Emerging Technologies Washington Update - January 2020 #2

This Week: Senate Commerce Committee holds hearing on industries of the future, IRS launches gig economy tax center, DOJ and FTC propose to update vertical merger guidelines, House Oversight and Reform Committee resumes hearings on facial recognition technology.

Week in Review

The Senate confirmed Peter Gaynor on Tuesday to be Administrator of the Federal Emergency Management Agency (FEMA). Gaynor previously served as the Director of Rhode Island’s Emergency Management Agency (RIEMA) and advised Governor Gina Raimondo on emergency management and response.

The Senate passed the United States-Canada-Mexico trade agreement (USMCA) this morning 89-10. Earlier in the day, it made its way through committees of jurisdiction.  On the Senate Commerce Committee, Senators Brian Schatz (D-HI) and Ed Markey (D-MA) voted against the agreement, citing its lack of environmental protections as the reason for their decision. Senator Ted Cruz (R-TX) voted in favor, but took the opportunity to criticize the agreement’s Section 230-like language. He asserted that it has allowed big tech to censor speech and expressed disappointment in its inclusion. Cruz added that US Trade Representative Robert Lighthizer told Republicans that the provision does not reform, but rather reflects, current law, so the “good news” is that current law can change.

Senate Minority Leader Chuck Schumer (D-NY) and Senator Tim Kaine (D-VA) announced on Tuesday that they have the simple majority needed to pass a war powers resolution limiting President Trump’s ability to escalate tensions with Iran. The measure is expected to pass with support from all 45 Democrats, as well as Senators Rand Paul (R-KY), Mike Lee (R-UT), Todd Young (R-IN), and Susan Collins (R-ME), but President Trump will veto the resolution.

On Tuesday, Reps. Lisa Blunt Rochester (D-DE) and Bryan Steil (R-WI) launched the Future of Work Caucus with approximately a dozen members. Per a Dear Colleague, the Caucus “will discuss the growing effects of automation on the workforce, the emerging impact of artificial intelligence on society, and how technological innovation might reshape the labor market. We hope to educate policymakers, stakeholders, and the general public with the latest information and empower them to successfully navigate the disruptions that are coming and are already underway.”  

The US and China signed “Phase 1” of a trade deal on Wednesday after almost two years of sparring. One lingering problem the deal addresses, but does not thoroughly resolve, relates to forced technology transfers. In order to gain access to the lucrative Chinese market, foreign companies, which in some industries are required to form joint ventures with local firms to operate, are pressured to hand over sensitive technology as a “cost” of doing business. Phase 1 forestalls until later many of these thornier structural issues at the heart of the U.S.-China trade dispute. Phase 2 is certain to be even more complicated.

A Special Committee created by Transportation Secretary Elaine Chao following the two fatal crashes of Boeing 737-MAX aircraft to examine the FAA’s certification process issued its report today. While the Committee generally praised the FAA’s certification processes, including its Organization Designation Authorization (ODA) process, and cautioned against any systemic dismantling of the FAA’s process, it made over twenty recommendations for improvements.

On January 9, Los Angeles Superior Court Judge William Highberger held that AB 5 - the California law that went into effect on January 1 and transitioned thousands of workers from independent contractors to employees - is preempted as it applies to truck drivers due to federal law as applied to motor carriers. In a separate case, US District Judge Roger Benitez on January 13 extended a temporary restraining order that prevents the state from enforcing AB 5 as it applies to truck drivers pending his ruling on the motion for a preliminary injunction. A ruling is expected in the coming days. Read more about AB 5 and its impact here in last week’s Emerging Technologies Washington Update.

Looking Ahead

On Friday, the House Antitrust Subcommittee will hold a field hearing at the University of Colorado, Boulder Law School. The hearing is titled “Online Platforms and Market Power, Part 5: Competitors in the Digital Economy” and will include testimony from the CEOs of Sonos, Popsocket, and Basecamp, as well as the Vice President and General Counsel of Tile. The House will be in recess next week following the Martin Luther King Jr. holiday weekend.

