Category Archives: Corporate Watch

How social media platforms are threatening democracy and what the Trudeau government can do about it.

Mark Zuckerberg, CEO of Facebook, testifies in Congress following the uncovering of the Cambridge Analytica scandal in which it was revealed that Cambridge Analytica harvested the personal data of up to 87 million Facebook users and subsequently used the profiles to help the Trump campaign.

Introduction

There is a growing sense that Facebook and other social media platforms are a significant factor in the increasing polarization of our politics and even a real threat to democracy in countries such as the U.S. and Canada – countries with historically strong democratic institutions. This post explores how the business model chosen by the biggest platforms  has contributed to the weakening of our democratic institutions and what can be done to curb the socially destructive consequences of the platforms’ current operations.

The Facebook business model

The problem with  Facebook is that it is fine-tuned to be an addictive site in which politics – and information more broadly – are indistinguishable from entertainment. Of course, much the same could be said of cable TV news and the tabloid press. However, the engagement and immersion in social media is more intense  than the kind that television or print delivers. It encourages people to associate only with those who share their opinions, creating information filters regarding politics and general views of the world. By training its users to place greater importance on feelings of  agreement and belonging (“friends”, “like/dislike”) than on objective truth and facts, Facebook has created a gigantic forum for tribalism. Or more precisely, a forum for tribalism that contains a multitude of tribes that define themselves in terms of politics, race, ethnicity, religion, cultural/consumer preferences and social status. And because they are tribes existing in an information bubble with news of the outside world delivered to them primarily by Facebook’s algorithms through its newsfeed, members of any given tribe are increasingly oblivious to any views other than their own. They are also increasingly oblivious (and even hostile) to the notion of objective truth and facts more generally.

Moreover, Facebook’s algorithms are designed to feed users, over time, ever more extreme material that plays to these tribal identities. In strictly business terms, this increases the average time a user stays on the platform thereby increasing Facebook’s advertising revenue. In political and social terms, it leads to a polarized electorate and society.

98% of Facebook’s revenue comes from selling ads and the company has every incentive to continue to collect as much private data as it can on its users in order to keep them engaged on the site and to allow ad buyers to effectively target their ads. The potential impact  of a business model driven by this combination of intense immersion and surveillance manifested itself when it was revealed that the political consulting firm Cambridge Analytica had obtained information about 50 million Facebook users in order to develop psychological profiles to assist the Trump campaign. That number has since risen to 87 million. Yet Facebook seems incapable of accepting the fact that its relentless pursuit of growth, which Facebook CEO Mark Zuckerberg characterizes as encouraging “openness and connection” globally, has been socially destructive.

But concerns over tribalization and the debasement of truth and facts caused by social media, should not stop with Facebook. Apple, Amazon, Microsoft, and Google, also share an aspiration to become the primary lens through which we both view the world and participate in it. And Google, in particular, suffers from many of the same problems as Facebook. Continue reading

The real story behind the NAFTA negotiations on autos and labour standards.

 

None of the governments of the three countries involved in the NAFTA auto and labour standards discussions have told the real story on the tactics and strategies they are using in the negotiations. In the absence of straightforward communication on the trade negotiations, the public in all three countries has a right to be suspicious until the full legal text of an agreement is publicly released.

 

There is no question that Donald Trump rode a wave of anti-trade sentiment to victory in the 2016 presidential election. This included a threat to rip up NAFTA, which he called “the worst trade deal in the history” of the United States.

Trump’s was a populist message that tapped into long-simmering resentment over the loss of American manufacturing operations – including the loss of auto assembly and auto parts plants – to Mexico. And it resonated strongly with voters in the leading manufacturing states – including the states of Michigan, Wisconsin and Pennsylvania  that ultimately gave Trump his victory.

Therefore, it should be no surprise that at the start of the NAFTA talks, Canadian trade officials believed the success of the NAFTA renegotiation hinged on Trump’s ability to claim a win on the auto front. Further, they believed the route to that victory would be through stricter labour standards to minimize Mexico’s low-wage advantage in attracting auto investment.

In theory, reducing the Mexican advantage in auto wages should have been an area where  Canadian and American interests are largely aligned. Statistics compiled by Unifor, the union representing autoworkers in Canada, explain why:

  • Mexico buys just eight per cent of North American-made vehicles but employs 45 per cent of the continent’s auto workers;
  • Since NAFTA came into effect in 1994, four assembly plants in Canada and 10 in the United States have closed; eight new plants have opened in Mexico.
  • U.S. and Canadian vehicle and auto parts trade deficits with Mexico have grown exponentially – a four-fold increase for Canada, from $1.6 billion pre-NAFTA to $8.7 billion now.

