Legal News for Thurs 6/6 - US Antitrust Probes into AI, Tax Issues for Restaurants, Pause in Trump GA Case and $1.3b UK Lawsuit Against Amazon by Sellers

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This Day in Legal History: SEC Established

On this day in legal history, June 6, 1934, the United States Securities and Exchange Commission (SEC) was established, marking a pivotal moment in the regulation of financial markets. The SEC was created in response to the stock market crash of 1929 and the ensuing Great Depression, aiming to restore investor confidence and safeguard their interests. Tasked with enforcing securities laws and regulating the securities industry, the SEC's mission was to ensure transparency, prevent fraud, and protect investors from unfair practices.

President Franklin D. Roosevelt appointed Joseph P. Kennedy, a businessman and former stock market speculator, as the first Chairman of the SEC. Kennedy's experience and insider knowledge of Wall Street made him a controversial but effective choice for the role. Under his leadership, the SEC began implementing key reforms, including the requirement for companies to provide accurate and comprehensive financial statements, the regulation of stock exchanges, and the enforcement of laws against insider trading. These measures were crucial in stabilizing the financial markets and rebuilding public trust. The establishment of the SEC represented a significant shift towards greater federal oversight and accountability in the financial sector.

The U.S. Federal Trade Commission (FTC) and the Department of Justice (DOJ) have agreed to divide responsibility over the artificial intelligence (AI) industry, allowing the FTC to investigate Microsoft's relationship with OpenAI. The DOJ will probe Nvidia for potential antitrust violations and oversee Alphabet Inc.'s Google. This arrangement follows over six months of negotiations between the agencies.

The FTC has already initiated a probe into Microsoft's $650 million deal with Inflection AI, scrutinizing whether the company properly notified antitrust authorities. Both the DOJ and FTC declined to comment, and representatives from Microsoft, Inflection, OpenAI, Google, and Nvidia did not respond to requests for comments.

The DOJ and FTC jointly enforce U.S. antitrust laws and decide internally which agency will handle specific investigations. This process, known as clearance, has previously led to disputes, especially in high-profile cases like those involving Google.

The process of "clearance" between the DOJ and FTC, which involves determining which agency will investigate specific mergers and anticompetitive conduct, is crucial in managing jurisdictional overlaps and ensuring efficient enforcement of antitrust laws.

In related developments, the European Union reviewed Microsoft's investment in OpenAI but opted not to pursue a formal investigation. Meanwhile, the UK's competition watchdog is examining the partnership but determined that Microsoft's deal with French AI company Mistral AI does not warrant an investigation.

Microsoft, Nvidia to Face US Antitrust Probes Over Moves in AI

US regulators to open antitrust inquiries of Microsoft, OpenAI and Nvidia | Reuters

Dan Jacobs, chef-owner of two Milwaukee restaurants, adopted a service charge model during the pandemic to increase employee pay, which led to a $70,000 tax bill. This situation highlights a broader issue where the U.S. tax code favors traditional tipping systems with tax credits, disadvantaging restaurants that use service charges. Service fees, which can range from a few percent to over 20% of the bill, are intended to raise wages for back-of-house workers and reduce tipping disparities.

Rep. Earl Blumenauer has introduced legislation to equalize the tax treatment of service charges and tips, arguing that the tax code should not penalize restaurants adapting to industry changes. The proposed bill would allow restaurants using service charges to claim a tax credit similar to the tip tax credit, provided the service charge goes directly to employees. Critics argue that service charges reduce workers' take-home pay and believe tips give employees more control over their earnings.

The National Restaurant Association supports policies offering operational flexibility, and many Democrats in Congress advocate eliminating the subminimum tipped wage. Service charges spread earnings among all staff, including those already earning the minimum wage, potentially reducing income for traditionally tipped workers. Ending the tipped wage could address these disparities and make service charges a more viable option for restaurants.

In short, the disparity in tax treatment between traditional tips and service charges under the U.S. tax code, which currently benefits restaurants that rely on tips through tax credits, is a significant issue. This inequity impacts how restaurants choose to compensate their staff and has prompted legislative efforts to create a more balanced system.

Restaurant Service Fees Strike a New Nerve: How They’re Taxed

A Georgia appeals court has paused the criminal case against Donald Trump, who is accused of attempting to overturn the 2020 election results, while it considers his request to disqualify lead prosecutor Fani Willis. This decision halts progress toward a trial for Trump and 14 co-defendants until the appeal is resolved. Trump’s appeal argues that Willis, the Fulton County District Attorney, has a conflict of interest due to an alleged romantic relationship with a former top deputy.

The case is one of four legal battles Trump faces as he campaigns to reclaim the presidency. Recently, a New York jury found Trump guilty of concealing hush money payments to a porn star, a verdict he plans to appeal. Two federal cases, involving attempts to overturn the election and mishandling classified documents, are also entangled in legal delays.

In the Georgia case, prosecutors intend to appeal a previous ruling that dismissed some charges in the indictment. The appeal process is expected to take several months, with oral arguments scheduled for October. Trump and his co-defendants have pleaded not guilty to racketeering and other charges related to the alleged scheme to reverse his narrow loss in Georgia.

Trump election interference case paused in Georgia during challenge to prosecutor | Reuters

Amazon is facing a £1 billion ($1.3 billion) lawsuit in the UK, filed by the British Independent Retailers Association (BIRA) on behalf of about 35,000 small retailers. The lawsuit accuses Amazon of misusing non-public data from these retailers to promote its own competing products, thus boosting its market share and profits. BIRA's Chief Executive, Andrew Goodacre, stated that small retailers are compelled to use Amazon due to its extensive reach, but the case aims to prevent Amazon from driving them out of business.

The lawsuit also claims that Amazon manipulated the "Buy Box" feature on its website to its advantage. This feature, which showcases select products at the top of product pages, is already under investigation by Britain's Competition and Markets Authority (CMA) for its impact on fair competition. Last year, the CMA accepted commitments from Amazon to ensure fair competition on its platform. Amazon has not responded to the lawsuit at this time.

$1.3 bln UK lawsuit accuses Amazon of misusing small sellers' data | Reuters

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