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Europe agrees platform rules to tackle unfair business practices

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The European Union’s political institutions have reached agreement over new rules designed to boost transparency around online platform businesses and curb unfair practices to support traders and other businesses that rely on digital intermediaries for discovery and sales.

The European Commission proposed a regulation for fairness and transparency in online platform trading last April. And late yesterday the European Parliament, Council of the EU and Commission reached a political deal on regulating the business environment of platforms, announcing the accord in a press release today.

The political agreement paves the way for adoption and publication of the regulation, likely later this year. The rules will apply 12 months after that point.

Online platform intermediaries such as ecommerce marketplaces and search engines are covered by the new rules if they provide services to businesses established in the EU and which offer goods or services to consumers located in the EU.

The Commission estimates there are some 7,000 such platforms and marketplaces which will be covered by the regulation, noting this includes “world giants as well as very small start-ups”.

Under the new rules, sudden and unexpected account suspensions will be banned — with the Commission saying platforms will have to provide “clear reasons” for any termination and also possibilities for appeal.

Terms and conditions must also be “easily available and provided in plain and intelligible language”.

There must also be advance notice of changes — of at least 15 days, with longer notice periods applying for more complex changes.

For search engines the focus is on ranking transparency. And on that front dominant search engine Google has attracted more than its fair share of criticism in Europe from a range of rivals (not all of whom are European).

In 2017, the search giant was also slapped with a $2.7BN antitrust fine related to its price comparison service, Google Shopping. The EC found Google had systematically given prominent placement to its own search comparison service while also demoting rival services in search results. (Google rejects the findings and is appealing.)

Given the history of criticism of Google’s platform business practices, and the multi-year regulatory tug of war over anti-competitive impacts, the new transparency provisions look intended to make it harder for a dominant search player to use its market power against rivals.

Changing the online marketplace

The importance of legislating for platform fairness was flagged by the Commission’s antitrust chief, Margrethe Vestager, last summer — when she handed Google another very large fine ($5BN) for anti-competitive behavior related to its mobile platform Android.

Vestager said then she wasn’t sure breaking Google up would be an effective competition fix, preferring to push for remedies to support “more players to have a real go”, as her Android decision attempts to do. But she also stressed the importance of “legislation that will ensure that you have transparency and fairness in the business to platform relationship”.

If businesses have legal means to find out why, for example, their traffic has stopped and what they can do to get it back that will “change the marketplace, and it will change the way we are protected as consumers but also as businesses”, she argued.

Just such a change is now in sight thanks to EU political accord on the issue.

The regulation represents the first such rules for online platforms in Europe and — commissioners’ contend — anywhere in the world.

“Our target is to outlaw some of the most unfair practices and create a benchmark for transparency, at the same time safeguarding the great advantages of online platforms both for consumers and for businesses,” said Andrus Ansip, VP for the EU’s Digital Single Market initiative in a statement.

Elżbieta Bieńkowska, commissioner for internal market, industry, entrepreneurship, and SMEs, added that the rules are “especially designed with the millions of SMEs in mind”.

“Many of them do not have the bargaining muscle to enter into a dispute with a big platform, but with these new rules they have a new safety net and will no longer worry about being randomly kicked off a platform, or intransparent ranking in search results,” she said in another supporting statement.

In a factsheet about the new rules, the Commission specifies they cover third-party ecommerce market places (e.g. Amazon Marketplace, eBay, Fnac Marketplace, etc.); app stores (e.g. Google Play, Apple App Store, Microsoft Store etc.); social media for business (e.g. Facebook pages, Instagram used by makers/artists etc.); and price comparison tools (e.g. Skyscanner, Google Shopping etc.).

The regulation does not target every online platform. For example, it does not cover online advertising (or b2b ad exchanges), payment services, SEO services or services that do not intermediate direct transactions between businesses and consumers.

The Commission also notes that online retailers that sell their own brand products and/or don’t rely on third party sellers on their own platform are also excluded from the regulation, such as retailers of brands or supermarkets.

