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Rep. Scott Fitzgerald, R-Wis., is seen during a group photo with freshmen members of the House Republican Conference on the House steps of the Capitol on Monday, January 4, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

A Republican lawmaker is readying a bill that would require businesses subsidized by foreign governments to disclose that information when they pursue large mergers subject to U.S. regulatory review.

The bill, led by Rep. Scott Fitzgerald, R-Wisc., and tentatively named the “Stopping Foreign Government Subsidies for Mergers Act,” would require businesses backed by state-owned entities to notify regulators of that backing when they report a deal of more than $92 million in value.

That additional information can help regulators assess how a company might act once merged, Republican Federal Trade Commissioner Noah Joshua Phillips, who supports the legislation, told CNBC in an interview Wednesday.

Noah Phillips, commissioner, Federal Trade Commission, testifies during the Senate Commerce, Science and Transportation Committee hearing tilted The Invalidation of the EU-US Privacy Shield and the Future of Transatlantic Data Flows, in Russell Building on Wednesday, December 9, 2020.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

“Our presumptions in the law and the way we do our work are based on the notion fundamentally that firms profit maximize. They seek to make money,” Phillips said. “But state-owned entities don’t necessarily have the pursuit of profit as their ultimate motive, and as a result, they may not act in the same way as the companies that we normally look at do.”

A firm that values certain political objectives over profits might make a different calculation when it comes to the risk of pursuing anticompetitive conduct, like steeply undercutting rival prices only to raise them later on. While Phillips declined to speculate on the types of conduct in which a state-owned entity might engage, he said it would help to know their potential incentives in order to assess the facts of each individual case.

As it stands, regulators may become aware of a foreign government subsidy in a merger case, but Phillips said requiring that information up-front will allow them to “develop expertise and ask the right questions.”

The bill builds on a recommendation last year from the bipartisan U.S.-China Economic and Security Review Commission. In its annual report to Congress, the commission recommended the FTC have a system in place to determine how proposed transactions are influenced by such foreign government support.

The commission found that the Chinese government would back companies it saw becoming national champions and eventually push them to expand into the U.S. and other countries.

“This process assists Chinese national champions in surpassing and supplanting global market leaders,” the commission wrote in its annual report to Congress.

The commission said “China’s trade-distorting practices” mean that “U.S. workers and companies, no matter how innovative and efficient, struggle to compete when the Chinese government so decisively tilts the playing field in favor of Chinese companies through a variety of legal, regulatory, and financial mechanisms, and when U.S. companies are granted access to the Chinese market, it is at the cost of transferring valuable intellectual property to their Chinese counterparts.”

The group warned that the risk is particularly acute when it comes to emerging technologies, where China allegedly seeks to “surpass and displace the United States altogether.”

“Failure to appreciate the gravity of this challenge and defend U.S. competitiveness would be dire,” the commission wrote. “Because these emerging technologies are the drivers of future growth and the building blocks of future innovation, a loss of leadership today risks setting back U.S. economic and technological progress for decades.”

Though Fitzgerald said he’s in the early stages of engaging with colleagues about co-sponsoring the bill, he said he believes China’s apparent willingness to devote major resources toward corporate subsidies could rally lawmakers on both sides of the aisle behind the proposal.

The bill would not place any national security assessment requirements on the antitrust agencies, which Phillips said are best left to the existing agencies responsible for that type of review. The Committee on Foreign Investment in the U.S. (CFIUS) within the Treasury Department is already responsible for reviewing national security implications for mergers with foreign entities, for example.

But Phillips and Fitzgerald said there remains a need to assess foreign-subsidized businesses from a potential harm to competition perspective, which is squarely within the antitrust regulators’ purview.

Doug Melamed, a Stanford University law professor and former Acting Assistant Attorney General of the Antitrust Division at the Department of Justice, said one possible outcome of such legislation, if passed, would be a chilling of mergers with state-owned entities.

