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The Pronk Pops Show 1356, November 11, 2019, Story 1: President Trump Honors Veterans at 100th New York City Veterans Day Parade — Videos — Story 2: President Trump’s Back Channel To Ukraine And Personal Lawyer Rudy Giuliani — Cashing In As Trump’s Trusted Adviser? —  Video — Story 3: President Trump Press Conference — Videos

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Story 1: President Trump Honors Veterans at 100th New York City Veterans Day Parade — Videos

See the source image

President Trump and The First Lady Attend the New York City Veterans Day Parade

Trump is first sitting president to attend Veterans Day Parade

Trump speaks at the New York City Veterans Day parade

President Trump kicks off the 100th annual NYC Veterans Day Parade at Madison Square Park in Manhattan. He will be the first president to participate in the parade. Trump gives an address at the park, the site of the Eternal Light Flagstaff memorial. #FoxNews

Vice President Pence Delivers Remarks on Veterans Day 2019

Vice President Pence Attends a National Veterans Day Observance

WATCH: Trump speaks at Veterans Day Parade in New York

USA: Veterans Day Parade sees anti-Trump protests

100th Annual NYC Veterans Day Parade

Veterans Day observances from across the country

VP Pence speaks at Arlington Cemetery

WATCH: Vice President Pence observes Veterans Day at Arlington National Cemetery

 

Story 2: President Trump’s Back Channel To Ukraine And Personal Lawyer Rudy Giuliani — Cashing In As Trump’s Trusted Adviser? —  Video

Trish Regan: Corruption, payouts and quid pro quos

Fitton: This is a fundamental threat to our republic

WATCH: Giuliani had a campaign against former U.S. ambassador to Ukraine, John Sullivan says

How Rudy Giuliani went from ‘America’s mayor’ to Ukraine business broker

Giuliani’s globetrotting complicates US foreign policy

Giuliani: Shouldn’t Biden be investigated over Ukraine if Trump can be impeached over it?

Giuliani rips ‘corrupt’ media, defends Trump’s calls for Biden probe

Giuliani slams ‘swamp media’, says it’s time to fight back against Dems

PBS News Hour full episode November 11, 2019

‘He’s Gonna Sing’: Giuliani Hires 3 Lawyers Amid Ukraine Scandal | The Beat With Ari Melber | MSNBC

What diplomat George Kent said about Rudy Giuliani — and Hunter Biden

‘I wouldn’t cooperate with Adam Schiff’: Giuliani | ABC News

 

Rudy Giuliani’s diplomatic backchannel was both ‘irregular’ and ‘outlandish’

Story 3: President Trump Press Conference — Videos

PHONY SCAM: President Trump Says Democrat “Witch Hunt” MUST END

Trump unloads on Democrats ahead of public impeachment hearings

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The Pronk Pops Show 1341, October 15, 2019, Story 1: Senator Mitch McConnell on Unfair Behind Closed Doors Single Party Impeachment Inquiry and Syria — Videos — Story 2: The Search of Leakers in Trump Administration — Videos — Story 3: Democrats Goal of Replacing Your Employer Provided Health Care Cover With Higher Taxes for Medicare For All — Socialized Medicine — Videos — Story 4: President Trump Congratulates The St.Louis Blues For Winning The Stanley Cup — Videos

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Story 1: Senator Mitch McConnell on Unfair Behind Closed Doors Single Party Impeachment Inquiry and Syria — Videos —

Senator Mitch McConnell: Democrats Are ‘Throwing Fairness And Precedent To The Wind’ | NBC News

Senate Needs to Make a Strong, Strategic Statement on Syria

Trump was ‘absolutely right’ to take troops out of Syria: Rand Paul

Democrats, Republicans unite on Trump’s decision on Syria

Senate Needs to Make a Strong, Strategic Statement on Syria

McConnell splits with Trump on Syria pullout

 

Mitch McConnell rebukes Donald Trump over Turkish invasion of Kurdish-held Syria, saying troop pullout gives Iran a chance to reach Israel’s doorstep and contending worthwhile intervention does NOT make the U.S. world’s policeman

  • McConnell once again expressed his ‘grave concern’ about the situation in Syria  
  • Said the door is ‘wide open’ for resurgence of ISIS
  • Said policy could put Iran on Israel’s ‘door-step’
  • Said standing up for U.S. interests does not make nation the ‘evil empire’
  • Trump has repeatedly complained the nation should not be world’s policeman 
  • At the same time, he blasted House Democrats on impeachment

Senate Majority Leader Mitch McConnell directly confronted President Trump‘s complaint that U.S. troop deployment’s make it the ‘world’s policeman’ and expressed his ‘grave concern’ about Trump’s policy moves in Syria.

McConnell issued the rebuke without directly blaming President Trump for the latest calamity in the region – although he said Trump’s policy threatens to put Iran on Israel’s door-step and fuel a ‘humanitarian catastrophe.’

Following Turkey’s incursion into Syria in territory that had been controlled by U.S.-allied members of the Kurdish minority, McConnell warned that the ‘door is wide open for resurgence of the Islamic State.’

Senate Majority Leader Mitch McConnell took on President Trump's contention that having forces remain in Syria was akin to being the 'world's policeman'

Senate Majority Leader Mitch McConnell took on President Trump’s contention that having forces remain in Syria was akin to being the ‘world’s policeman’

In a Senate floor speech, McConnell said the situation created a power vacuum that could fuel the meddling influence of Russia, and ‘leaving northeastern Syria wide open Iran to extend reach unimpeded all the way from tehran to the door step of our friends in Israel.

He also confronted the view, espoused directly by President Trump, that the U.S. should pull out of the region rather serving as the ‘world’s policeman.’

I want to make something clear, the United States has taken the fight to Syria and Afghanistan because that is where our enemies are, that’s why we’re there. Fighting terrorists, exercising leadership and troubled regions and advancing U.S. interests around the world does not make us an evil empire or the world’s policeman,’ McConnell said.

This picture taken on October 15, 2019 shows a missile fired by Turkish forces towards the Syrian town of Ras al-Ain, from the Turkish side of the border at Ceylanpinar district in Sanliurfa on the first week of Turkey's military operation against Kurdish forces

This picture taken on October 15, 2019 shows a missile fired by Turkish forces towards the Syrian town of Ras al-Ain, from the Turkish side of the border at Ceylanpinar district in Sanliurfa on the first week of Turkey’s military operation against Kurdish forces

McConnell shared his 'grave concern' about the situation in Syria

McConnell shared his ‘grave concern’ about the situation in Syria

‘When it looked like President Trump would withdraw from Syria at beginning of the year, 70 senators joined in warning of the risk of precipitously withdrawing from Syria or Afghanistan,’ McConnell noted in his floor speech

McConnell had also warned of his ‘grave concern’ in a written statement Monday that did not mention Trump by name. But in his floor speech Tuesday, he included such a reference.

‘When it looked like President Trump would withdraw from Syria at beginning of the year, 70 senators joined in warning of the risk of precipitously withdrawing from Syria or Afghanistan,’ McConnell noted.

But even as he challenged the president on a policy that has resulted in the release of ISIS prisoners, led to attacks against key regional allies, and even led to shelling by Turkish forces toward a U.S. troop-held position, he defended the president on impeachment by attacking Democrats.

‘House Democrats are finally indulging in their impeachment obsession. Full steam ahead,’ McConnell warned. ‘I don’t think many of us were expecting to witness a clinic in terms of fairness or due process. But even by their own partisan standards, House Democrats have already found new ways to lower the bar,’ he complained.

McConnell has said he was required by Senate rules to hold a trial should the House impeach Trump.

https://www.dailymail.co.uk/news/article-7577029/Mitch-McConnell-rebukes-Donald-Trump-Turkish-invasion-Kurdish-held-Syria.html

Trump’s Syria Mess

He resorts to sanctions as the harm from withdrawal builds.

Syrians fleeing Turskih advance arrive to the town of Tal Tamr in north Syria, Oct. 14. PHOTO: BADERKHAN AHMAD/ASSOCIATED PRESS

What a fiasco. Foreign-policy blunders often take months or years to reveal their damaging consequences, but the harm from President Trump’s abrupt withdrawal of U.S. forces from northern Syria is playing out almost in real time.

Critics said Turkish President Recep Tayyip Erdogan would invade northern Syria despite Mr. Trump’s public warnings, and the Turkish strongman did. Critics said our Kurdish allies would strike a deal with Syria’s Bashar Assad to defend themselves, and the Kurds have. Critics said Islamic State prisoners held by the Kurds would be released and scatter to wage jihad again, and they are.

The mess compounded Monday when Mr. Trump authorized sanctions against several Turkish officials and agencies who are “contributing to Turkey’s destabilizing actions in northeast Syria.” The sanctions include financial measures and barring entry to the U.S. Mr. Trump also said he’s ending trade talks with Turkey and raising steel tariffs to 50%.

Mr. Trump now finds himself back in an economic and diplomatic brawl with Turkey that he said he wanted to avoid. Wouldn’t it have been easier simply to tell Mr. Erdogan, on that famous phone call two Sundays ago, that the U.S. wouldn’t tolerate a Turkish invasion against the Kurds and would use air power to stop it? Mr. Erdogan would have had to back down and continue negotiating a Syrian safe zone with the Kurds and the U.S.

Mr. Trump is also making matters worse with his unserious justifications. “After defeating 100% of the ISIS Caliphate, I largely moved our troops out of Syria. Let Syria and Assad protect the Kurds and fight Turkey for their own land,” he tweeted Monday. “Anyone who wants to assist Syria in protecting the Kurds is good with me, whether it is Russia, China, or Napoleon Bonaparte. I hope they all do great, we are 7,000 miles away!”

We suppose the Napoleon line was a joke, but the world is laughing at an American President. Mr. Trump was able to project an image of strength in his early days as he prosecuted the war against ISIS and used force to impose a cost on Mr. Assad for using chemical weapons. But that image has faded as he has indulged his inner Rand Paul and claims at every opportunity that the main goal of his foreign policy is to put an end to “endless wars.”

This is simple-minded isolationism, and it’s a message to the world’s rogues that a U.S. President has little interest in engaging on behalf of American allies or interests. Friends like Israel and Saudi Arabia are quietly dismayed, while Iran, Russia and Hezbollah can’t believe Mr. Trump has so glibly abandoned U.S. commitments and military partners.

By now it’s not unreasonable to conclude that Mr. Trump’s foreign policy can be distilled into two tactics—sanctions and tariffs. Mr. Trump wields them willy-nilly against friend and foe alike as substitutes for diplomacy and the credible threat of military force.

Mr. Trump won’t like to hear it, but the Syrian mess is hurting him at home too. Republicans who have stood by him through the Russia fight and more are questioning his judgment as Commander in Chief in an increasingly dangerous world. With impeachment looming, he can’t afford to alienate more friends.

Opinion: Trump's Foreign Policy Needs to Change Course

Opinion: Trump’s Foreign Policy Needs to Change Course
As Turkey advances into Syria, foreign powers will increasingly act on the belief that the American executive is both politically weak and intellectually unfocused. Image: Brendan Smialowski/Getty Imageshttps://www.wsj.com/articles/trumps-syria-mess-11571095091

TRUMP’S CHAOTIC SYRIA EXIT PUTS ANTI-WAR 2020 DEMOCRATS IN A DELICATE SPOT

THE PENTAGON announced on Monday that the U.S. was pulling all of its troops out of northeastern Syria at President Donald Trump’s direction, completing a withdrawal he had started by Twitter declaration a week earlier. The move further clears the way for a full-on invasion by Turkey, whose soldiers have already been accused of executing noncombatants. In the chaos, hundreds of Islamic State detainees have reportedly escaped.

Trump defended his decision in a series of early-morning tweets on Monday. “The same people who got us into the Middle East mess are the people who most want to stay there!” he wrote. “Never ending wars will end!”

Trump’s abandonment of eastern Syria and the U.S. military’s Kurdish allies has put progressive Democrats — many of whom also favor withdrawing from overseas military operations — in a delicate spot. Over the past week, they have been trying to thread the needle between condemning Trump for recklessly abandoning an ally and emphasizing that withdrawing U.S. troops should be an eventual policy goal.

Trump’s decision has showcased what a worst-case scenario for expedited military withdrawal could look like, making it harder for progressive Democratic presidential candidates like Sens. Bernie Sanders and Elizabeth Warren to press their cases against “endless wars” on the campaign trail. The question of how progressives can go about drawing down U.S. military commitments without repeating Trump’s calamitous actions would be an obvious pick for Tuesday night’s Democratic debate.

So far, the Democratic candidates have been critical of Trump but light on specifics about what they would do differently. Last week, Sanders condemned Trump’s withdrawal from Syria, telling reporters that “as somebody who does not want to see American troops bogged down in countries all over the world — you don’t turn your back on allies who have fought and died alongside American troops. You just don’t do that.” But when George Stephanopoulos asked Sunday morning on ABC for Sanders to explain the difference between his and Trump’s approaches, Sanders responded simply that Trump “lies. I don’t.”

Warren’s response was similarly vague. She tweeted that “Trump recklessly betrayed our Kurdish partners” and that “we should bring our troops home, but we need to do so in a way that respects our security.”

Ro Khanna, a Democratic representative from California and co-chair of Sanders’s 2020 campaign, told The Intercept that progressives urgently need to make the case for a “doctrine of responsible withdrawal.”

“I don’t believe that withdrawal from a progressive perspective means a moral indifference to the lives of the places that we leave,” Khanna said in a phone interview. “It’s not an ‘America First’ approach that says our interests and our American lives are the only things that have moral worth. Rather, our withdrawal is based on an understanding of the limitations of American power to shape and restructure societies. It emphasizes the need for effective diplomacy and understands our moral obligations in these places.”

The U.S. should not have withdrawn troops without negotiating a deal that would have kept Turkey from invading Syria, backed by a threat to withhold future arms sales and economic assistance, Khanna told The Intercept. “We could have used all those points of leverage to get their commitment that they wouldn’t slaughter the Kurds.”

Another key difference between Trump’s approach and that of progressives is their level of trust for civil service expertise, Khanna said. “What this shows is that it’s not enough to have a president with certain instincts. Foreign policy requires great expertise. You need a progressive president who understands the importance of military restraint, but who also has the ability to put together an extraordinary foreign policy team to implement the goals that they may have.”

Far from admiring Trump’s approach to Syria, many anti-interventionists and foreign policy experts in D.C. view it as a blueprint for how not to withdraw from a conflict, according to Adam Wunische, a researcher with the Quincy Institute, a new pro-diplomacy, noninterventionist, and nonpartisan think tank.

“What we should have been doing from the very beginning is once we achieved the limited objective of destroying ISIS territory, they should have immediately begun contemplating what kind of peace or settlement could come afterwards,” Wunische told The Intercept. “To my knowledge, the U.S. is one of the only actors that can effectively talk to both the Turks and the Kurds. So they should have been trying to find an acceptable political arrangement for all the parties involved that doesn’t involve an endless, ill-defined military presence for the U.S.”

The Quincy Institute is working on a report outlining a possible plan for U.S. military withdrawal from Afghanistan that would avoid the type of disorder on display in northeastern Syria, Wunische said, though the timing of the report remains unclear.

Throughout the 2020 Democratic primary campaign, a number of candidates have railed against “endless wars.” But in a conversation that has been defined by intricate domestic policy proposals and detailed outlines of how to structure a wealth tax, candidates have said little about the rest of the world and even less about how they would wind down overseas conflicts.

Sanders, for example, has called for a withdrawal of U.S. forces from Afghanistan “as expeditiously as possible.” Warren has said “it’s long past time to bring our troops home, and I would begin to do so immediately.” Joe Biden has said he would bring “American combat troops in Afghanistan home during my first term,” but left the door open for a “residual U.S. military presence” that would be “focused on counterterrorism operations.” When asked during a July debate whether he would withdraw from Afghanistan during the first year of his presidency, Pete Buttigieg, the South Bend mayor and Navy Reserve veteran who spent seven months in Afghanistan, answered emphatically in the affirmative.

But aside from seeking a diplomatic solution, candidates have said very little about their policies for ending the war. And as in Syria, stakes for U.S. allies in Afghanistan are high.

A January study by the Rand Corporation found that a “precipitous U.S. withdrawal from Afghanistan” would have far-reaching consequences. The legitimacy for the U.S.-backed Kabul government would plummet, the report argued, and the Taliban would extend its control and influence. People all across the country would turn to regional militias and rival warlords for basic security.

“I don’t think that anyone, whether they promise it or not, is going to get out of Afghanistan in a week,” said Wuinsche. “What we need to focus on is, what is the political solution that we think is possible, and how do we get there? That requires marshaling all of these different tools of foreign policy, not just the military.”

Kate Kizer, policy director for the D.C.-based advocacy group Win Without War, stressed that one of the most revealing differences between progressives and Trump is how they would treat a conflict’s refugees. Under Trump, the U.S. has accepted historically low numbers of refugees and closed the door on future Syrian immigrants applying for Temporary Protected Status.

“One of the cruelest parts of Trump’s policy is the fact that, in addition to fueling more bloodshed with this decision, he’s also banning any types of civilians who would be fleeing from the conflict,” Kizer said. “In a situation like Syria and even Afghanistan, there’s a way to responsibly withdraw and then there’s a way to cut and run, which is what Trump has shown he has a predilection for. But I’m not sitting here saying that any type of military withdraw will necessarily be bloodless.”

https://theintercept.com/2019/10/15/syria-troop-withdrawal-trump-democrats/

Story 2: The Search of Leakers in Trump Administration — Videos

RUST NO ONE

Trump Suspects a Spiteful John Bolton Is Behind Some of the Ukraine Leaks

Trump fears the leaks are now coming from the people he chose to serve him—and that only increases the paranoia currently infecting the West Wing.

Photo Illustration by Lyne Lucien/The Daily Beast/Getty

At a critical juncture in his presidency, facing a rapidly unfolding impeachment inquiry by House Democrats, Donald Trump is feeling besieged by snitches.

In recent weeks, numerous leaks have appeared in the pages of The Washington PostThe New York TimesThe Wall Street Journal, and other major papers and news outlets detailing the president’s attempts to enlist foreign leaders to help dig up dirt on former Vice President Joe Biden and also aid Trump’s quest to discredit Special Counsel Robert Mueller’s concluded investigation. And as is his MO, the media-obsessed president has been fixated on not just the identity of the whistleblower behind the internal complaint that brought this scandal to the fore, but also on who, exactly, has been namelessly feeding intel to the press.

In the course of casual conversations with advisers and friends, President Trump has privately raised suspicions that a spiteful John Bolton, his notoriously hawkish former national security adviser, could be one of the sources behind the flood of leaks against him, three people familiar with the comments said. At one point, one of those sources recalled, Trump guessed that Bolton was behind one of the anonymous accounts that listed the former national security adviser as one of the top officials most disturbed by the Ukraine-related efforts of Trump and Rudy Giuliani, the president’s personal attorney who remains at the center of activities that spurred the impeachment inquiry.

“[Trump] was clearly implying [it, saying] something to the effect of, ‘Oh, gee, I wonder who the source on that could be,’” this source said, referring to the president’s speculation. Bolton, for his part, told The Daily Beast last month that allegations that he was a leaker in Trump’s midst are “flatly incorrect.”

The former national security adviser—who departed the administration last month on awfulmutually bitter terms—is working on a book about his time serving Trump, and has “a lot to dish,” one knowledgeable source noted.

Neither Bolton nor White House spokespeople provided comment for this story. Matt Schlapp, an influential conservative activist with close ties to the White House, said his assumption was that the leaks were coming from “career folks inside who hate Trump” and that the president and his campaign had “14 months of this” to come. As for Bolton, Schlapp said, “He’s smarter than that, although he does aggressively defend himself.”

Indeed, Bolton’s name surfaced Monday before House impeachment inquiry committees, when Hill reportedly testified that he told her to alert the chief lawyer for the National Security Council that Giuliani was working with Mick Mulvaney, the acting White House chief of staff, on an operation with legal implications, the Times reported late Monday. “I am not part of whatever drug deal Rudy and Mulvaney are cooking up,” Bolton told Hill to tell White House lawyers, according to sources familiar with the testimony.

“I have not spoken to John about [his comments, as conveyed by Hill],” Giuliani told The Daily Beast on Tuesday morning. “John is a longtime friend. I have no idea why John is doing this. My best guess is that he’s confused and bought into a false media narrative without bothering to call me about it.”

Regarding Bolton’s reported comment about Mulvaney being involved in this figurative Ukraine “drug deal,” the former New York City mayor insisted that “Mick wasn’t involved in this. I don’t recall having any lengthy conversation with him about this subject… I don’t recall ever having a lengthy conversation [about Ukraine] with John, either.”

Trump has felt under siege from within before, including at various flashpoints of his presidency. For instance, near the end of the Mueller probe, the president became so distrustful and resentful toward Don McGahn, his own White House counsel at the time, he started asking those close to him, “Is [Don] wearing a wire?”

But the current sense that he has been undermined by people whom he brought into his orbit has come at a critical juncture and colored some of the decisions he has made since the whistleblower complaint became public.  The president has openly declared that the whistleblower committed an act of treason. He has attempted to stop prominent advisers—including Ambassador to the European Union Gordon Sondland, a man who donated $1 million to the Trump inauguration—from testifying to Congress, only to apparently fail. On Monday, Fiona Hill, Trump’s former top adviser on Russia and Europe, was on Capitol Hill, where she reportedly told lawmakers that Sondland and Giuliani circumventedthe standard national-security process on high-profile Ukraine matters. The president has struggled to add to his current legal team, and appeared to begin putting some distance between himself and Giuliani last week.

And when outside allies began to talk about constructing a war room to help with impeachment, Trump shot down the concept, in part out of a sense that he couldn’t rely on them to get the message out right. One top White House aide subsequently labeled the idea an exercise by “outside peeps trying to self-aggrandize.”

The impression left on Republicans is one of a president increasingly driven by paranoia and a desire for insularity—and not, necessarily, to his own benefit.

“There is a certain level of frustration that all the sudden the president says something, then Rudy does, and it is not always consistent. There is a frustration that not everybody knows what they should be doing. It is not that they can’t defend the president it is a frustration that they don’t know exactly how they are supposed to defend the president,” said John Brabender, a longtime GOP consultant. “From the president’s perspective, this whole thing is a witch hunt and is outrageous and, therefore, it shouldn’t even need explanation…But with that said, you can’t just be angry. You need a unified communications team.”

According to those who’ve known the president, the sense that a good chunk of the government has never fully accepted his presidency and has actively worked to undermine it has animated much of his activity over the past few weeks. And though they believe he has a point, they also wonder if it is making him functionally incapable of taking the advice of some advisers: to simply ignore impeachment and apply his attention to other facets of governance.

Trump, they add, is preternaturally incapable of ignoring press about him and lingers particularly on leaks that depict atmospherics of his inner sanctum, the West Wing, and his internal well-being.

“In my experience, what he despises is somebody writing that Donald Trump feels under siege and his emotions are this and his thinking is this,” said Sam Nunberg, a former Trump campaign aide. “He hates people saying what he is thinking… And one of his most frequent tricks in terms of talking about himself on background [as an anonymous source] is him having the reporter say [he is] someone ‘familiar with the president’s thinking.’”

Nunberg said he had yet to see a blind quote in any recent report that would lead him to believe that Trump is cold-calling reporters. But the president is certainly working the fourth estate. Democratic aides were left shaking their heads last week when they received an email from the White House with the subject line, “Article from President Trump” and a PDF attachment of a Kimberly Strassel Wall Street Journal column.

“He’s apparently so anxious about GOP support in the Senate, he’s taken to sending WSJ columns against the House inquiry,” said a Senate source.

