A New Ruling Could Complicate Biden’s Policy on Social Media

Global NewsXJuly 6, 2023Last Updated: July 6, 2023

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A new hole emerges in Washington’s social media efforts

Government efforts to interact with social media platforms took a major hit on Tuesday when a federal judge restricted the Biden administration from communicating with tech companies about a broad array of online content.

The 155-page ruling, which the administration is likely to appeal, raises questions about how the government is supposed to interact with platforms that reach billions of people. It also complicates the outlook for regulating tech companies over the content their users post.

The ruling: Judge Terry Doughty of the U.S. District Court for the Western District of Louisiana said that broad parts of the government, including the Department of Health and Human Services and the F.B.I., couldn’t talk with social media companies in any way that would lead to the “removal, deletion, suppression or reduction” of content.

“If the allegations made by plaintiffs are true, the present case arguably involves the most massive attack against free speech in United States’ history,” said Mr. Doughty, who was appointed by President Donald Trump.

It’s a win for Republican state attorneys general who sued the administration, arguing that federal officials were seeking to curtail users’ First Amendment rights. In their lawsuit, the plaintiffs cited emails and text messages in which, they claimed, federal officials had pressured tech executives to remove or censor posts about federal pandemic policies, articles about Hunter Biden, election security and other issues.

Doughty also pointed to efforts to remove or play down content by Robert Kennedy Jr., the anti-vaccine activist who is now challenging President Biden for the Democratic presidential nomination. Mr. Kennedy cheered the decision: “Happy Independence Day Everyone!,” he tweeted.

Doughty listed some exceptions in his ruling, including in instances involving crimes, national security threats or foreign attempts to influence elections. And other government officials, including lawmakers, can still reach out to social platforms.

Critics of the ruling say it’s too broad and problematic, especially because it applies to government efforts to encourage action by companies, not force it. “It can’t be that the government violates the First Amendment simply by engaging with the platforms about their content-moderation decisions and policies,” Jameel Jaffer of the Knight First Amendment Institute at Columbia University told The Times.

Experts are also worried disinformation will only increase on social platforms, which have already cut their content moderation teams.

The injunction may have wider consequences for tech regulation. Other Republican state officials have moved to ban internet platforms from taking down some political content, which legal experts say are likely to wend their way to the Supreme Court.

Meanwhile, plaintiffs in this case have argued that the Biden administration had threatened tech companies by floating moves to revise antitrust law or Section 230 of the Communications Decency Act, the legal shield protecting online platforms from lawsuits over user content. (It’s worth noting that the Trump administration also made noise about rethinking Section 230.)

While there’s little chance at the moment of Section 230 being overturned, Doughty’s ruling raises the prospect that some kinds of pressure about revising tech regulations might be viewed as improper pressure on tech companies.

HERE’S WHAT’S HAPPENING

Global temperatures set a record. Tuesday saw an average worldwide temperature of 17.2 degrees Celsius (about 63 degrees Fahrenheit), the latest example of extreme weather battering people from China to India to Texas. The return of the El Niño phenomenon is likely to fuel temperature rises, and climate officials urged more action on cutting the use of fossil fuels.

A short but packed week awaits investors. This afternoon, the Fed will publish minutes from its rate-setting meeting last month. Markets will look at how many officials at the central bank feel that multiple rate increases would be needed this year to tamp down inflation. On Friday, the Labor Department will publish monthly jobs numbers; economists polled by Reuters have predicted that employers added 225,000 new jobs last month.

A SPAC seeking to take Donald Trump’s media company public settles with the S.E.C. Digital World Acquisition Corporation said that it would pay $18 million in penalties and revise its securities filings to resolve an investigation into its proposed merger with the parent company of the Truth Social online platform. But it’s unclear whether Trump’s company wants to proceed with the merger.

Illumina reportedly faces a record penalty by the European Union. The gene-sequencing company could be fined up to $453 million, or 10 percent of its sales, for closing its $8 billion takeover of the cancer-detection business Grail despite a continuing investigation into the deal, according to The Financial Times. (E.U. regulators eventually opposed the deal.) Such a penalty would be far higher than any previously imposed by Brussels.

China hedges its bets

Janet Yellen is scheduled to land in Beijing on Thursday on her first trip to China as Treasury secretary, the latest effort by the Biden administration to improve dialogue between the world’s two biggest economies. Experts don’t expect big breakthroughs, especially as the trade fight shows little sign of abating. But China’s stuttering economy and Beijing’s focus on elections in the United States and Taiwan next year are driving a calculation by Chinese policymakers that it is still worth engaging.