“The most important effect of that kind of requirement might be to deter the acquisition in the first place,” Melamed said. “Because if the Chinese have some interesting stake in company X that would not ordinarily surface … this might deter it if they don’t want their position to be known.”

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E-commerce firm Shopee agreed to adjust its practices in Indonesia after watchdog says it violated competition law

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E-commerce firm Shopee agreed to adjust its practices in Indonesia after watchdog says it violated competition law

BRAZIL – 2022/03/22: In this photo illustration, a woman’s silhouette holds a smartphone with a Shopee logo in the background. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)

Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Shopee and its courier service Shopee Express agreed to adjust its current practices after admitting to breaching a competition rule in Indonesia, the country’s watchdog said on Wednesday.

Shopee is the e-commerce arm of Southeast Asian tech giant Sea Limited.

“Shopee and Shopee Express admitted that they had violated Law no. 5 of 1999, regarding delivery (courier) services on the Shopee platform by agreeing to various behavioral change points determined by the KPPU Council in the hearing yesterday,” Indonesia Competition Commission Komisi Pengawas Persaingan Usaha said in a Google-translated statement.

KPPU said Shopee proposed adjustments to its current practices on June 20 which were approved by the commission council.

“Shopee Indonesia attended a meeting with KPPU on 25 June to discuss points of the integrity pact that was shared by KPPU last week. On 20 June, Shopee proposed changes to our user interface to enhance our services and demonstrate our compliance in providing the best services to our users, in accordance with the feedback provided and approved by the KPPU,” Radynal Nataprawira, head of public affairs at Shopee Indonesia, told CNBC in emailed comments.

“Shopee is always committed to complying with all applicable regulations and laws in the Republic of Indonesia in conducting our business operations,” said Nataprawira.

Last month, KPPU revealed its preliminary investigation found that Shopee allegedly prioritized Shopee Express in every package delivery to consumers.

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The watchdog also accused Shopee of “discriminatory behavior,” saying Shopee Express and another delivery service J&T Express were “automatically activated en masse on the seller dashboard” while other companies that also have good service performance did not get selected automatically.

KPPU investigators also named an employee who held director positions in both Shopee Indonesia and Shopee Express, saying this “dual position” has the ability to influence competition and control the behavior of both companies.

KPPU is also probing Shopee rival Lazada, the Southeast Asian e-commerce arm of Chinese tech giant Alibaba, saying it has found indications of similar violations.

“If it is later proven to have violated, Lazada can be subject to a fine of a maximum of 50% of the net profit or 10% of the total sales it earned in the relevant market during the period of the violation,” KPPU said in a statement last month.

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Europe is at risk of over-restricting AI and falling behind U.S. and China, Dutch prince says  

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Europe is at risk of over-restricting AI and falling behind U.S. and China, Dutch prince says  

Prince Constantijn is special envoy to Techleap, a Dutch startup accelerator.

Patrick Van Katwijk | Getty Images

AMSTERDAM — Europe is at risk of falling behind the U.S. and China on artificial intelligence as it focuses on regulating the technology, according to Prince Constantijn of the Netherlands.

“Our ambition seems to be limited to being good regulators,” Constantijn told CNBC in an interview on the sidelines of the Money 20/20 fintech conference in Amsterdam earlier this month.

Prince Constantijn is the third and youngest son of former Dutch Queen Beatrix and the younger brother of reigning Dutch King Willem-Alexander.

He is special envoy of the Dutch startup accelerator Techleap, where he works to help local startups grow fast internationally by improving their access to capital, market, talent, and technologies.

“We’ve seen this in the data space [with GDPR], we’ve seen this now in the platform space, and now with the AI space,” Constantijn added.

European Union regulators have taken a tough approach to artificial intelligence, with formal regulations limiting how developers and companies can apply the technology in certain scenarios.

The bloc gave final approval to the EU AI Act, a ground-breaking AI law, last month.

