TLJ News from February 6-10, 2008 |
Bush Again Addresses FISA Reform
2/8. President Bush gave a speech in Washington DC in which he discussed legislation to reform the Foreign Intelligence Surveillance Act (FISA).
He said that "we must take measures to protect America, the homeland. We must give our intelligence officials the tools they need to uncover terrorist plots and prevent new attacks. And one of the most important tools is the ability to monitor terrorist communications. My most important job is to protect the American people. In order to do that job, we need to know who the terrorists are talking to; we need to know what they're saying; we need to know what they're planning. So Congress passed the Protect America Act. This law modernized an outdated surveillance law and closed dangerous gaps in our intelligence."
He continued that "Our ability to monitor the communications of terrorists overseas has helped us gain crucial elements on terrorist cells, and helped keep our country safe. The Protect America Act is working. The problem is that Congress set the law to expire one week from tomorrow. I don't think the al Qaeda threat is going to expire one week from tomorrow. Congress must ensure the flow of vital intelligence is not disrupted. Congress must pass liability protection for companies believed to have assisted in the efforts to defend America. The time -- the time for temporary fixes has ended. Congress must pass this law -- and they must pass it now."
S 1927 [LOC | WW] is the "Protect America Act". The bill currently being considered by the Senate is S 2248 [LOC | WW], the "Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007". The bill passed by the House, and opposed by President Bush, is and HR 3773 [LOC | WW], the "Responsible Electronic Surveillance That is Overseen, Reviewed, and Effective Act of 2007" or "RESTORE Act".
Cox Announces Tech Related Items on SEC's 2008 Agenda
2/8. Chris Cox, Chairman of the Securities and Exchange Commission (SEC), gave a speech in which he outline the agenda for the SEC for 2008. Much of his speech focused on technology related matters, including internet fraud, pricing of market data, mutual funds and the internet, and mutual recognition, international accounting standards and XBRL. He said, among other things, that this year the SEC will consider a "rule for the use of interactive data by U.S. reporting companies". The SEC XBRL program is currently voluntary.
Internet Fraud. Cox said that "To deal with the global threat of Internet fraud and the special enforcement challenges it presents", the SEC's Division of Enforcement's (DOE) Office of Internet Enforcement (OIE), "under the leadership of John Stark, will continue to focus a spotlight on this shadowy technological underworld. This group's message to cybercriminals is clear: we'll find you, wherever in the world you are, and make you pay for what you're doing to innocent and unsuspecting investors."
He also said that "Each year, hundreds of thousands of ordinary investors are victimized by unscrupulous manipulators who prey upon the OTC markets in what we call microcap fraud. These financial sharks are betting that because of such mammoth responsibilities as the subprime mess, the federal government won't have the resources or the inclination to go after them."
Cox (at left) said that "They've bet wrong. In 2008, our microcap fraud group in the Enforcement Division will set new standards for the efficient use of resources in tracking down shell company manipulators, pump-and-dump artists, and Internet spam fraudsters. John Polise, who leads this group, has an exceptionally able team who will be developing innovative ways to cover the very broad waterfront in this area."
Pricing of Market Data. Cox also addressed the pricing of market data, an issue of interest to internet and media companies. He said that "During the last year, the Division of Trading and Markets and each of the Commissioners have been intently focused on the novel and important questions of the pricing of market data."
He said that the SEC has "carefully weighed the available evidence. The result of that analysis, which was deliberately thorough because the Commission's first decisions in this area will be precedent setting, will be reflected in an upcoming vote by the Commission."
Mutual Funds and the Internet. First, Cox said that in 2008 the SEC will address by rulemaking "the kind of disclosure that investors are entitled to at the time of sale when they buy mutual funds. For several years now, the SEC has been studying how to improve the information that customers get at the point of sale about fees, expenses, and conflicts of interest. I have asked the Division of Trading and Markets, under Erik Sirri's leadership, to prepare a rule for Commission consideration that takes full advantage of the latest Internet technology to get investors the very best information on these subjects in a form they can readily understand. You should expect the Commission to consider this rule proposal by summer."
Second, Cox said that the SEC's Division of Investment Management (DIM) "is taking the lead on another 2008 rulemaking designed to improve disclosure for mutual fund investors. Last fall, thanks to the leadership of Susan Nash, the Commission proposed rules to authorize a ``summary prospectus´´ for mutual funds -- a short, investor-friendly document that discloses a mutual fund's investment objectives, as well as all of the information about fees, risks, performance, and other vital subjects that customers need to understand to make a sound investment decision."
He said that "Using the Internet, investors could drill down from the summary prospectus to more detailed information, depending on their interests and needs. This month marks the end of the comment period on this proposal, and I anticipate that the Division of Investment Management will present a final rule to the Commission by the summer that responds to the public's comments and suggestions -- and makes Internet delivery of the mutual fund summary prospectus a reality."
Muni-EDGAR for Municipal Markets. Cox said that "next month the Commission will consider amendments to Rule 15c2-12 that will authorize the Municipal Securities Rulemaking Board to create a ``muni-EDGAR,´´ modeled on the SEC's own EDGAR system that gives investors access to all filings by public companies."
