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Europe to limit how big tech can push its own services and use third party data

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European lawmakers are taking aim at big tech’s ability to push its own services in search results at the expense of rivals, with Commission EVP Margrethe Vestager confirming today that a legislative proposal due in a few weeks will aim to ban what she called “unfair self-preferencing”.

The concern is that so-called gatekeeper platforms have the ability to manipulate the way that they rank different businesses — and “show their own services more visibly than their rivals”, she said in a speech.

The Commission is expected to propose a package of legislative measures next month to update long-standing EU ecommerce rules and propose new strictures for platforms with significant market power (aka gatekeepers) — making good on its earlier pledge to reboot digital regulation.

In her speech to the EPC Digital Clearinghouse today, Vestager confirmed that the Digital Services Act (DSA) and Digital Markets Act (DMA) will be introduced in a few weeks’ time.

The Commission is surely enjoying its timing, here, with grumblings of political discontent against big tech over the pond and the US Department of Justice having just filed an antitrust case against Google. Although the EU executive’s proposals for reworking digital rules have been years in the making.

Vestager said the DSA will update the existing E-Commerce Directive — by requiring digital services to “take more responsibility for dealing with illegal content and dangerous products”, including by standardizing processes for reporting illegal content and dealing with content reports and complaints.

“Those new responsibilities will help to keep Europeans just as safe online as they are in the physical world. They’ll protect legitimate businesses, which follow the rules, from being undercut by others who sell cheap, dangerous products. And by applying the same standards, all over Europe, they’ll make sure every European can rely on the same protection – and that digital businesses of all sizes can easily operate throughout Europe, without having to meet the costs of complying with different rules in different EU countries,” said Vestager.

She also confirmed increased transparency requirements would be in the package — such as related to content takedowns and recommendations; and also disclosures for online ads, including both who’s paying for an ad and “why we’ve been targeted by a certain ad”.

The DMA proposal will have two components, per Vestager: A “clear list of dos and don’ts” for “big digital gatekeepers”, which she said “will be based on our experience with the sorts of behaviour that can stop markets working well”; and a “harmonised market investigation framework” that will span the EU’s single market — giving the executive the power to preemptively intervene in digital markets to address structural problems before they become entrenched and lead to baked in Internet monopolies.

Recent press reports have suggested that the list of dos and don’ts that’s coming down the pipe for big tech could be lengthy — although the final detail remains to be seen.

But a ban on some forms of self-preferencing will certainly be on that list.

Google’s preferencing of its own services in search results has been on the European Commission’s antitrust radar for years — with a multi-year investigation into its Shopping search comparison service culminating in a $2.7BN fine in 2017 and an order to Google to cease abusive self-preferencing. Despite that action rival price comparison services have continued to complain it’s still not playing fair. Hence the Commission deciding more needs to be done now.

Another restriction Vestager confirmed affected major dual marketplaces — which are set to face future EU controls is on how they can use third party sellers’ data. She argued that the asymmetry of platforms both having access to sellers’ data and competing against those third parties in other markets “can seriously damage fairness” — saying the proposal “aims to ban big gatekeepers from misusing their business users’ data in that way”.

Again it’s an issue that’s been on the Vestager’s radar for some time. Last year, for example, the Commission opened a formal investigation into ecommerce giant Amazon’s use of merchant data (although that probe remains ongoing).

The other core plank of the DMA involves reform of digital competition rules, as EU lawmakers look to evolve the regulatory toolbox to keep pace with digital business.

“We face a constant risk that big companies will succeed in pushing markets to a tipping point, sending them on a rapid, unstoppable slide towards monopoly — and creating yet another powerful gatekeeper,” said Vestager, explaining the push for a harmonised set of rules to tackle structural problems in digital markets across the EU.

The risk of leaving it to EU Member States’ national competition authorities to tackle such issues is “a fragmented system, with different rules in different EU countries”, she went on, adding: “We’ve come to a point where we have to take action. A point where the power of digital businesses – especially the biggest gatekeepers – threatens our freedoms, our opportunities, even our democracy. And where the trust that successful digitisation relies on is becoming seriously frayed.”