Still, for all of Trump’s grousing and preoccupation with who is and isn’t stabbing him in the back, loyalty has always been a one-way street for this president. Last week, after the news broke that Lev Parnas and Igor Fruman, two Soviet-born businessmen tied to Giuliani, were arrested on charges of violating campaign-finance law, a reporter at the White House asked Trump if the former New York mayor was still his personal attorney. The president responded that he didn’t know.

Though the president would later tweet out his support for Giuliani over the weekend, Trump has a long track record for being loyal to and supportive of a longtime associate, friend, or staffer—up until the moment he’s not. Perhaps the quintessential example of this is that of one of the president’s former attorneys, Michael Cohen, who famously turned on Trump after becoming convinced that the president had abandoned him while he was in the crosshairs of federal prosecutors.

Asked by The Daily Beast last week if the president told him that he still had his lawyer’s back—an attorney who further earned the president’s trust by defending Trump during the Mueller investigation—Giuliani let out a big belly-laugh and responded, “There’s nothing, [no knife], in my back.”

“My back feels very comfortable right now,” he added.

https://www.thedailybeast.com/trump-suspects-a-spiteful-john-bolton-is-behind-ukraine-leaks

Story 3: Democrats Goal of Replacing Your Employer Provided Health Care Cover With Higher Taxes for Medicare For All — Socialized Medicine — Videos —

 

See the source image

See the source image

Medicare For All: What Does it Actually Mean?

DEBUNKED: Medicare for All MYTHS! | Louder With Crowder

Story 4: President Trump Congratulates The St.Louis Blues For Winning The Stanley Cup — Videos —

Trump welcomes the Stanley Cup Champions to WH

President Trump Welcomes the St. Louis Blues Stanley Cup Champions

Trump welcomes 2019 Stanley Cup champions to White House

Trump welcomes the St. Louis Blues to the White House

WATCH: Trump hosts NHL champions St. Louis Blues at the White House

 

St. Louis Blues visit the White House after Stanley Cup win

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The Pronk Pops Show 1323, September 19, 2019, Story 1: Zuckerberg Meets President Trump and Senators — Regulating Big Tech Data Cartel: Internet Regulation, Data Privacy, Bias, Censorship, Filtering, Shadow Banning, Cryptocurrency, Control — Breakup The Big Tech Data Cartel or Threat of Changing Big Tech Platforms to Publishers — Internet Bill of Rights — Videos –Story 2: Department of Justice Charges Health Care Fraud Against 58 Individuals — Pill Mills — Videos —

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Story 1: Zuckerberg Meets President Trump and Senators — Regulating Big Tech Data Cartel: Internet Regulation, Data Privacy, Bias, Censorship, Filtering, Shadow Banning, Cryptocurrency, Control — Breakup The Big Tech Data Cartel or Threat of Changing Big Tech Platforms to Publishers — Internet Bill of Rights — Videos —

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Mark Zuckerberg meets with senators on Captiol Hill

Mark Zuckerberg doesn’t answer questions between meetings with senators

President Trump says his meeting with Mark Zuckerberg ‘constructive’

Facebook CEO Mark Zuckerberg meets with President Trump and other lawmakers

Is Facebook a Publisher or a Platform? A Definitive Answer…

Google, Twitter and Facebook – Platforms or Publishers?

Zuckerberg: We’re a tech company, not a publisher

The Rise of Big Tech Monopolies from Microsoft to Google

Breaking the Monopolies of Facebook, Google, and Amazon | Kat Chrysostom | TEDxOcala

Politico’s Levine: The main issue with Big Tech is the financial relationship between publishers and

Design of the platform business | Paul von Gruben | TEDxTUBerlin

Congressional investigation into big tech companies focus on effect digital platforms have on jou…

As calls to break up big tech grow louder, a split may pay off for one tech company

It’s Time: Break Up Big Tech

Which Silicon Valley Tech Titans Will Topple? (w/ Scott Galloway)

Measuring Market Concentration

What is HERFINDAHL INDEX? What does HERFINDAHL INDEX mean? HERFINDAHL INDEX meaning & explanation

Market Concentration: Greg Werden on the difficulties in measuring concentration

In this video, Greg Werden, Senior Economic Counsel in the Antitrust Division of the US Department of Justice explains the difficulties in using US census bureau data to measure market concentration and what he thinks about the existing evidence on market power in the US. More materials on this discussion available at http://oe.cd/2gw

Regulations may not hurt big tech companies

Antitrust & Big Tech

Adam Ruins Everything – How the Government Created Tech Monopolies | truTV

States Targeting Big Tech Companies

Feds investigating major tech companies for antitrust violations

Watch out, Google, the U.S. government has an ‘ironclad’ antitrust case

Big Tech and Antitrust: Rethinking Competition Policy for the Digital Era

The Left Ruins Everything

Big Tech Is Big Brother

Ted Cruz’s Opening Statement on Big Tech Censorship

Dr. Robert Epstein on Big Tech Censorship

Ingraham: Big tech and the new corporate censorship

Dennis Prager and Google VP Testify Before the U.S. Senate on Tech Censorship

Dennis Prager on Google’s censorship allegations

PragerU v. YouTube

Tucker defends Steven Crowder in spat with YouTube

How to Combat Big Tech Censorship | Louder with Crowder

Steven Crowder Exposes Vox’s Dirty Tactics

Dave Rubin Responds to VoxAdpocalypse I Louder with Crowder

Vox Journalist Gets Steven Crowder Demonetized on Youtube I White House Brief

In an unprecedented move, Youtube demonetized Steven Crowder after Vox Journalist Carlos “Gaywonk” Maza complained on Twitter about a few of Crowder’s jokes. Bowing to twitter mobs, Youtube demonetized Steven Crowder’s whole channel along with hundreds of other small creators on Youtube. Jon Miller breaks down the latest tech censorship drama in today’s episode of White House Brief.

YouTube’s messy fight with its most extreme creators

Big Tech Promotes Pluralism | The News & Why It Matters | Ep 329

Dan Crenshaw Interrogates Social Media Execs on Silencing Conservatives

Big Tech faces backlash as Washington explores regulation

Bill Gates says to regulate big tech companies

Bill Gates Says Big Tech Companies Shouldn’t Be Broken Up

The War on Big Tech – Everything is About to Change

FTC’s New Antitrust Task Force Zeroes In on Big Tech

Why Sen. Mark Warner wants tech companies to tell you how much your data is worth

The evolving relationship between platforms and publishers

Politicians Want to Destroy Section 230, the Internet’s First Amendment

Here’s a recap of Tuesday’s Big Tech antitrust congressional hearing

Is Big Tech Too Big?

Trump warns tech over conservative censorship concerns

Ted Cruz GRILLS Google rep over big tech censorship

Report reveals how tech giants censor conservative speech

What Should Have Happened at the Facebook Hearing

Department of Justice’s antitrust chief on regulating big tech

8 Attorneys General Launch Facebook Antitrust Investigation

How to regulate Facebook, Google, Apple, Amazon? | Tech Wash

News Media Alliance on Google profiting from news coverage

Lawsuit over big tech censorship strikes at core of American values

Facebook falls on report of possible FTC antitrust investigation

How to regulate Facebook, Google, Apple, Amazon? | Tech Wash

Sen. Ted Cruz grills Mark Zuckerberg on political bias

10 Most Expensive Things Owned By Mark Zuckerberg

Priscilla Chan is trying to change the fate of an entire generation

Priscilla Chan on meeting Mark Zuckerberg, and their goal to cure all diseases

The Struggles That Almost Ruined Mark Zuckerberg’s Marriage | ⭐OSSA

Zuckerberg meets Trump, senators; nixes breaking up Facebook

Facebook chief executive Mark Zuckerberg held private meetings with US lawmakers in Washington to discuss technology regulations and social media issues, including concerns about the social network's operations

Facebook chief executive Mark Zuckerberg held private meetings with US lawmakers in Washington to discuss technology regulations and social media issues, including concerns about the social network’s operations

Facebook chief executive Mark Zuckerberg met Thursday with US President Donald Trump and members of Congress on a political reconnaissance mission to Washington, where he rejected calls to break up the world’s biggest social network.

Zuckerberg’s visit comes as Facebook faces a myriad of regulatory and legal questions surrounding issues like competition, digital privacy, censorship and transparency in political advertising.

A Facebook spokesman said discussions were focusing in part on future internet regulation.

Senate Democrat Mark Warner, one of the lawmakers who has taken the lead in Washington on digital security, signalled they gave Zuckerberg an earful.

The visit, including a Wednesday night private dinner with Warner and other lawmakers, comes after his stormy appearance last year before Congress, where he was grilled on Facebook’s data protection and privacy missteps.

Senator Josh Hawley, a Republican freshman and one of the more outspoken critics of Facebook, said he had a “frank conversation” with Zuckerberg but remains concerned.

“Challenged him to do two things to show FB is serious about bias, privacy & competition. 1) Sell WhatsApp & Instagram 2) Submit to independent, third-party audit on censorship,” Hawley tweeted.

“He said no to both.”

Trump late Thursday posted a picture on Facebook and Twitter showing him shaking hands with Zuckerberg, but didn’t share details of their conversation.

“Nice meeting with Mark Zuckerberg of Facebook in the Oval Office today,” the president wrote.

Federal and state anti-trust enforcers are looking into potential anti-competitive actions by Facebook, and members of Congress are debating national privacy legislation.

The messaging product WhatsApp and picture-sharing giant Instagram are part of Facebook’s broad family of services that has made it a global online behemoth, but have also exposed the company to concerns about competition, data harvesting and sprawling digital control.

Warner said he was not prepared to call for Facebook’s dismantlement.

“I’m not yet with some of my friends who want to go straight to break up,” he told Fox Business Network.

“I am concerned. These are global companies, and I don’t want to transfer the leadership to Chinese companies,” he added.

“But I do think we need a lot more transparency. We need to have privacy rights protected. We need to increase competition with things like data portability and interoperability.”

Two months ago, the US Federal Trade Commission hit Facebook with a record $5 billion fine for data protection violations in a wide-ranging settlement that calls for revamping privacy controls and oversight at the social network.

Earlier Wednesday, executives from Facebook, Google and Twitter appeared before a Senate panel to answer questions on “digital responsibility” in the face of online violence and extremism.

https://www.dailymail.co.uk/wires/reuters/article-7484185/Saudi-led-coalition-launches-military-operation-north-Hodeidah-Yemen.html

Hawley Introduces Bill to Make Big Tech Embrace Free Speech

By Corinne Weaver | June 19, 2019 10:49 AM EDT

Republicans in the Senate plan on striking a blow for online free speech — by eradicating censorship of conservatives online.

Senator Josh Hawley (R-MO) introduced a new bill June 19, meant to tackle the problem of tech monopolies and their consistent censorship of conservatives and conservative ideology. The bill, called the Ending Support for Internet Censorship Act, looks to remove the immunity enjoyed by Big Tech companies from Section 230 of the Communications Decency Act. The bill would target companies with more than 30 million monthly users, such as Facebook, Google, Twitter, and YouTube.

Hawley wrote that the companies could earn their immunity back through a series of third-party external audits that provided “convincing evidence that their algorithms and content-removal practices are politically neutral.”

The legislation would exclude smaller companies. Hawley’s bill is more interested in going after the “tech monopolies” that present a greater threat through censorship. He stated in his press release:

There’s a growing list of evidence that shows big tech companies making editorial decisions to censor viewpoints they disagree with. Even worse, the entire process is shrouded in secrecy because these companies refuse to make their protocols public. This legislation simply states that if the tech giants want to keep their government-granted immunity, they must bring transparency and accountability to their editorial processes and prove that they don’t discriminate.”

In the bill itself, all acts of business were permitted except for those that favored or were biased against a specific ideology, political candidates, or political opinions.

The Free Speech Alliance, a coalition of more than 50 conservative organizations led by the Media Research Center, urged that tech companies “mirror the First Amendment.” This bill, if passed, would require Big Tech to do just that.

So far, major critics have gone after Hawley on Twitter. Americans for Prosperity called the bill “misguided legislation.” The group argued that the bill will prevent innovative startups from succeeding, even though it is clearly aimed at companies larger than 30 million monthly users.

Executive editor of Vox’s tech magazine, The Verge, Dieter Bohn, wrote that Hawley “doesn’t understand section 230.”

https://www.newsbusters.org/blogs/2019/06/19/hawley-introduces-bill-make-big-tech-embrace-free-speech

 

Mark Zuckerberg’s Call to Regulate Facebook, Explained

Here’s why the Facebook chief executive invited Congress to regulate his company in a post on Saturday.

Facebook's chief executive, Mark Zuckerberg, at Senate hearings last year. With the expectation that personal data handling and content restrictions are coming, Facebook tries in an op-ed piece to set the playing field.
CreditCreditTom Brenner/The New York Times

Facebook has faced months of scrutiny for a litany of ills, from spreading misinformation to not properly protecting its users’ data to allowing foreign meddling in elections.

Many at the Silicon Valley company now expect lawmakers and regulators to act to contain it — so the social network is trying to set its own terms for what any regulations should look like.

That helps explain why Mark Zuckerberg, Facebook’s chief executive, wrote an opinion piece for The Washington Post on Saturday laying out a case for how he believes his company should be treated.

In his post, Mr. Zuckerberg discussed four policy areas — harmful content, election integrity, privacy and data portability — which he said the government should focus attention on.

https://www.nytimes.com/2019/03/30/technology/mark-zuckerberg-facebook-regulation-explained.html

What Would Regulating Facebook Look Like?

In an interview with WIRED, Mark Zuckerberg seemed to accept the idea of some US regulation. Other countries could provide the blueprint.

In an interview with WIRED Mark Zuckberg seemed to accept the idea of some US regulation. Other countries could provide...
In an interview with WIRED, Mark Zuckberg seemed to accept the idea of some US regulation. Other countries could provide the blueprint .PHUC PHAM The drumbeat to regulate Big Tech began pounding long before the Cambridge Analytica scandal rocked Facebook—six long years ago, the Obama administration pushed a “Privacy Bill of Rights” that, like most other legislative attempts to safeguard your data online, went nowhere. But this time, as they say, feels different. Thanks to repeated lapses from not just Facebook but all corners of Silicon Valley, some sort of regulation seems not only plausible but imminent.

US politicians have called for Facebook CEO Mark Zuckerberg to appear in person before Congress. Some tech-focused legislation is currently wending its way through the Capitol’s corridors. And regulators in other countries have already clamped down on tech.

‘I think what tends to work well is transparency, which I think is an area where we need to do a lot better and are working on.’

FACEBOOK CEO MARK ZUCKERBERG

In an interview with WIRED editor-in-chief Nicholas Thompson Wednesday, Facebook CEO Mark Zuckberg seemed if not outright welcoming toward regulation, at least accepting of it. “There are some really nuanced questions though about how to regulate, which I think are extremely interesting intellectually,” says Zuckerberg, who points to the bipartisan Honest Ads Act, cosponsored by senators Mark Warner, Amy Klobuchar, and John McCain, as an example of the sort of bill his company can get behind.

The Honest Ads Act, legislation that calls for increased transparency behind who pays for political ads online, makes for a convenient example, though, in part because Facebook has already implemented many of its provisions. The bill, introduced last October, also appears to have languished, making it a non-substantive threat. Meanwhile, critics say it wouldn’t have stopped Russian propagandists from flooding Facebook in the first place.

Besides, even the Honest Ads Act’s sponsors have noted that it addresses a very small piece of a very large problem. And it does nothing to address the data privacy concerns that rightly create so much angst among anyone with any sort of presence online. Which is to say, everyone. For that, the US would need something much bigger.

“We do not have an omnibus privacy legislation at the federal level,” says David Vladeck, former director of the Federal Trade Commission’s Bureau of Consumer Protection. “We don’t have a statute that recognizes generally that privacy is a right that’s secured by federal law. And that puts us at the opposite end of the spectrum from some of the other major economies in the world.”

It’s not that living in the US puts you totally in the privacy hinterlands. The FTC has a modicum of authority, and has used it when companies grossly overreach—as it did against Facebook in 2011, when the company failed to keep its promises regarding how it treated their data. Facebook had made user information public, even if they’d previously had more restrictive privacy settings, and allowed third-party developers to mine the data not just of the Facebook users who downloaded their apps, but of all of those peoples’ friends. (If that sounds familiar, well, it’s precisely what allowed the Cambridge Analytica fiasco.)

Even then, though, Facebook got off with a scolding. It had to sign a consent decree, essentially a promise that it wouldn’t stray again. That’s gone unchecked until this week, when the FTC reportedly opened an investigation into the Cambridge Analytica scandal, and could fine Facebook up to $40,000 per violation—with 50 million people impacted, the potential fine hypothetically stretches into the trillions.

But the threat of retroactive fines clearly hasn’t done the trick. The FTC, meanwhile, can only work with the legislative tools it’s given. So what would it look like if Congress gave it better tools? Other countries might offer something like an outline, if not an outright blueprint.

In Finland, officials feel that their strong public education system and a coordinated government response have been enough to stave off Russia’s propaganda; Sri Lanka banned Facebook, WhatsApp, and Instagram entirely. Which is to say, it’s a wide gamut.

On the data privacy front, the most recent high-profile model comes from the European Union, where General Data Protection Regulation becomes the law of the land on May 25. GDPR focuses on ensuring that people who use online services know not only exactly what data those companies will take, but how they put it to use.

Zuckerberg, at least, seems supportive of those levels of transparency—although they’re also, since GDPR’s passage, an inevitability. “I think what tends to work well is transparency, which I think is an area where we need to do a lot better and are working on,” Zuckerberg tells WIRED. “I think guidelines are much better than dictating specific processes.”

‘We do not have an omnibus privacy legislation at the federal level.’

DAVID VLADECK FORMER BUREAU OF CONSUMER PROTECTION DIRECTOR

Rough guidelines also seem like a more plausible approach in the US due to both precedent and practicality. The EU approach to privacy law has long been highly detailed and prescriptive, says Vladeck, which sounds good in theory but can create issues in practice. “The implementation of it, in my view, is going to be ineffective, because it places an enormous regulatory burden on some parties, and worse, it places an enormous regulatory burden on the data protection authorities that need to enforce it,” says Vladeck. “I don’t think we could simply take the European regulation and simply adopt it in the United States. But I think there are a lot of elements in it that could provide guidance.”

One danger of an overly prescribed law is that technological solutions can outpace those mandates. Zuckerberg points to Germany, where hate speech laws require Facebook and other companies to remove offending posts within 24 hours. “The German model—you have to handle hate speech in this way—in some ways that’s actually backfired,” Zuckerberg says. “Because now we are handling hate speech in Germany in a specific way, for Germany, and our processes for the rest of the world have far surpassed our ability to handle that. But we’re still doing it in Germany the way that it’s mandated that we do it there. So I think guidelines are probably going to be a lot better.”

Zuckerberg also raises the question of the use of artificial intelligence in weeding out unwelcome uploads. “Now that companies increasingly over the next five to 10 years as AI tools get better and better will be able to proactively determine what might be offensive content or violate some rules, what therefore is the responsibility and legal responsibility of companies to do that,” Zuckerberg says.

Here, too, Facebook’s getting out ahead of any potential legal requirements; it already scans for nudity and terrorist content, and remains hard at work at AI that can spot what Zuckerberg calls “really nuanced hate speech and bullying.”

Eventually, though, Silicon Valley may run out of ways to appease regulators. By now there have been too many data breaches, too much negligence, whether by Facebook, Equifax, or the government itself. “I do think increasingly that there’s a sense that we need it,” says Vladeck.

At the very least, when regulation does come, Facebook has an open invite to help inform what happens, albeit in gruff terms. “Mr. Zuckerberg needs to testify before the Senate and answer some tough questions about Russian activity on the platform, and the way his company protects—or doesn’t—its users’ data,” said Senator Mark Warner in a email to WIRED Wednesday.

And if it doesn’t pitch in, Congress has a model for privacy protection waiting for it, at least philosophically, just an ocean away.

Facebook’s World

https://www.wired.com/story/what-would-regulating-facebook-look-like/

Section 230 of the Communications Decency Act

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Section 230 of the Communications Decency Act (CDA) of 1996 (a common name for Title V of the Telecommunications Act of 1996) is a landmark piece of Internet legislation in the United States, codified at 47 U.S.C. § 230. Section 230(c)(1) provides immunity from liability for providers and users of an “interactive computer service” who publish information provided by third-party users:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

Section 230 was developed in response to a pair of lawsuits against Internet service providers in the early 1990s that had different interpretations of whether the services providers should be treated as publishers or distributors of content created by its users. It was also pushed by the tech industry and other experts that language in the proposed CDA making providers responsible for indecent content posted by users that could extend to other types of questionable free speech. After passage of the Telecommunications Act, the CDA was challenged in courts and ruled by the Supreme Court in Reno v. American Civil Liberties Union (1997) to be partially unconstitutional, leaving the Section 230 provisions in place. Since then, several legal challenges have validated the constitutionality of Section 230. Section 230 protects are not limitless, requiring providers to remove criminal material such as copyright infringement; more recently, Section 230 was amended by the Stop Enabling Sex Traffickers Act in 2018 to require the removal of material violating federal and state sex trafficking laws.

Passed at a time where Internet use was just starting to take off, Section 230 has frequently been referred as a key law that has allowed the Internet to flourish, often referred to as “The Twenty-Six Words That Created the Internet”.

Contents

History

Prior to the Internet, case law was clear that a liability line was drawn between publishers of content and distributors of content; publishers would be expected to have awareness of material it was publishing and thus should be held liable for any illegal content it published, while distributors would likely not be aware and thus would be immune. This was established in Smith v. California (1959), where the Supreme Court ruled that putting liability on the provider (a book store in this case) would have “a collateral effect of inhibiting the freedom of expression, by making the individual the more reluctant to exercise it.”[1]

In the early 1990s, the Internet became more widely adopted and created means for users to engage in forums and other user-generated content. While this helped to expand the use of the Internet, it also resulted in a number of legal cases putting service providers at fault for the content generated by its users. This concern was raised by legal challenges against CompuServe and Prodigy, early service providers at this time.[2] CompuServe stated they would not attempt to regulate what users posted on their services, while Prodigy had employed a team of moderators to validate content. Both faced legal challenges related to content posted by their users. In Cubby, Inc. v. CompuServe Inc., CompuServe was found not be at fault as, by its stance as allowing all content to go unmoderated, it was a distributor and thus not liable for libelous content posted by users. However, Stratton Oakmont, Inc. v. Prodigy Services Co. found that as Prodigy had taken an editorial role with regard to customer content, it was a publisher and legally responsible for libel committed by customers.[3][a]

Chris Cox
Ron Wyden
Chris Cox (left) and Ron Wyden, the framers of Section 230

Service providers made their Congresspersons aware of these cases, believing that if upheld across the nation, it would stifle the growth of the Internet. United States Representative Christopher Cox (R-CA) had read an article about the two cases and felt the decisions were backwards. “It struck me that if that rule was going to take hold then the internet would become the Wild West and nobody would have any incentive to keep the internet civil”, Cox stated.[4]

At the time, Congress was preparing the Communications Decency Act (CDA), part of the omnibus Telecommunications Act of 1996, which was designed to make knowingly sending indecent or obscene material to minors a criminal offense. A version of the CDA had passed through the Senate pushed by Senator J. James Exon.[5] A grassroots effort in the tech industry reacted to try to convince the House of Representatives to challenge Exon’s bill. Based on the Stratton Oakmont decision, Congress recognized that by requiring service providers to block indecent content would make them be treated as publishers in context of the First Amendment and thus become liable for other illegal content such as libel, not set out in the existing CDA.[2] Cox and fellow Representative Ron Wyden (D-OR) wrote the House bill’s section 509, titled the Internet Freedom and Family Empowerment Act, designed to override the decision from Stratton Oakmont, so that services providers could moderate content as necessary and did not have to act as a wholly neutral conduit. The new Act was added the section while the CDA was in conference within the House.