He added that "This would be a free, one-stop electronic database, accessible to all investors via the Internet, that would contain official statements, annual financials, and material event notices filed in connection with a municipal security."
E-Proxy Rules. Cox said that the SEC's Division of Corporation Finance (DFC) has on its agenda for 2008 another rulemaking regarding the proxy process.
Cox said that the SEC has recently held three roundtables focused on "the relationship between the federal proxy rules and state corporation law, as well as new developments in technology that have led to the Commission's adoption of our e-proxy rules and the creation of new opportunities for electronic shareholder forums."
Mutual Recognition, International Accounting Standards and XBRL. Cox also said that the SEC needs a "a truly global strategy" because of recent developments in "instant communications and technology".
Consequently, he said, "the most significant initiatives we expect to complete in 2008 are in the international and technology arena. Mutual recognition, international accounting standards, and interactive disclosure will all be the subjects of important rule proposals that will be presented to the Commission in late spring. And they are all closely interrelated."
He said that mutual recognition "describes the concept of allowing U.S. investors to have the benefit of direct access to foreign markets and foreign broker-dealers, provided those entities are supervised in a foreign jurisdiction with high standards under a securities regulatory regime that will provide investors with a high level of protection similar to what they enjoy in the United States."
He continued that the SEC's Office of International Affairs (OIA), Division of Trading and Markets (DTM), and DCF have been working on a proposal "that will establish an overall framework for mutual recognition. At the same time, the Division of Trading and Markets has been preparing amendments to our Rule 15a-6 governing U.S. investor contacts with foreign broker-dealers to ease some of the anti-investor restrictions that hinder international commerce in financial services. I expect that the Commission will consider both sets of proposals in early 2008."
With respect to accounting standards, he said that "The same imperatives of ever-faster communications, ever-more-closely linked markets, and truly global competition for capital that underlie our conceptualization of mutual recognition have for several years been driving the project to converge the world's two great accounting systems", Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
He noted that "foreign issuers can now file their financial statements with the SEC using IFRS, without need of keeping a second set of books under U.S. GAAP."
In addition, he said, in August of 2007, the SEC "issued a Concept Release seeking advice on whether U.S. issuers should be allowed to choose to prepare financial statements using IFRS. And in December 2007 we held roundtables on this subject and heard from more than two dozen experts.
He announced that in 2008 the DCF and the Office of the Chief Accountant, led by Wayne Carnall and Julie Erhardt, "will formally propose to the Commission an updated ``roadmap´´ that lays out a schedule, and appropriate milestones on which the schedule will be conditioned, for continuing the progress that the United States is making in moving to accept IFRS in this country."
Finally, he addressed eXtensible Business Reporting Language (XBRL) and interactive data. He said that the "third pillar of this international strategy" is "the adoption of a global computer language for the exchange of financial information".
"A standard data format for sharing financial statements and other information that is important to investors will facilitate the kind of comparisons among global investment options that investors need." He continued that XBRL "will let investors easily find and compare business and financial data with the same ease of doing a Google or Yahoo! search today. And it promises to let companies prepare their financial information more quickly, more accurately, and for less cost."
Currently, companies can file with XBRL formatted data. However, it is a voluntary program. Most public companies do not participate.
Cox announced that in 2008, "the Commission will consider a rule for the use of interactive data by U.S. reporting companies that will parallel efforts already underway in other countries. David Blaszkowsky, who heads the SEC's Office of Interactive Disclosure, has been an important leader in this initiative."
Boucher and Goodlatte Again Introduce BAT Bill
2/7. Rep. Rick Boucher (D-VA), Rep. Bob Goodlatte (R-VA) and others introduced HR 5267 [LOC | WW], the "Business Activity Tax Simplification Act of 2008".
Rep. Boucher and Rep. Goodlatte wrote in a release that some "states assert that having a website on a server in the state creates a sufficient connection to justify imposing these taxes".
Rep. Boucher (at right) stated in this release that “Currently, no clear national standard exists to define a substantial nexus for the taxation of business activity by the states. This uncertainty has allowed some states to impose unfair taxes on businesses which have no physical presence in those states and do not benefit from the services provided by the tax revenue."
He said that this bill "will rectify the unfairness which currently exists by setting a physical presence nexus standard. This standard would ensure that states have the ability to tax businesses that benefit from services provided by the state, while businesses that have no physical presence in a state would be exempt from taxation on business activity in that state".
The other original cosponsors of the bill are Rep. Artur Davis (D-AL), Rep. Steve Chabot (R-OH), Rep. Stephanie Sandlin (D-SD), Rep. Tom Feeney (R-FL), Rep. Sheila Lee (D-TX), Rep. Elton Gallegly (R-CA), Rep. Hank Johnson (D-GA), Rep. Mike Pence (R-IN), Rep. Zoe Lofgren (D-CA), Rep. Bobby Scott (D-VA) and Rep. Robert Wexler (D-FL). Most, but not all, are members of the House Judiciary Committee (HJC), which has jurisdiction over the bill.