The message to tech giants from the EU’s executive is an unwavering “things are going to have to change” — with enforced responsibility coming down the pipe to replace patchy self-regulation.

Vestager also made it clear the Commission is paying attention to how the future rebooted digital rules will be enforced — which is a key point given how a lack of uniformly vigorous enforcement has taken some of the shine off the EU’s rebooted data protection framework (because decision powers are held at the Member State level).

The commissioner said “effective enforcement” will be a vital component of the DSA package, arguing that: “To really give people trust in the digital world, having the right rules in place isn’t enough. People also need to know that those rules really work – that even the biggest companies will actually do what they’re supposed to. And to make sure that happens, there’s no substitute for effective enforcement.”

This means the package will include measures aimed at improving the way national authorities cooperate — “to make sure the rules are properly enforced, throughout the EU”, as she put it.

“Our proposal won’t change the fundamental principle, that digital services should be regulated by their home country. But it will set up a permanent system of cooperation that will help those regulators work more effectively, to protect consumers all across Europe. And it will give the EU power to step in, when we need to, to enforce the rules against some very large platforms,” she added.

The Commission is also clearly banking on the DMA as its key enforcement lever against big tech’s market-denting bulk — by being able to intervene proactively as a way to foster and sustain competition.

And with anger at big tech riding high across Europe the Commission likely feels confident in getting bu-in from EU Member States’ representatives on the EU Council and the elected members of the European Parliament — support that it’ll need to get its legislation proposals across the line.

 

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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What about $30 billion under 30

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Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast (now on Twitter!), where we unpack the numbers behind the headlines.

We’re back with not an Equity Shot or Dive of Monday, this is just the regular show! So, we got back to our roots by looking at a huge number of early stage rounds. And a few other things that we were just too excited about to not mention.

So from Chris and Danny and Natasha and I, here’s the rundown:

That was a lot, but how could we leave any of it out? We’re back Monday with more!

Equity drops every Monday at 7:00 a.m. PDT and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

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Henry picks up cash to be a Lambda School for Latin America

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Latin America’s startup scene has attracted troves of venture investment, lifting highly-valued companies such as Rappi and NuBank into behemoth businesses. Now that the spotlight has arrived, those same startups need more talent than ever before to meet demand.

That’s where one seed-stage Buenos Aires startup wants to help. Henry has created an online computer science school that trains software developers from low-income backgrounds to understand technical skills and get employed. The company was founded by brother-sister duo Luz and Martin Borchardt, as well as Manuel Barna Ferrés, Antonio Tralice and Leonardo Maglia.

The Henry team.

The company claims that there’s an estimated 1 million software engineering job openings in Latin America, but fewer than 100,000 professionals that have training suitable for those roles.

“Higher education is only for 13% of the population in Latin America,” says Martin Borchardt, CEO and co-founder of Henry . “It’s very exclusive, very expensive, and has very low impact skills. So we’re giving these people an opportunity.”

With 90% of graduates coming from no formal higher education background, Henry seeks to help bring more back-end junior developers and full-stack developers into startups. Henry offers a five-month course that goes from Monday to Friday, 9 a.m. to 6 p.m., which focuses on software developer skills. Beyond technical training, Henry gives participants job coaching, resume workshops and up-skilling opportunities post-graduation.

To make the school more affordable, Henry looks to take on the same strategy used by Lambda School, a YC-graduate that has raised over $122 million in known funding: income-share agreements. The set-up would allow for boot camp participants to join the program at zero upfront costs, and then only pay once they get hired at a job.

Lambda School’s ISA terms ask students to pay 17% of their monthly salary for 24 months once they earn $4,167 monthly. The students pay a maximum of $30,000. Henry takes a much smaller slice of the pie, partly because salaries are lower in Latin American than in the United States. Henry asks students to pay 15% of their monthly salary for 24 months once students earn $500 a month.

If a Henry student doesn’t get employed in a job that allows them to make $500 a month within five years after the program completes, they are off the hook for paying back the boot camp.

Henry is also focused on helping more women get into the field of software development. Internally, Henry’s remote team is 20% women, 64% men. The current students reflect the same breakdown.