The overall Telecommunications Act, with both Exon’s CDA and Cox/Wyden’s provision, passed both Houses by near-unanimous votes and signed into law by President Bill Clinton by February 1996.[6] Cox/Wyden’s section was codified as Section 230 in Title 47 of the US Code. The anti-indecency portion of the CDA was immediately challenged on passage, resulting in the Supreme Court 1997 case, Reno v. American Civil Liberties Union, that ruled all of the anti-indecency sections of the CDA were unconstitutional, but left Section 230.[7]

One of the first legal challenges to Section 230 was the 1997 case Zeran v. America Online, Inc., in which a Federal court affirmed that the purpose of Section 230 as passed by Congress was “to remove the disincentives to self-regulation created by the Stratton Oakmont decision”.[8] Under that court’s holding, computer service providers who regulated the dissemination of offensive material on their services risked subjecting themselves to liability, because such regulation cast the service provider in the role of a publisher. Fearing that the specter of liability would therefore deter service providers from blocking and screening offensive material, Congress enacted § 230’s broad immunity “to remove disincentives for the development and utilization of blocking and filtering technologies that empower parents to restrict their children’s access to objectionable or inappropriate online material.”[8] In addition, Zeran notes “the amount of information communicated via interactive computer services is . . . staggering. The specter of tort liability in an area of such prolific speech would have an obviously chilling effect. It would be impossible for service providers to screen each of their millions of postings for possible problems. Faced with potential liability for each message republished by their services, interactive computer service providers might choose to severely restrict the number and type of messages posted. Congress considered the weight of the speech interests implicated and chose to immunize service providers to avoid any such restrictive effect.”[8]

Application and limits

In analyzing the availability of the immunity offered by Section 230, courts generally apply a three-prong test. A defendant must satisfy each of the three prongs to gain the benefit of the immunity:[9]

  1. The defendant must be a “provider or user” of an “interactive computer service.”
  2. The cause of action asserted by the plaintiff must treat the defendant as the “publisher or speaker” of the harmful information at issue.
  3. The information must be “provided by another information content provider,” i.e., the defendant must not be the “information content provider” of the harmful information at issue.

Section 230 immunity is not unlimited. The statute specifically excepts federal criminal liability and intellectual property claims.[10] However, state criminal laws have been held preempted in cases such as Backpage.com, LLC v. McKenna[11] and Voicenet Commc’ns, Inc. v. Corbett[12] (agreeing “[T]he plain language of the CDA provides … immunity from inconsistent state criminal laws.”).

As of mid-2016, courts have issued conflicting decisions regarding the scope of the intellectual property exclusion set forth in 47 U.S.C. § 230(e)(2). For example, in Perfect 10, Inc. v. CCBill, LLC,[13] the 9th Circuit Court of Appeals ruled that the exception for intellectual property law applies only to federal intellectual property claims such as copyright infringement, trademark infringement, and patents, reversing a district court ruling that the exception applies to state-law right of publicity claims.[14] The 9th Circuit’s decision in Perfect 10 conflicts with conclusions from other courts including Doe v. Friendfinder. The Friendfinder court specifically discussed and rejected the lower court’s reading of “intellectual property law” in CCBill and held that the immunity does not reach state right of publicity claims.[15]

Additionally, with the passage of the Digital Millennium Copyright Act in 1998, services provides must comply with additional requirements for copyright infringement to maintain “safe harbor” protections from liability, as defined in the DMCA’s Title II, Online Copyright Infringement Liability Limitation Act.[16]

Controversies

The first major challenge to Section 230 was in Zeran v. AOL, a 1997 case decided at the Fourth Circuit. The case involved a person that sued America Online (AOL) for failing to remove, in a timely manner, libelous ads posted by AOL users that inappropriately connected his home phone number to the Oklahoma City bombing. The court found for AOL and upheld the constitutionality of Section 230, stating that Section 230 “creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.”[17] This rule, cementing Section 230’s liability protections, has been considered one of the most important case laws affecting the growth of the Internet, allowing websites to be able to incorporate user-generated content without fear of prosecution.[18] However, at the same time, this has led to Section 230 being used as a shield for some website owners as courts have ruled Section 230 provides complete immunity for ISPs with regard to the torts committed by their users over their systems.[19]

Sex trafficking

Around 2001, a University of Pennsylvania paper warned that “online sexual victimization of American children appears to have reached epidemic proportions” due to the allowances granted by Section 230.[20] Over the next decade, advocates against such exploitation such as the National Center for Missing and Exploited Children pressured major websites to block or remove content related to sex trafficking, leading to sites like FacebookMySpace, and Craigslist to pull such content. Because mainstream sites were blocking this content, those that engaged or profited from trafficking started to use more obscure sites, leading to the creation of sites like Backpage. In addition to removing these from the public eye, these new sites worked to obscure what trafficking was going on and who was behind it, limiting ability for law enforcement to take action.[20] Backpage and similar sites quickly came under numerous lawsuits from victims of the sex traffickers and exploiters for enabling this crime, but the court continually found in favor of Backpage due to Section 230,[21] and the Supreme Court let stand a Circuit Court decision in favor of Backpage due to Section 230 in January 2017.[22]

Due to numerous complaints from constituents, Congress began an investigation into Backpage and similar sites in January 2017, finding Backpage complicit in aiding and profiting from illegal sex trafficking.[23] Subsequently, Congress introduced the FOSTA-SESTA bills: the Allow States and Victims to Fight Online Sex Trafficking Act (FOSTA) in the House of Representatives by Ann Wagner in April 2017, and the Stop Enabling Sex Traffickers Act (SESTA) U.S. Senate bill introduced by Rob Portman in August 2017. Combined, the FOSTA-SESTA bills modified Section 230 to exempt services providers from Section 230 immunity when dealing with civil or criminal crimes related to sex trafficking,[24] which removes section 230 safe harbors for services that knowingly facilitate or support sex trafficking.[25] The bill passed both Houses and was signed into law by President Donald Trump on April 11, 2018.[26][27]

The bills were criticized by pro-free speech and pro-Internet groups as a “disguised internet censorship bill” that weakens the section 230 safe harbors, places unnecessary burdens on Internet companies and intermediaries that handle user-generated content or communications with service providers required to proactively take action against sex trafficking activities, and requires a “team of lawyers” to evaluate all possible scenarios under state and federal law (which may be financially unfeasible for smaller companies).[28][29][30][31][32] Critics also argued that FOSTA-SESTA did not distinguish between consensual, legal sex offerings from non-consensual ones, and argued it would cause websites otherwise engaged in legal offerings of sex work would be threatened with liability charges.[23] Online sex workers argued that the bill would harm their safety, as the platforms they utilize for offering and discussing sexual services in a legal manner (as an alternative to street prostitution) had begun to reduce their services or shut down entirely due to the threat of liability under the bill.[33][34]

Social media

Many social media sites, notably Facebook and Twitter, came under scrutiny as a result of the alleged Russian interference in the 2016 United States elections, where it was alleged that Russian agents used the sites to spread propaganda and fake news to swing the election in favor of Donald Trump. These platforms also were criticized for not taking action against users that used the social media outlets for harassment and hate speech against others. Shortly after the passage of FOSTA-SESTA acts, some in Congress recognized that additional changes could be made to Section 230 to require service providers to deal with these bad actors, beyond what Section 230 already provided to them.[35] During 2019, there have been renewed calls for changes in Section 230 to address what are seen as growing problems across social media and the protections given to tech companies.

Platform neutrality

Some politicians, including Republican senators Ted Cruz and Josh Hawley, have accused major social networks of displaying a bias against conservative perspectives when moderating content (such as Twitter suspensions).[36][36][37][38] In a Fox News op-ed, Cruz argued that section 230 should only apply to providers that are politically “neutral”, suggesting that a provider “should be considered to be a [liable] ‘publisher or speaker’ of user content if they pick and choose what gets published or spoke.”[39] Section 230 does not contain any requirements that moderation decisions be neutral.[39] Hawley alleged that section 230 safe harbors were a “sweetheart deal between big tech and big government”.[40][41]

In December 2018, Republican house representative Louie Gohmert introduced the Biased Algorithm Deterrence Act (H.R.492), which would remove all section 230 protections for any provider that used filters or any other type of algorithms to display user content when otherwise not directed by a user.[42][43]

In June 2019, Hawley introduced the Ending Support for Internet Censorship Act (S. 1914), that would remove section 230 protections from companies whose services have more than 30 million active monthly users in the U.S. and more than 300 million worldwide, or have over $500 million in annual global revenue, unless they receive a certification from the majority of the Federal Trade Commission that they do not moderate against any political viewpoint, and have not done so in the past 2 years.[44][45]

There has been criticism—and support—of the proposed bill from various points on the political spectrum. A poll of more than 1,000 voters gave Senator Hawley’s bill a net favorability rating of 29 points among Republicans (53% favor, 24% oppose) and 26 points among Democrats (46% favor, 20% oppose).[46] Some Republicans feared that by adding FTC oversight, the bill would continue to fuel fears of a big government with excessive oversight powers.[47] Democrat Speaker Nancy Pelosi has indicated support for the same approach Hawley has taken.[48] The chairman of the Senate Judiciary Committee, Senator Graham, has also indicated support for the same approach Hawley has taken, saying “he is considering legislation that would require companies to uphold ‘best business practices’ to maintain their liability shield, subject to periodic review by federal regulators.” [49]

Legal experts have criticized the Republicans’ push to make Section 230 encompass platform neutrality. Wyden stated in response to potential law changes that “Section 230 is not about neutrality. Period. Full stop. 230 is all about letting private companies make their own decisions to leave up some content and take other content down.”[50] Law professor Jeff Kosseff, who has written extensively on Section 230, has stated that the Republican intentions are based on a “fundamental misunderstanding” of Section 230’s purpose, as platform neutrality was not one of the considerations made at the time of passage.[51] Kosseff stated that political neutrality was not the intent of Section 230 according to the framers, but rather making sure providers had the ability to make content-removal judgement without fear of liability.[2] There have been concerns that any attempt to weaken Section 230 could actually cause an increase in censorship when services lose their liability.[41][52]

Hate speech

In the wake of the 2019 shootings in Christchurch, New ZealandEl Paso, Texas and Dayton, Ohio, the impact on Section 230 and liability towards online hate speech has been raised. In both the Christchurch and El Paso shootings, the perpetrator posted hate speech manifestos to 8chan, a moderated imageboard known to be favorable for the posting of extreme views. Concerned politicians and citizens raised calls at large tech companies for the need for hate speech to be removed from the Internet; however, hate speech is generally protected speech under the First Amendment, and Section 230 removes the liability for these tech companies to moderate such content as long as it is not illegal. This has given the appearance that tech companies do not need to be proactive against hateful content, thus allowing the hate content to fester online and lead to such incidents.[53][5]

Notable articles on this concerns were published after the El Paso shooting by The New York Times,[53] The Wall Street Journal,[54] and Bloomberg Businessweek,[5] among other outlets, but which were criticized by legal experts including Mike GodwinMark Lemley, and David Kaye, as the articles implied that hate speech was protected by Section 230, when it is in fact protected by the First Amendment. In the case of The New York Times, the paper issued a correction to affirm that the First Amendment protected hate speech, and not Section 230.[55][56][57]

Members of Congress have indicated they may pass a law that changes how Section 230 would apply to hate speed as to make tech companies liable for this. Wyden, now a Senator, stated that he intended for Section 230 to be both “a sword and a shield” for Internet companies, the “sword” allowing them to remove content they deem inappropriate for their service, and the shield to help keep offensive content their from sites without liability. However, Wyden argued that become tech companies have not been willing to use the sword to remove content, it is necessary to take away that shield.[53][5] Some have compared Section 230 to the Protection of Lawful Commerce in Arms Act, a law that grants gun manufacturers immunity from certain types of lawsuits when their weapons are used in criminal acts. According to law professor Mary Anne Franks, “They have not only let a lot of bad stuff happen on their platforms, but they’ve actually decided to profit off of people’s bad behavior.”[5] Representative Beto O’Rourke has stated his intent for his 2020 presidential campaign to introduce sweeping changes to Section 230 to make Internet companies liable for not being proactive in taking down hate speech.[58]

Terrorism-related content

In the aftermath of the Backpage trial and subsequent passage of FOSTA-SESTA, others have found that Section 230 appears to protect tech companies from content that is otherwise illegal under United States law. Professor Danielle Citron and journalist Benjamin Wittes found that as late as 2018, several groups deemed as terrorist organizations by the United States had been able to maintain social media accounts on services run by American companies, despite federal laws that make providing material support to terrorist groups subject to civil and criminal charges.[59] However, case law from the Second Circuit has ruled that under Section 230, technology companies are not liable for civil claims based on terrorism-related content.[60]

Case law

Defamatory information

Immunity was upheld against claims that AOL unreasonably delayed in removing defamatory messages posted by third party, failed to post retractions, and failed to screen for similar postings.

  • Blumenthal v. Drudge, 992 F. Supp. 44, 49-53 (D.D.C. 1998).[62]

The court upheld AOL’s immunity from liability for defamation. AOL’s agreement with the contractor allowing AOL to modify or remove such content did not make AOL the “information content provider” because the content was created by an independent contractor. The Court noted that Congress made a policy choice by “providing immunity even where the interactive service provider has an active, even aggressive role in making available content prepared by others.”

The court upheld immunity for an Internet dating service provider from liability stemming from third party’s submission of a false profile. The plaintiff, Carafano, claimed the false profile defamed her, but because the content was created by a third party, the website was immune, even though it had provided multiple choice selections to aid profile creation.

  • Batzel v. Smith, 333 F.3d 1018 (9th Cir. 2003).[64]

Immunity was upheld for a website operator for distributing an email to a listserv where the plaintiff claimed the email was defamatory. Though there was a question as to whether the information provider intended to send the email to the listserv, the Court decided that for determining the liability of the service provider, “the focus should be not on the information provider’s intentions or knowledge when transmitting content but, instead, on the service provider’s or user’s reasonable perception of those intentions or knowledge.” The Court found immunity proper “under circumstances in which a reasonable person in the position of the service provider or user would conclude that the information was provided for publication on the Internet or other ‘interactive computer service’.”

  • Green v. AOL, 318 F.3d 465 (3rd Cir. 2003).[65]

The court upheld immunity for AOL against allegations of negligence. Green claimed AOL failed to adequately police its services and allowed third parties to defame him and inflict intentional emotional distress. The court rejected these arguments because holding AOL negligent in promulgating harmful content would be equivalent to holding AOL “liable for decisions relating to the monitoring, screening, and deletion of content from its network — actions quintessentially related to a publisher’s role.”

Immunity was upheld for an individual internet user from liability for republication of defamatory statements on a listserv. The court found the defendant to be a “user of interactive computer services” and thus immune from liability for posting information passed to her by the author.

  • MCW, Inc. v. badbusinessbureau.com(RipOff Report/Ed Magedson/XCENTRIC Ventures LLC) 2004 WL 833595, No. Civ.A.3:02-CV-2727-G (N.D. Tex. April 19, 2004).[67]

The court rejected the defendant’s motion to dismiss on the grounds of Section 230 immunity, ruling that the plaintiff’s allegations that the defendants wrote disparaging report titles and headings, and themselves wrote disparaging editorial messages about the plaintiff, rendered them information content providers. The Web site, http://www.badbusinessbureau.com, allows users to upload “reports” containing complaints about businesses they have dealt with.

  • Hy Cite Corp. v. badbusinessbureau.com (RipOff Report/Ed Magedson/XCENTRIC Ventures LLC), 418 F. Supp. 2d 1142 (D. Ariz. 2005).[68]

The court rejected immunity and found the defendant was an “information content provider” under Section 230 using much of the same reasoning as the MCW case.

False information

  • Gentry v. eBay, Inc., 99 Cal. App. 4th 816, 830 (2002).[69]

eBay‘s immunity was upheld for claims based on forged autograph sports items purchased on the auction site.

  • Ben Ezra, Weinstein & Co. v. America Online, 206 F.3d 980, 984-985 (10th Cir. 2000), cert. denied, 531 U.S. 824 (2000).[70]

Immunity for AOL was upheld against liability for a user’s posting of incorrect stock information.

Immunity was upheld against claims of fraud and money laundering. Google was not responsible for misleading advertising created by third parties who bought space on Google’s pages. The court found the creative pleading of money laundering did not cause the case to fall into the crime exception to Section 230 immunity.

Immunity for Orbitz and CheapTickets was upheld for claims based on fraudulent ticket listings entered by third parties on ticket resale marketplaces.

  • Herrick v. Grindr, 18-396

The Second Circuit upheld immunity for the Grindr dating app for LGBT persons under Section 230 in regards to the misuse of false profiles created in the names of a real person. The plaintiff had broken up with a boyfriend, who later went onto Grindr to create multiple false profiles that presented the real-life identity and address of the plaintiff and as being available for sexual encounters, as well as having illegal drugs for sale. The plaintiff reported that over a thousand men had come to his house for sex and drugs, based on the communications with the fake profile, and he began to fear for his safety. He sued Grindr for not taking actions to block the false profiles after multiple requests. Grindr asserted Section 230 did not make them liable for the actions of the ex-boyfriend. This was agreed by the district court and the Second Circuit.[73][74]

Sexually explicit content and minors

  • Doe v. America Online, 783 So. 2d 1010, 1013-1017 (Fl. 2001),[75] cert. denied, 122 S.Ct. 208 (2000).

The court upheld immunity against state claims of negligence based on “chat room marketing” of obscene photographs of minor by a third party.

  • Kathleen R. v. City of Livermore, 87 Cal. App. 4th 684, 692 (2001).[76]

The California Court of Appeal upheld the immunity of a city from claims of waste of public funds, nuisance, premises liability, and denial of substantive due process. The plaintiff’s child downloaded pornography from a public library’s computers, which did not restrict access to minors. The court found the library was not responsible for the content of the internet and explicitly found that section 230(c)(1) immunity covers governmental entities and taxpayer causes of action.

The court upheld immunity for a social networking site from negligence and gross negligence liability for failing to institute safety measures to protect minors and failure to institute policies relating to age verification. The Does’ daughter had lied about her age and communicated over MySpace with a man who later sexually assaulted her. In the court’s view, the Does’ allegations were “merely another way of claiming that MySpace was liable for publishing the communications.”

The court upheld immunity for Craigslist against a county sheriff’s claims that its “erotic services” section constituted a public nuisance because it caused or induced prostitution.

  • Backpage.com v. McKenna, et al., CASE NO. C12-954-RSM[79]
  • Backpage.com LLC v Cooper, Case #: 12-cv-00654[SS1][80]
  • Backpage.com LLC v Hoffman et al., Civil Action No. 13-cv-03952 (DMC) (JAD)[81]

The court upheld immunity for Backpage in contesting a Washington state law (SB6251)[82] that would have made providers of third-party content online liable for any crimes related to a minor in Washington state.[83] The states of Tennessee and New Jersey later passed similar legislation. Backpage argued that the laws violated Section 230, the Commerce Clause of the United States Constitution, and the First and Fifth Amendments.[82] In all three cases the courts granted Backpage permanent injunctive relief and awarded them attorney’s fees.[80][84][85][86][87]

The court ruled in favor of Backpage after Sheriff Tom Dart of Cook County IL, a frequent critic of Backpage and its adult postings section, sent a letter on his official stationary to Visa and MasterCard demanding that these firms “immediately cease and desist” allowing the use of their credit cards to purchase ads on Backpage. Within two days both companies withdrew their services from Backpage.[89] Backpage filed a lawsuit asking for a temporary restraining order and preliminary injunction against Dart granting Backpage relief and return to the status quo prior to Dart sending the letter. Backpage alleged that Dart’s actions were unconstitutional, violating the First and Fourteenth Amendments to the US Constitution as well as Section 230 of the CDA. Backpage asked for Dart to retract his “cease and desist” letters.[90] After initially being denied the injunctive relief by a lower court,[91][92] the Seventh Circuit U.S. Court of Appeals reversed that decision and directed that a permanent injunction be issued enjoining Dart and his office from taking any actions “to coerce or threaten credit card companies…with sanctions intended to ban credit card or other financial services from being provided to Backpage.com.”[93] The court cited section 230 as part of its decision.

Discriminatory housing ads

The court upheld immunity for Craigslist against Fair Housing Act claims based on discriminatory statements in postings on the classifieds website by third party users.

The Ninth Circuit Court of Appeals rejected immunity for the Roommates.com roommate matching service for claims brought under the federal Fair Housing Act[96] and California housing discrimination laws.[97] The court concluded that the manner in which the service elicited information from users concerning their roommate preferences (by having dropdowns specifying gender, presence of children, and sexual orientation), and the manner in which it utilized that information in generating roommate matches (by eliminating profiles that did not match user specifications), the matching service created or developed the information claimed to violate the FHA, and thus was responsible for it as an “information content provider.” The court upheld immunity for the descriptions posted by users in the “Additional Comments” section because these were entirely created by users.

Threats

  • Delfino v. Agilent Technologies, 145 Cal. App. 4th 790 (2006), cert denied, 128 S. Ct. 98 (2007).

A California Appellate Court unanimously upheld immunity from state tort claims arising from an employee’s use of the employer’s e-mail system to send threatening messages. The court concluded that an employer that provides Internet access to its employees qualifies as a “provider . . . of an interactive service.”

Failure to warn

The Ninth Circuit Court of Appeals rejected immunity for claims of negligence under California law. Doe filed a complaint against Internet Brands which alleged a “failure to warn” her of a known rape scheme, despite her relationship to them as a ModelMayhem.com member. They also had requisite knowledge to avoid future victimization of ModelMayhem.com users by warning users of online sexual predators. The Ninth Circuit Court of Appeals concluded that the Communications Decency Act did not bar the claim and remanded the case to the district court for further proceedings.

In February 2015, the Ninth Circuit panel set aside its 2014 opinion and set the case for reargument. In May 2016, the panel again held that Doe’s case could proceed.[98][99]

Terrorism

  • Force v. Facebook, Inc., No. 18-397 (2d Cir. July 31, 2019)

The Second Circuit upheld immunity in civil claims for service providers for hosting terrorism-related content created by users. Families, friends, and associates of several killed in Hamas-attacks filed suit against Facebook under the United State’s Anti-Terrorism Act, asserting that since Hamas members used Facebook to coordinate activities, Facebook was liable for its content. While previous rules at federal District and Circuit level have generally ruled against such cases, this decision in the Second Circuit was first to assert that Section 230’s safe harbor provisions do apply even to acts related to terrorism that may be posted by users of service providers, thus dismissing the suit against Facebook. The Second Circuit ruled that the various algorithms Facebook uses to recommend content remains as part of the role of the distributor of the content and not the publisher, since these automated tools were essentially neutral.[60]

Similar legislation in other countries]

European Union

Directive 2000/31/EC[100] establishes a safe haven regime for hosting providers:

  • Article 14 establishes that hosting providers are not responsible for the content they host as long as (1) the acts in question are neutral intermediary acts of a mere technical, automatic and passive capacity; (2) they are not informed of its illegal character, and (3) they act promptly to remove or disable access to the material when informed of it.
  • Article 15 precludes member states from imposing general obligations to monitor hosted content for potential illegal activities.