This bill is a revised version of HR 1956 (109th Congress), which was approved by the HJC in 2006, but went no further.
State tax collectors have incentives to maximize tax collections. Moreover, since out of state businesses, and their employees, cannot vote in state, they are sometimes particularly attractive targets for state tax collectors. To the extent that states sometimes seize upon the internet based activities of out of state companies to impose business activity taxes upon them, this is a technology related bill.
This bill is the product of many debates and compromises over several Congresses. It is also a tax bill that would govern both state tax collectors and interstate businesses, many of which have considerable experience and expertise in contorting the language of statutes and cases to maximize and minimize tax collections, respectively. Hence, this bill is now long, complex, and awkwardly worded attempt to address a simple problem.
Bill Summary. The bill has three sections. Section 1 of the bill only provides its title.
Section 2 of HR 5267 amends 15 U.S.C. § 381, regarding "Imposition of net income tax" by states.
Section 381(a) currently provides, in part, that "No State, or political subdivision thereof, shall have power to impose ... a net income tax on the income derived within such State by any person from interstate commerce if the only business activities within such State by or on behalf of such person during such taxable year are" certain solicitations of orders, as set forth in Sections 381(a)(1) and (2).
Currently, Section 381(a)(1) provides that states cannot impose an income or business activity tax on "the solicitation of orders by such person, or his representative, in such State for sales of tangible personal property, which orders are sent outside the State for approval or rejection, and, if approved, are filled by shipment or delivery from a point outside the State".
HR 5267 would rewrite this. It would provides that states cannot impose an income or business activity tax on "the solicitation of orders (which are sent outside the State for approval or rejection) or customers by such person, or his representative, in such State for sales or transactions, which are--(A) in the case of tangible personal property, filled by shipment or delivery from a point outside the State; and (B) in the case of all other forms of property, services, and other transactions, fulfilled or distributed from a point outside the State". (Parentheses in original.)
HR 5267 would also add a new Section 381(a)(3) that covers "the furnishing of information to customers or affiliates in such State" and certain news gathering activities. See, further discussion below.
HR 5267 would also add a new subsection (c) to Section 381 that provides that "a person shall not be considered to have engaged in business activities within a State merely ... by reason of sales or transactions in such State, the solicitation of orders for sales or transactions in such State, the furnishing of information to customers or affiliates in such State, or the coverage of events or other gathering of information in such State, on behalf of such person by one or more independent contractors ... by reason of the maintenance of an office in such State by one or more independent contractors whose activities on behalf of such person in such State consist solely of making sales or fulfilling transactions, soliciting order for sales or transactions, the furnishing of information to customers or affiliates, or the coverage of events or other gathering of information; or ... by reason of the furnishing of information to an independent contractor by such person ancillary to the solicitation of orders or transactions by the independent contractor on behalf of such person".
Section 3 of HR 5267 is titled "Minimum jurisdictional Standard for State and Local Net Income Taxes and other Business Activity Taxes".
It provides that "No taxing authority of a State shall have power to impose, assess, or collect a net income tax or other business activity tax on any person relating to such person's activities in interstate commerce unless such person has a physical presence in the State during the taxable period with respect to which the tax is imposed."
The bill defines "other business activity tax" as "any tax in the nature of a net income tax or tax measured by the amount of, or economic results of, business or related activity conducted in the State".
However, the key term is "physical presence". The bill provides that "a person has a physical presence in a State only if such person's business activities in the State include any of the following during such person's taxable year: (A) Being an individual physically in the State, or assigning one or more employees to be in the State. (B) Using the services of an agent (excluding an employee) to establish or maintain the market in the State, if such agent does not perform business services in the State for any other person during such taxable year. (C) The leasing or owning of tangible personal property or of real property in the State." (Parentheses in original.)
However, the bill provides two exemptions. It provides that "physical presence" does not include either "presence in a State for less than 15 days in a taxable year (or a greater number of days if provided by State law)" or "presence in a State to conduct limited or transient business activity". (Parentheses in original.)
Section 3 of the previous version of the bill also included exemptions, that are not in the just introduced bill, for lobbying, "attending educational or training conferences", and "Nonprofit participation in charitable activities".
State Taxation of News Gathering. Section 3 of the previous version of the bill, HR 1956 (109th), also included an exemption for "Gathering news for print, broadcast, or other distribution through the news media". This exemption is not in Section 3 of the present bill.
However, the just introduced bill adds new language to Section 2 of the bill. Section 381(a)'s limitation would also extend to "the coverage of events or other gathering of information in such State by such person, or his representative, which information is used or disseminated from a point outside the State".
Section 2 of the bill also provides that "a person shall not be considered to have engaged in business activities within a State merely ... by reason of ... the coverage of events or other gathering of information in such State ..." or "maintenance of an office in such State by one or more independent contractors whose activities on behalf of such person in such State consist solely of ... the coverage of events or other gathering of information".