Where transparency is concerned, the rules require that regulated marketplaces and search engines disclose the main parameters they use to rank goods and services on their site “to help sellers understand how to optimise their presence” — with the Commission saying the aim is to support sellers without allowing gaming of the ranking system.

Some platform business practices will also require mandatory disclosure — such as for platforms that not only provide a marketplace for sellers but sell on their platform themselves, as does Amazon for example.

The ecommerce giant’s use of merchant data remains under scrutiny in the EU. Vestager revealed a preliminary antitrust probe of Amazon last fall — when she said her department was gathering information to “try to get a full picture”. She said her concern is dual platforms could gain an unfair advantage as a consequence of access to merchants’ data.

And, again, the incoming transparency rules look intended to shrink that risk — requiring what the Commission couches as exhaustive disclosure of “any advantage” a platform may give to their own products over others.

“They must also disclose what data they collect, and how they use it — and in particular how such data is shared with other business partners they have,” it continues, noting also that: “Where personal data is concerned, the rules of the GDPR [General Data Protection Regulation] apply.”

(GDPR of course places further transparency requirements on platforms by, for example, empowering individuals to request any personal data held on them, as well as the reasons why their information is being processed.)

The platform regulation also includes new avenues for dispute resolution by requiring platforms set up an internal complaint-handling system to assist business users.

“Only the smallest platforms in terms of head count or turnover will be exempt from this obligation,” the Commission notes. (The exemption limit is set at fewer than 50 staff and less than €10M revenue.)

It also says: “Platforms will have to provide businesses with more options to resolve a potential problem through mediators. This will help resolve more issues out of court, saving businesses time and money.”

But, at the same time, the new rules allow business associations to take platforms to court to stop any non-compliance — mirroring a provision in the GDPR which also allows for collective enforcement and redress of individual privacy rights (where Member States adopt it).

“This will help overcome fear of retaliation, and lower the cost of court cases for individual businesses, when the new rules are not followed,” the Commission argues.

“In addition, Member States can appoint public authorities with enforcement powers, if they wish, and businesses can turn to those authorities.”

One component of the regulation that appears to be being left up to EU Member States to tackle is penalties for non-compliance — with no clear regime of fines set out (as there is in GDPR). So it’s not clear whether the platform regulation might not have rather more bark than bite, at least initially.

“Member States shall need to take measures that are sufficiently dissuasive to ensure that the online intermediation platforms and search engines comply with the requirements in the Regulation,” the Commission writes in a section of its factsheet dealing with how to make sure platforms respect the new rules.

It also points again to the provision allowing business associations or organisations to take action in national courts on behalf of members — saying this offers a legal route to “stop or prohibit non-compliance with one or more of the requirements of the Regulation”. So, er, expect lawsuits.

The Commission says the rules will be subject to review within 18 months after they come into force — in a bid to ensure the regulation keeps pace with fast-paced tech developments.

A dedicated Online Platform Observatory has been established in the EU for the purpose of “monitoring the evolution of the market and the effective implementation of the rules”, it adds.

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European Parliament DDoSed after declaring Russia a sponsor of terrorism

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Enlarge / An iteration of what happens when your site gets shut down by a DDoS attack.

The European Parliament website was knocked offline for several hours on Wednesday by a distributed denial-of-service (DDoS) attack that started shortly after the governing body voted to declare the Russian government a state sponsor of terrorism.

European Parliament President Roberta Metsola confirmed the attack on Wednesday afternoon European time, while the site was still down. “A pro-Kremlin group has claimed responsibility,” she wrote on Twitter. “Our IT experts are pushing back against it & protecting our systems. This, after we proclaimed Russia as a State-sponsor of terrorism.”

While this post was being reported and written, the website became available again and appeared to work normally.

The pro-Kremlin group Metsola referred to is likely the one known as Killnet, which emerged at the start of Russia’s invasion of Ukraine and has posted claims of DDoS attacks in countries supporting the smaller nation. Targets have included police departments, airports, and governments in Lithuania, Germany, Italy, Romania, Norway, and the United States.