The updated Directive on Copyright in the Digital Single Market (Directive 2019/790) Article 17 makes providers liable if they fail to take “effective and proportionate measures” to prevent users from uploading certain copyright violations and do not response immediately to takedown requests.[101]

Australia

In Dow Jones & Company Inc v Gutnick,[102] the High Court of Australia treated defamatory material on a server outside Australia as having been published in Australia when it is downloaded or read by someone in Australia.

Gorton v Australian Broadcasting Commission & Anor (1973) 1 ACTR 6

Under the Defamation Act 2005 (NSW),[103] s 32, a defence to defamation is that the defendant neither knew, nor ought reasonably to have known of the defamation, and the lack of knowledge was not due to the defendant’s negligence.

New Zealandcause of the material CompuServe’s network was carrying into Germany. He was convicted and sentenced to two years probation on May 28, 1998.[104][105] He was cleared on appeal on November 17, 1999.[106][107]

The Oberlandesgericht (OLG) Cologne, an appellate court, found that an online auctioneer does not have an active duty to check for counterfeit goods (Az 6 U 12/01).[108]

In one example, the first-instance district court of Hamburg issued a temporary restraining order requiring message board operator Universal Boards to review all comments before they can be posted to prevent the publication of messages inciting others to download harmful files. The court reasoned that “the publishing house must be held liable for spreading such material in the forum, regardless of whether it was aware of the content.”[109]

United Kingdom

Also see: Defamation Act 2013.

The laws of libel and defamation will treat a disseminator of information as having “published” material posted by a user, and the onus will then be on a defendant to prove that it did not know the publication was defamatory and was not negligent in failing to know: Goldsmith v Sperrings Ltd (1977) 2 All ER 566; Vizetelly v Mudie’s Select Library Ltd (1900) 2 QB 170; Emmens v Pottle & Ors (1885) 16 QBD 354.

In an action against a website operator, on a statement posted on the website, it is a defence to show that it was not the operator who posted the statement on the website. The defence is defeated if it was not possible for the claimant to identify the person who posted the statement, or the claimant gave the operator a notice of complaint and the operator failed to respond in accordance with regulations.

Notes

  1. ^ The details of the Stratton Oakmont case would later serve as the basis for the book and its film The Wolf of Wall Street

References …

External links

https://en.wikipedia.org/wiki/Section_230_of_the_Communications_Decency_Act

 

United States antitrust law

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“The Bosses of the Senate”, a cartoon by Joseph Keppler depicting corporate interests—from steel, copper, oil, iron, sugar, tin, and coal to paper bags, envelopes, and salt—as giant money bags looming over the tiny senators at their desks in the Chamber of the United States Senate.[1]

In the United States, antitrust law is a collection of federal and state government laws that regulates the conduct and organization of business corporations, generally to promote competition for the benefit of consumers. (The concept is called competition law in other English-speaking countries.) The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of the Sherman Act prohibits price-fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that would likely substantially lessen competition. Third, Section 2 of the Sherman Act prohibits the abuse of monopoly power.[2]

The Federal Trade Commission, the U.S. Department of Justice, state governments and private parties who are sufficiently affected may all bring actions in the courts to enforce the antitrust laws. The scope of antitrust laws, and the degree to which they should interfere in an enterprise’s freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. One view, mostly closely associated with the “Chicago School of economics” suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controlling economic power in the public interest.[3]

Contents

History

Although “trust” has a specific legal meaning (where one person holds property for the benefit of another), in the late 19th century the word was commonly used to denote big business, because that legal instrument was frequently used to effect a combination of companies.[4] Large manufacturing conglomerates emerged in great numbers in the 1880s and 1890s, and were perceived to have excessive economic power.[5] The Interstate Commerce Act of 1887 began a shift towards federal rather than state regulation of big business.[6] It was followed by the Sherman Antitrust Act of 1890, the Clayton Antitrust Act of 1914 and the Federal Trade Commission Act of 1914, the Robinson–Patman Act of 1936, and the Celler–Kefauver Act of 1950.

In the 1880s, hundreds of small short-line railroads were being bought up and consolidated into giant systems. (Separate laws and policies emerged regarding railroads and financial concerns such as banks and insurance companies.) People for strong antitrust laws argued that, in order for the American economy to be successful, it would require free competition and the opportunity for individual Americans to build their own businesses. As Senator John Sherman put it, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life.” Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of antitrust policy. The Act prohibits agreements in restraint of trade and abuse of monopoly power. It gives the Justice Department the mandate to go to federal court for orders to stop illegal behavior or to impose remedies.[7][original research?]

Public officials during the Progressive Era put passing and enforcing strong antitrust high on their agenda. President Theodore Roosevelt sued 45 companies under the Sherman Act, while William Howard Taft sued 75. In 1902, Roosevelt stopped the formation of the Northern Securities Company, which threatened to monopolize transportation in the Northwest (see Northern Securities Co. v. United States).

Standard Oil (Refinery No. 1 in ClevelandOhio, pictured) was a major company broken up under United States antitrust laws.

One of the better-known trusts was the Standard Oil CompanyJohn D. Rockefeller in the 1870s and 1880s had used economic threats against competitors and secret rebate deals with railroads to build what was called a monopoly in the oil business, though some minor competitors remained in business. In 1911 the Supreme Court agreed that in recent years (1900–1904) Standard had violated the Sherman Act (see Standard Oil Co. of New Jersey v. United States). It broke the monopoly into three dozen separate companies that competed with one another, including Standard Oil of New Jersey (later known as Exxon and now ExxonMobil), Standard Oil of Indiana (Amoco), Standard Oil Company of New York (Mobil, again, later merged with Exxon to form ExxonMobil), of California (Chevron), and so on. In approving the breakup the Supreme Court added the “rule of reason”: not all big companies, and not all monopolies, are evil; and the courts (not the executive branch) are to make that decision. To be harmful, a trust had to somehow damage the economic environment of its competitors.[citation needed]

United States Steel Corporation, which was much larger than Standard Oil, won its antitrust suit in 1920 despite never having delivered the benefits to consumers that Standard Oil did.[citation needed] In fact, it lobbied for tariff protection that reduced competition, and so contending that it was one of the “good trusts” that benefited the economy is somewhat doubtful.[citation needed] Likewise International Harvester survived its court test, while other monopolies were broken up in tobacco, meatpacking, and bathtub fixtures. Over the years hundreds of executives of competing companies who met together illegally to fix prices went to federal prison.[citation needed]

In 1914 Congress passed the Clayton Act, which prohibited specific business actions (such as price discrimination and tying) if they substantially lessened competition. At the same time Congress established the Federal Trade Commission (FTC), whose legal and business experts could force business to agree to “consent decrees“, which provided an alternative mechanism to police antitrust.[citation needed]

American hostility to big business began to decrease after the Progressive Era.[citation needed] For example, Ford Motor Company dominated auto manufacturing, built millions of cheap cars that put America on wheels, and at the same time lowered prices, raised wages, and promoted manufacturing efficiency. Welfare capitalism made large companies an attractive place to work; new career paths opened up in middle management; local suppliers discovered that big corporations were big purchasers.[citation needed] Talk of trust busting faded away. Under the leadership of Herbert Hoover, the government in the 1920s promoted business cooperation, fostered the creation of self-policing trade associations, and made the FTC an ally of “respectable business”.[citation needed]

The printing equipment company ATF explicitly states in its 1923 manual that its goal is to ‘discourage unhealthy competition’ in the printing industry.

During the New Deal, attempts were made to stop cutthroat competition. The National Industrial Recovery Act (NIRA) was a short-lived program in 1933–35 designed to strengthen trade associations, and raise prices, profits and wages at the same time. The Robinson-Patman Act of 1936 sought to protect local retailers against the onslaught of the more efficient chain stores, by making it illegal to discount prices. To control big business, the New Deal policymakers preferred federal and state regulation —controlling the rates and telephone services provided by AT&T, for example— and by building up countervailing power in the form of labor unions.[citation needed]

The antitrust environment of the 70’s was dominated by the case United States v. IBM, which was filed by the U.S. Justice Department in 1969. IBM at the time dominated the computer market through alleged bundling of software and hardware as well as sabotage at the sales level and false product announcements. It was one of the largest and certainly the lengthiest antitrust case the DoJ brought against a company. In 1982, the Reagan administration dismissed the case, and the costs and wasted resources were heavily criticized. However, contemporary economists argue that the legal pressure on IBM during that period allowed for the development of an independent software and personal computer industry with major importance for the national economy.[8]

In 1982 the Reagan administration used the Sherman Act to break up AT&T into one long-distance company and seven regional “Baby Bells“, arguing that competition should replace monopoly for the benefit of consumers and the economy as a whole. The pace of business takeovers quickened in the 1990s, but whenever one large corporation sought to acquire another, it first had to obtain the approval of either the FTC or the Justice Department. Often the government demanded that certain subsidiaries be sold so that the new company would not monopolize a particular geographical market.[citation needed]

In 1999 a coalition of 19 states and the federal Justice Department sued Microsoft.[9] A highly publicized trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from the Netscape browser.[10] In 2000, the trial court ordered Microsoft to split in two, preventing it from future misbehavior.[11][9] The Court of Appeals affirmed in part and reversed in part. In addition, it removed the judge from the case for discussing the case with the media while it was still pending.[12] With the case in front of a new judge, Microsoft and the government settled, with the government dropping the case in return for Microsoft agreeing to cease many of the practices the government challenged.[13] In his defense, CEO Bill Gates argued that Microsoft always worked on behalf of the consumer and that splitting the company would diminish efficiency and slow the pace of software development.[citation needed]

Cartels and collusion

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Sherman Act 1890 §1

Preventing collusion and cartels that act in restraint of trade is an essential task of antitrust law. It reflects the view that each business has a duty to act independently on the market, and so earn its profits solely by providing better priced and quality products than its competitors. The Sherman Act §1 prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.”[14] This targets two or more distinct enterprises acting together in a way that harms third parties. It does not capture the decisions of a single enterprise, or a single economic entity, even though the form of an entity may be two or more separate legal persons or companies. In Copperweld Corp. v. Independence Tube Corp.[15] it was held an agreement between a parent company and a wholly owned subsidiary could not be subject to antitrust law, because the decision took place within a single economic entity.[16] This reflects the view that if the enterprise (as an economic entity) has not acquired a monopoly position, or has significant market power, then no harm is done. The same rationale has been extended to joint ventures, where corporate shareholders make a decision through a new company they form. In Texaco Inc. v. Dagher[17] the Supreme Court held unanimously that a price set by a joint venture between Texaco and Shell Oil did not count as making an unlawful agreement. Thus the law draws a “basic distinction between concerted and independent action”.[18] Multi-firm conduct tends to be seen as more likely than single-firm conduct to have an unambiguously negative effect and “is judged more sternly”.[19] Generally the law identifies four main categories of agreement. First, some agreements such as price fixing or sharing markets are automatically unlawful, or illegal per se. Second, because the law does not seek to prohibit every kind of agreement that hinders freedom of contract, it developed a “rule of reason” where a practice might restrict trade in a way that is seen as positive or beneficial for consumers or society. Third, significant problems of proof and identification of wrongdoing arise where businesses make no overt contact, or simply share information, but appear to act in concert. Tacit collusion, particularly in concentrated markets with a small number of competitors or oligopolists, have led to significant controversy over whether or not antitrust authorities should intervene. Fourth, vertical agreements between a business and a supplier or purchaser “up” or “downstream” raise concerns about the exercise of market power, however they are generally subject to a more relaxed standard under the “rule of reason”.

Restrictive practices

Some practices are deemed by the courts to be so obviously detrimental that they are categorized as being automatically unlawful, or illegal per se. The simplest and central case of this is price fixing. This involves an agreement by businesses to set the price or consideration of a good or service which they buy or sell from others at a specific level. If the agreement is durable, the general term for these businesses is a cartel. It is irrelevant whether or not the businesses succeed in increasing their profits, or whether together they reach the level of having market power as might a monopoly. Such collusion is illegal per se.

Bid rigging is a form of price fixing and market allocation that involves an agreement in which one party of a group of bidders will be designated to win the bid. Geographic market allocation is an agreement between competitors not to compete within each other’s geographic territories.

  • Addyston Pipe and Steel Co. v. United States[20] pipe manufacturers had agreed among themselves to designate one lowest bidder for government contracts. This was held to be an unlawful restraint of trade contrary to the Sherman Act. However, following the reasoning of Justice Taft in the Court of Appeals, the Supreme Court held that implicit in the Sherman Act §1 there was a rule of reason, so that not every agreement which restrained the freedom of contract of the parties would count as an anti-competitive violation.
  • Hartford Fire Insurance Co. v. California, 113 S.Ct. 2891 (1993) 5 to 4, a group of reinsurance companies acting in London were successfully sued by California for conspiring to make U.S. insurance companies abandon policies beneficial to consumers, but costly to reinsure. The Sherman Act was held to have extraterritorial application, to agreements outside U.S. territory.
Group boycotts of competitors, customers or distributors

Rule of reason

If an antitrust claim does not fall within a per se illegal category, the plaintiff must show the conduct causes harm in “restraint of trade” under the Sherman Act §1 according to “the facts peculiar to the business to which the restraint is applied”.[21] This essentially means that unless a plaintiff can point to a clear precedent, to which the situation is analogous, proof of an anti-competitive effect is more difficult. The reason for this is that the courts have endeavoured to draw a line between practices that restrain trade in a “good” compared to a “bad” way. In the first case, United States v. Trans-Missouri Freight Association,[22] the Supreme Court found that railroad companies had acted unlawfully by setting up an organisation to fix transport prices. The railroads had protested that their intention was to keep prices low, not high. The court found that this was not true, but stated that not every “restraint of trade” in a literal sense could be unlawful. Just as under the common law, the restraint of trade had to be “unreasonable”. In Chicago Board of Trade v. United States the Supreme Court found a “good” restraint of trade.[23] The Chicago Board of Trade had a rule that commodities traders were not allowed to privately agree to sell or buy after the market’s closing time (and then finalise the deals when it opened the next day). The reason for the Board of Trade having this rule was to ensure that all traders had an equal chance to trade at a transparent market price. It plainly restricted trading, but the Chicago Board of Trade argued this was beneficial. Brandeis J., giving judgment for a unanimous Supreme Court, held the rule to be pro-competitive, and comply with the rule of reason. It did not violate the Sherman Act §1. As he put it,

Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. To determine that question, the court must ordinarily consider the facts peculiar to the business to which the restraint is applied, its condition before and after the restraint was imposed, the nature of the restraint, and its effect, actual or probable.[24]

Tacit collusion and oligopoly

Vertical restraints

Resale price maintenance
  • Dr. Miles Medical Co. v. John D. Park and Sons, 220 U.S. 373 (1911) affirmed a lower court’s holding that a massive minimum resale price maintenance scheme was unreasonable and thus offended Section 1 of the Sherman Antitrust Act.
  • Kiefer-Stewart Co. v. Seagram & Sons, Inc., 340 U.S. 211 (1951) it was unlawful for private liquor dealers to require that their products only be resold up to a maximum price. It unduly restrained the freedom of businesses and was per se illegal.
  • Albrecht v. Herald Co., 390 U.S. 145 (1968) setting a fixed price, minimum or maximum, held to violate section 1 of the Sherman Act
  • State Oil Co. v. Khan, 522 U.S. 3 (1997) vertical maximum price fixing had to be adjudged according to a rule of reason
  • Leegin Creative Leather Products, Inc. v. PSKS, Inc. 551 U.S. 877 (2007) 5 to 4 decision that vertical price restraints were not per se illegal. A leather manufacturer therefore did not violate the Sherman Act by stopping delivery of goods to a retailer after the retailer refused to raise its prices to the leather manufacturer’s standards.
Outlet, territory or customer limitations
  • Packard Motor Car Co. v. Webster Motor Car Co., 243 F.2d 418, 420 (D.C. Cir.), cert, denied, 355 U.S. 822 (1957)
  • Continental Television v. GTE Sylvania, 433 U.S. 36 (1977) 6 to 2, held that it was not an antitrust violation, and it fell within the rule of reason, for a seller to limit the number of franchises and require the franchisees only sell goods within its area
  • United States v. Colgate & Co.250 U.S. 300 (1919) there is no unlawful action by a manufacturer or seller, who publicly announces a price policy, and then refuses to deal with businesses who do not subsequently comply with the policy. This is in contrast to agreements to maintain a certain price.
  • United States v. Parke, Davis & Co.362 U.S. 29 (1960) under Sherman Act §4
  • Monsanto Co. v. Spray-Rite Service Corp.465 U.S. 752 (1984), stating that, “under Colgate, the manufacturer can announce its re-sale prices in advance and refuse to deal with those who fail to comply, and a distributor is free to acquiesce to the manufacturer’s demand in order to avoid termination”. Monsanto, an agricultural chemical, terminated its distributorship agreement with Spray-Rite on the ground that it failed to hire trained salesmen and promote sales to dealers adequately. Held, not per se illegal, because the restriction related to non-price matters, and so was to be judged under the rule of reason.
  • Business Electronics Corp. v. Sharp Electronics Corp.485 U.S. 717 (1988) electronic calculators; “a vertical restraint is not illegal per se unless it includes some agreement on price or price levels. … [T]here is a presumption in favor of a rule-of-reason standard; [and] departure from that standard must be justified by demonstrable economic effect, such as the facilitation of cartelizing … “

Mergers

No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.

Clayton Act 1914 §7

Although the Sherman Act 1890 initially dealt, in general, with cartels (where businesses combined their activities to the detriment of others) and monopolies (where one business was so large it could use its power to the detriment of others alone) it was recognized that this left a gap. Instead of forming a cartel, businesses could simply merge into one entity. The period between 1895 and 1904 saw a “great merger movement” as business competitors combined into ever more giant corporations.[25] However upon a literal reading of Sherman Act, no remedy could be granted until a monopoly had already formed. The Clayton Act 1914 attempted to fill this gap by giving jurisdiction to prevent mergers in the first place if they would “substantially lessen competition”.

Dual antitrust enforcement by the Department of Justice and Federal Trade Commission has long elicited concerns about disparate treatment of mergers. In response, in September 2014, the House Judiciary Committee approved the Standard Merger and Acquisition Reviews Through Equal Rules Act (“SMARTER Act”).[26]

Horizontal mergers

Vertical mergers

Conglomerate mergers

Monopoly and power

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

Sherman Act 1890 §2

The law’s treatment of monopolies is potentially the strongest in the field of antitrust law. Judicial remedies can force large organizations to be broken up, be run subject to positive obligations, massive penalties may be imposed, and/or the people involved can be sentenced to jail. Under §2 of the Sherman Act 1890 every “person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States” commits an offence.[27] The courts have interpreted this to mean that monopoly is not unlawful per se, but only if acquired through prohibited conduct.[28] Historically, where the ability of judicial remedies to combat market power have ended, the legislature of states or the Federal government have still intervened by taking public ownership of an enterprise, or subjecting the industry to sector specific regulation (frequently done, for example, in the cases watereducationenergy or health care). The law on public services and administration goes significantly beyond the realm of antitrust law’s treatment of monopolies. When enterprises are not under public ownership, and where regulation does not foreclose the application of antitrust law, two requirements must be shown for the offense of monopolization. First, the alleged monopolist must possess sufficient power in an accurately defined market for its products or services. Second, the monopolist must have used its power in a prohibited way. The categories of prohibited conduct are not closed, and are contested in theory. Historically they have been held to include exclusive dealingprice discrimination, refusing to supply an essential facilityproduct tying and predatory pricing.

Monopolization

  • Northern Securities Co. v. United States, 193 U.S. 197 (1904) 5 to 4, a railway monopoly, formed through a merger of 3 corporations was ordered to be dissolved. The owner, James Jerome Hill was forced to manage his ownership stake in each independently.
  • Swift & Co. v. United States, 196 U.S. 375 (1905) the antitrust laws entitled the federal government to regulate monopolies that had a direct impact on commerce
  • Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911) Standard Oil was dismantled into geographical entities given its size, and that it was too much of a monopoly
  • United States v. American Tobacco Company, 221 U.S. 106 (1911) found to have monopolized the trade.
  • United States v. Alcoa, 148 F.2d 416 (2d Cir. 1945) a monopoly can be deemed to exist depending on the size of the market. It was generally irrelevant how the monopoly was achieved since the fact of being dominant on the market was negative for competition. (Criticised by Alan Greenspan.)
  • United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377 (1956), illustrates the cellophane paradox of defining the relevant market. If a monopolist has set a price very high, there may now be many substitutable goods at similar prices, which could lead to a conclusion that the market share is small, and there is no monopoly. However, if a competitive price were charged, there would be a lower price, and so very few substitutes, whereupon the market share would be very high, and a monopoly established.
  • United States v. Syufy Enterprises, 903 F.2d 659 (9th Cir. 1990) necessity of barriers to entry
  • Lorain Journal Co. v. United States, 342 U.S. 143 (1951) attempted monopolization
  • United States v. American Airlines, Inc., 743 F.2d 1114 (1985)
  • Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) in order for monopolies to be found to have acted unlawfully, action must have actually been taken. The threat of abusive behavior is insufficient.
  • Fraser v. Major League Soccer, 284 F.3d 47 (1st Cir. 2002) there could be no unlawful monopolization of the soccer market by MLS where no market previously existed
  • United States v. Griffith 334 U.S. 100 (1948) four cinema corporations secured exclusive rights from distributors, foreclosing competitors. Specific intent to monopolize is not required, violating the Sherman Act §§1 and 2.
  • United Shoe Machinery Corp v. U.S., 347 U.S. 521 (1954) exclusionary behavior
  • United States v. Grinnell Corp., 384 U.S. 563 (1966) Grinnell made plumbing supplies and fire sprinklers, and with affiliates had 87% of the central station protective service market. From this predominant share there was no doubt of monopoly power.

Exclusive dealing

  • Standard Oil Co. v. United States (Standard Stations), 337 U.S. 293 (1949): oil supply contracts affected a gross business of $58 million, comprising 6.7% of the total in a seven-state area, in the context of many similar arrangements, held to be contrary to Clayton Act §3.
  • Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961): Tampa Electric Co contracted to buy coal for 20 years to provide power in Florida, and Nashville Coal Co later attempted to end the contract on the basis that it was an exclusive supply agreement contrary to the Clayton Act § 3 or the Sherman Act §§ 1 or 2. Held, no violation because foreclosed share of market was insignificant this did not affect competition sufficiently.
  • US v. Delta Dental of Rhode Island, 943 F. Supp. 172 (1996)

Price discrimination

Essential facilities

Tying products

It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

Clayton Act 1914 §3

Predatory pricing

In theory, which is hotly contested, predatory pricing happens when large companies with huge cash reserves and large lines of credit stifle competition by selling their products and services at a loss for a time, to force their smaller competitors out of business. With no competition, they are then free to consolidate control of the industry and charge whatever prices they wish. At this point, there is also little motivation for investing in further technological research, since there are no competitors left to gain an advantage over. High barriers to entry such as large upfront investment, notably named sunk costs, requirements in infrastructure and exclusive agreements with distributors, customers, and wholesalers ensure that it will be difficult for any new competitors to enter the market, and that if any do, the trust will have ample advance warning and time in which to either buy the competitor out, or engage in its own research and return to predatory pricing long enough to force the competitor out of business. Critics argue that the empirical evidence shows that “predatory pricing” does not work in practice and is better defeated by a truly free market than by antitrust laws (see Criticism of the theory of predatory pricing).