Legislative History. Rep. Boucher and Rep. Goodlatte have been trying for years to enact legislative to limit states' ability to tax distant businesses with minimal connection to the taxing state.
The two sponsored HR 1956 (109th Congress), the "Business Activity Tax Simplification Act of 2005", in the last Congress. See also, story titled "House Subcommittee to Hold Hearing on Goodlatte Boucher BAT Bill" in TLJ Daily E-Mail Alert No. 1,219, September 22, 2005. That bill was approved by the HJC, but not by the full House, or the Senate. It was briefly placed on the House floor calendar, but then withdrawn. See, "More News" in TLJ Daily E-Mail Alert No. 1,420, July 28, 2006.
In the 108th Congress, the two sponsored HR 3220 (108th), the "Business Activity Tax Simplification Act of 2003". See also, stories titled "Reps. Goodlatte and Boucher Introduce Bill to Limit Business Activity Taxes" in TLJ Daily E-Mail Alert No. 753, October 6, 2003, and "House Subcommittee Holds Hearing on Business Activity Taxes" in TLJ Daily E-Mail Alert No. 899, May 17, 2004.
The two sponsored a related bill in the 107th Congress, HR 2526 (107th), titled the "Internet Tax Fairness Act of 2001". That bill addressed both internet taxes and business activity taxes. See also, stories titled "Goodlatte and Boucher Introduce Net Tax Moratorium Bill" in TLJ Daily E-Mail Alert No. 229, July 18, 2001, and "House Subcommittee Approves Bill to Limit Business Activity Taxes" in TLJ Daily E-Mail Alert No. 471, July 17, 2002.
Bush and Leahy Trade Barbs over Delays in Confirmations
2/7. President Bush gave a speech at the White House in which he urged the Senate to confirm pending nominees to the federal judiciary and executive branch. See also, White House news office release.
"As President", said Bush, "I have a constitutional responsibility to nominate qualified men and women for public office. That's my responsibility, I take it very seriously. I have nominated skilled and faithful public servants to lead federal agencies and sit on the federal bench. The Constitution also gives senators an important responsibility. They must provide advice and consent by voting up or down on these nominees. Unfortunately, the Senate is not fulfilling its duty."
He said that the Senate has delayed confirmation of 28 judges. "Many of my nominees would fill urgent vacancies on courts that are understaffed and overworked. I've sent the Senate three nominees to relieve such a situation on the 4th Circuit Court of Appeals."
These three, Robert Conrad, Steve Matthews and Rod Rosenstein appeared with Bush at the White House event.
Other delayed Court of Appeals nominees include the following:
There are numerous pending nominees for various U.S. District Courts. Some of the key nominees for technology related cases are as follows:
Bush also said that "the Senate has not voted on seven nominations for senior leadership positions" at the Department of Justice (DOJ), including Judge Mark Filip to be the Deputy Attorney General.
Other delayed nominees for DOJ positions include the following:
Bradbury's prospects for confirmation may be affected by his prior legal advice to former Attorney General Alberto Gonzales and President Bush regarding the National Security Agency's (NSA) extrajudicial electronic surveillance of communications where one party is inside the U.S. and one party is outside. See also, stories titled "Bush Nominates Bradbury for OLC" in TLJ Daily E-Mail Alert No. 1,297, January 26, 2006, and "Bush Responds to USA Today Story Regarding NSA Database of Phone Calls" in TLJ Daily E-Mail Alert No. 1,369, May 12, 2006.
The Senate is also delaying confirmation of several persons who have been nominated for trade and commerce positions. These include the following:
Bush complained that because of Senate delay, "The three-member Council of Economic Advisers is down to one person".
Bush also said that the "Senate is delaying confirmation of three highly qualified nominees for the Fed's Board of Governors. I nominated these individuals nearly nine months ago." These three persons are Elizabeth Duke, Larry Klane, and Randall Kroszner.
Complaints about confirmation delays have long been made during both Republican and Democratic administrations, and during both periods of Republican and Democratic control of the Senate. Moreover, failure to either confirm or reject judicial nominees tends to increase during President election years.
That is, federal judgeships, unlike executive branch positions, are lifetime appointments that do not end with the term of the President. Many organized interests seek appointment of judges who they expect will render opinions favorable to their policy goals. Constituency groups of Democratic Senators are pressuring them to take no action on Bush's judicial appointments, so that these nominations will lapse, and the next President, who these groups hope will be a Democrat, can appoint other persons in their places. Moreover, the Senators of the party of the President play a leading role in the selection of District Court Judges.
Also, it should be noted that not all of the delayed nominees are Republicans being held up by Democrats. For example, one unconfirmed nominee is Jonathan Adelstein. The nomination of Deborah Tate is also pending. Both are renominations.
Sen. Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee (SJC), which considers both judicial and DOJ nominees, responded to President Bush in a statement on February 7, 2008.
He said that "It is disappointing, but not surprising, that the administration is returning to their tired partisan playbook of trying to pick a political fight over judicial nominations."