On Tuesday, the Senate will hold opening arguments in President Trump’s impeachment trial. The trial’s impeachment managers, who will serve as prosecutors, were appointed this Wednesday by Speaker of the House Nancy Pelosi (D-CA) and are led by House Intelligence Committee Chairman Adam Schiff (D-CA). In addition, the group consists of Judiciary Committee Chairman Jerry Nadler (D-NY) and Reps. Zoe Lofgren (D-CA), Hakeem Jeffries (D-NY), Val Demings (D-FA), Jason Crow (D-CO), and Sylvia Garcia (D-TX). The trial itself will begin only after the Senate agrees to take up Majority Leader Mitch McConnell’s (R-KY) rules package.

Several members of the Cabinet, led by Treasury Secretary Steve Mnuchin, will join the President next week at the World Economic Forum in Davos, Switzerland. Mnuchin will meet with his French counterpart during the summit to discuss the ongoing dispute around France’s digital services tax (DST).

The Department of Justice Antitrust Division will hold a public workshop on February 12 at Stanford University focused on venture capital investment and antitrust law. The workshop will feature speeches from Assistant Attorney General Makan Delrahim as well as industry professionals and academics from Stanford’s law and business schools.

Senate Commerce Committee Holds Hearing on Industries of the Future

On Wednesday, the Senate Commerce Committee held a hearing titled “Industries of the Future.” The hearing featured testimony from executive branch officials from the Department of Commerce, National Science Foundation, Federal Communications Commission, and the White House Office of Science and Technology Policy. Its principal focus was on 5G and how its deployment in the United States will impact the economy and national security. Among other topics discussed were artificial intelligence, rural access to broadband, and job training. Senators largely agreed that American investment in 5G technology needs to increase, rural populations do not have sufficient access to broadband, and job training and apprenticeship programs need to be modernized.

Prior to the hearing, a bipartisan group of Committee members unveiled the Industries of the Future Act, which was introduced on Tuesday by Chairman Roger Wicker (R-MS). Cosponsored by Senators Cory Gardner (R-CO), Tammy Baldwin (D-WI), and Gary Peters (D-MI), the bill aims to increase America’s investment in emerging technologies. In order to do so, the bill would require the government to assess how much it is spending on “industries of the future” and develop a plan to increase that number to $10 billion by 2025. The bill also specifically calls for the government to double its investment in artificial intelligence and quantum information science.

IRS Launches Gig Economy Tax Center

The Internal Revenue Service (IRS) launched a new Gig Economy Tax Center last week. The gig economy, which the IRS defines as encompassing “activity where people earn income providing on-demand work, services or goods,” has revolutionized myriad sectors of the economy and has thus created a number of headaches for federal and state tax collectors. The platform is designed to help the tens of millions of Americans who work in the gig economy file their taxes, for which companies often do not account when paying their on-demand contractors. The platform will also help businesses that operate in the gig economy classify workers, report payments, and pay and file taxes.

DOJ and FTC Propose to Update Vertical Merger Guidelines

The Department of Justice (DOJ) and Federal Trade Commission (FTC) announced last Friday proposed joint vertical merger guidelines, which will be open for public comment for 30 days. The proposal, which follows the government’s unsuccessful attempts to block the AT&T-Time Warner merger, marks the first time since 1984 that the guidelines have been updated and outlines a number of important determining factors in the agencies’ antitrust enforcement. These include updated definitions for terms such as ‘related products,’ warnings about the ways in which vertical deals can harm rivals by raising their operating costs, and the incorporation of both unilateral actions such as foreclosures and coordinated actions into deliberations about challenging a vertical transaction.

The proposed rules drew criticism from the FTC’s Democrats, Commissioners Rebecca Slaughter and Rohit Chopra. In her individual statement, Commissioner Slaughter expressed concerns that the guidelines would lead antitrust enforcers to not target any transactions in which the company’s market share is less than 20%. She said that providing any concrete safe harbor threshold is problematic because it limits enforcement capacity, and that she sees little evidence for why this threshold specifically was selected.

House Oversight and Reform Committee Resumes Hearings on Facial Recognition Technology

On Wednesday, the House Oversight and Reform Committee held the latest installment in a string of hearings on facial recognition technologies. Chairman Carolyn Maloney (D-NY) signaled that members are moving forward in a bipartisan fashion with plans to unveil legislation “in the very near future” examining the use of facial recognition technologies. Ranking Member Jim Jordan (R-OH) agreed about the importance of advancing a bill, saying the issue “transcends politics” and must be addressed. Jordan added that legislation will likely provide means to study and monitor the federal government’s use of the technology, which he said has serious implications on Americans’ first and fourth amendment rights.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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