Intellectual property

Scope of antitrust law

Antitrust laws do not apply to, or are modified in, several specific categories of enterprise (including sports, media, utilities, health careinsurancebanks, and financial markets) and for several kinds of actor (such as employees or consumers taking collective action).[29]

Collective actions

First, since the Clayton Act 1914 §6, there is no application of antitrust laws to agreements between employees to form or act in labor unions. This was seen as the “Bill of Rights” for labor, as the Act laid down that the “labor of a human being is not a commodity or article of commerce”. The purpose was to ensure that employees with unequal bargaining power were not prevented from combining in the same way that their employers could combine in corporations,[30] subject to the restrictions on mergers that the Clayton Act set out. However, sufficiently autonomous workers, such as professional sports players have been held to fall within antitrust provisions.[31]

Pro sports exemptions and the NFL cartel

Since 1922 the courts and Congress have left Major League Baseball, as played at Chicago‘s Wrigley Field, unrestrained by antitrust laws.

Second, professional sports leagues enjoy a number of exemptions. Mergers and joint agreements of professional football, hockey, baseball, and basketball leagues are exempt.[32] Major League Baseball was held to be broadly exempt from antitrust law in Federal Baseball Club v. National League.[33] Holmes J held that the baseball league’s organization meant that there was no commerce between the states taking place, even though teams traveled across state lines to put on the games. That travel was merely incidental to a business which took place in each state. It was subsequently held in 1952 in Toolson v. New York Yankees,[34] and then again in 1972 Flood v. Kuhn,[35] that the baseball league’s exemption was an “aberration”. However Congress had accepted it, and favored it, so retroactively overruling the exemption was no longer a matter for the courts, but the legislature. In United States v. International Boxing Club of New York,[36] it was held that, unlike baseball, boxing was not exempt, and in Radovich v. National Football League (NFL),[37] professional football is generally subject to antitrust laws. As a result of the AFL-NFL merger, the National Football League was also given exemptions in exchange for certain conditions, such as not directly competing with college or high school football.[38] However, the 2010 Supreme Court ruling in American Needle Inc. v. NFL characterised the NFL as a “cartel” of 32 independent businesses subject to antitrust law, not a single entity.

Media

Third, antitrust laws are modified where they are perceived to encroach upon the media and free speech, or are not strong enough. Newspapers under joint operating agreements are allowed limited antitrust immunity under the Newspaper Preservation Act of 1970.[39] More generally, and partly because of concerns about media cross-ownership in the United States, regulation of media is subject to specific statutes, chiefly the Communications Act of 1934 and the Telecommunications Act of 1996, under the guidance of the Federal Communications Commission. The historical policy has been to use the state’s licensing powers over the airwaves to promote plurality. Antitrust laws do not prevent companies from using the legal system or political process to attempt to reduce competition. Most of these activities are considered legal under the Noerr-Pennington doctrine. Also, regulations by states may be immune under the Parker immunity doctrine.[40]

  • Professional Real Estate Investors, Inc., v. Columbia Pictures, 508 U.S. 49 (1993)
  • Allied Tube v. Indian Head, Inc., 486 U.S. 492 (1988)
  • FTC v. Superior Ct. TLA, 493 U.S. 411 (1990)

Other

Fourth, the government may grant monopolies in certain industries such as utilities and infrastructure where multiple players are seen as unfeasible or impractical.[41]

Fifth, insurance is allowed limited antitrust exemptions as provided by the McCarran-Ferguson Act of 1945.[42]

Sixth, M&A transactions in the defense sector are often subject to greater antitrust scrutiny from the Department of Justice and the Federal Trade Commission.[43]

Remedies and enforcement

The several district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7 of this title; and it shall be the duty of the several United States attorneys, in their respective districts, under the direction of the Attorney General, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the court shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decree, the court may at any time make such temporary restraining order or prohibition as shall be deemed just in the premises.

Sherman Act 1890 §4

The remedies for violations of U.S. antitrust laws are as broad as any equitable remedy that a court has the power to make, as well as being able to impose penalties. When private parties have suffered an actionable loss, they may claim compensation. Under the Sherman Act 1890 §7, these may be trebled, a measure to encourage private litigation to enforce the laws and act as a deterrent. The courts may award penalties under §§1 and 2, which are measured according to the size of the company or the business. In their inherent jurisdiction to prevent violations in future, the courts have additionally exercised the power to break up businesses into competing parts under different owners, although this remedy has rarely been exercised (examples include Standard OilNorthern Securities CompanyAmerican Tobacco CompanyAT&T Corporation and, although reversed on appeal, Microsoft). Three levels of enforcement come from the Federal government, primarily through the Department of Justice and the Federal Trade Commission, the governments of states, and private parties. Public enforcement of antitrust laws is seen as important, given the cost, complexity and daunting task for private parties to bring litigation, particularly against large corporations.

Federal government

Along with the Federal Trade Commission the Department of Justice in Washington, D.C. is the public enforcer of antitrust law.

Federal Trade Commission building, view from southeast

The federal government, via both the Antitrust Division of the United States Department of Justice and the Federal Trade Commission, can bring civil lawsuits enforcing the laws. The United States Department of Justice alone may bring criminal antitrust suits under federal antitrust laws.[44] Perhaps the most famous antitrust enforcement actions brought by the federal government were the break-up of AT&T’s local telephone service monopoly in the early 1980s[45] and its actions against Microsoft in the late 1990s.

Additionally, the federal government also reviews potential mergers to attempt to prevent market concentration. As outlined by the Hart-Scott-Rodino Antitrust Improvements Act, larger companies attempting to merge must first notify the Federal Trade Commission and the Department of Justice’s Antitrust Division prior to consummating a merger.[46] These agencies then review the proposed merger first by defining what the market is and then determining the market concentration using the Herfindahl-Hirschman Index (HHI) and each company’s market share.[46] The government looks to avoid allowing a company to develop market power, which if left unchecked could lead to monopoly power.[46]

The United States Department of Justice and Federal Trade Commission target nonreportable mergers for enforcement as well. Notably, between 2009 and 2013, 20% of all merger investigations conducted by the United States Department of Justice involved nonreportable transactions.[47]

  • FTC v. Sperry & Hutchinson Trading Stamp Co., 405 U.S. 233 (1972). Case held that the FTC is entitled to bring enforcement action against businesses that act unfairly, as where supermarket trading stamps company injured consumers by prohibiting them from exchanging trading stamps. The FTC could prevent the restrictive practice as unfair, even though there was no specific antitrust violation.

International cooperation

Despite considerable effort by the Clinton administration, the Federal government attempted to extend antitrust cooperation with other countries for mutual detection, prosecution and enforcement. A bill was unanimously passed by the US Congress;[48] however by 2000 only one treaty has been signed[49] with Australia.[50] On 3 July 2017 the Australian Competition and Consumer Commission announced it was seeking explanations from a US company, Apple Inc. In relation to potentially anticompetitive behaviour against an Australian bank in possible relation to Apple Pay.[51] It is not known whether the treaty could influence the enquiry or outcome.

In many cases large US companies tend to deal with overseas antitrust within the overseas jurisdiction, autonomous of US laws, such as in Microsoft Corp v Commission and more recently, Google v European Union where the companies were heavily fined.[52] Questions have been raised with regards to the consistency of antitrust between jurisdictions where the same antitrust corporate behaviour, and similar antitrust legal environment, is prosecuted in one jurisdiction but not another.[53]

State governments

State attorneys general may file suits to enforce both state and federal antitrust laws.

Private suits]

Private civil suits may be brought, in both state and federal court, against violators of state and federal antitrust law. Federal antitrust laws, as well as most state laws, provide for triple damages against antitrust violators in order to encourage private lawsuit enforcement of antitrust law. Thus, if a company is sued for monopolizing a market and the jury concludes the conduct resulted in consumers’ being overcharged $200,000, that amount will automatically be tripled, so the injured consumers will receive $600,000. The United States Supreme Court summarized why Congress authorized private antitrust lawsuits in the case Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 262 (1972):

Every violation of the antitrust laws is a blow to the free-enterprise system envisaged by Congress. This system depends on strong competition for its health and vigor, and strong competition depends, in turn, on compliance with antitrust legislation. In enacting these laws, Congress had many means at its disposal to penalize violators. It could have, for example, required violators to compensate federal, state, and local governments for the estimated damage to their respective economies caused by the violations. But, this remedy was not selected. Instead, Congress chose to permit all persons to sue to recover three times their actual damages every time they were injured in their business or property by an antitrust violation. By offering potential litigants the prospect of a recovery in three times the amount of their damages, Congress encouraged these persons to serve as “private attorneys general”.

  • Pfizer, Inc. v. Government of India, 434 U.S. 308 (1978) foreign governments have standing to sue in private actions in the U.S. courts.
  • Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946) treble damages awarded under the Clayton Act §4 needed not to be mathematically precise, but based on a reasonable estimate of loss, and not speculative. This meant a jury could set a higher estimate of how much movie theaters lost, when the film distributors conspired with other theaters to let them show films first.
  • Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) indirect purchasers of goods where prices have been raised have no standing to sue. Only the direct contractors of cartel members may, to avoid double or multiple recovery.
  • Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) on arbitration

Theory

The Supreme Court calls the Sherman Antitrust Act a “charter of freedom”, designed to protect free enterprise in America.[54] One view of the statutory purpose, urged for example by Justice Douglas, was that the goal was not only to protect consumers, but at least as importantly to prohibit the use of power to control the marketplace.[55]

We have here the problem of bigness. Its lesson should by now have been burned into our memory by Brandeis. The Curse of Bigness shows how size can become a menace–both industrial and social. It can be an industrial menace because it creates gross inequalities against existing or putative competitors. It can be a social menace … In final analysis, size in steel is the measure of the power of a handful of men over our economy … The philosophy of the Sherman Act is that it should not exist … Industrial power should be decentralized. It should be scattered into many hands so that the fortunes of the people will not be dependent on the whim or caprice, the political prejudices, the emotional stability of a few self-appointed men … That is the philosophy and the command of the Sherman Act. It is founded on a theory of hostility to the concentration in private hands of power so great that only a government of the people should have it.

— Dissenting opinion of Justice Douglas in United States v. Columbia Steel Co.[55]

By contrast, efficiency argue that antitrust legislation should be changed to primarily benefit consumers, and have no other purpose. Free market economist Milton Friedman states that he initially agreed with the underlying principles of antitrust laws (breaking up monopolies and oligopolies and promoting more competition), but that he came to the conclusion that they do more harm than good.[56] Thomas Sowell argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:

In short, the financial demise of a competitor is not the same as getting rid of competition. The courts have long paid lip service to the distinction that economists make between competition—a set of economic conditions—and existing competitors, though it is hard to see how much difference that has made in judicial decisions. Too often, it seems, if you have hurt competitors, then you have hurt competition, as far as the judges are concerned.[57]

Alan Greenspan argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitled Antitrust, he says: “No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible.” Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its results—low prices. As long as a monopoly is not a coercive monopoly where a firm is securely insulated from potential competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.[58]

Thomas DiLorenzo, an adherent of the Austrian School of economics, found that the “trusts” of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all.[59] Ayn Rand, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations.[60] Such laissez faire advocates suggest that only a coercive monopoly should be broken up, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production to price-gouge consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention and that there is no case of a coercive monopoly ever existing that was not the result of government policies.

Judge Robert Bork‘s writings on antitrust law (particularly The Antitrust Paradox), along with those of Richard Posner and other law and economics thinkers, were heavily influential in causing a shift in the U.S. Supreme Court’s approach to antitrust laws since the 1970s, to be focused solely on what is best for the consumer rather than the company’s practices.[45]

See also[

Notes …

References

Texts
  • ET Sullivan, H Hovenkamp and HA Shlanski, Antitrust Law, Policy and Procedure: Cases, Materials, Problems (6th edn 2009)
  • CJ Goetz, FS McChesney and TA Lambert, Antitrust Law, Interpretation and Implementation (5th edn 2012)
  • P Areeda and L Kaplow, Antitrust Analysis: Problems, Texts, Cases (1997)
Theory
  • W Adams and JW Brock, Antitrust Economics on Trial: Dialogue in New Learning (Princeton 1991) ISBN 0-691-00391-2.
  • O Black, Conceptual Foundations of Antitrust (2005)
  • RH BorkThe Antitrust Paradox (Free Press 1993) ISBN 0-02-904456-1.
  • Choi, Jay Pil (ed.) (2007). Recent Developments in Antitrust: Theory and EvidenceThe MIT PressISBN978-0-262-03356-5.
  • Antonio Cucinotta, ed. Post-Chicago Developments in Antitrust Law (2003)
  • David S Evans. Microsoft, Antitrust and the New Economy: Selected Essays (2002)
  • John E Kwoka and Lawrence J White, eds. The Antitrust Revolution: Economics, Competition, and Policy (2003)
  • RA PosnerAntitrust Law: An Economic Perspective (1976)
Articles
Historical
  • Adolf Berle and Gardiner MeansThe Modern Corporation and Private Property (1932)
  • Louis BrandeisThe Curse of Bigness (1934)
  • Alfred ChandlerThe Visible Hand: The Managerial Revolution in American Business (1977)
  • J Dirlam and A Kahn, Fair Competition: The Law and Economics of Antitrust Policy (1954)
  • J Dorfman, The Economic Mind in American Civilization 1865–1918 (1949)
  • T Freyer, Regulating Big Business: Antitrust in Great Britain and America, 1880–1990 (1992)
  • W Hamilton & I Till, Antitrust in Action (U.S. Government Printing Office, 1940)
  • W Letwin, Law and Economic Policy in America: The Evolution of the Sherman Antitrust Act (1965)
  • E Rozwenc, ed. Roosevelt, Wilson and The Trusts. (1950)
  • George StiglerThe Organization of Industry (1968)
  • G Stocking and M Watkins, Monopoly and Free Enterprise (1951).
  • H Thorelli, The Federal Antitrust Policy: Origination of an American Tradition (1955)
  • S Webb and B WebbIndustrial Democracy (9th edn 926) Part III, ch 2

External links

https://en.wikipedia.org/wiki/United_States_antitrust_law

Industrial Concentration


Industrial concentration” refers to a structural characteristic of the business sector. It is the degree to which production in an industry—or in the economy as a whole—is dominated by a few large firms. Once assumed to be a symptom of “market failure,” concentration is, for the most part, seen nowadays as an indicator of superior economic performance. In the early 1970s, Yale Brozen, a key contributor to the new thinking, called the profession’s about-face on this issue “a revolution in economics.” Industrial concentration remains a matter of public policy concern even so.

The Measurement of Industrial Concentration

Industrial concentration was traditionally summarized by the concentration ratio, which simply adds the market shares of an industry’s four, eight, twenty, or fifty largest companies. In 1982, when new federal merger guidelines were issued, the Herfindahl-Hirschman Index (HHI) became the standard measure of industrial concentration. Suppose that an industry contains ten firms that individually account for 25, 15, 12, 10, 10, 8, 7, 5, 5, and 3 percent of total sales. The four-firm concentration ratio for this industry—the most widely used number—is 25 + 15 + 12 + 10 = 62, meaning that the top four firms account for 62 percent of the industry’s sales. The HHI, by contrast, is calculated by summing the squared market shares of all of the firms in the industry: 252 + 152 + 122 + 102 + 102 + 82 + 72 + 52 + 52 + 32 = 1,366. The HHI has two distinct advantages over the concentration ratio. It uses information about the relative sizes of all of an industry’s members, not just some arbitrary subset of the leading companies, and it weights the market shares of the largest enterprises more heavily.

In general, the fewer the firms and the more unequal the distribution of market shares among them, the larger the HHI. Two four-firm industries, one containing equalsized firms each accounting for 25 percent of total sales, the other with market shares of 97, 1, 1, and 1, have the same four-firm concentration ratio (100) but very different HHIs (2,500 versus 9,412). An industry controlled by a single firm has an HHI of 1002 = 10,000, while the HHI for an industry populated by a very large number of very small firms would approach the index’s theoretical minimum value of zero.

Concentration in the U.S. Economy

According to the U.S. Department of Justice’s merger guidelines, an industry is considered “concentrated” if the HHI exceeds 1,800; it is “unconcentrated” if the HHI is below 1,000. Since 1982, HHIs based on the value of shipments of the fifty largest companies have been calculated and reported in the manufacturing series of the Economic Census.1 Concentration levels exceeding 1,800 are rare. The exceptions include glass containers (HHI = 2,959.9 in 1997), motor vehicles (2,505.8), and breakfast cereals (2,445.9). Cigarette manufacturing also is highly concentrated, but its HHI is not reported owing to the small number of firms in that industry, the largest four of which accounted for 89 percent of shipments in 1997. At the other extreme, the HHI for machine shops was 1.9 the same year.

Whether an industry is concentrated hinges on how narrowly or broadly it is defined, both in terms of the product it produces and the extent of the geographic area it serves. The U.S. footwear manufacturing industry as a whole is very unconcentrated (HHI = 317 in 1997); the level of concentration among house slipper manufacturers is considerably higher, though (HHI = 2,053.4). Similarly, although the national ready-mix concrete industry is unconcentrated (HHI = 29.4), concentration in that industry undoubtedly is much higher in specific cities and towns that typically are served by only a handful of such firms.

These examples suggest that concentration varies substantially across U.S. industries. Trends in concentration vary from industry to industry, but most changes in concentration proceed at a glacial pace. So, too, does aggregate concentration: the fifty largest U.S. companies accounted for 24 percent of manufacturing value added (revenue minus the costs of fuel, power, and raw materials) in 1997, the same percentage as in 1992 (and as in 1954, for that matter). On some measures—the percentages of total employment and total assets controlled by the nation’s 50, 100, or 200 largest firms—industrial concentration in the United States actually has declined since World War II.

Concentration indexes calculated for a particular year conceal the identities of the industry’s members. In reality, turnover among the nation’s leading firms is fairly regular over long time horizons, averaging between 2 and 5 percent annually. Success at one point in time does not guarantee survival: only three of the ten largest U.S. companies in 1909 made the top one hundred list in 1987. Available concentration indexes, which are based solely on domestic manufacturing data, also ignore the global dimensions of industrial production.

The Causes and Consequences of Industrial Concentration

Some industries are more concentrated than others because of technical properties of their production technologies or unique characteristics of the markets they serve. Economies of scale, which allow firms to reduce their average costs as they increase their rates of output, favor large-scale production over small-scale production. Thus, industries for which scale economies are important (e.g., auto manufacturing and petroleum refining) are expected to be more concentrated than others in which costs do not fall as rapidly as output expands (e.g., cut-and-sew apparel manufacturing). Similarly, concentration tends to be higher in industries, such as aircraft and semiconductor manufacturing, where learning curves generate substantial production-cost savings as additional units of the original model or design are made.

Owing to so-called network effects, some goods increase in value as more people use them. Computer operating systems, word-processing software, and video recorder-players are examples of such goods, as are literal networks such as railroads, commercial air transportation, and wire line telephony. Because standard technologies and protocols that provide compatible interconnections are critical to the realization of network effects— allowing faxes to be sent and received or computer users easily to exchange files—consumers rationally favor large networks over small ones. The necessity of building networks that accommodate critical masses of users means that only a few providers will achieve dominant positions, and therefore the industry will tend to be highly concentrated. Such domination is likely to be temporary, however, since consumers will switch networks when benefits outweigh costs, as illustrated by the replacement of Betaformatted video tapes by VHS formatted ones, which in turn are being replaced by DVDs.

Industrial concentration also is promoted by barriers to entry, which make it difficult for new firms to displace established firms. Barriers to entry are erected by government-conferred privileges such as patents, copyrights and trademarks, exclusive franchises, and licensing requirements. Existing firms may possess other advantages over newcomers, including lower costs and brand loyalty, which make entry more difficult.

The fundamental public policy question posed by industrial concentration is this: Are concentrated industries somehow less competitive than unconcentrated ones? Concentration would have adverse effects if it bred market power—the ability to charge prices in excess of costs—thereby increasing industry profits at consumers’ expense. In theory, industrial concentration can facilitate the exercise of market power if the members of the industry agree to cooperate rather than compete, or if the industry’s dominant firm takes the lead in setting prices that rivals follow. And, indeed, the evidence generated by hundreds of econometric studies suggests that concentrated industries are more profitable than unconcentrated ones. But that evidence begs the question. It does not tell us whether profits are higher in concentrated industries because of market power effects or because the firms in those industries use resources more efficiently (i.e., have lower costs).

Some economists have found that concentration leads to higher prices, but the link observed typically is both small (prices elevated by 1–5 percent) and statistically weak. A detailed econometric study by Sam Peltzman (1977) reaches the opposite conclusion. He reports that profits are higher in concentrated industries not because prices are higher, but because they do not decline as much as costs do as efficient firms expand their scales of operation. Analyses by Yale Brozen (1982), Harold Demsetz (1974), and others have found that the positive relation between industrial concentration and profits disappears altogether when firm size is taken into account. These results are consistent with the hypothesis that some industries are more concentrated than others because large firms have significant cost advantages over small firms. There is, in short, little unequivocal evidence that industrial concentration per se is worrisome. Just the reverse seems to be true.

Public Policies Toward Industrial Concentration

Consolidating production in the hands of fewer firms through mergers and acquisitions obviously is the most direct route to industrial concentration. Preventing transactions that, by eliminating one or more competitors, would lead to undue increases in concentration and the possible exercise of market power by the remaining firms is the mandate of the two federal antitrust agencies—the U.S. Department of Justice and the Federal Trade Commission—under section 7 of the Clayton Act (1914). That mandate was strengthened considerably by the Hart-Scott-Rodino Act (1978), which requires firms to notify the antitrust authorities of their intention to merge and then to hold the transaction in abeyance until it has been reviewed. Most transactions with summed firm values of fifteen million dollars or more had to file premerger notifications initially; in February 2001 that threshold was raised to fifty million dollars and indexed for inflation.

Two important factors that antitrust authorities consider in deciding whether to allow a proposed merger to proceed are the level of market concentration if the merger is consummated and the change in market concentration from its premerger level. (Note that the “market” considered relevant for merger analysis hardly ever corresponds to the “industry” defined by the Economic Census; antitrust markets may be defined more broadly or more narrowly; in practice, the definition of the relevant market usually is the key to whether a merger is lawful or not.) Concentration thresholds are laid out in the Justice Department’s merger guidelines, first promulgated in 1968, revised substantially in 1982, and amended several times since.

The guidelines state that proposed mergers are unlikely to be challenged if the postmerger market is unconcentrated (HHI remains below 1,000). However, mergers generally will not be approved if, following consummation, market concentration falls within the 1,000–1,800 range, and the HHI increases by more than 100 points or, if the postmerger HHI is 1,800 or more, concentration increases by more than 50 points.2 Exceptions are provided when the merging firms can demonstrate significant cost savings, when barriers to entry are low, or when one of the merger’s partners would fail otherwise. (In the European Union, by contrast, competition policy, including merger law enforcement, is shaped principally by fears of possible “abuses of dominant market positions” by large firms.)

Studies examining the enforcement of section 7 under the merger guidelines have found that they are not always followed closely. Mergers are, indeed, more likely to be challenged the greater the level of market concentration and the higher the barriers to entry are thought to be. But law enforcement also is found to be influenced significantly by political pressures on the antitrust authorities from groups that stand to lose if a merger is approved, including rivals worried that the transaction will create a more effective competitor. In fact, studies of stock-market reactions to news that a merger is likely to be challenged typically find competitors to be the main beneficiaries of such decisions.


About the Author

William F. Shughart II is F. A. P. Barnard Distinguished Professor of Economics at the University of Mississippi. He was special assistant to the director of the Federal Trade Commission’s Bureau of Economics during the Reagan administration and currently is editor in chief of Public Choice and associate editor of the Southern Economic Journal.