Sen. Leahy continued that "They seem to have short memories indeed as they whip up complaints about the pace that the Senate is confirming nominations. If President Clinton’s judicial nominees had received the fair treatment we have given to President Bush’s nominees in the last seven years, judicial vacancies at the end of his administration would not have been at record high levels. In fact, at the end of President Clinton’s administration, there were 80 judicial vacancies, 26 for circuit courts ..."
Sen. Leahy added that he is not delaying. Rather, "the President has not shown the commitment to send qualified, consensus nominees to the Senate for consideration".
He concluded, "I have shown the commitment to continue to consider judicial nominations in this election year. If the President would change course and work with home-state Senators to send qualified, consensus nominations to the Senate for consideration, we could make even more progress."
President Bush's speech may have had some immediate effects. Several Congressional committees announced hearings on several executive branch nominees.
SEC Pursues Securities Lawyer for E-Mail Pump and Dump Offerers
2/7. The Securities and Exchange Commission (SEC) instituted and simultaneously settled an administrative action against Kenneth M. Christison, a member of the state bar of California, alleging violation of federal securities laws in connection with his issuance of opinion of counsel letters to the issuers of securities that these securities were exempt from registration requirements.
The SEC further alleged that Christison knew or should have known that the securities were not exempt.
The SEC has already taken action against the issuers of these securities for violation of federal securities laws in connection with their fraudulent use of spam e-mails to pump and dump these securities.
Linda Thomsen, Director of the SEC's Division of Enforcement stated in a release that "Today's action demonstrates that even after we stop those who profit from fraudulent schemes, we continue to pursue other individuals, especially attorneys and other gatekeepers who are enablers behind the scenes".
Christison consented to the entry of a cease and desist order, without admitting or denying any allegations. See also, order instituting cease and desist proceeding [7 pages in PDF].
Mukasey Testifies Regarding FISA Reform
2/7. The House Judiciary Committee (HJC) held a hearing titled "Oversight Hearing of the Department of Justice". Attorney General Michael Mukasey was the witness. He praised the Senate FISA reform bill (S 2248), and urged rejection of the House bill (HR 3773). He also advocated immunity for "telecommunications companies" and "electronic communication service providers". See, prepared testimony [PDF].
He addressed, among other topics, legislation to amend the Foreign Intelligence Surveillance Act (FISA), including S 1927 [LOC | WW], the "Protect America Act", S 2248 [LOC | WW], the "Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007", and HR 3773 [LOC | WW], the "Responsible Electronic Surveillance That is Overseen, Reviewed, and Effective Act of 2007" or "RESTORE Act".
The PAA was enacted into law in August of 2007. It is now Public Law No. 110-55. See also, story titled "Summary of Protect America Act" in TLJ Daily E-Mail Alert No. 1,638, September 11, 2007. The original PAA had a six month sunset, which provided for expiration on February 1, 2008. In January of 2008 the Congress passed, and President Bush signed, HR 5104 [LOC | WW], a bill to extend the expiration date of the PAA for 15 days.
Mukasey wrote that the PAA "will soon sunset, but threats to our national security will not expire with it. I urge Congress to pass long-term legislation to update the Foreign Intelligence Surveillance Act (FISA) to ensure that this statute addresses present and emerging threats to our national security."
He said that the Senate bill, S 2248, "includes tools contained in the Protect America Act that have allowed us to close critical intelligence gaps."
He continued that "sunset provisions create uncertainty in the Intelligence Community and stifle the development of stable partnerships necessary to detect, deter, and disrupt threats to our national security."
Mukasey also discussed immunity for companies that have assisted the government. He said that S 2248 "protects telecommunications companies now under legal assault because they are believed to have responded to the Government’s call for assistance in the aftermath of September 11." He added that this means "retroactive immunity".
He argued that it is also "critical that Congress provide liability protection to electronic communication service providers in enacting a reauthorization bill."
Finally, he criticized HR 3773, the "RESTORE Act". The House approved this bill on November 15, 2007, by a vote of 227-189. See, Roll Call No. 1120. See also, story titled "Reps. Conyers and Reyes Introduce FISA Reform Bill" in TLJ Daily E-Mail Alert No. 1,653, October 10, 2007.
Mukasey wrote that HR 3773 "falls far short of providing the Intelligence Community with the tools it needs to collect foreign intelligence effectively from individuals located outside the United States. We cannot support this bill, which does not provide liability protection, would sunset in less than two years, requires prior court approval of acquisitions targeting persons outside the United States except in emergencies, and limits the type of foreign intelligence information that may be collected."
Kroes Discusses EC's Global Regulation Goals
2/7. Nellie Kroes gave a speech in Innsbruck, Austria, on February 7, 2008. Kroes, whose title is "European Commissioner for Competition Policy", discussed her regulatory agenda. She said that "we are `going global´" and that "we want to exercise appropriate political influence on the global scene".
Her office is engaging in regulation of the business practices of U.S. technology companies, including Microsoft, Qualcomm, and Intel, that is not consistent with the goals of reducing anti-competitive behavior, maximizing consumer welfare, or promoting innovation.
