On August 25, 2022, President Biden announced a new Executive Order (“EO”) addressing the Implementation of the CHIPS Act of 2022 (“CHIPS Act”).  The CHIPS Act was signed by President Biden on August 9, 2022, and, among other things, authorizes $39 billion in funding for new projects to establish semiconductor production facilities within the United States.  The new EO identifies the Administration’s implementation priorities for this CHIPS Act funding and creates the CHIPS Implementation Steering Council to aid with the rollout of administrative guidance.  In connection with the EO, the Department of Commerce launched CHIPS.gov, which is intended to be a centralized resource for potential applicants of CHIPS funding.  The EO and new website reflect the Administration’s intent to swiftly implement the CHIPS Act and increase the domestic production of semiconductors. 

First, the EO identifies the Administration’s implementation priorities, including (1) protecting taxpayer resources; (2) meeting economic, sustainability, and national security needs; (3) ensuring long-term leadership in the microelectronic sector; (4) catalyzing private-sector investments; (5) generating high-skilled, well-paying jobs; (6) increasing opportunities for disadvantaged businesses and communities; and (7) expanding regional manufacturing and innovation ecosystems.  These additional priorities expand on the policy objectives first expressed by Congress in the text of the CHIPS Act. 

Second, the EO creates a CHIPS Implementation Steering Council within the Executive Office of the President.  The Council will be made up of the Secretary of State, Secretary of the Treasury, Secretary of Defense, OMB Director, National Cyber Director, and SBA Administrator, among others.  The Council will be responsible for coordinating policy development efforts, as the statutory requirements of the CHIPS Act requires input from a wide variety of agencies.  The Steering Council will also be assisted in this effort by the Industrial Advisory Committee, which was previously established in 2021 to provide advice on domestic microelectronics R&D and manufacturing. 

Last, as noted above, the Commerce Department has also published the CHIPS.gov website.  The website currently identifies the EO implementation priorities, and the Department’s initial guidance (released in July 2022) on taxpayer protections it intends to implement when allocating CHIPS Act funds.  The Commerce Department intends for this website to be a central resource for all information related to the implementation of the CHIPS Act.

In sum, President Biden has directed a whole-of-government effort to implement the CHIPS Act in a manner that comports with legislative and executive policy objectives.  We expect more developments in this space soon, as the Administration continues to pivot from the initial setup stages towards public regulatory guidance, and will continue to monitor developments as they occur. 

Today, the California Attorney General announced the first settlement agreement under the California Consumer Privacy Act (“CCPA”).  The Attorney General alleged that online retailer Sephora, Inc. failed to disclose to consumers that it was selling their information and failed to process user requests to opt out of sale via user-enabled global privacy controls.  The Attorney General also alleged that Sephora did not cure these violations within the cure period. 

The meaning of the CCPA’s “sale” definition has been controversial and unclear. The CCPA statute defines the term to require an exchange of personal information for “monetary or other valuable consideration.”  The Attorney General previously declined to clarify whether the term covered various advertising practices in its earlier rulemakings, and the CPRA voted on by the California electorate clarifies that “sales” are distinct from “cross-context behavioral advertising.”  However, the Attorney General’s complaint suggests that Sephora’s relationships with certain ad tech partners met the definition of “sale” “because “Sephora gave companies access to consumer personal information in exchange for free or discounted analytics and advertising benefits. . . . Both the trade of personal information for analytics and the trade of personal information for an advertising option constituted sales under the CCPA.”  However, the complaint also acknowledges that maintaining a valid service provider contract with a vendor is an exception to the “sale” definition.

The complaint also reveals that, in June, the Attorney General conducted “an enforcement sweep of large retailers to determine whether they continued to sell personal information when a consumer signaled an opt-out via the GPC.”  The Attorney General’s press release on the settlement suggests that “businesses must treat opt-out requests made by user-enabled global privacy controls the same as requests made by users who have clicked the ‘Do Not Sell My Personal Information’ link.”  Without recognizing open questions about the GPC and its status under the CPRA, the press release also states, “Technologies like the Global Privacy Control are a game changer for consumers looking to exercise their data privacy rights [and businesses must] process opt-out requests made via user-enabled global privacy controls.”

The settlement requires Sephora to pay $1.2 million in penalties and comply with injunctive terms, including adding a representation that it sells data in its online disclosures and privacy policy, creating mechanisms for consumers to opt out of sale (including via the GPC), editing its service provider agreements to conform with CCPA requirements, and providing reporting to the Attorney General on its compliance with these requirements.

In addition to announcing the Sephora settlement today, the Attorney General also sent notices to a number of businesses alleging non-compliance related to a failure to process consumer opt-out requests made via user-enabled global privacy controls.  The Attorney General also released additional enforcement case examples, including an enforcement sweep of loyalty programs and allegations of noncompliance due to confusing or non-functional CCPA request mechanisms.