China’s economy has not fully rebounded from Covid lockdowns. New data published on Wednesday showed that services sector activity expanded at its slowest pace in five months. That adds to a parade of weak data showing tepid consumer spending, lackluster exports and manufacturing. Chinese stocks have fallen, too, as hopes for a large-scale stimulus seem increasingly remote.

That’s one reason China has been on a charm offensive with global business. It tried to use the World Economic Forum meeting in Tianjin last week. But that came after a crackdown on consulting and due diligence firms with Western connections, prompting worries about doing business in the country.

Ms. Yellen’s visit follows a new round of tit-for-tat sanctions. China announced export restrictions on two metals used to make semiconductors on Monday. Last week, the Netherlands said Dutch companies like ASML, which makes machines that are crucial to chip-making, would need to seek government permission to ship some equipment abroad. Washington is also reportedly weighing new measures to restrict Chinese access to cloud computing technology.

But the Chinese are looking beyond the United States, and 2023. “Beijing policymakers are hedging their bets,” Rana Mitter, director of Oxford University’s China Center, told DealBook. “They believe that the Biden administration is using softer language but in practice seeking to contain China. They are therefore waiting to see what happens in the key elections of 2024, and also seeking to create warmer dialogue with the E.U., U.K. and other major trading states.”

The Twitter-Meta rivalry heats up

This week is shaping up to be rough for Elon Musk and Twitter. After the social network unexpectedly announced limits on viewing tweets — freezing out power users and potentially hurting the company’s efforts to woo back advertisers — Meta is set to debut a rival app on Thursday that some have called a “Twitter killer.”

Users will be able to test out the app, Threads, a forum for short message posts that looks a lot like Mr. Musk’s online platform. Its development arises from a longstanding desire by Mark Zuckerberg, who as Meta’s C.E.O. helps oversee Facebook and Instagram, to “dislodge Twitter and provide the central place for public conversation online,” The Times’s Mike Isaac reports.

For some inside Meta, the tumult at Twitter since Mr. Musk took over the company last fall has been an opportunity to, in the words of one employee’s internal post last year, “GO FOR THEIR BREAD AND BUTTER.”

Advertisers will be watching closely. Meta has strong relations with advertisers, and probably more so after many fled Twitter amid turmoil tied to sudden policy changes that Mr. Musk imposed. That whiplash at Twitter has created a challenge for Linda Yaccarino, who became the company’s C.E.O. last month and is tasked with reviving the platform’s ad business.

Ms. Yaccarino’s job may have been complicated by the new limits on viewing tweets — which may have also hurt Google’s ability to display posts in its search results — according to analysts.

(Mr. Musk said the new policy was temporary and meant to deter artificial intelligence companies from scraping Twitter posts to train their services without adequate payment.)

In case you missed it: Another dust-up between Mr. Musk and Mr. Zuckerberg — a potential “cage match” — appears to be going forward, according to Dana White of Ultimate Fighting Championship, who is helping to arrange the fight.

Blackstone’s Schwarzman has a big payday

Last year was a dud for most investors, but chief executive pay continued to zoom higher.

Leading the list of the most richly compensated was Steve Schwarzman, Blackstone’s C.E.O., whose pay package topped a quarter of a billion dollars, according to The Wall Street Journal. At $253 million, Mr. Schwarzman’s pay put him slightly ahead of Alphabet’s Sundar Pichai ($226 million).

In total, nine C.E.O.s made more than $100 million in 2022. That included some running companies that didn’t perform so well for investors, such as Barry McCarthy of Peloton ($168 million), whose stock fell about 77 percent last year, and Stephen Scherr of Hertz ($182 million), which emerged from bankruptcy in 2021 and whose stock underperformed the S&P 500.

Restricted stock and options make up a big chunk of executive pay. A Blackstone spokesman told The Journal that 30 percent of Mr. Schwarzman’s compensation could be attributed to the private equity giant’s 2021 stock performance; last year, Blackstone shares fell roughly 40 percent.

Another bonus: About $190 million of Mr. Schwarzman’s compensation is tied to carried interest, a common form of Wall Street pay that has a relatively low tax rate. The Biden administration wanted to close the carried interest loophole, but senior officials blamed fierce lobbying in Washington by the private equity industry for stymieing those plans.

Options don’t always work out. The package that Peloton’s Mr. McCarthy received was almost entirely in options that carry a strike well above Wednesday’s share price, $8.19. Cashing that in would cost him.