Her office is also reviewing, but delaying its decision upon, the Google DoubleClick merger. The Federal Trade Commission (FTC) approved the deal on December 20, 2007. See, story titled "FTC Will Not Block Google DoubleClick Merger" in TLJ Daily E-Mail Alert No. 1,691, December 19, 2007.
Nellie Kroes (at left), said in her speech that "we have to ask ourselves how best to keep a grip on global actors in a global economy". She added that "we have to make sure that our competition policy plays a greater role on the international scene".
She concluded that "we have to properly enforce our competition rules to `global companies´."
Thomas Barnett, Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, and his predecessors, have periodically given speeches that criticize EC actions against US companies under the guise of competition law enforcement.
For example, Barnett stated in speech in Washington DC on September 26, 2007, titled "Global Antitrust Enforcement" that "Review by multiple antitrust enforcement authorities can impose significant burdens and costly delays on corporate transactions, as well as heavy and non-productive burdens on the resources of the reviewing agencies themselves."
He continued that "firms in the marketplace generally can choose between a strategy of competing on the merits or a strategy of seeking government intervention to slow down their competitors." He elaborated that "If it is predictable that losers in the marketplace can become winners because antitrust enforcement agencies and courts will compel access to a competitor's property or prohibit the competitive actions of a big firm, then competitors who cannot win on the merits will find it more desirable to seek government help rather than do the hard work of competing in the marketplace. On the other hand, for firms that do choose to compete, intervention can deter broad categories of vigorous competitive behavior."
See, story titled "Barnett Addresses Benefits and Harms of Increasing Antitrust Enforcement Activity Around World" in TLJ Daily E-Mail Alert No. 1,648, October 1, 2007.
More News
2/7. The Federal Communications Commission (FCC) adopted and released an order [5 pages in PDF] that denies petitions to reject or suspend AT&T's proposed revisions to tariffs, on behalf of various of its subsidiaries, that withdraw broadband services from its tariff, including "Frame Relay, ATM, Ethernet, Remote Network Access, SONET, Optical Network and Wave-Based services, with the exception of certain Frame Relay and ATM services operating below 200 Kbps in each direction." Time Warner Telecom, Comptel, and Sprint Nextel filed the petitions. This order is FCC 08-42.
FCC Sets Comments Deadlines for Forbearance NPRM
2/6. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets comment deadlines for, its Notice of Proposed Rulemaking (NPRM) in its proceeding titled "In the Matter of Petition to Establish Procedural Requirements to Govern Proceedings for Forbearance Under Section 10 of the Communications Act of 1934, as Amended". See, Federal Register, February 6, 2008, Vol. 73, No. 25, at Pages 6888-6895
Section 10 of the Communications Act, which is codified at 47 U.S.C. § 160(a), provides, in part, that the FCC:
"shall forbear from applying any regulation or any provision of this chapter
to a telecommunications carrier or telecommunications service, or class of
telecommunications carriers or telecommunications services, in any or some of
its or their geographic markets, if the Commission determines that--
(1) enforcement of such regulation or provision is not necessary to ensure
that the charges, practices, classifications, or regulations by, for, or in
connection with that telecommunications carrier or telecommunications service
are just and reasonable and are not unjustly or unreasonably discriminatory;
(2) enforcement of such regulation or provision is not necessary for the
protection of consumers; and
(3) forbearance from applying such provision or regulation is consistent with
the public interest."
There is also a forbearance provision in 47 U.S.C. § 332 that applies to commercial mobile radio service (CMRS) providers.
The NPRM states that the FCC seeks "comment in general on the need for procedural rules to govern the Commission’s consideration of petitions for forbearance pursuant to section 10 and/or section 332", and with respect to the issues raised and rules proposed by the petitioners, Covad, NuVox, XO, Cavalier, and McLeod, in their September 19, 2007 petition. See, part 1 [PDF] and part 2 [PDF] of petition.
See also, story titled "FCC Announces that Verizon Petition for Forbearance is Deemed Granted" in TLJ Daily E-Mail Alert No. 1,334, March 22, 2006, and story titled "Reps. Dingell and Markey Introduce Bill to End Deemed Granting of FCC Forbearance Petitions" in TLJ Daily E-Mail Alert No. 1,661, October 24, 2007.
The FCC adopted this NPRM on November 27, 2007, and released the text [25 pages in PDF] on November 30, 2007. This item is FCC 07-202 in WC Docket No. 07-267.
The deadline to submit initial comments is March 7, 2008. The deadline to submit reply comments is March 24, 2008.
CDT and PFF Criticize Pending Bills Related to Protecting Children Online
2/6. The Center for Democracy and Technology (CDT) and Progress & Freedom Foundation (PFF) released a report [38 pages in PDF] titled "Online Child Protection and Online Content Regulation Bills". The co-authors are John Morris (CDT) and Adam Thierer (PFF).
The joint report summarizes 34 bills that pertain to protecting children in the context of computers and internet use, including child pornography, indecency, child predation, children's privacy, and violence and video games. The report covers bills that address social networking sites, domain names, parental controls, and age verification.