Shortly after Wednesday’s attack against the European Parliament started, Killnet members took to a private channel on Telegram to post screenshots showing the European Parliament website was unavailable in 23 countries. Text accompanying the images made a homophobic remark directed at the legislative body.

The outage occurred shortly after the parliament overwhelmingly voted to declare the Kremlin a sponsor of terrorism.

Members of the European Parliament “highlight that the deliberate attacks and atrocities committed by Russian forces and their proxies against civilians in Ukraine, the destruction of civilian infrastructure and other serious violations of international and humanitarian law amount to acts of terror and constitute war crimes,” the declaration stated. “In light of this, they recognize Russia as a state sponsor of terrorism and as a state that ‘uses means of terrorism.’”

The resolution was adopted with 494 votes in favor, and 58 against. There were 44 abstentions.

DDoS attacks typically harness the bandwidth of hundreds, thousands, and in some cases, millions of computers infected with malware. After coming into their control, the attackers cause them to bombard a target site with more traffic than they can accommodate, forcing them to deny service to legitimate users. Traditionally, DDoS has been among the crudest forms of attack because it relies on brute force to silence its targets.

Over the years, DDoSes have become more advanced. In some cases, the attackers can increase the bandwidth by as much as a thousand-fold using amplification methods, which send data to a misconfigured third-party site, which then returns a much larger amount of traffic to the target.
Another innovation has been designing attacks that exhaust the computing resources of a server. Rather than clogging the pipe between the website and the would-be visitors—the way more traditional volumetric DDoSes work—packet-per-second attacks send specifc types of compute-intensive requests to a target in an attempt to bring the hardware connected to the pipe to a standstill.

Metsola said the DDoS attacks on the European Parliament were “sophisticated,” a word that’s often misused to describe DDoSes and hacks. She provided no details to corroborate that assessment.

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Apple iPhone factory workers clash with police in China

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Enlarge / Workers walk outside Hon Hai Group’s Foxconn plant in Shenzhen, China, in 2010.

Violent worker protests have erupted at the world’s largest iPhone factory in central China as authorities at the Foxconn plant struggle to contain a COVID-19 outbreak while maintaining production ahead of the peak holiday season.

Workers at the factory in Zhengzhou shared more than a dozen videos that show staff in a standoff with lines of police armed with batons and clad in white protective gear. The videos show police beating workers, with some bleeding from their heads and others limping away from chaotic clashes.

Beijing’s strict zero-COVID regime has posed big challenges for the running of Foxconn’s Zhengzhou plant, which typically staffs more than 200,000 workers on a large campus in the city’s suburbs.

Wednesday’s unrest will heighten investor concerns about supply chain risk at Apple, with more than 95 percent of iPhones produced in China.

Problems at the plant earlier this month led Apple to cut estimates for high-end iPhone 14 shipments and to issue a rare warning to investors over the delays.

Two workers at the Foxconn factory said the protests broke out on Wednesday morning after Apple’s manufacturing partner attempted to deny bonuses promised to new workers put into quarantine before being sent to assembly lines.

“Initially they just went into the plant seeking an explanation from executives, but they [the executives] didn’t show their faces and instead called the police,” said one of the workers.

Another worker said there was growing discontent over the factory’s continued inability to curb a COVID outbreak, tough living conditions, and fear among staff that they would test positive.

Foxconn said the company would work with employees and the government to prevent further violent acts.

The company said it had always fulfilled its contracts and would continue to “communicate and explain” that to new staff. It said reports that the company had mixed COVID positive workers with those not yet infected were untrue.

Videos show workers flipping over carts on the Foxconn campus, charging into the factory’s offices and bashing a COVID testing booth. Live streams from the scene on Wednesday afternoon showed groups of workers milling about in a courtyard between buildings. Some workers were livestreaming the protests on social media until censors stepped in to cut off the broadcasts.

“The Foxconn situation raises concern for China’s leaders because it challenges the narrative of being a reliable supplier,” said Shan Guo at Plenum China Research. “It’s clear workers are not happy being locked down,” she said.

Foxconn has been working with the local government in Henan province, where the plant is located, to repopulate its assembly lines with new workers after a mass staff exodus late last month spurred by conditions at the plant.