Those  numbers are explained by another stark statistic: Mexican autoworkers earn an average of about $4 per hour, compared to $30-$35 per hour in the U.S. and Canada. As such, using NAFTA re-negotiations to rebalance the North American auto industry so that all three countries get a fair share of investment and jobs would seem to be a no-brainer. Continue reading

The Ontario election: Why Doug Ford is the enemy of the “little guy”

While campaigning as the voice of the “little guy”, Doug Ford’s PC’s are actually joined at the hip with corporate interests that are pushing a detailed policy agenda that will make life worse for many Ford supporters.

Introduction

A previous post made the argument that the core appeal of Doug Ford populism (much like Trump populism) is a cultural resentment against the professional class as opposed to an economic populism in which working and middle class resentment is directed against the wealthy and large corporations. In other words, the “elites” that Ford rants against are professionals such as bureaucrats, academics, lawyers, journalists and teachers who Ford portrays as “looking down” on average Ontarians and recklessly spending their hard-earned tax dollars.

The previous article also described economic populism – in contrast to Ford/Trump populism –  as a politics that argues that the “elites” who really need to be reigned in are the large corporations whose business practices have directly resulted in an increase in part-time, low wage jobs and the loss of high wage, full-time jobs. This decline in good quality jobs with benefits has hurt many Ford supporters and the article asserts that economic populism embraces a set of policies that would significantly improve the economic lives of Ford voters.

The article also argued that Ford, a rich man’s son like Trump, has no interest in improving the lives of everyday Ontarians and his PC program (such as it is), is evidence of this. Put bluntly, Ford supporters are being duped into voting against their pocketbook interests by being led to believe that they are somehow striking a blow against “elites” by voting for Ford. In fact, the reality is just the opposite. Electing a Ford government would hand the province over to a tightly knit network of corporate interests that already have too much influence and whose policy agenda would hurt non-wealthy Ontarians. This is discussed in detail below.

The reality is that a Doug Ford government would hurt the people who voted it in because it would take its marching orders from corporate interests (the real elites) who have a detailed policy  agenda aimed at enriching themselves and the wealthy at the expense of average, hard-working  Ontarians. Those corporate interests are already talking amongst themselves as to who will fill staff positions in the Doug Ford Premier’s Office, in Ministerial offices (Finance, Health, Education, etc.), and in key positions in the Ontario Public Service. They want their people to implement their policy agenda and this agenda will hurt all but the wealthiest Ontarians.

These corporate interests are named below and parts of their policy agenda are discussed in detail. For years, these corporate interests have been working closely with PC MPP’s and staff at Queen’s Park and have had immense influence on the policy positions the PC caucus took on Liberal government legislation and other policy issues.

It is important to note that the two kinds of populism (Ford/Trump populism on the one hand, and economic populism on the other) have considerable appeal to Ontario voters with broadly similar social values – voters who value being fairly compensated for their hard work and for “playing by the rules”. However, when it comes to voting intentions, those not affiliated with a union (many of which are  rural residents not living in communities with a labour tradition), mistakenly lean towards a Ford-style cultural populism which portrays the elite “villains” essentially as “know-it-all” professional types who “think they are better than me”. In contrast, those with a union affiliation (or who live in urban communities with a labour tradition), lean towards an anti-corporate, economic populism most associated with the NDP.

The previous article further argued that Andrea Horwath’s NDP are in a good position to tap into those who hold to this anti-corporate, economic populism. Recent polls suggest that this is exactly what is happening in the Ontario election with a surge in support for Horwath’s NDP – especially in the economically hard hit regions of the Southwest, North and Hamilton/Niagara which have seen a massive loss of well paying manufacturing and resource jobs  in the past decade.

While the NDP may be pulling even with the PC’s in terms of the popular vote, as of this writing (June 1), the most recent polls still suggest that the Ford PC’s have an excellent chance to win  a plurality of seats and a good chance of forming a majority government. Therefore, the question of what a Doug Ford government would actually do during its time in office needs to be examined closely. Continue reading

The root of fake news in Canada: Facebook and other advertising-based social media

Canadian Christopher Wylie says that Cambridge Analytica targeted 50 million Facebook users without their knowledge during the U. S. presidential election campaign with Trump aligned messaging based on psychological profiles.