Officials are concerned by how quickly the technology is advancing and risks it poses around jobs displacement, privacy, and algorithmic bias.

The law takes a risk-based approach to artificial intelligence, meaning that different applications of the tech are treated differently depending on their risk level.

For generative AI applications, the EU AI Act sets out clear transparency requirements and copyright rules.

All generative AI systems would have to make it possible to prevent illegal output, to disclose if content is produced by AI and to publish summaries of the copyrighted data used for training purposes.

But the EU’s Ai Act requires even stricter scrutiny for high-impact, general-purpose AI models that could pose “systemic risk,” such as OpenAI’s GPT-4 — including thorough evaluations and compulsory reporting of any “serious incidents.”

Prince Constantijn said he’s “really concerned” that the Europe’s focus has been more on regulating AI than trying to become a leader innovating in the space.

“It’s good to have guardrails. We want to bring clarity to the market, predictability and all that,” he told CNBC earlier this month on the sidelines of Money 20/20. “But it’s very hard to do that in such a fast-moving space.”

“There are big risks in getting it wrong, and like we’ve seen in genetically modified organisms, it hasn’t stopped the development. It just stopped Europe developing it, and now we are consumers of the product, rather than producers able to influence the market as it develops.”

Between 1994 and 2004, the EU had imposed an effective moratorium on new approvals of genetically modified crops over perceived health risks associated with them.

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The bloc subsequently developed strict rules for GMOs, citing a need to protect citizens’ health and the environment. The U.S. National Academies of Sciences says that genetically modified crops are safe for both human consumption and the environment.

Constantijn added that Europe is making it “quite hard” for itself to innovate in AI due to “big restrictions on data,” particularly when it comes to sectors like health and medical science.

In addition, the U.S. market is “a much bigger and unified market” with more free-flowing capital, Constantijn said. On these points he added, “Europe scores quite poorly.”

“Where we score well is, I think, on talent,” he said. “We score well on technology itself.”

Plus, when it comes to developing applications that use AI, “Europe is definitely going to be competitive,” Constantijn noted. He nevertheless added that “the underlying data infrastructure and IT infrastructure is something we’ll keep depending on large platforms to provide.”

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Waymo opens robotaxi service to all San Francisco users

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Waymo opens robotaxi service to all San Francisco users

A Waymo rider-only robotaxi is seen during a test ride in San Francisco on Dec. 9, 2022.

Paresh Dave | Reuters

Waymo robotaxis are now open to all users in San Francisco, expanding the self-driving ride-hailing service, which has been available in the city to a limited number of riders.

In a blog post on Tuesday, Waymo said nearly 300,000 people have signed up for the service, called Waymo One, since the Alphabet-owned company opened its waitlist. The company began commercial passenger operations in August after a period of testing.

“We’re committed to growing our service gradually and responsibly,” Waymo said in the post. “We work closely with city and state officials, first responders, and advocates for road safety to ensure our service helps local communities gain access to reliable, safe, environmentally friendly transportation and has a positive impact on mobility.”

It is the second citywide rollout for Waymo, following Phoenix in 2020. Waymo One also operates in limited capacity in Los Angeles and Austin, Texas. As of February, the company had approximately 700 vehicles in the Waymo One fleet, including about 300 cars as part of its San Francisco service.

Driverless vehicles have faced some public backlash in recent months following collisions and other accidents. In October, General Motors’ Cruise autonomous vehicle unit paused all driverless operations after collisions led to investigations and a suspension of its licenses in California.

However, Waymo has experienced less controversy. The company has a large public affairs operation and communicates closely with the National Highway Traffic Safety Administration and local first responders.

In total, the 15-year-old project, which became Waymo in 2016, has driven about 20 million fully autonomous miles and nearly two million paid ride-hail trips, Waymo said. The company said it has logged 3.8 million rider-only miles in San Francisco as of the end of March.  

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