Local officials have been tasked with helping send workers to the plant, which is a big taxpayer and was responsible for 60 percent of the province’s exports in 2019.

Ivan Lam, an analyst at Counterpoint Research, said Foxconn had already been shifting iPhone 14 production away from the Zhengzhou factory amid the COVID problems. He estimated the Zhengzhou plant’s share of total iPhone 14 production was down to about 60 percent today from about 80 percent before the outbreak began.

Apple did not immediately respond to requests for comment.

© 2022 The Financial Times Ltd. All rights reserved. Please do not copy and paste FT articles and redistribute by email or post to the web.

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Meta researchers create AI that masters Diplomacy, tricking human players

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Enlarge / A screenshot of an online game of Diplomacy, including a running chat dialog, provided by a Cicero researcher.

On Tuesday, Meta AI announced the development of Cicero, which it clams is the first AI to achieve human-level performance in the strategic board game Diplomacy. It’s a notable achievement because the game requires deep interpersonal negotiation skills, which implies that Cicero has obtained a certain mastery of language necessary to win the game.

Even before Deep Blue beat Garry Kasparov at chess in 1997, board games were a useful measure of AI achievement. In 2015, another barrier fell when AlphaGo defeated Go master Lee Sedol. Both of those games follow a relatively clear set of analytical rules (although Go’s rules are typically simplified for computer AI).

But with Diplomacy, a large portion of the gameplay involves social skills. Players must show empathy, use natural language, and build relationships to win—a difficult task for a computer player. With this in mind, Meta asked, “Can we build more effective and flexible agents that can use language to negotiate, persuade, and work with people to achieve strategic goals similar to the way humans do?”

According to Meta, the answer is yes. Cicero learned its skills by playing an online version of Diplomacy on webDiplomacy.net. Over time, it became a master at the game, reportedly achieving “more than double the average score” of human players and ranking in the top 10 percent of people who played more than one game.

To create Cicero, Meta pulled together AI models for strategic reasoning (similar to AlphaGo) and natural language processing (similar to GPT-3) and rolled them into one agent. During each game, Cicero looks at the state of the game board and the conversation history and predicts how other players will act. It crafts a plan that it executes through a language model that can generate human-like dialog, allowing it to coordinate with other players.

A block diagram of Cicero, the <em>Diplomacy</em>-playing bot, provided by Meta.
Enlarge / A block diagram of Cicero, the Diplomacy-playing bot, provided by Meta.

Meta AI

Meta calls Cicero’s natural language skills a “controllable dialog model,” which is where the heart of Cicero’s personality lies. Like GPT-3, Cicero pulls from a large corpus of Internet text scraped from the web. “To build a controllable dialogue model, we started with a 2.7 billion parameter BART-like language model pre-trained on text from the internet and fine tuned on over 40,000 human games on webDiplomacy.net,” writes Meta.

The resulting model mastered the intricacies of a complex game. “Cicero can deduce, for example, that later in the game it will need the support of one particular player,” says Meta, “and then craft a strategy to win that person’s favor—and even recognize the risks and opportunities that that player sees from their particular point of view.”

Meta’s Cicero research appeared in the journal Science under the title, “Human-level play in the game of Diplomacy by combining language models with strategic reasoning.”

As for wider applications, Meta suggests that its Cicero research could “ease communication barriers” between humans and AI, such as maintaining a long-term conversation to teach someone a new skill. Or it could power a video game where NPCs can talk just like humans, understanding the player’s motivations and adapting along the way.

At the same time, this technology could be used to manipulate humans by impersonating people and tricking them in potentially dangerous ways, depending on the context. Along those lines, Meta hopes other researchers can build on its code “in a responsible manner,” and says it has taken steps toward detecting and removing “toxic messages in this new domain,” which likely refers to dialog Cicero learned from the Internet texts it ingested—always a risk for large language models.

Meta provided a detailed site to explain how Cicero works and has also open-sourced Cicero’s code on GitHub. Online Diplomacy fans—and maybe even the rest of us—may need to watch out.

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