The CDT also released its own analysis [15 pages in PDF]. It wrote that many of these bills "would not be effective child protection measures and would raise very serious policy and constitutional problems."
The PFF's Thierer also released his own analysis. He wrote that "it is important for those concerned about speech and privacy rights to remain vigilant". Thierer concluded that "While Congress is right to take steps to protect children against actual harms -- namely, child predation and child pornography -- it would be unwise for lawmakers to expand the censorial schemes of the past. The better approach for potentially objectionable, but legal, content is to use education and empowerment-based strategies. Again, parents already have a multitude of tools, controls, and information at their disposal to establish their own household standards regarding acceptable media content."
The CDT analysis does express support for several of the bills. The CDT backs several education bills, HR 3461 [LOC | WW], the "SAFER-NET Act", S 2344 [LOC | WW], the "Internet Safety Education Act", and S 1965 [LOC | WW], "Protecting Children in the 21st Century Act". It also backs HR 719 [LOC | WW], the "Sex Offender Internet Usage Limits", and HR 3845 [LOC | WW], the "PROTECT Our Children Act".
It is also possible that some of these bills have been introduced for purposes other than, or in addition to, obtaining enactment into law. First, bills are sometimes introduced for the purpose of prompting action outside of the Congress, such as pressuring companies or industry sectors that would be affected by enacted legislation to alter their business practices, or to organize or enhance industry self-regulatory initiatives.
Federal and state legislative activity may have already played a role in prompting MySpace to reach an agreement with state attorneys general regarding self policing of its social networking web site. See, story titled "MySpace and State AGs Sign Document Regarding Online Safety" in TLJ Daily E-Mail Alert No. 1,701, January 16, 2008.
Bills are also sometimes introduced in an attempt to influence subsequent agency rulemaking proceedings and administrative enforcement actions. Bills are also sometimes introduced as attempts to induce law enforcement agencies and prosecutors to investigate and prosecute more cases related to the subject matter of the legislation.
Also, introduction, cosponsorship, and floor votes in favor of bills allow members of Congress to publicly take positions. Child protection bills may be an easy way to build a legislative record of apparent concern for children. Such position taking may be useful in a member's election contests if opponents or potential opponents site that member's votes or positions on other matters affecting children, such as children's health care, education funding, or abortion.
Some of the introduced bills were drafted without expertise. Some of the bills approved by the full House received no hearing. Some received no subcommittee or even full committee markup. It is already the second month of the second session, yet none of these 34 bills have been approved by both the House and Senate. And, as Thierer states in his analysis, some of these bills are just "silly". These are all indicia of bills introduced with lessened expectations of enactment into law.
FCC Sets Comments Deadlines for Pole Attachments NPRM
2/6. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets comment deadlines for, its Notice of Proposed Rulemaking (NPRM) regarding pole attachments. See, Federal Register, February 6, 2008, Vol. 73, No. 25, at Pages 6879-6888.
The federal Pole Attachments Act, which is codified at 47 U.S.C. § 224, provides that the FCC "shall regulate the rates, terms, and conditions for pole attachments to provide that such rates, terms, and conditions are just and reasonable, and shall adopt procedures necessary and appropriate to hear and resolve complaints concerning such rates, terms, and conditions".
It defines "pole attachment" as "any attachment by a cable television system or provider of telecommunications service to a pole, duct, conduit, or right-of-way owned or controlled by a utility".
The FCC adopted rules after passage of the Telecommunications Act of 1996. This NPRM revisits the topic. The NPRM states that "we seek comment on a variety of issues relating to our implementation of section 224 including whether our existing rules governing pole attachment rates remain appropriate in light of increasing intermodal competition in the marketplace today; whether section 224 confers rights on incumbent local exchange carriers (LECs) to regulation of the rates they pay for pole attachments; and whether it would be appropriate to adopt specific rules regarding certain nonprice terms and conditions associated with section 224 access rights. With regard to rates, we tentatively conclude that all attachments used for broadband Internet access service should be subject to a single rate, regardless of the platform over which those services are provided, and that that rate, for reasons discussed herein, should be greater than the current cable rate, yet no greater than the telecommunications rate."
The deadline to submit initial comments is March 7, 2008. The deadline to submit reply comments is March 24, 2008.
The FCC adopted this NPRM on October 31, 2007, and released the text [40 pages in PDF] on November 20, 2007. This NPRM is FCC 07-187 in WC Docket No. 07-245.
House to Consider Student Aid Bill with Peer to Peer Infringement Language
2/6. The House Rules Committee adopted HRes 956, a rule for consideration of HR 4137 [LOC | WW], the "College Opportunity and Affordability Act of 2007".
This is a huge bill. A few provisions deal with peer to peer copyright infringement on college campuses. The House is scheduled to consider HR 4137 on Thursday, February 7.
Section 488 of the bill as reported would amend 20 U.S.C. § 1092(a)(1). This subsection of the statute requires educational institutions participating in federal student financial assistance programs "shall carry out information dissemination activities for prospective and enrolled students (including those attending or planning to attend less than full time) regarding the institution and all financial assistance". The statute then enumerates many types of information that must be disseminated.