Further Reading

Introductory

Adams, Walter, and James Brock. The Structure of American Industry. 11th ed. Upper Saddle River, N.J.: Pearson/Prentice Hall, 2005.
Cabral, Luís M. B. Introduction to Industrial Organization. Cambridge: MIT Press, 2000.
Kwoka, John E. Jr., and Lawrence J. White. The Antitrust Revolution: Economics, Competition, and Policy. 4th ed. New York: Oxford University Press, 2004.
Pautler, Paul A. “Evidence on Mergers and Acquisitions.” Antitrust Bulletin 48 (Spring 2003): 119–221.
Shughart, William F. II. Antitrust Policy and Interest-Group Politics. New York: Quorum Books, 1990.
Shughart, William F. II. “Regulation and Antitrust.” In Charles K. Rowley and Friedrich Schneider, eds., The Encyclopedia of Public Choice. Vol. 1. Boston: Kluwer, 2004. Pp. 263–283.

 

Advanced

Brozen, Yale. Concentration, Mergers, and Public Policy. New York: Macmillan, 1982.
Carlton, Dennis W., and Jeffrey M. Perloff. Modern Industrial Organization. 3d ed. Reading, Mass.: Addison-Wesley, 2000.
Coate, Malcolm B., Richard S. Higgins, and Fred S. Mc-Chesney. “Bureaucracy and Politics in FTC Merger Challenges.” Journal of Law and Economics 33 (October 1990): 463–482.
Demsetz, Harold. “Two Systems of Belief About Monopoly.” In Harvey J. Goldschmid, H. Michael Mann, and J. Fred Weston, eds., Industrial Concentration: The New Learning. Boston: Little, Brown, 1974.
Goldschmid, Harvey J., H. Michael Mann, and J. Fred Weston, eds. Industrial Concentration: The New Learning. Boston: Little, Brown, 1974.
McChesney, Fred S., and William F. Shughart II, eds. The Causes and Consequences of Antitrust: The Public-Choice Perspective. Chicago: University of Chicago Press, 1995.
Peltzman, Sam. “The Gains and Losses from Industrial Concentration.” Journal of Law and Economics 20 (April 1977): 229–263.
Shy, Oz. The Economics of Network Industries. Cambridge: Cambridge University Press, 2001.
Stiglitz, Joseph E., and G. Frank Mathewson, eds. New Developments in the Analysis of Market Structure. Cambridge: MIT Press, 1986.

Footnotes

The Economic Census has been conducted every five years since 1967, and before that for 1954, 1958, and 1963. Prior to 1997, it was known as the Census of Manufactures. That same year, industries began being categorized according to the North American Industry Classification System (NAICS), which replaced the Standard Industrial Classification (SIC) codes used until 1992. Industrial concentration also is reported by the Economic Census on the basis of value added. Industry concentration ratios and HHIs for the 1992 and 1997 economic censuses can be accessed online at: http://www.census.gov/epcd/www/concentration.html. Information on industrial concentration is not readily available for sectors of the economy other than manufacturing.

When firms with market shares of s1 and s2 merge, the HHI increases by (s1 + s2)2 − s12 − s22 = 2s1s2. So, for example, if a merger is proposed between the two largest firms in the hypothetical ten-firm industry described earlier, the HHI would increase by 2 × 25 × 15 = 750 points (from 1,366 to 2,116). According to the guidelines, that merger would in all likelihood be challenged.

 

Cryptocurrency

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Various cryptocurrency logos.

cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.[1][2][3] Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.[4]

The decentralized control of each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.[5]

Bitcoin, first released as open-source software in 2009, is generally considered the first decentralized cryptocurrency.[6] Since the release of bitcoin, over 4,000 altcoins (alternative variants of bitcoin, or other cryptocurrencies) have been created.

Contents

History

In 1983, the American cryptographer David Chaum conceived an anonymous cryptographic electronic money called ecash.[7][8] Later, in 1995, he implemented it through Digicash,[9] an early form of cryptographic electronic payments which required user software in order to withdraw notes from a bank and designate specific encrypted keys before it can be sent to a recipient. This allowed the digital currency to be untraceable by the issuing bank, the government, or any third party.

In 1996, the NSA published a paper entitled How to Make a Mint: the Cryptography of Anonymous Electronic Cash, describing a Cryptocurrency system first publishing it in a MIT mailing list[10] and later in 1997, in The American Law Review (Vol. 46, Issue 4).[11]

In 1998, Wei Dai published a description of “b-money”, characterized as an anonymous, distributed electronic cash system.[12] Shortly thereafter, Nick Szabo described bit gold.[13] Like bitcoin and other cryptocurrencies that would follow it, bit gold (not to be confused with the later gold-based exchange, BitGold) was described as an electronic currency system which required users to complete a proof of work function with solutions being cryptographically put together and published. A currency system based on a reusable proof of work was later created by Hal Finney who followed the work of Dai and Szabo.[citation needed]

The first decentralized cryptocurrency, bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work scheme.[14][15] In April 2011, Namecoin was created as an attempt at forming a decentralized DNS, which would make internet censorship very difficult. Soon after, in October 2011, Litecoin was released. It was the first successful cryptocurrency to use scrypt as its hash function instead of SHA-256. Another notable cryptocurrency, Peercoin was the first to use a proof-of-work/proof-of-stake hybrid.[16]

On 6 August 2014, the UK announced its Treasury had been commissioned to do a study of cryptocurrencies, and what role, if any, they can play in the UK economy. The study was also to report on whether regulation should be considered.[17]

Formal definition

According to Jan Lansky, a cryptocurrency is a system that meets six conditions:[18]

  1. The system does not require a central authority, its state is maintained through distributed consensus.
  2. The system keeps an overview of cryptocurrency units and their ownership.
  3. The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
  4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
  5. The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
  6. If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them.

In March 2018, the word cryptocurrency was added to the Merriam-Webster Dictionary.[19]

Altcoin

The term altcoin has various similar definitions. Stephanie Yang of The Wall Street Journal defined altcoins as “alternative digital currencies,”[20] while Paul Vigna, also of The Wall Street Journal, described altcoins as alternative versions of bitcoin.[21] Aaron Hankins of the MarketWatch refers to any cryptocurrencies other than bitcoin as altcoins.[22]

Crypto token

blockchain account can provide functions other than making payments, for example in decentralized applications or smart contracts. In this case, the units or coins are sometimes referred to as crypto tokens (or cryptotokens).

Architecture

Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers. In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.[23]

As of May 2018, over 1,800 cryptocurrency specifications existed.[24] Within a cryptocurrency system, the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.[14]

Most cryptocurrencies are designed to gradually decrease production of that currency, placing a cap on the total amount of that currency that will ever be in circulation.[25] Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement.[1] This difficulty is derived from leveraging cryptographic technologies.

Blockchain

The validity of each cryptocurrency’s coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[23][26] Each block typically contains a hash pointer as a link to a previous block,[26] a timestamp and transaction data.[27] By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.[28] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault toleranceDecentralized consensus has therefore been achieved with a blockchain.[29] Blockchains solve the double-spending problem without the need of a trusted authority or central server, assuming no 51% attack (that has worked against several cryptocurrencies).

Timestamping

Cryptocurrencies use various timestamping schemes to “prove” the validity of transactions added to the blockchain ledger without the need for a trusted third party.

The first timestamping scheme invented was the proof-of-work scheme. The most widely used proof-of-work schemes are based on SHA-256 and scrypt.[16]

Some other hashing algorithms that are used for proof-of-work include CryptoNightBlakeSHA-3, and X11.

The proof-of-stake is a method of securing a cryptocurrency network and achieving distributed consensus through requesting users to show ownership of a certain amount of currency. It is different from proof-of-work systems that run difficult hashing algorithms to validate electronic transactions. The scheme is largely dependent on the coin, and there’s currently no standard form of it. Some cryptocurrencies use a combined proof-of-work/proof-of-stake scheme.[16]

Mining

Hashcoin mine

In cryptocurrency networks, mining is a validation of transactions. For this effort, successful miners obtain new cryptocurrency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt.[30] This arms race for cheaper-yet-efficient machines has been on since the day the first cryptocurrency, bitcoin, was introduced in 2009.[30] With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.[30][31]

Some miners pool resources, sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block. A “share” is awarded to members of the mining pool who present a valid partial proof-of-work.

As of February 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada.[32] One company is operating data centers for mining operations at Canadian oil and gas field sites, due to low gas prices.[33] In June 2018, Hydro Quebec proposed to the provincial government to allocate 500 MW to crypto companies for mining.[34] According to a February 2018 report from Fortune,[35] Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. Prices are contained because nearly all of the country’s energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland.[citation needed]

In March 2018, a town in Upstate New York put an 18-month moratorium on all cryptocurrency mining in an effort to preserve natural resources and the “character and direction” of the city.[36]

GPU price rise

An increase in cryptocurrency mining increased the demand of graphics cards (GPU) in 2017.[37] Popular favorites of cryptocurrency miners such as Nvidia’s GTX 1060 and GTX 1070 graphics cards, as well as AMD’s RX 570 and RX 580 GPUs, doubled or tripled in price – or were out of stock.[38] A GTX 1070 Ti which was released at a price of $450 sold for as much as $1100. Another popular card GTX 1060’s 6 GB model was released at an MSRP of $250, sold for almost $500. RX 570 and RX 580 cards from AMD were out of stock for almost a year. Miners regularly buy up the entire stock of new GPU’s as soon as they are available.[39]

Nvidia has asked retailers to do what they can when it comes to selling GPUs to gamers instead of miners. “Gamers come first for Nvidia,” said Boris Böhles, PR manager for Nvidia in the German region.[40]

Wallets

An example paper printable bitcoin wallet consisting of one bitcoin address for receiving and the corresponding private key for spending

cryptocurrency wallet stores the public and private “keys” or “addresses” which can be used to receive or spend the cryptocurrency. With the private key, it is possible to write in the public ledger, effectively spending the associated cryptocurrency. With the public key, it is possible for others to send currency to the wallet.

Anonymity

Bitcoin is pseudonymous rather than anonymous in that the cryptocurrency within a wallet is not tied to people, but rather to one or more specific keys (or “addresses”).[41] Thereby, bitcoin owners are not identifiable, but all transactions are publicly available in the blockchain. Still, cryptocurrency exchanges are often required by law to collect the personal information of their users.[citation needed]

Additions such as Zerocoin, Zerocash and CryptoNote have been suggested, which would allow for additional anonymity and fungibility.[42][43]

Fungibility

Most cryptocurrency tokens are fungible and interchangeable. However, unique non-fungible tokens also exist. Such tokens can serve as assets in games like CryptoKitties.

Economics

Cryptocurrencies are used primarily outside existing banking and governmental institutions and are exchanged over the Internet.

Transaction fees

Transaction fees for cryptocurrency depend mainly on the supply of network capacity at the time, versus the demand from the currency holder for a faster transaction. The currency holder can choose a specific transaction fee, while network entities process transactions in order of highest offered fee to lowest. Cryptocurrency exchanges can simplify the process for currency holders by offering priority alternatives and thereby determine which fee will likely cause the transaction to be processed in the requested time.

For ether, transaction fees differ by computational complexity, bandwidth use, and storage needs, while bitcoin transaction fees differ by transaction size and whether the transaction uses SegWit. In September 2018, the median transaction fee for ether corresponded to $0.017,[44] while for bitcoin it corresponded to $0.55.[45]

Exchanges

Cryptocurrency exchanges allow customers to trade cryptocurrencies for other assets, such as conventional fiat money, or to trade between different digital currencies.

Atomic swaps

Atomic swaps are a mechanism where one cryptocurrency can be exchanged directly for another cryptocurrency, without the need for a trusted third party such as an exchange.

ATMs

Jordan Kelley, founder of Robocoin, launched the first bitcoin ATM in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs but has scanners to read government-issued identification such as a driver’s license or a passport to confirm users’ identities.[46]

Initial coin offerings

An initial coin offering (ICO) is a controversial means of raising funds for a new cryptocurrency venture. An ICO may be used by startups with the intention of avoiding regulation. However, securities regulators in many jurisdictions, including in the U.S., and Canada have indicated that if a coin or token is an “investment contract” (e.g., under the Howey test, i.e., an investment of money with a reasonable expectation of profit based significantly on the entrepreneurial or managerial efforts of others), it is a security and is subject to securities regulation. In an ICO campaign, a percentage of the cryptocurrency (usually in the form of “tokens”) is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, often bitcoin or ether.[47][48][49]

According to PricewaterhouseCoopers, four of the 10 biggest proposed initial coin offerings have used Switzerland as a base, where they are frequently registered as non-profit foundations. The Swiss regulatory agency FINMA stated that it would take a “balanced approach” to ICO projects and would allow “legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with national laws protecting investors and the integrity of the financial system.” In response to numerous requests by industry representatives, a legislative ICO working group began to issue legal guidelines in 2018, which are intended to remove uncertainty from cryptocurrency offerings and to establish sustainable business practices.[50]

Legality

The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed their use and trade,[51] others have banned or restricted it. According to the Library of Congress, an “absolute ban” on trading or using cryptocurrencies applies in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. An “implicit ban” applies in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.[52] In the United States and Canada, state and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating “bitcoin scams” and ICOs in 40 jurisdictions.[53]

Various government agencies, departments, and courts have classified bitcoin differently. China Central Bank banned the handling of bitcoins by financial institutions in China in early 2014.

In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian ruble.[54] Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[55]

Cryptocurrencies are a potential tool to evade economic sanctions for example against RussiaIran, or Venezuela. Russia also secretly supported Venezuela with the creation of the petro (El Petro), a national cryptocurrency initiated by the Maduro government to obtain valuable oil revenues by circumventing US sanctions.[citation needed]

In August 2018, the Bank of Thailand announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).[56]

Advertising bans

Bitcoin and other cryptocurrency advertisements were temporarily banned on Facebook,[57] GoogleTwitter,[58] Bing,[59] SnapchatLinkedIn and MailChimp.[60] Chinese internet platforms BaiduTencent, and Weibo have also prohibited bitcoin advertisements. The Japanese platform Line and the Russian platform Yandex have similar prohibitions.[61]

U.S. tax status

On 25 March 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes. This means bitcoin will be subject to capital gains tax.[62] In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.[63]

In July 2019, the IRS started sending letters to cryptocurrency owners warning them to amend their returns and pay taxes.[64]

The legal concern of an unregulated global economy

As the popularity of and demand for online currencies has increased since the inception of bitcoin in 2009,[65] so have concerns that such an unregulated person to person global economy that cryptocurrencies offer may become a threat to society. Concerns abound that altcoins may become tools for anonymous web criminals.[66]

Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes and launder money.

Transactions that occur through the use and exchange of these altcoins are independent from formal banking systems, and therefore can make tax evasion simpler for individuals. Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.[66]

Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to launder money. Rather than laundering money through an intricate net of financial actors and offshore bank accounts, laundering money through altcoins can be achieved through anonymous transactions.[66]

Loss, theft, and fraud

In February 2014 the world’s largest bitcoin exchange, Mt. Gox, declared bankruptcy. The company stated that it had lost nearly $473 million of their customers’ bitcoins likely due to theft. This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins in existence. The price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.[67]

Two members of the Silk Road Task Force—a multi-agency federal task force that carried out the U.S. investigation of Silk Road—seized bitcoins for their own use in the course of the investigation.[68] DEA agent Carl Mark Force IV, who attempted to extort Silk Road founder Ross Ulbricht (“Dread Pirate Roberts”), pleaded guilty to money laundering, obstruction of justice, and extortion under color of official right, and was sentenced to 6.5 years in federal prison.[68] U.S. Secret Service agent Shaun Bridges pleaded guilty to crimes relating to his diversion of $800,000 worth of bitcoins to his personal account during the investigation, and also separately pleaded guilty to money laundering in connection with another cryptocurrency theft; he was sentenced to nearly eight years in federal prison.[69]

Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015. The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest. The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.[70]

On 21 November 2017, the Tether cryptocurrency announced they were hacked, losing $31 million in USDT from their primary wallet.[71] The company has ‘tagged’ the stolen currency, hoping to ‘lock’ them in the hacker’s wallet (making them unspendable). Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.

In May 2018, Bitcoin Gold (and two other cryptocurrencies) were hit by a successful 51% hashing attack by an unknown actor, in which exchanges lost estimated $18m.[citation needed] In June 2018, Korean exchange Coinrail was hacked, losing US$37 million worth of altcoin. Fear surrounding the hack was blamed for a $42 billion cryptocurrency market selloff.[72] On 9 July 2018 the exchange Bancor had $23.5 million in cryptocurrency stolen.[73]

The French regulator Autorité des marchés financiers (AMF) lists 15 websites of companies that solicit investment in cryptocurrency without being authorised to do so in France.[74]

Darknet markets

Properties of cryptocurrencies gave them popularity in applications such as a safe haven in banking crises and means of payment, which also led to the cryptocurrency use in controversial settings in the form of online black markets, such as Silk Road.[66] The original Silk Road was shut down in October 2013 and there have been two more versions in use since then. In the year following the initial shutdown of Silk Road, the number of prominent dark markets increased from four to twelve, while the amount of drug listings increased from 18,000 to 32,000.[66]

Darknet markets present challenges in regard to legality. Bitcoins and other forms of cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of the world. In the U.S., bitcoins are labelled as “virtual assets”. This type of ambiguous classification puts pressure on law enforcement agencies around the world to adapt to the shifting drug trade of dark markets.[75]

Reception

Cryptocurrencies have been compared to Ponzi schemespyramid schemes[76] and economic bubbles,[77] such as housing market bubbles.[78] Howard Marks of Oaktree Capital Management stated in 2017 that digital currencies were “nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it”, and compared them to the tulip mania (1637), South Sea Bubble (1720), and dot-com bubble (1999).[79] The New Yorker has explained the debate based on interviews with blockchain founders in an article about the “argument over whether Bitcoin, Ethereum, and the blockchain are transforming the world”.[80]

While cryptocurrencies are digital currencies that are managed through advanced encryption techniques, many governments have taken a cautious approach toward them, fearing their lack of central control and the effects they could have on financial security.[81] Regulators in several countries have warned against cryptocurrency and some have taken concrete regulatory measures to dissuade users.[82] Additionally, many banks do not offer services for cryptocurrencies and can refuse to offer services to virtual-currency companies.[83] Gareth Murphy, a senior central banking officer has stated “widespread use [of cryptocurrency] would also make it more difficult for statistical agencies to gather data on economic activity, which are used by governments to steer the economy”. He cautioned that virtual currencies pose a new challenge to central banks’ control over the important functions of monetary and exchange rate policy.[84] While traditional financial products have strong consumer protections in place, there is no intermediary with the power to limit consumer losses if bitcoins are lost or stolen.[85] One of the features cryptocurrency lacks in comparison to credit cards, for example, is consumer protection against fraud, such as chargebacks.

An enormous amount of energy goes into proof-of-work cryptocurrency mining, although cryptocurrency proponents claim it is important to compare it to the consumption of the traditional financial system.[86]

There are also purely technical elements to consider. For example, technological advancement in cryptocurrencies such as bitcoin result in high up-front costs to miners in the form of specialized hardware and software.[87] Cryptocurrency transactions are normally irreversible after a number of blocks confirm the transaction. Additionally, cryptocurrency private keys can be permanently lost from local storage due to malware, data loss or the destruction of the physical media. This prevents the cryptocurrency from being spent, resulting in its effective removal from the markets.[88]

The cryptocurrency community refers to pre-mining, hidden launches, ICO or extreme rewards for the altcoin founders as a deceptive practice.[89] It can also be used as an inherent part of a cryptocurrency’s design.[90] Pre-mining means currency is generated by the currency’s founders prior to being released to the public.[91]

Paul KrugmanNobel Memorial Prize in Economic Sciences winner does not like bitcoin, has repeated numerous times that it is a bubble that will not last[92] and links it to Tulip mania.[93] American business magnate Warren Buffett thinks that cryptocurrency will come to a bad ending.[94] In October 2017, BlackRock CEO Laurence D. Fink called bitcoin an ‘index of money laundering‘.[95] “Bitcoin just shows you how much demand for money laundering there is in the world,” he said.

Academic studies

In September 2015, the establishment of the peer-reviewed academic journal Ledger (ISSN 2379-5980) was announced. It covers studies of cryptocurrencies and related technologies, and is published by the University of Pittsburgh.[96]

The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[97][98]

See also

References …

https://en.wikipedia.org/wiki/Cryptocurrency

 

 

Story 2: Department of Justice Charges Health Care Fraud Against 58 Individuals — Pill Mills — Videos

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58 charged in health care fraud across Texas

Health care frauds arrests announced by DOJ in regional investigation

DOJ charges 601 in health care fraud takedown

2 Sisters, Others Charged In Massive Medicaid Fraud Scheme

4 NYC area doctors among 20 charged in massive health care fraud scheme

I

DOJ Announces Major Crackdown On Healthcare Fraud; 301 Arrested

Investigators warn of Medicaid fraud and home care abuse

Health Care Fraud Enforcement – The Final Frontier

Medicare/Medicaid Fraud Waste and Abuse Training

Texas Health Care Fraud and Opioid Takedown Results in Charges Against 58

HOUSTON – The Justice Department has announced a coordinated health care fraud enforcement operation across the state of Texas involving charges against a total of 58 individuals, several of which are charged in Houston. They were allegedly involved in Medicare fraud schemes and networks of “pill mill” clinics resulting in $66 million in loss and 6.2 million pills. Of those charged, 16 were doctors or medical professionals, while 20 were charged for their role in diverting opioids.

The Health Care Fraud Unit of the Criminal Division’s Fraud Section in conjunction with its Medicare Fraud Strike Force (MFSF) partners led the enforcement actions. The MFSF is a partnership among the Criminal Division, U.S. Attorney’s Offices, FBI, Department of Health and Human Services – Office of Inspector General (HHS-OIG) and Drug Enforcement Administration. In addition, the operation includes the participation of the Veterans Affairs – OIG and the Department of Labor (DOL), various other federal law enforcement agencies and Texas State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and their families), DOL – Office of Worker’s Compensation Programs and private insurance companies for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department.

According to the Centers for Disease Control, approximately 115 Americans die every day of an opioid-related overdose.

Today’s arrests come three weeks after the Department announced that the Health Care Fraud Unit’s Houston Strike Force coordinated the filing of charges against dozens in a trafficking network responsible for diverting over 23 million oxycodone, hydrocodone and carisoprodol pills.

“Sadly, opioid proliferation is nothing new to Americans,” said U.S. Attorney Ryan K. Patrick of the Southern District of Texas. “What is new, is the reinforced fight being taken to dirty doctors and shady pharmacists. Texas may have four U.S. Attorneys, but we are focused on one health care mission: shutting down pills mills and rooting out corruption in health care. From Lufkin to Laredo and Dallas to Del Rio, one of us will shut these operations down.”

“Today’s charges highlight the amazing work being done by the Department’s Medicare Fraud Strike Force and our partners in Texas,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “As we continue to dedicate resources to battle healthcare and opioid fraud schemes in Texas and elsewhere, we are shining an inescapable light on dirty doctors, clinic owners, pharmacists and others who may have long believed they could perpetrate their frauds behind closed doors.”

“These arrests across multiple investigations and jurisdictions is further proof that successful teamwork exemplifies Texas law enforcement,” said DEA Houston Special Agent in Charge Will R. Glaspy. “Today’s operation affirms both our commitment to targeting those individuals who illegally divert opioids in our communities, and our collective will to bring those individuals to justice.”