Introduction

This article contends that the increasing spread of “fake news” is a direct result of the rise of social media platforms such as Facebook, Twitter and Google. These companies have undermined traditional, fact-based newspapers, and have encouraged the growth of web-based, fake news sites in the following ways.

  1. They have undermined the business model of fact-based, quality journalism by garnering the lion’s share of digital advertising at a time when print-based advertising was collapsing; and
  2. By refusing to take responsibility for what is posted on their sites, they have allowed their sites to be used by fake news propagators;

The following are four examples of the harm being done by the rise of fake news driven by the growth of social media:

Example 1: Facebook estimated that 11.4 million Americans saw advertisements that had been bought by Russians in an attempt to sway the 2016 election in favor of Donald Trump. Google found similar ads on its own platforms, including YouTube and Gmail. A further 126 million Americans, Facebook disclosed, were exposed to free posts by Russia-backed Facebook groups. Approximately 1.4 million Twitter users received notifications that they might have been exposed to Russian propaganda. But this probably understates the reach of the propaganda spread on its platform. Just one of the flagged Russian accounts, using the name @Jenn_Abrams (a supposed American girl), was quoted in almost every mainstream news outlet.

A Russian troll farm known as the Internet Research Agency used Facebook’s tools to promote rallies, protests and other events across the U.S. According to Facebook, 13 of the pages created by the Internet Research Agency attempted to organize 129 events. Some 338,300 unique Facebook accounts viewed the events, the company said. Facebook said about 62,500 marked they were attending one of the events and 25,800 accounts marked they were interested. Continue reading

Reining in Canada’s Financial Giants – Are Consumers Getting a Fair Break?

While arm’s-length regulators at both the provincial and federal levels do the heavy lifting when it comes to regulating Canada’s financial services, it is ultimately politicians such as Ontario Finance Minister Charles Sousa and Federal Finance Minister Bill Morneau, who are accountable for protecting the interests of consumers in their dealings with Canada’s banks and other  financial institutions.

Introduction

In an important piece in the July 31 issue of the New Yorker Magazine on the decline in the prosecution of white collar crime in the U.S., author Patrick Radden Keefe cites a telling 2002 incident involving ex-FBI director James Comey. Keefe relies on the description of the incident contained in the journalist Jesse Eisinger’s recently published book, “The Chickenshit Club”.

Keefe writes:

When James Comey took over as the U.S. Attorney for the Southern District of New York, in 2002, Eisinger tells us, he summoned his young prosecutors for a pep talk. For graduates of top law schools, a job as a federal prosecutor is a brass ring, and the Southern District of New York, which has jurisdiction over Wall Street, is the most selective office of them all. Addressing this ferociously competitive cohort, Comey asked, “Who here has never had an acquittal or a hung jury?” Several go-getters, proud of their unblemished records, raised their hands.

But Comey, with his trademark altar-boy probity, had a surprise for them. “You are members of what we like to call the Chickenshit Club,” he said.

What Comey was saying, of course, was that avoiding risky prosecutions aimed at reining in Wall St. might have been seen as career enhancing under the previous U.S. Attorney responsible for keeping an eye on Wall St. but with Comey as boss, such an approach was going to be a career killer.

This post is the first of a series of Canada Fact Check investigations asking the question: does Canada have a Chickenshit Club problem when it comes to the development and enforcement of financial services regulation?

The answer for impatient readers? The next 12 – 18 months will tell and Canada Fact Check will be there to tell the inside story.

Here’s what we know now.

Finance Minister Morneau’s response to CBC investigations of hyper-aggressive bank sales practices

On March 6, the CBC’s Erica Johnston broke the first of a number of CBC stories on shady sales practices in Canada’s banking industry. The CBC reports revealed a constant pattern amongst big banks and credit unions of signing consumers up for products or services without providing all the required information, particularly about fees, costs and penalties related to the products. In many cases, bank employees were signing people up for products without even notifying them.

On March 15, in response to the CBC reports, Finance Minister Morneau turned to the Financial Consumer Agency of Canada (FCAC) and announced that the Agency would be conducting a separate industry review to examine Canada’s financial institutions’ sales practices. The FCAC has the primary mandate to represent the interests of consumers on “systemic” policy matters effecting federally regulated financial institutions such as banks, trust companies, life insurance companies and property and casualty (auto, property, etc.) insurance companies.