Section 488 of this bill would add a new category of information titled "Disclosure of Policies and Sanctions Related to Copyright Infringement". This would become Section 485(a)(1)(P) of the statute.
Specifically, the bill would require dissemination of information regarding the following:
"institutional policies and sanctions related to copyright infringement,
including--
(i) an annual disclosure that explicitly informs students that
unauthorized distribution of copyrighted material, including unauthorized
peer-to-peer file sharing, may subject the students to civil and criminal
liabilities;
(ii) a summary of the penalties for violation of Federal copyright
laws;
(iii) a description of the institution's policies with respect to
unauthorized peer-to-peer file sharing, including disciplinary actions that are
taken against students who engage in unauthorized distribution of copyrighted
materials using the institution's information technology system; and
(iv) a description of actions that the institution takes to prevent
and detect unauthorized distribution of copyrighted material on the
institution's information technology system."
Then Section 495 of the bill as reported would add a new section to the student financial assistance statute, to be numbered Section 494, and titled "Campus-Based Digital Theft Prevention".
This new Section 494 would provide that "Each eligible institution participating in any program under this title shall to the extent practicable -- (1) make publicly available to their students and employees, the policies and procedures related to the illegal downloading and distribution of copyrighted materials required to be disclosed under section 485(a)(1)(P); and (2) develop a plan for offering alternatives to illegal downloading or peer-to-peer distribution of intellectual property as well as a plan to explore technology-based deterrents to prevent such illegal activity."
This new Section would also provide for federal grants colleges, universities, and other entities "to develop, implement, operate, improve, and disseminate programs of prevention, education, and cost-effective technological solutions, to reduce and eliminate the illegal downloading and distribution of intellectual property".
These grants would be awarded on a competitive basis. The bill also authorizes unspecified appropriations for five years to fund these grants.
Rep. Steve Cohen (D-TN) offered, but withdrew, an amendment [PDF] titled "Sanctions for section 494 prohibited".
His amendment provided that "No institution of higher education shall be denied or given reduced Federal funding for student loan or other student financial aid programs under this title because of such institution's noncompliance with the requirements of this section or any other requirement contained in this Act that concerns the illegal downloading or distribution of intellectual property."
House and Senate Pass Two Do Not Call Registry Bills
2/6. The House passed S 781 [LOC | WW], the "Do-Not-Call Registry Fee Extension Act" by voice vote. The Senate passed this bill on December 17, 2007. It is now ready for the signature of President Bush.
S 781 extends the authority of the Federal Trade Commission (FTC) to collect Do-Not-Call Registry fees to fiscal years after FY 2007. For a summary of the bill, see story titled "House to Vote on Do Not Call Registry Fee Extension Act" in TLJ Daily E-Mail Alert No. 1,710, February 4, 2008.
In addition, the Senate passed HR 3541 [LOC | WW], the "Do-Not-Call Improvement Act of 2007", on February 6, 2008, by unanimous consent.
Rep. Mike Doyle (D-PA), Rep. Chip Pickering (R-MS), and Rep. Rick Boucher (D-VA) introduced this bill on September 17, 2007. The House Commerce Committee (HCC) amended and approved it on October 30, 2007. See, story titled "House Commerce Committee Approves Bill to Preclude Expiration of Do Not Call Registrations" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007. The House passed this bill on December 11, 2007. It is now ready for the President's signature.
HR 3541 provides that "Telephone numbers registered on the national 'do-not-call' registry ... shall not be removed from such registry except as provided for in subsection (b) or upon the request of the individual to whom the telephone number is assigned." Without this legislation, registrations would be removed after five years.
Subsection (b) provides for removal of invalid, disconnected, and reassigned telephone numbers.
Rep. John Dingell (D-MI), the Chairman of the HCC, stated that the House passed its own version of S 781 before the Senate passed its bill, and that "By agreement with the Chairman of the Senate Committee on Commerce, we are sending the later Senate-passed bill to the President."
He added that "as part of the agreement, the Senate today will take up and pass H.R. 3541, legislation also passed by the House on December 11, 2007, to eliminate the automatic removal of telephone numbers from the registry, thus clearing the bill for the President's signature. Current rules provide that telephone numbers be removed from the list after five years, thus requiring consumers to reregister their numbers in order to fend off telemarketing calls."
At 2:00 PM on Thursday, February 7, 2008, Sen. Ted Stevens (R-AK), Sen. Byron Dorgan (D-ND), Rep. Doyle, Rep. Pickering, and others will hold a news conference regarding passage of these bills.
More News
2/6. The U.S. Court of Appeals (FedCir) issued a per curium order [4 pages in PDF] in Prism Technologies v. VeriSign, affirming the judgment of the District Court, without an opinion. This patent case is Prism Technologies LLC v. VeriSign, Inc., et al., U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2007-1315, an appeal from the U.S. District Court for the District of Delaware.