“Health care fraud undermines our country by driving up medical costs, wasting taxpayer dollars, and often harming patients,” said Special Agent in Charge C.J. Porter of HHS-OIG. “Today’s takedown shows that we are fighting hard to protect Medicare and Medicaid and the patients served by those programs. Working closely with our law enforcement partners, our agents are determined to ensure fraudsters pay for their crimes.”

“Today’s announcement demonstrates the close collaboration between the FBI and its law enforcement partners in North Texas,” said Special Agent in Charge Matthew J. DeSarno of the FBI’s Dallas Field Office. “The enormous economic damage caused by those who defraud crucial public health programs, as well as the ever-increasing loss of life caused by illicit and illegitimate pill schemes cannot be overstated. The public can rest assured the FBI will continue to make these investigations a top priority moving forward.”

Among those charged in the Southern District of Texas are:

Diana Hernandez, Kathy Hernandez, Hieu Troung R.P.H., Clint Randall, Prince White, Charles Walton and Cedric Milbrurn were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through S&S Pharmacy of Houston.

Franklin Nwabugwu R.P.H. was charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose through Golden Pharmacy of Houston.

Steven Inbody M.D. and Hoai-Huong Truong were charged for their alleged participation in a scheme to unlawfully distribute and dispense controlled substance without a legitimate medical purpose.

Ashley McCain, John Sims, Gregory Comer, Kesia Banks and Jacqueline Hill were charged for their alleged participation in a scheme to unlawfully distribute and dispense a controlled substance without a legitimate medical purpose through Continuous Medical Care and Rehabilitation.

Trial Attorneys Devon Helfmeyer and Catherine Wagner and Assistant Deputy Chief Aleza Remi, all of the Fraud Section, are prosecuting the respective cases.

Several others were also charged in the Northern District of Texas (NDTX), Eastern District of Texas (EDTX) and Eastern District of Texas (EDTX).

“Healthcare should revolve around patients’ well-being – not providers’ personal interests,” said NDTX U.S. Attorney Erin Nealy Cox.  “When medical professionals line their own pockets by submitting false insurance claims or prescribing unnecessary medications, equipment or treatments, it not only drains taxpayer coffers – but it makes healthcare more expensive for everyone else. We cannot allow the healthcare industry to become bloated by fraud.”

“Every dollar stolen from Medicare through fraud comes out of the pocket of taxpayers,” said EDTXU.S. Attorney Joseph D. Brown of the “These are real costs that help drive up the cost of medical services for everyone. It is important that there be real consequences for those who cheat the system.”

“I am proud to fight healthcare fraud in Texas alongside Ryan Patrick, Erin Nealy Cox and Joe Brown,” said WDTX U.S. Attorney John Bash. “These crimes drive up the cost of health insurance, waste tax revenue and threaten the well-being of Texans.”

The Fraud Section leads the MFSF, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. MFSF maintains 15 strike forces operating in 24 districts. Since its inception in March 2007, MFSF has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, HHS Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.

Medicaid Fraud and Abuse

Overview

Fraud, abuse and waste in Medicaid cost states billions of dollars every year, diverting funds that could otherwise be used for legitimate health care services. Not only do fraudulent and abusive practices increase the cost of Medicaid without adding value – they increase risk and potential harm to patients who are exposed to unnecessary procedures. In 2015, improper payments alone—which include things like payment for non-covered services or for services that were billed but not provided—totaled more than $29 billion according to the Government Accountability Office.

While Medicaid fraud involves knowingly misrepresenting the truth to obtain unauthorized benefit, abuse includes any practice that is inconsistent with acceptable fiscal, business or medical practices that unnecessarily increase costs. Waste encompasses overutilization of resources and inaccurate payments for services, such as unintentional duplicate payments. As states look for innovative ways to contain burgeoning Medicaid costs and promote the program’s integrity, fighting fraud and abuse offers one approach that everyone can support.

Program Integrity Initiatives. The federal government and states have adopted a variety of steps to combat Medicaid fraud, waste and abuse and to ensure that public funds are used to promote Medicaid enrollees’ health. According to the Medicaid and CHIP Payment Access Commission (MACPAC), these include data mining, audits, investigations, enforcement actions, technical assistance to help state agencies detect fraud and abuse, and provider and enrollee outreach and education. Well-designed program integrity initiatives ensure that:

  • Eligibility decisions are made correctly;
  • Prospective and enrolled providers meet federal and state participation requirements;
  • Delivered services are medically necessary and appropriate; and
  • Provider payments are made in the right amount and for appropriate services.

A 2013 Pew Charitable Trusts’ report found that states utilized three types of Medicaid fraud prevention strategies, including: provider screening; prior authorization and pre-payment reviews; and post-payment review and recovery. While states have traditionally relied upon the latter, “pay and chase” model in which they pay Medicaid claims and then try to recover improper payments, they are increasingly focusing on preventing and detecting fraudulent activities early on. New York, for example has integrated targeted data mining and risk analysis into its fraud-fighting tool box. In Texas, a few simple process changes and new pattern analysis and recognition efforts moved the state closer to ‘real–time analysis’ and significantly increased the amount of fraud identified.  For more on what these states have done to fight Medicaid fraud and abuse, check out this Webinar archive.

Federal Medicaid Integrity Provisions. The Affordable Care Act (ACA) introduced various requirements aimed at improving Medicaid program integrity. For example, the law created a web-based portal, enabling states to compare information on providers that have been terminated (and whose billing privileges have been revoked). An overview of the law’s provisions related to improving Medicaid program integrity is available here.

Common Examples of Medicaid Fraud

Provider Fraud

Patient Fraud

Insurer Fraud

  • Billing for services not performed
  • Billing duplicate times for one service
  • Falsifying a diagnosis
  • Billing for a more costly service than performed
  • Accepting kickbacks for patient referrals
  • Billing for a covered service when a noncovered service was provided
  • Ordering excessive or inappropriate tests
  •  Prescribing medicines that are not medically necessary or for use by people other than the patient
  • Filing a claim for services or products not received
  • Forging or altering receipts
  • Obtaining medications or products that are not needed and selling them on the black market
  • Providing false information to apply for services
  • Doctor shopping to get multiple prescriptions
  • Using someone else’s insurance coverage for services
  • Overstating the insurer’s cost in paying claims
  • Misleading enrollees about health plan benefits
  • Undervaluing the amount owed by the insurer to a health care provider under the terms of its contract
  • Denying valid claims

Additional NCSL Resources

 

Other Recent Medicaid Program Integrity and Fraud Prevention Resources

http://www.ncsl.org/research/health/medicaid-fraud-and-abuse.aspx

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Kyle Bass

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Kyle Bass
J Kyle Bass.JPG

J. Kyle Bass
Born September 7, 1969 (age 49)

Residence Dallas, TexasUnited States
Nationality American
Alma mater Texas Christian University (B.B.A.)
Occupation Founder & Chief Investment Officer,
Hayman Capital Management

J. Kyle Bass (born September 7, 1969) is an American hedge fund manager. He is the founder and principal of Hayman Capital Management, L.P., a Dallas-based hedge fund focused on global events.[1]

In 2008, Bass successfully predicted and effectively bet against the U.S. subprime mortgage crisis by purchasing credit default swaps on subprime securities which, in turn, increased in value when the real estate bubble burst.[2]

Despite his early success in predicting subprime mortgages, he has received criticism for subsequent poor performance of investments.[3] Bass has made prominent bets based on predictions of debt crisis in Japan and European sovereign debt, and shorted the Chinese yuan premised on a predicted collapse in the Chinese banking system. His fund has also challenged patents held by drug companies and shorted their stocks. His Japanese and European strategies have not been major successes and the Chinese yuan short led to severe losses for his fund in 2017.[4][5] The drug patent challenge campaign fizzled after several legal setbacks.[6]

Contents

Early life

Bass was born on September 7, 1969, in Miami, Florida, where his father managed the Fontainebleau Hotel. His father later moved the family to Dallas, Texas where he managed the Dallas Convention and Visitors Bureau.[7] Bass attended Texas Christian University on an academic and Division I diving scholarship. In 1992, Bass graduated with honors, earning a B.B.A. in finance with a concentration in real estate.[8]

Career

Before founding Hayman Capital Management in 2005, Bass briefly worked at Prudential Securities from 1992-1994 before joining Bear Stearns in 1994.[9] At Bear Stearns, he rose through the ranks rapidly, becoming a senior managing director at the age of 28 – among the youngest in the firm’s history to carry such a title.[2][8]

In 2001, he joined Legg Mason, signing a five-year deal to form the firm’s first institutional equity office in Texas. Bass told his hiring managers, “In five years and one day, I [will] be launching my own firm.”[9] While at Legg Mason, Bass advised hedge funds and other institutional clients on special situation investment strategies.[2]

In December 2005, when Legg Mason sold the portion of the business where he worked, Bass left Legg Mason and started Hayman Capital Management to serve as the investment manager to a “global special situations” hedge fund that he planned to launch. Bass launched Hayman Capital Management, L.P. with $33 million in assets under management – $5 million he had saved on his own and the balance he had raised from outside investors.[9] Shortly after launching the hedge fund in February 2006, Bass became convinced that there was a residential real-estate bubble in the United States one of the few investors to successfully predict and benefit from the subprime mortgage crisis, bringing him notoriety in the financial services industry.

In 2007, Bass testified as an expert witness before the U.S. House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises. During his testimony, he addressed: i) the role of credit rating agencies in the structured finance market and ii) policy measures that could be taken to minimize inherent conflicts of interest between rating agencies and issuers.[10]

In 2010, Bass testified before the Financial Crisis Inquiry Commission. During his testimony, he addressed his analysis of the factors that caused the crisis.

After enjoying success in predicting the subprime mortgage crisis and moderate success with debt in Greece and Japan, Bass would make a string of poor bets, leading to a dramatic downsizing of his fund. In April 2014, Bass was among a very few defenders of GM for its failure to address a defect that had been tied to 13 deaths. Hayman at the time owned eight million shares of G.M., making it Hayman’s single biggest holding,[11] Coming to the defense of GM, Bass said on CNBC that of the 13 passengers who had died owing to the defect, 12 “either weren’t wearing their seatbelt or were under the influence of alcohol.” [12] Bass admitted in a late 2014 interview that it had been “a tough year” for Hayman due to owning a lot of GM stock, which was the fund’s biggest position in 2014.[13]

After the losing year in 2014, investor’s pulled out nearly a quarter of Hayman’s capital and the firm was forced to liquidate most of its stock holdings.[14] Bass called 2015 one of his fund’s worst years.[15] By early 2019, Hayman had $423.6 million in discretionary assets under management, down from $2.3 billion at the end of 2014.[16]

Fund performance

The long term performance of Hayman Capital’s flagship fund is described by the New York Post as “small caliber”.[14] In the period from 2008 to mid-2015, the flagship fund experienced a very modest annualized performance of 1.56%.[14] The flagship fund had a tremendously successful year in 2007, having gained 212%, based on the subprime mortgage meltdown bet that brought fame to Bass.[14] The fund also gained 16% in 2012 based on bets on Greek debt. The fund lost 1.4% in 2014 and suffered its worst year in 2017 with a 19% loss (in contrast to a 19% surge of the S&P 500) due to Hayman’s misplaced short on a collapse in the Chinese yuan.[14][5]

Investment positions

Subprime mortgages

Bass first began formulating his subprime strategy after he met with an investment banker from New York while attending a wedding in Spain where they discussed how and why the Subprime Mezzanine CDO business existed.[17][18] After returning to the US, Bass hired several private investigators to determine the ease of obtaining a mortgage. Bass spent a significant amount of time studying the residential mortgage market and performed research to identify which residential mortgage backed securities (RMBS) composed of low-quality mortgages were most likely to default. This investment thesis was expressed by purchasing credit default swaps against the securitizations he deemed to be most unstable, which essentially was a manner of shorting the bonds using synthetic instruments. After purchasing the positions for his flagship fund in 2006, Bass raised additional capital for a special fund dedicated exclusively to capitalizing on the opportunity that existed in the market place. Bass managed or advised over $4 billion of positions in subprime RMBS.

In December 2007, after a wave of foreclosures had swept across the US, Bass was featured on Bloomberg TV as making a fortune betting against these subprime securities.

Europe and Japanese debt “doomsday”

After the subprime debt crisis occurred, Bass decided that it was the symptom of a more significant problem with debt and made predictions about debt “doomsday” in Europe and Japan. In 2009 he warned about the possibility of defaults by major countries over the next 3 years.[19] As of 2010, 10-15% of his portfolio was involved in bets against European and Japanese sovereign debts.[20] He went as far predicted that 2012 would be a “doomsday year” for Europe and spoke of a looming breakup of the Eurozone, which, he declared, would lead to defaults in Japan and the United States. He stated in June 2012, “Europe goes first, then Japan and finally the United States.”[21]

Bass has since 2012 also predicted a “full blown crisis” in Japan describing its approach to financing debt as a Ponzi scheme similar to Bernie Madoff‘s investment scam. Most experts have disagreed with his analysis.[22][23] Cullen Roche criticized Bass’s Japan analysis in August 2010, noting that Bass comparing Japan to the EU was an error, since their monetary systems are wildly different. Roche stated “people still fail to understand that a nation with monetary sovereignty that is the supplier of currency in a floating exchange rate system never has a problem funding itself.”[24] In May 2012, Business Insider agreed, faulting Bass’s analysis, since debt-to-GDP ratios do not reflect the interest rate or credit risk of a nation. The Business Insider noted that in a nation that borrows its own currency, public spending finances borrowing.[25]

He has been vocal in public appearances about future calamities stemming from financial meltdown. September 14, 2011, Bass maintained on CNBC that Greece’s only way out of its debt mess was a restructuring. Bass noted that despite the strife it would bring to Greece it was the only measure the nation could take. He added that within a year all of Europe would be in default as well.[26] In a speech reported on January 1, 2014, he assured the audience of his confidence that the next few years would be rife with turmoil, including the eruption of major wars. In his speech, he claimed that with the growing debt and inability to pay it off, eventually social unrest will lead to violent outbreaks. Bass finished his speech stating “War is coming – just as it has throughout history.” [27]

Chinese banking collapse

Starting in July 2015, Bass made a multiyear bet against the Chinese yuan based on a predicted banking collapse in China.[28] Bass would close out his position against the Chinese currency in early 2019 when the predicted devaluation of the currency didn’t occur.[28]

Bass argued in 2015 that the Chinese banking system was undercapitalized and its foreign reserves would be insufficient in a crisis. Bass predicted a hard landing for the Chinese economy following a bank crisis and a severe devaluation of the Chinese currency, variously given as “somewhere between 15%-20%” and “30 to 40 percent”.[29][30]

Hayman suffered its worst year in 2017 with a loss of 19% due to the strengthening of the Chinese yuan.[5]

Drug patent challenge campaign

Bass has attempted to profit from filing and publicizing patent challenges against pharmaceutical companies while also betting against their shares.[31][32] After 2 years of setbacks in his effort, Bass by 2017 ended his patent challenges.[6]

In 2015, Bass organized the Coalition For Affordable Drugs (CFAD) to use the inter partes review (IPR) process to challenge patent validity.[33][34] When he initiated this practice in January 2015, he claimed that his motive was to encourage competition in the manufacture of pharmaceuticals and thus bring down prices.[35]

Bass filed a total of 35 patent challenges, in collaboration with Erich Spangenberg who has been called “the world’s most notorious patent troll”,[3] including 33 filed by CFAD and two filed by Bass personally on a not-for-profit basis.[36]

In June 2015, Celgene received permission from the U.S. Patent and Trademark Office to file a motion seeking sanctions against the CFAD for allegedly abusing the patent-review process. The Wall Street Journal noted that this development was “being closely watched because it raises the possibility that patent officials may put an end” to Bass’s patent-challenge scheme. Celgene also told the patent office, through counsel, that CFAD had threatened to challenge its patents unless Celgene met CFAD’s demands.[37]

In October 2016, Bass prevailed in the case, with USPTO invalidating the two Celgene Corp patents related to its cancer drugs Revlimid, Pomalyst, and Thalomid at issue.[38] However, one year later Celgene was able to convince the Patent Trial and Appeal Board to re-hear the case.[39]

Political relationships

Trump administration

Bass is described by a ProPublica story as a friend of Tommy Hicks Jr, a private investor, who was a hunting buddy to Donald Trump Jr. and had further ties to the Trump administration.[40] According to the investigative story on improper links between Hicks and the Trump administration, Hicks had obtained a hearing for Bass with high level officials at an interagency meeting at the Treasury Department to air views on China.[40] This meeting was at the time Bass held a large short position counting on the fall of the Chinese currency.[40]

Cristina Fernandez de Kirchner

The BBC has described Bass as having a “good relationship” with Argentina’s president Cristina Fernandez de Kirchner.[41] In February 2014, Bass said that Argentinian bonds represented a profitable opportunity and called Argentina most “interesting” nation for investments. He was virtually alone in this assessment, with one observer noting the poor state of the Argentine economy. The IB Times noted that the country had “cheated creditors seven times since it gained independence from Spain in 1816,” most recently defaulting on its debt in 1989.[42] When the Argentine government defaulted on its debt in July 2014, Bass supported the move and criticized the bondholders, notably Elliott Management and Aurelius Capital, that, with the support of U.S. federal judge Thomas Griesa, had held out for full payment. Echoing Argentine President Cristina Fernandez de Kirchner, he called these creditors “vultures,” said that they were “holding up 42 million people from progress,” and were holding Argentina for “ransom”.[43] On August 27, 2014, Bass accused Elliott’s Paul Singer of “holding poor countries as hostages,” prompting The New York Post to comment in an editorial the next day that Bass had “sounded more like Argentina’s leftist economy minister Axel Kicillof than a US hedge-fund manager.” [44]

Philanthropy

Bass serves on the board or in an advisory role for a number of charities and organizations.

He has advised the University of Texas System Investment Management Company (UTIMCO), a public university endowment since 2010.

He also current serves or has served on the board of a number of organizations including the University of Virginia Darden School of Business Advisory Group for the Richard A. Mayo Center for Asset Management, Texas Department of Public Safety Foundation, Business Executives for National Security, Comeback America Initiative, Troops First Foundation and Capital for Kids.[45][46][47][48][49][50]

References …

External links

https://en.wikipedia.org/wiki/Kyle_Bass


China has been seeking to turn American spies for decades. But the rules of the game have changed. About 10 years ago, Charity Wright was a young U.S. military linguist training at the elite Defense Language Institute Foreign Language Center at a base called the Presidio in Monterey, California. Like many of her peers, Wright relied on taxis to visit the city. There were usually a few waiting outside the base’s gate. She’d been assigned to the institute’s Mandarin program, so she felt lucky to frequently find herself in the cab of an old man who told her he’d emigrated from China years ago. He was inquisitive in a way she found charming at first, letting her practice her new language skills as he asked about her background and family. After several months, though, she grew suspicious. The old man seemed to have an unusually good memory, and his questions were becoming more specific: Where is it that your father works? What will you be doing for the military once you graduate?Wright had been briefed on the possibility of foreign intelligence operatives collecting information on the institute’s trainees, building profiles for potential recruitment, given that many of them would move on to careers in intelligence. She reported the man to an officer at the base. Not long after, she heard that he’d been arrested and that there had been a crackdown in Monterey on a suspected Chinese spy ring.

Wright went on to spend five years as a cryptologic language analyst with the National Security Agency, assessing communications intercepts from China. Now she works in private-sector cybersecurity. As a reservist, she still holds a U.S. government clearance that allows her access to classified secrets. And she’s still the target of what she suspects are Chinese espionage efforts. Only these days, the agents don’t approach her in person. They get in touch the same way they reached Kevin Mallory: online. She gets messages through LinkedIn and other social-media sites proposing various opportunities in China: a contract with a consulting firm, a trip to speak at a conference for a generous stipend. The offers seem tempting, but this type of outreach comes straight from the Chinese-spy playbook. “I’ve heard that they can be very convincing, and by the time you fly over, they’ve got you in their lair,” Wright told me.

The tactics she saw from the old man in Monterey were “cut and dry HUMINT,” or human intelligence, she said. They were old school. But those tactics have been amplified by the tools of the social-media age, which allow intelligence officers to reach out to their targets en masse from China, where there’s no risk of getting caught. Meanwhile, intelligence experts tell me, Chinese intelligence officers have only been getting better at the traditional skills involved in persuading a target to turn on his or her country.

Donald Trump has made getting tough on China a central aspect of his foreign policy. He has focused on a trade war and tariffs aimed at rectifying what he portrays as an unfair economic playing field—earlier this month, the U.S. designated China as a currency manipulator—while holding onto the idea that China’s powerful leader, Xi Jinping, can be an ally and a friend. U.S. political and business leaders for decades pushed the idea that embracing trade with China would help to normalize its behavior, but Beijing’s aggressive espionage efforts have fueled an emerging bipartisan consensus in Washington that the hope was misplaced. Since 2017, the DOJ has brought at least a dozen cases against alleged agents and spies for conducting cyber- and economic espionage on behalf of China. “The hope was, as they develop, as they become more wealthy, as they start being a part of the club of developed nations, they’re going to change their behavior—once they get closer to the top, they’re going to operate by our rules,” John Demers told me. “What we’ve seen instead is [China] becoming better resourced and more methodical about the theft of information.”

For the past 20 years, America’s intelligence community’s top priority has been counterterrorism. A generation of operations officers and analysts has been geared more toward finding and killing America’s enemies and preventing extremist attacks than toward the more patient and strategic work that comes with peer competition and counterintelligence. If America is indeed entering an era of “great power” conflict with China, then the crux of the struggle will likely take place not on a battlefield, but in the race for information, at least for now. And here China is using an age-old human frailty to gain advantage in the competition with its more powerful adversary: greed. U.S. officials have been warning companies and research institutions not just of the strings that might be attached to Chinese money, but of the danger of corrupted employees turned spies. They are also worried about current and former U.S. officials who have been entrusted with protecting the nation’s secrets.


When I told William Evanina, America’s top counterintelligence official, Wright’s story about the cab driver in Monterey, he replied: “Of course.”

Spy rings operating out of taxis are relatively unoriginal, he told me, and have long been an issue around U.S. military and intelligence installations. An FBI and CIA veteran who is now the director of the National Counterintelligence and Security Center, Evanina has a suspicious mind—and perhaps one of the country’s worst Uber ratings. He sees the risk of intelligence collection and hidden cameras in any hired car, he told me, and if a driver ever tries to make small talk, he immediately shuts it down.

Knowing someone’s background can help an intelligence agency build a profile for potential recruitment. The person might have medical bills piling up, a parent in debt, a sibling in jail, or an infidelity that exposes him or her to blackmail. What really worries Evanina is that so much of this information can now be obtained online, legally and illegally. People can ignore Uber drivers all they want, but a good hacker or even someone savvy at mining social media might be able to track down targets’ financial records, their political views, profiles of their family members, and their upcoming travel plans. “It makes it so damn easy,” he said.

Security breaches happen with alarming regularity. Capital One announced in July that a data breach had exposed about 100 million people in America. During one of my conversations with Wright, she mused that whatever information the old man in the taxi might have wanted to glean from her, all that and much more may have been revealed in the 2015 breach of the U.S. Office of Personnel Management. In that sophisticated attack, widely believed to have been carried out by state-sponsored Chinese hackers, an enormous batch of data was stolen, including detailed information the government collects as part of the process of approving security clearances. The stolen information contained “probing questions about an applicant’s personal finances, past substance abuse, and psychiatric care,” according to Wired, as well as “everything from lie detector results to notes about whether an applicant engages in risky sexual behavior.”

