lately, it’s also been busy writing smaller checks. In the last year, it’s led cannabis startup Green Bits’ $17 million Series A and participated in subscription billing and payment service Chargebee’s $18 million Series C.

According to PitchBook, Tiger Global has participated in 24 venture capital rounds so far in 2018.

This morning, Coinbase announced two new hires. The first is Jonathan Kellner, who joined as a managing director of its institutional coverage group. The former CEO of Instinet will lead institutional sales and support organizations and will focus on Coinbase’s effort to introduce cryptocurrency to hedge funds and other traditional institutional investors.

The second addition is Chris Dodds, who will join Coinbase’s board of directors. He currently serves on the board of Charles Schwab and is a senior advisor to The Carlyle Group.

Coinbase has made several additions to its C-suite this year as it enters a major growth phase and presumably preps for an IPO. Most recently, it brought on a former Fannie Mae exec Brian Brooks as its chief legal officer and LinkedIn’s Michael Li as its head of data.

Coinbase’s Brian Armstrong: ‘I’d love to run a public company’

Read more: https://techcrunch.com/2018/10/02/tiger-global-is-in-talks-to-invest-in-cryptocurrency-unicorn-coinbase-at-8b-valuation/

Filed Under: Technology Tagged With: battery ventures, ChargeBee, charles schwab, coinbase, Draper Associates, Flipkart, Greylock Partners, LinkedIn, Ribbit Capital, Spark Capital, spotify, stripe, tiger global, Tiger Management, Union Square Ventures, Venture Capital

Coinbase hires Fannie Mae exec Brian Brooks as chief legal officer

September 24, 2018 by Blockchain Interchange Leave a Comment

Coinbase has made yet another addition to its C-suite. The cryptocurrency trading platform has hired Brian Brooks, the former executive vice president, general counsel and corporate secretary of Fannie Mae, as its chief legal officer.

The hiring is part of the company’s effort to expand its legal, compliance and government affairs teams. Mike Lempres, who until now held the chief legal and risk officer title, will transition into the role of chief policy officer.

“From the time it was founded seven years ago, Coinbase has been a leading advocate for the adoption of cryptocurrency,” Coinbase CEO Brian Armstrong said in a statement. “We’ve engaged proactively with regulators as we built products and services that allow people to buy, sell and use cryptocurrency all over the world. In recent years, the industry expanded faster than we could have imagined with an explosion in customer demand and entrepreneurial activity pushing the capabilities of the ecosystem forward. As this trend continues, it is more important than ever that we contribute to a public policy and regulatory environment that fosters innovation while protecting investors.”

Brooks joined Fannie Mae in 2014; before that, he was the vice chairman of OneWest Bank and a managing partner at the law firm O’Melveny & Myers.

The news comes one day after Coinbase announced the hiring of Michael Li as VP of data. Li had spent the last seven years at LinkedIn, most recently as its head of analytics and data science.

Here’s an updated round-up of Coinbase’s other notable 2018 hires:

  • Michael Li, VP of data (September). Li was previously the head of analytics and data science at LinkedIn.
  • Tim Wagner, VP of engineering (July). Wagner was previously a general manager at Amazon Web Services.
  • Jeff Horowitz, chief compliance officer (July). Horowitz was the former global head of compliance at Pershing.
  • Jennifer Jones, chief accounting officer (July). Jones joined from EY, where she was a senior manager.
  • Alesia Haas, chief financial officer (April). Haas joined from New York-based alternative asset management firm Oz Management.
  • Balaji Srinivasan, chief technology officer (April). Srinivasan joined through the company’s acquisition of Earn.com, where he was CEO.
  • Rachael Horwitz, VP of communications (April). Horwitz was formerly a partner at Spark Capital.
  • Tariq Meyers, global head of belonging and inclusion (April). Meyers was formerly the head of diversity and inclusion at Lyft.
  • Emilie Choi, VP of corporate and business development (March). Choi joined from LinkedIn, where she was head of corporate development.

Coinbase’s Brian Armstrong: ‘I’d love to run a public company’

Read more: https://techcrunch.com/2018/09/19/coinbase-hires-fannie-mae-exec-brian-brooks-as-chief-legal-officer/

Filed Under: Technology Tagged With: Amazon Web Services, balaji srinivasan, Brian Armstrong, ceo, chief technology officer, coinbase, cryptocurrencies, earn.com, economy, Emilie choi, Finance, head of diversity, LinkedIn, Lyft, New York, rachael horwitz, Spark Capital, vice-chairman, vp

Coinbase poaches LinkedIns head of data Michael Li

September 22, 2018 by Blockchain Interchange Leave a Comment

Coinbase continues to beef up its management team with another new hire in Michael Li, who’s joining the cryptocurrency trading platform as its VP of data. Li spent the last seven years at LinkedIn, most recently as its head of analytics and data science.

“Data will be essential to empowering Coinbase’s mission, and core to company’s strategy to deliver the most trusted and easiest-to-use cryptocurrency products and services,” Li wrote in a Medium post this morning. “I feel privileged to take on this challenging and rewarding new role to start the next chapter of my career.”

“We will be both leveraging existing technologies like machine learning and AI, as well as creating data innovations for emerging blockchain use cases to keep up with the ever-changing industry landscape. I look forward to advancing the company’s leadership position in the crypto industry through the power of data and will share key learnings along the way.”

On stage at TechCrunch Disrupt 2018, Coinbase CEO Brian Armstrong opened up about his desire to one day run a public company. For now, Coinbase is backed by private investors including IVP, Spark Capital, Greylock Partners, Battery Ventures, Section 32 and Draper Associates. It had raised more than $200 million at a $1.6 billion valuation as of August 2017.

Coinbase’s Brian Armstrong: ‘I’d love to run a public company’

Here’s a look at some of Coinbase’s other 2018 hires:

  • Tim Wagner, VP of engineering (July). Wagner was previously a general manager at Amazon Web Services.
  • Jeff Horowitz, Chief Compliance Officer (July). Horowitz was the former global head of compliance at Pershing.
  • Alesia Haas, Chief Financial Officer (April). Haas joined from New York-based alternative asset management firm Oz Management.
  • Balaji Srinivasan, Chief Technology Officer (April). Srinivasan joined through the company’s acquisition of Earn.com, where he was CEO.
  • Rachael Horwitz, VP of communications (April). Horwitz was formerly a partner at Spark Capital.
  • Tariq Meyers, Global Head of Belonging & Inclusion (April). Meyers was formerly the head of diversity and inclusion at Lyft.
  • Emilie Choi, VP of corporate and business development (March). Choi also joined from LinkedIn, where she was head of corporate development.

Read more: https://techcrunch.com/2018/09/18/coinbase-poaches-linkedins-head-of-data-michael-li/

Filed Under: Blockchain Tagged With: coinbase, LinkedIn

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