The FCAC has indicated that it expects to publish its initial findings by the end of 2017. Furthermore, FCAC officials expect to conclude the review of bank sales practices in June, 2018 and will publish a final report soon after. Finally, FCAC may conduct additional specific investigations flowing from the industry review. For example, if a FCAC  follow-up investigation determines that a specific violation has occurred, the Commissioner may make public the nature of the violation, which financial institution committed it, and the amount of any monetary penalty levied by the FCAC on the financial institution. Continue reading

Uber in Canada: what governments must do to protect the public interest

16-03-29 Uber

.As governments across the country grapple with the implications of the so-called sharing economy, they need to remember that the interests of the Canadian public and the interests of corporate behemoths such as Uber, are not the same.

This is the fourth post in a four-part series of articles on Uber.

The argument in posts 1, 2, and 3 can be summarized as follows:  Uber’s flagship UberX service is unambiguously illegal in most cities in Canada because municipal and provincial taxi licensing law (British Columbia and Quebec license taxis at the provincial level) considers UberX a taxi service and Uber refuses to apply for a taxi licence for UberX under these laws. And it doesn’t apply for a taxi license for UberX because it does not want UberX to operate under the same rules as the rest of the taxi industry and incur the same licencing fee, insurance, and consumer safety costs that the rest of the industry pays.

Nor does it want its UberX service to charge the same regulated fares as its taxi competitors – it wants to be able to charge “surge pricing” which sometimes increases the fare for an Uber passenger as much as 10-fold over the regular fare.

In other words, while Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to industry regulatory costs and fares.

Why? Simple – without its own set of rules that reduce its costs, the UberX service can’t afford to undercut the fares of existing taxi brokers – by far its most important competitive advantage. Put differently, Uber’s business strategy is simply a political strategy designed to pressure Canadian licensing authorities into creating a separate, cheaper set of taxi rules for UberX to operate under.

How does Uber justify having new licensing rules written just for itself – rules that significantly reduce its costs relative to the costs it would incur operating under the same rules that other taxi companies operate under? Why does Uber think it deserves special treatment?

In Uber’s public statements, it is its unique technology that sets it apart from other taxi services. Uber likes to advertise itself as a technology company that provides a “digital application service” to connect passengers to drivers. In other words, according to Uber its defining feature is that it provides a software platform that connects a customer with a service. And because it is essentially a technology company, unlike other cab companies, it needs its own rules.

The problem with this rationale is obvious – by now, many taxi companies employ Uber-like digital technology that puts drivers in touch with passengers (in addition to traditional phone dispatch). And it goes without saying that the established taxi industry doesn’t think a whole new set of rules are needed just so they can deploy their nifty new apps. Continue reading

Uber in Canada: Cutting corners on taxes and benefits

16-03-12 Uber photo

Uber pays no Corporate Income Tax in Canada and it avoids paying for all forms of employee benefits by declaring its drivers “independent contractors”. The truth is that Uber is not a benign intermediary between drivers and passengers but rather a $50 billion corporate behemoth designed by an army of lawyers to exploit regulatory grey areas for the expressed purpose of undercutting fares charged by its competitors.

This is the third installment of a four part series on Uber’s entry into Canada.

To summarize Parts 1 & 2: at the heart of Uber’s global business strategy is a political strategy. Because Uber has difficulty competing with established taxi companies under existing taxi industry rules, it needs to pressure Canadian licensing authorities into creating a separate set of taxi rules for it to operate under. Put bluntly: without its own set of rules that reduce its costs, Uber can’t afford to undercut the fares of existing taxi brokers – by far its most important competitive advantage.

There are four deal-breakers for Uber in any new set of licencing rules that it pries from governments through its ferocious lobbying: 1) the new rules must allow UberX to charge “surge pricing” with no maximum cap (think New Year’s Eve, an 8.9 times multiplier, and a $1,115 charge for a 60-minute ride in Montreal) while its competitors must continue to charge fixed-rate fares; 2) the new rules must exempt Uber from the commercial insurance coverage that is mandatory for licensed taxis so Uber drivers can carry a new, less comprehensive kind of “hybrid” insurance policy that is cheaper than commercial coverage; 3) Uber must be exempted from the existing licensing fees that govern both cab owners and drivers – and be given its own licensing fee regime with much lower fees; and 4) the background safety check rules for Uber drivers should not be so onerous as to scare off potential Uber drivers. For Uber this usually means that it objects to rules requiring that driver safety checks be done through local police departments.