Russia, the U.S. adversary that is often included with China in discussions of “near peer” conflict, has a modus operandi when it comes to recruiting spies that is similar to America’s, Evanina said. While some of their intelligence efforts, such as election interference, are loud and aggressive and seemingly unconcerned with being discovered, Russians are careful and targeted when trying to turn a well-placed asset. Russia tends to have veteran intelligence operatives make contact in person and proceed with care and patience. “Their worst-case scenario is getting caught,” Evanina told me. “They take pride in their HUMINT operations. They’re very targeted. They take extra time to increase the percentage of success. Whereas the Chinese don’t care.” (This doesn’t mean that the Chinese can’t also be targeted and discreet when needed, he added.)

“What you have is an intelligence officer sitting in Beijing,” he said. “And he can send out 30,000 emails a day. And if he gets 300 replies, that’s a high-yield, low-risk intelligence operation.” Concerning those who have left government for the private sector—and who sometimes keep their clearance to continue doing sensitive government work—it can be hard to know where to draw the line. Evanina said China will sometimes wait years to target former officials: “Your Spidey sense goes down.” But “your memory is not erased”—that is, they’ve still got the information the Chinese want.

(Alicia Tatone)

Often, Chinese spies don’t even have to look too hard. Many of those who have left U.S. intelligence jobs reveal on their LinkedIn profiles which agencies they worked for and the countries and topics on which they focused. If they still have a government clearance, they might advertise that too. Buried in the questionnaire Evanina filled out for his Senate confirmation is a question asking whether he had any plans for a career after government. “I currently have no plans subsequent to completing government service,” he wrote. When I asked him about this, he admitted that this is becoming less common among intelligence officials his age. (He’s 52.) “All of my friends are leaving like crazy now because they have kids in college,” he said. “The money is [better]. It’s hard to say no.”

If a former intelligence officer lands a job at a prominent government contractor, such as Booz Allen Hamilton or DynCorp International, he or she can expect to be well compensated. But others find themselves in less lucrative posts, or try to strike out on their own. Evanina told me that Chinese intelligence operatives pose online as Chinese professors, think-tank experts, or executives. They usually propose a trip to China as a business opportunity. “Especially the ones who have retired from the CIA, DIA, and are now contractors—they have to make the bucks,” Evanina said. “And a lot of times that’s in China. And they get compromised.”

Once a target is in China, Chinese operatives might try to get the person to start passing over sensitive information in degrees. The first request could be for information that doesn’t seem like a big deal. But by then the trap is set. “When they get that [first] envelope, it’s being photographed. And then they can blackmail you. And then you’re being sucked in,” Evanina said. “One document becomes 10 documents becomes 15 documents. And then you have to rationalize that in your mind: I am not a spy, because they’re forcing me to do this.”

In the cases of Mallory, Hansen, and Lee, Evanina said, the lure wasn’t ideology. It was money. Money was also the lure in two similar cases, in which suspects were convicted of lesser charges than espionage. Both apparently began their relationship with Chinese intelligence officers while still employed in sensitive U.S. government jobs.

In 2016, Kun Shan Chun, a veteran FBI employee who had a top-secret security clearance, pleaded guilty to acting as an agent of China. Prosecutors said that while working for the agency in New York he sent his Chinese handler, “at minimum, information regarding the FBI’s personnel, structure, technological capabilities, general information regarding the FBI’s surveillance strategies, and certain categories of surveillance targets.” And in April, Candace Claiborne, a former State Department employee, pleaded guilty to conspiracy to defraud the United States. According to the criminal complaint, Claiborne, who had served in a number of posts overseas including China, and held a top-secret security clearance, did not report her contacts with suspected Chinese agents, who provided her and a co-conspirator with “tens of thousands of dollars in gifts and benefits,” including New Year’s gifts, international travel and vacations, fashion-school tuition, rent, and cash payments. In exchange, Claiborne provided copies of State Department documents and analysis, prosecutors said.

Evanina’s office in Bethesda, Maryland, features a so-called Wall of Shame, on which hang the photographs of dozens of convicted American traitors—a testament to the struggles that have always plagued the U.S. intelligence community. The Cold War, for example, was marked by disastrous leaks from people such as the CIA officer Aldrich Ames and the FBI agent Robert Hanssen. Larry Chin, a CIA translator, was arrested in 1985 on charges of selling classified information to China over the course of three decades. That came during the so-called Year of the Spy, as the FBI made a series of high-profile arrests of U.S. government officials spying for the Soviet Union, Israel, and even Ghana. The Wall of Shame is currently being renovated, and when it’s unveiled in the fall, it will feature several new faces.Whenever a current or former U.S. intelligence officer has been turned, it takes years to assess the full repercussions. “We have to mitigate that damage for sometimes a decade,” Evanina said.


Two decades ago, Chinese intelligence officers were largely seen as relatively amateurish, even sloppy, a former U.S. intelligence official who spent years focusing on China told me. Usually, their English was poor. They were clumsy. They used predictable covers. Chinese military intelligence officers masquerading as civilians often failed to hide a military bearing and could come across as almost laughably uptight. Typically their main targets tended to be of Chinese descent. In recent years, however, Chinese intelligence officers have become more sophisticated—they can come across as suave, personable, even genteel. Their manners can be fluid. Their English is usually good. “Now this is the norm,” the former official said, speaking with me on condition of anonymity due to security concerns. “They really have learned quite a bit and grown up.”

Rodney Faraon, a former senior analyst at the CIA, told me that the Mallory and Hansen cases show just how far China’s espionage services have come. “They’ve broadened their tactics to go beyond relatively easy targets, from recruiting among the ethnically Chinese community to a much more diverse set of human assets,” he said. “In a sense, they’ve become more traditional.”

In his recently published bookTo Catch a Spy: The Art of Counterintelligence, James Olson, a veteran of the CIA’s clandestine service and its former chief of counterintelligence, breaks down the basics of China’s espionage services and how they operate. The Ministry of State Security (MSS), its main service, focuses on overseas intelligence. The Ministry of Public Security focuses on domestic intelligence, but also has agents abroad. The People’s Liberation Army, which focuses on military intelligence, “has defined its role broadly and has competed with the MSS in a widerange of economic, political, and technological intelligence collection operations overseas, in addition to its more traditional military targeting.” Olson adds that “the PLA has been responsible for the bulk” of China’s cyberespionage, though the MSS may also be expanding in this realm. Both the MSS and PLA, meanwhile, “make regular use of diplomatic, commercial, journalistic, and student covers for their operations in the United States. They aggressively use Chinese travelers to the US, especially business representatives, academics, scientists, students, and tourists, to supplement their intelligence collection. US intelligence experts have been amazed at how voracious the Chinese have been in their collection activity.”

If veteran American spies are vulnerable to Chinese espionage, U.S. companies may be faring even worse. In some cases, targeting the private sector and targeting U.S. national security can mix. A former U.S. security official, who now works for a prominent American aviation company that is involved in highly sensitive U.S. government projects, told me that the company had a suspected intelligence collector linked to China in its midst. “I would say that he’s had tradecraft training,” this person said, speaking anonymously due to an ongoing law-enforcement investigation.The former security official was hired by the company to monitor such threats, and initially found the lack of effective prevention measures and training at the company jarring. “When I walked in and got the briefing here, I thought it was a joke … Now we do take some measures to protect against [insider threats], but in a sense it’s fox in a henhouse,” this person said. “We as an industry are woefully inadequate at protecting ourselves from a foreign-intelligence threat.”

In a sense, going after American spies and government officials is fair game in the intelligence world. The U.S. does the same against the Chinese. “Intelligence operations are universal, with every country—other than a few isolated island-states who are concerned mainly with the danger of approaching cyclones—engaging in them, to one degree or another,” Loch K. Johnson, a professor emeritus at the University of Georgia, the author of Spy Watching: Intelligence Accountability in the United States, and one of America’s foremost intelligence scholars, told me in an email. He added that while almost every nation fields capabilities to both collect information about its adversaries and defend itself against espionage, a much smaller number have meaningful networks for covert action, which he described as “secret propaganda; political and economic manipulation; even paramilitary activities.” Both America and China count themselves among this group.

“The United States used propaganda, political, and economic ops during the Cold War and (somewhat less aggressively) since. China returns [the] favor,” Johnson said. “Both are major powers and have a full complement of intelligence capabilities, aimed at each other and other significant targets around the world. This means that the United States (like China in reverse) is constantly trying to learn what China is doing when it comes to military, economic, political, and cultural activities, since they may impinge upon U.S. interests in Asia and elsewhere.” To that end, the U.S. uses signals intelligence, geospatial intelligence, and HUMINT, Johnson said, “all aided by a diligent searching through the available (and voluminous) [open-source intelligence] materials for background.”

But he noted a key difference between the two countries: China’s aggressive approach to economic espionage. These Chinese efforts are partly what have prompted U.S. officials and politicians to turn to a newly popular refrain that China’s not playing by the rules. U.S. officials insist that American intelligence agencies do not target foreign companies with the aim of helping domestic ones. (The line between American spying on foreign companies to advance the country’s economic and strategic interests and whether that spying helps U.S. companies can be blurry.) “What we do not do, as we have said many times, is use our foreign intelligence capabilities to steal the trade secrets of foreign companies on behalf of—or give intelligence we collect to—U.S. companies to enhance their international competitiveness or increase their bottom line,” James Clapper, then the director of national intelligence, said in 2013, amid revelations that the NSA had spied on foreign companies.Dennis Wilder, who retired as the CIA’s deputy assistant director for East Asia and the Pacific in 2016, told me that the Chinese approach to espionage is defined by the fact that its leaders have long seen America as an existential threat. “This is a constant theme in Chinese intelligence—that we’re not just out to steal secrets, we’re not just out to protect ourselves, that the real American goal is the end of Chinese Communism, just as that was the goal with the Soviet Union,” he said.
Wilder, who still travels to the country as the director of an initiative for U.S.-China dialogue at Georgetown University, told me that Chinese officials regularly bring up past American covert action such as the CIA’s ill-fated support for the independence movement in Tibet beginning in the 1950s, and its infiltration of agents into China via Taiwan. And they still see an American hand in events such as the protests in Hong Kong today. “So we’re all sitting here scratching our heads and saying, ‘Do they really believe we’re behind Hong Kong? And the answer is, yes they do. They really believe that the fundamental American goal is the destruction and demise of Chinese Communism,” he said. “Now, if you believe that the other guy is bent on your destruction, then it’s kind of anything goes. So for the Chinese, stealing, espionage, cyberespionage against American corporations for the good of the Chinese state, are just part and parcel of the need for survival against this very formidable enemy.”China denies that it is spying against the U.S.  on the scale alleged by American officials. When presented with the details of this story, a spokesperson for the Chinese embassy in Washington, D.C., Fang Hong, said via email that she had no knowledge of the cases involving Mallory, Hansen, Lee, and others. “China has always fully respected the sovereignty of all countries and does not interfere in the internal affairs of other countries,” she said. Fang also disparaged U.S. attempts to root out Chinese spies, citing a quote commonly attributed to a great American writer. U.S. views on Chinese espionage, she remarked, “remind me of what Mark Twain said: ‘To a man with a hammer, everything looks like a nail.’”
Fang continued, “U.S. officials’ accusations against Chinese students and researchers are groundless. Guided by the zero-sum-game mentality and ill intentions to contain China, people and institutions in the U.S. have been fabricating such absurd pretexts as ‘espionage’ as an excuse to harass them and make groundless allegations.”

She added that innocent people had been framed in some cases and that “such false accusations severely undermine China-U.S. people-to-people exchanges, and scientific and technological cooperation.”

The litany of cases the DOJ has brought over the past year or so underscores the comprehensive quality of China’s espionage efforts: a former General Electric engineer charged with theft of trade secrets related to gas and steam turbines (he has pleaded not guilty); an American and a Chinese citizen charged with attempting to steal trade secrets related to plastics (the American has pleaded not guilty and the Chinese defendant, as of March 2019, had yet to appear in a U.S. court); a state-owned Chinese chip-making company and a Taiwanese company that makes semiconductors charged with stealing from an American competitor(the chipmaker has pleaded not guilty); two Chinese hackers charged with targeting intellectual property (China denied the “slanderous” economic espionage charges). In Senate testimony in July, FBI Director Christopher Wray said that the agency has “probably about 1,000 plus investigations all across the country involving attempted theft of U.S. intellectual property … almost all leading back to China.”

Demers, the national-security official at the Justice Department, told me that China uses the same tactics and even some of the same intelligence officers in its espionage efforts against America’s private sector. “What it shows is how seriously the Chinese government takes their intellectual-property-theft efforts, because they’re really using the crown jewels of their intelligence community and their most sophisticated and well-honed tradecraft,” he said.Some of the trade secrets China is accused of stealing seem simply aimed to help a specific company or industry. Often, however, the distinction between a Chinese company and the Chinese state is not clear-cut. Chinese law mandates that all corporations cooperate with the government on national security. This was one concern U.S. officials cited after announcing indictments against the Chinese telecommunications giant Huawei earlier this year; the Trump administration has banned U.S. companies from doing business with it. (Huawei has pleaded not guilty to attempted U.S. trade-theft allegations.)Demers told me that China uses economic espionage as a form of “R&D,” or research and development. “They also have very talented, smart people who are using their resources in legitimate ways, which is, I think, some of the frustration that folks have right now—that you could do this differently. You could fight fair, right? You’re not the 80-pound weakling who has to throw dirt in somebody’s eye to get ahead.”
The open business climate between America and China—the sort of climate that did not exist between America and the Soviet Union during the Cold War—makes addressing Chinese espionage trickier: China is both a rival and a top trade partner. The economic and research relationship between the two countries benefits them both. At the same time, Chinese immigrants and visitors to America risk being unfairly targeted if U.S. officials fail to find the right balance, which would cast a chill on legitimate exchange between the two countries while raising the specter of American overreactions during past struggles, from the Cold War to the War on Terror. As U.S. officials warn about the Chinese espionage threat and the U.S. intelligence community reorients to face it, they must be careful not to undermine the American values—openness, civil liberty, enterprise—that remain perhaps the country’s greatest advantage over China.Rodney Faraon, who worked on the President’s Daily Briefing team at the CIA during the Bill Clinton and George W. Bush administrations and is now a partner at Crumpton Group, a business intelligence firm, told me that it will take a major push not just from America’s intelligence agencies but from the U.S. government overall to find the right strategy. And despite the Trump administration’s combative stance on trade negotiations and other issues, this has yet to happen. “The approach must be whole of government and must involve the private sector,” Faraon said. “The Chinese use and value intelligence better than we do, seeing its applicability in nearly every aspect of private and public life—military, social, commercial. We have been slow to recognize this for ourselves.
https://www.theatlantic.com/politics/archive/2019/08/inside-us-china-espionage-war/595747/

Story 3: Big Brother Is Watching Every Move You Make With Social Credit System — Chinese Communist Control  Digital Dictatorship Surveillance State — From Authoritarian to Totalitarian State — Socialist Serfs —   Videos

The Police – Every Breath You Take (Official Music Video)

The Police – Every breath you take lyrics

Social surveillance in China – Credit or control? | DW Documentary

China’s Secret File on Everyone

Big Brother is watching you: How China is ranking its citizens

Exposing China’s Digital Dystopian Dictatorship | Foreign Correspondent

A Look Inside China’s Social Credit System | NBC News Now

Hong Kong police fire live round warning shot and use water cannon on protesters

China ranks ‘good’ and ‘bad’ citizens with ‘social credit’ system

China Expert Gordon Chang On Its Social Credit Rating System & Surveillance State

China’s TERRIFYING Social Credit System

Inside China’s High-Tech Dystopia

China Social Credit System: Beijing plans to go full on Big Brother in 2020 – TomoNews

China’s “Social Credit System” Has Caused More Than Just Public Shaming (HBO)

Chinese “Social Credit System” rewards Obedient Citizens – Infowars News 12/24

China’s Secret Plan to Control the Internet | China Uncensored

20 Years Ago, This Changed China Forever: Here Are 5 Ways | China Uncensored

Big Brother: China Edition!

1984 Introduction

What is 1984?

 

Uh-oh: Silicon Valley is building a Chinese-style social credit system

In China, scoring citizens’ behavior is official government policy. U.S. companies are increasingly doing something similar, outside the law.

Uh-oh: Silicon Valley is building a Chinese-style social credit system
[Images: Rawf8/iStock; zhudifeng/iStock]

Have you heard about China’s social credit system? It’s a technology-enabled, surveillance-based nationwide program designed to nudge citizens toward better behavior. The ultimate goal is to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step,” according to the Chinese government.

In place since 2014, the social credit system is a work in progress that could evolve by next year into a single, nationwide point system for all Chinese citizens, akin to a financial credit score. It aims to punish for transgressions that can include membership in or support for the Falun Gong or Tibetan Buddhism, failure to pay debts, excessive video gaming, criticizing the government, late payments, failing to sweep the sidewalk in front of your store or house, smoking or playing loud music on trains, jaywalking, and other actions deemed illegal or unacceptable by the Chinese government.

It can also award points for charitable donations or even taking one’s own parents to the doctor.

Punishments can be harsh, including bans on leaving the country, using public transportation, checking into hotels, hiring for high-visibility jobs, or acceptance of children to private schools. It can also result in slower internet connections and social stigmatization in the form of registration on a public blacklist.

China’s social credit system has been characterized in one pithy tweet as “authoritarianism, gamified.”

Authoritarianism, gamified. https://www.privateinternetaccess.com/blog/2015/10/in-china-your-credit-score-is-now-affected-by-your-political-opinions-and-your-friends-political-opinions/  ht @VitalikButerin @FrankPasquale

In China, Your Credit Score Is Now Affected By Your Political Opinions – And Your Friends’ Politi…

China just introduced a universal credit score, where everybody is measured as a number between 350 and 950. But this credit score isn’t just affected by how well you manage credit – it also reflects…

privateinternetaccess.com

At present, some parts of the social credit system are in force nationwide and others are local and limited (there are 40 or so pilot projects operated by local governments and at least six run by tech giants like Alibaba and Tencent).

Beijing maintains two nationwide lists, called the blacklist and the red list—the former consisting of people who have transgressed, and the latter people who have stayed out of trouble (a “red list” is the Communist version of a white list.) These lists are publicly searchable on a government website called China Credit.

The Chinese government also shares lists with technology platforms. So, for example, if someone criticizes the government on Weibo, their kids might be ineligible for acceptance to an elite school.

Public shaming is also part of China’s social credit system. Pictures of blacklisted people in one city were shown between videos on TikTok in a trial, and the addresses of blacklisted citizens were shown on a map on WeChat.

Some Western press reports imply that the Chinese populace is suffocating in a nationwide Skinner box of oppressive behavioral modification. But some Chinese are unaware that it even exists. And many others actually like the idea. One survey found that 80% of Chinese citizens surveyed either somewhat or strongly approve of social credit system.

IT CAN HAPPEN HERE

Many Westerners are disturbed by what they read about China’s social credit system. But such systems, it turns out, are not unique to China. A parallel system is developing in the United States, in part as the result of Silicon Valley and technology-industry user policies, and in part by surveillance of social media activity by private companies.

Here are some of the elements of America’s growing social credit system.

INSURANCE COMPANIES

The New York State Department of Financial Services announced earlier this year that life insurance companies can base premiums on what they find in your social media posts. That Instagram pic showing you teasing a grizzly bear at Yellowstone with a martini in one hand, a bucket of cheese fries in the other, and a cigarette in your mouth, could cost you. On the other hand, a Facebook post showing you doing yoga might save you money. (Insurance companies have to demonstrate that social media evidence points to risk, and not be based on discrimination of any kind—they can’t use social posts to alter premiums based on race or disability, for example.)

The use of social media is an extension of the lifestyle questions typically asked when applying for life insurance, such as questions about whether you engage in rock climbing or other adventure sports. Saying “no,” but then posting pictures of yourself free-soloing El Capitan, could count as a “yes.”

PATRONSCAN

A company called PatronScan sells three products—kiosk, desktop, and handheld systems—designed to help bar and restaurant owners manage customers. PatronScan is a subsidiary of the Canadian software company Servall Biometrics, and its products are now on sale in the United States, Canada, Australia, and the United Kingdom.

PatronScan helps spot fake IDs—and troublemakers. When customers arrive at a PatronScan-using bar, their ID is scanned. The company maintains a list of objectionable customers designed to protect venues from people previously removed for “fighting, sexual assault, drugs, theft, and other bad behavior,” according to its website. A “public” list is shared among all PatronScan customers. So someone who’s banned by one bar in the U.S. is potentially banned by all the bars in the U.S., the U.K., and Canada that use the PatronScan system for up to a year. (PatronScan Australia keeps a separate system.)

Judgment about what kind of behavior qualifies for inclusion on a PatronScan list is up to the bar owners and managers. Individual bar owners can ignore the ban, if they like. Data on non-offending customers is deleted in 90 days or less. Also: PatronScan enables bars to keep a “private” list that is not shared with other bars, but on which bad customers can be kept for up to five years.

PatronScan does have an “appeals” process, but it’s up to the company to grant or deny those appeals.

UBER AND AIRBNB

Thanks to the sharing economy, the options for travel have been extended far beyond taxis and hotels. Uber and Airbnb are leaders in providing transportation and accommodation for travelers. But there are many similar ride-sharing and peer-to-peer accommodations companies providing similar services.

Airbnb—a major provider of travel accommodation and tourist activities—bragged in March that it now has more than 6 million listings in its system. That’s why a ban from Airbnb can limit travel options.

Airbnb can disable your account for life for any reason it chooses, and it reserves the right to not tell you the reason. The company’s canned message includes the assertion that “This decision is irreversible and will affect any duplicated or future accounts. Please understand that we are not obligated to provide an explanation for the action taken against your account.” The ban can be based on something the host privately tells Airbnb about something they believe you did while staying at their property. Airbnb’s competitors have similar policies.

It’s now easy to get banned by Uber, too. Whenever you get out of the car after an Uber ride, the app invites you to rate the driver. What many passengers don’t know is that the driver now also gets an invitation to rate you. Under a new policy announced in May: If your average rating is “significantly below average,” Uber will ban you from the service.

WHATSAPP

You can be banned from communications apps, too. For example, you can be banned on WhatsApp if too many other users block you. You can also get banned for sending spam, threatening messages, trying to hack or reverse-engineer the WhatsApp app, or using the service with an unauthorized app.

WhatsApp is small potatoes in the United States. But in much of the world, it’s the main form of electronic communication. Not being allowed to use WhatsApp in some countries is as punishing as not being allowed to use the telephone system in America.

WHAT’S WRONG WITH SOCIAL CREDIT, ANYWAY?

Nobody likes antisocial, violent, rude, unhealthy, reckless, selfish, or deadbeat behavior. What’s wrong with using new technology to encourage everyone to behave?

The most disturbing attribute of a social credit system is not that it’s invasive, but that it’s extralegal. Crimes are punished outside the legal system, which means no presumption of innocence, no legal representation, no judge, no jury, and often no appeal. In other words, it’s an alternative legal system where the accused have fewer rights.

Social credit systems are an end-run around the pesky complications of the legal system. Unlike China’s government policy, the social credit system emerging in the U.S. is enforced by private companies. If the public objects to how these laws are enforced, it can’t elect new rule-makers.

An increasing number of societal “privileges” related to transportation, accommodations, communications, and the rates we pay for services (like insurance) are either controlled by technology companies or affected by how we use technology services. And Silicon Valley’s rules for being allowed to use their services are getting stricter.

If current trends hold, it’s possible that in the future a majority of misdemeanors and even some felonies will be punished not by Washington, D.C., but by Silicon Valley. It’s a slippery slope away from democracy and toward corporatocracy.

In other words, in the future, law enforcement may be determined less by the Constitution and legal code, and more by end-user license agreements.