Facebook, other Silicon Valley giants get jitters over European regulatory environment

7 June 2016. By Mike Swift.

The general counsels at Facebook, Uber Technologies and Twitter now lead a combined total of nearly 500 in-house lawyers who grapple with regulatory and litigation issues around the world. Yet despite the impressive growth in legal staffing, the general counsels at the three Internet giants, alongside those at eBay and China’s Tencent Holdings, said at a conference* on Monday in Silicon Valley that they remain worried about the regulatory and litigation risk faced by their companies, particularly in Europe.

“We have major challenges in Europe, both as a company and as an industry, as well,” said Colin Stretch, Facebook’s general counsel. “The regulatory environment — it’s not great, but the real challenge is where it’s going. At a basic level, what we’re seeing is an historical appetite for regulation, particularly in the privacy realm.”

Although Europe has had an “historical norm of fairly aggressive regulation,” Stretch said Facebook and other US Internet companies were increasingly concerned that European regulators are “pushing us in the direction of a more aggressive regulatory environment that really does threaten how we do business.” Strech, who heads a legal team of more than 200 lawyers at Facebook, did not discuss any specific regulatory actions.

Vijaya Gadde, Twitter’s general counsel, said the San Francisco-based company and other US firms were concerned about the spillover of European legal decisions such as the “right to be forgotten” into the US legal framework.

“It’s definitely something that I think we’re all really worried about, and trying to figure out how we can limit the impact of that,” said Twitter’s top lawyer, who heads up an in-house legal and public policy team of about 75 people.

In both Europe and the US — Stretch singled out the US Federal Trade Commission and the Irish Data Protection Authority, where Facebook has its European headquarters, as the two most important privacy regulators in Facebook’s world — the Internet giants are increasingly trying to cooperate voluntarily with regulators whenever possible.

One example mentioned by Stretch and Gadde was a voluntary code of conduct on hate speech announced on May 31 by Facebook, Twitter, Microsoft and Google’s YouTube.

“It’s an experiment,” Gadde said. “I’m not sure how it’s going to play out, but it’s another way of thinking about how to work with [European governments].

“We sort of knew they were heading this way,” she said, referring to the regulation of hate speech.

Under the agreement, the US-based companies agreed to review notifications of illegal hate speech as defined by relevant national laws in less than 24 hours and block access to that content, if necessary. Vĕra Jourová, the EU’s commissioner for justice, said the agreement would help ensure the Internet remained a place “where European values and laws are respected.”

Salle Yoo, Uber’s general counsel, focused more on the problems global smartphone app car-hailing services have had with US regulators and courts. Uber faces a long list of lawsuits in state and federal courts across the US, including the uncertain future of its proposed $100 million settlement over the work status of its drivers in California.

Over the past 18 months, Uber has worked with local regulators in the US and elsewhere to put in place regulatory frameworks in more than 60 local jurisdictions for what regulators in California first called “transportation network companies,” or TNCs, when they approved the first regulatory rules for Uber in 2013.

“We are pro-smart regulation,” Yoo said, describing a series of historical laws involving jousting and public horse racing that are still on the books in Boston, Massachusetts, where Uber is trying to set up a TNC regulatory framework. Four years after hiring its first lawyer, Uber now has an in-house legal team with more than 180 lawyers in 120 locations around the world.

“Laws are living evolving things, and if they don’t live and they don’t evolve with technology … they are reduced to interesting anecdotes at dinner,” Yoo said. “We want be part of bringing the regulations forward as well.”

Yoo, who joined Uber four years ago as employee No.102 and was the company’s first lawyer, now heads a legal team of about 180 people, helping to write Uber’s “playbook” for launching in new cities, a local regulatory analysis that Uber executives use to decide when to approve a city for the company’s services.

Along with its biggest US competitor, Lyft, Uber decided on May 9, following a local referendum in Austin, Texas, that it would pull out of the Texas capital and technology hub. Voters rejected Proposition 1, which would have overturned regulations the city passed last December, including requirements for driver background checks based on fingerprints.

When Uber leaves a city, “the decision-making is usually around, ‘Is the regulation so restrictive on our company that we can’t scale?’,” Yoo said, adding that Uber’s policy team had remained behind in Austin. “We hope to get [local regulators and voters] to a place where we can return, like in Portland, [Oregon],” she said.

Brent Irvin, vice president and general counsel at Tencent and a former Silicon Valley lawyer with Wilson, Sonsini Goodrich & Rosati, ‎said he was concerned that European regulatory views were gaining influence in China and other countries, rather than the more Internet industry-friendly regulatory systems in the US. Tencent is based in Shenzhen, China, and is one of country’s largest Internet service portals.

Regulators in China “instinctively turn to EU regulation and not to the US,” Irvin said. “We try to make the point that there’s a reason that there aren’t a lot of Internet companies there [in Europe], and there are in the US.”

*13th Annual Stanford E-Commerce Best Practices Conference, Stanford Law School, Stanford, California, June 6, 2016