Because getting new rules that lower its costs is so crucial to Uber’s business strategy, when Uber doesn’t get the above provisions in a new set of rules from taxi regulators, it will either leave the market (e.g. Calgary) or simply operate illegally outside the existing rules (e.g. Toronto and many other Canadian cities). For example, even though Calgary gave Uber much of what it wanted in a new set of rules passed by Calgary City Council in late February, Uber still pulled out of the Calgary market because the specifics of the new licensing fee and driver background check rules weren’t to its liking.

There are two other major areas where Uber plays by different rules that give it an advantage over its competitors: 1) its (apparently legal) international tax avoidance strategy; and 2) its (legally contested) claim that Uber drivers are independent contractors as opposed to employees. These issues, of course, are not regulated within municipal (or provincial) taxi licensing regimes but are nevertheless central to Uber’s Canadian (indeed global) growth strategy.

The rest of this post deals with Uber’s global tax avoidance and labour strategies.

Continue reading

The secret strategy behind the Uber invasion of Canada

File illustration picture showing the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt, September 15, 2014. A Frankfurt court earlier this month instituted a temporary injunction against Uber from offering car-sharing services across Germany. San Francisco-based Uber, which allows users to summon taxi-like services on their smartphones, offers two main services, Uber, its classic low-cost, limousine pick-up service, and Uberpop, a newer ride-sharing service, which connects private drivers to passengers - an established practice in Germany that nonetheless operates in a legal grey area of rules governing commercial transportation. REUTERS/Kai Pfaffenbach/Files (GERMANY - Tags: BUSINESS EMPLOYMENT CRIME LAW TRANSPORT)

Even though Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to fares, insurance, and licensing fees. Uber even objects to being subject to the same background checks on its drivers as the rest of the taxi industry.

This is the second of  four Canada Fact Check articles on Uber’s entry into Canada.

The main argument in Part 1 was that Uber’s flagship UberX service is unambiguously illegal in most cities in Canada because the law considers UberX a taxi service and Uber refuses to apply for a taxi licence. And it doesn’t apply for a taxi license for its UberX service for the simple reason that it does not want its UberX service to operate under the same rules as the rest of the taxi industry and incur the same licencing fee, insurance, and consumer safety costs that the rest of the industry pays. In other words, while Uber is competing for the exact same passenger dollars as the rest of the taxi industry, Uber wants to play by its own rules when it comes to fares and industry regulatory costs.

But Uber also knows that sooner or later the fact that its UberX service is operating illegally is going to catch up with it. In other words, it knows that UberX eventually has to operate under some sort of government sanctioned regulatory regime in Canada. And that’s why, long-term, it needs to have Canadian licensing jurisdictions implement separate sets of taxi rules tailored to its business model. Not tailored to its “innovative” technology as Uber and some of its boosters might claim, mind you, but tailored to the way Uber maximizes its profits.

To accomplish this, Uber has written its own taxi rules and hired well connected, high powered lobbyists with close ties to politicians such as Toronto’s Mayor Tory, to shop Uber written rules around to key Canadian licensing jurisdictions. And Edmonton is the first major Canadian city to make the Uber authored rules law.

To summarize: at the heart of Uber’s global business strategy is a political strategy. Because Uber doesn’t have the business smarts to compete with established taxi companies under existing industry rules, it has to operate either illegally or pressure local licensing authorities to create a separate set of taxi rules for its main service – UberX – to operate under. Continue reading

Why Uber is Bad For Canada

16-02-02 uber

Taxi drivers in cities across Canada have taken to the streets to pressure municipalities to enforce existing taxi industry regulations in the face of the Uber challenge.

Just over five years after it began offering rides in San Francisco, the Uber passenger service now operates in 342 cities spread across more than 60 countries. It retains some 327,000 freelance drivers in the U.S. and hundreds of thousands more around the world. In Uber’s most recent round of financing, investors assigned it a value of $51 billion—a milestone it reached faster than Facebook had before it. According to a recent report by Reuters, Uber has told prospective investors that it will reach $10.8 billion in global ride payments in 2015—giving it $2 billion in revenue when it takes its 20% cut. It projected those numbers, the Reuters report says, to more than double to $26.12 billion this year.

While it primarily offers car rides today, Uber is aiming to be much more. With its UberRush service, the company has experimented with delivery. Uber CEO Travis Kalanick has described Uber as a new platform to help replace inefficient 20th-century transportation systems. Continue reading