One issue with coding boot camps is that while it might help a student go from unemployed to employed, the lack of credential and degree might limit career mobility past that first job. For that reason, Henry has created a database of alumni resources, including up-skilling and reskilling opportunities in the latest skill, which will be free of charge for graduates.

Henry needs to execute on job placement to be successful in its field. Currently, more than 80% of students in Henry’s first cohort have found jobs, but it’s too soon in the startups’ trajectory to get a stronger metric on that front. About four Henry graduates have been employed by the startup.

The need for more talent in emerging countries has not gone unnoticed. Microverse, also funded by Y Combinator, is similarly using income-sharing agreements to bring education to the masses in developing countries, including spaces in Latin America. Henry thinks the competitor is approaching the dynamic too broadly.

“They’re focusing on all emerging markets and don’t teach to Spanish speakers,” Borchardt said. Henry, alternatively, focuses on Spanish speakers, over 60% of its market in Latin America.

What if Lambda School, the source of Henry’s inspiration, was to break into Latin America? The founder added that the richly funded company has tried, and failed, to expand into international geographies, including China and Europe, due to fragmentation.

Currently, Henry has graduated 200 students and is working with 600 students across Colombia, Chile, Uruguay and Argentina. It plans to expand into Mexico and to bring on Portuguese instruction.

Now, VCs are giving Henry some cash to do so. After going through Y Combinator’s Summer batch, Henry announced today that it has raised $1.5 million in seed funding in a round led by Accion Venture Lab, Emles Venture Partners and Noveus VC. There were also a number of edtech angel investors from Latin American that participated in the round.

“I love the human interaction within instructors and our staff and students,” Borchardt said. “That is something very powerful of Henry compared to a MOOC. The biggest challenge is how do you scale maintaining those assets that bring you that?”

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Fantasy startup Esports One raises $4M more

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Esports One, a startup bringing the fantasy approach to esports, is announcing that it has raised an additional $4 million in funding.

When I first wrote about Esports One in April, co-founder and COO Sharon Winter described it as the first “all-in-one fantasy platform” in the esports world, allowing you to research players, create fantasy teams and watch games, with an initial focus on the North American and European divisions of League of Legends.

According to the Esports One team, creating this platform required building out a set of data and analytics products, as well as using computer vision technology that can track game activity (and update player stats) without relying on a publisher’s API.

The startup says its user base has been growing by more than 25% month-over-month. It may also have benefited from the pause in professional sports earlier this year, while CEO and co-founder Matt Gunnin told me recently that he also sees fantasy as a way to make video games accessible to a broader audience — he recalled one Esports One user who introduce his sister to League of Legends using the fantasy platform.

“I use the example of growing up and sitting there with my dad, watching a baseball game, he’s telling me everything that’s happening,” Gunnin said. “Now it’s the opposite — parents are sitting and watching their kids.”

Many parents, he suggested, are “never going to pick up a mouse and keyboard and play League of Legends,” but they might play the fantasy version: “That’s an entry point … if we can make it easily accessible to individuals both that are hardcore gamers playing video games and watching League of Legends their entire life, as well as someone who has no idea what’s going on.”

The new funding was led led by XSeed Capital, Eniac Ventures, and Chestnut Street Ventures, bringing Esports One to a total of $7.3 million raised. The company also recently signed a partnership deal with lifestyle company ESL Gaming.

Gunin said the money will allow the company to grow its Bytes virtual currency, which players use to enter contests and buy customizations — starting next year, players will be able to spend real money to purchase Bytes. In addition, it’s working on native iOS and Android apps (Esports One is currently accessible via desktop and mobile web).

Gunnin and his team also plan to develop fantasy competitions for Rainbow Six: Siege, Rocket League, Valorant and Fortnite.

“As a fairly new player in the esports world, we’ve seen immense determination and grit from Matt, Sharon, and the whole Esports One team to grow into a household name, ” said XSeed’s Damon Cronkey in a statement. “I’m excited to be partnering with a company that will deliver new perspectives and features to an evolving industry. We’re eager to see how Esports One grows in 2021.”

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