President Biden recently signed the $280 billion CHIPS and Science Act into law. It was the culmination of more than a year of bipartisan, bicameral negotiations to craft comprehensive innovation and competition legislation. As we previously reported, the new law includes a historic investment in domestic semiconductor manufacturing and the nation’s pursuit of science and technology leadership. But there’s another aspect of the bill that hasn’t garnered much media attention: it is permeated with provisions to expand opportunities to Americans who have been underrepresented in science and technology.

The CHIPS and Science Act is the most comprehensive effort in history to create opportunities in science and technology for women, people of color, and other underrepresented groups. The new law will advance diversity, equity, and inclusion in science and technology by:

  • Creating new research, invention, and entrepreneurial opportunities;
  • Authorizing $13 billion for STEM and invention education and providing teachers with the necessary resources to expand STEM;
  • Expanding access to the skills and training needed to join the scientific workforce;
  • Ensuring that people of color and other underrepresented groups have information about these opportunities;
  • Funding research on diversity and inclusion in the tech sector and sexual harassment in STEM fields;
  • Making federal agency policy and personnel changes related to diversity, equity, and inclusion, including developing caregiver policies for all science agencies and creating a position for a Chief Diversity Officer at the National Science Foundation (NSF)—the nation’s chief science agency; and
  • Recognizing the importance of diversity and inclusion in national science and technology strategies.
Continue Reading More than Semiconductors and Science:  New Law Recognizes Role of Diversity, Equity, and Inclusion in America’s Global Competitiveness

In a series of prior blog posts, we previously highlighted the historic implications of the Inflation Reduction Act (IRA) for the U.S.’s international climate commitments, as well as for private companies navigating the energy transition.  Shortly after our series published, the Senate passed the IRA on Sunday August 7th with only minor modifications to the bill’s $369 billion in climate and clean energy spending.  Today, the House passed the IRA without any further changes, and soon hereafter President Biden is expected to sign it into law. 

However, this is only the beginning of the road; the IRA will have sweeping implications beyond the four corners of its pages.  In the coming months and years, we expect to see intense jockeying over agency rulemakings that will shape the IRA’s implementation, as well as determine its ultimate success as an energy policy.  

I. Congressional Permitting Reform

As an initial matter, it seems Congress has not finished its work revamping the nation’s climate and energy laws.  As part of his agreement to support the IRA, Senator Joe Manchin (D-WV) announced that “President Biden, Leader Schumer and Speaker Pelosi have committed to advancing a suite of commonsense permitting reforms this fall that will ensure all energy infrastructure, from transmission to pipelines and export facilities, can be efficiently and responsibly built to deliver energy safely around the country and to our allies.”  While the exact contours of this legislation are not currently known, Senator Manchin’s office recently released a legislative framework, which includes proposals to, among other things:

Continue Reading House Passes Inflation Reduction Act, Marks a New Era for Climate Policy

On 22 June 2022, the EU’s General Court (“GC”) fully dismissed thyssenkrupp’s appeal against the European Commission’s (“Commission”) decision to block its proposed joint venture (“JV”) with Tata Steel in 2019.

This is the first time that the GC has considered the prohibition of a “gap” case under the EU Merger Regulation (“EUMR”) since it annulled the Commission’s prohibition of CK Hutchison’s proposed acquisition of Telefónica UK (O2) in 2020 (“CK Hutchison”) (see our previous blog post here). A “gap” case is a merger in an oligopolistic market that does not result in the creation or strengthening of an individual or collective dominant position. Rather, it risks causing a “significant impediment to effective competition”.

This result may indicate a return to a more traditional approach by the GC as regards “gap” cases than that demonstrated in the CK Hutchison judgment. The judgment also provides helpful guidance on the interpretation of the EUMR and other legal instruments (such as the Market Definition Notice and the Notice on Remedies). The key findings are:

Continue Reading EU General Court Upholds Tata Steel/thyssenkrupp JV Prohibition

On August 9, 2022, President Biden signed into law the CHIPS and Science Act—a massive, $280 billion bill to boost public and private sector investments in critical and emerging technologies.

We anticipate significant opportunities and an evolving regulatory landscape for companies, associations, universities, and others who work in various technology sectors, including:

  • High performance computing, semiconductors, and advanced computer hardware/software
  • Advanced communications technology and immersive technology
  • Advanced energy and industrial efficiency technology (including batteries, nuclear)
  • Advanced materials science (including composites 2D and next-generation materials)
  • Artificial intelligence, machine learning, autonomy, and related advances
  • Quantum information science and technology
  • Biotechnology, medical technology, genomics, and synthetic biology
  • Data storage/management, distributed ledgers, and cybersecurity (including biometrics)
  • Natural and anthropogenic disaster prevention or mitigation
  • Robotics, automation, and advanced manufacturing

Below is an overview of the legislation and the funding and tax credit opportunities it provides for entities that participate in the research, development, production, education, or transfer of critical and emerging technologies, especially semiconductor manufacturing and research and open-RAN technology.

Overview

Headlining the bill are $54 billion in appropriations to fund the Creating Helpful Incentives to Produce Semiconductors (“CHIPS”) for America Act, which was authorized in 2021. The bill also includes $1.5 billion in appropriations for a wireless supply chain innovation fund under the Utilizing Strategic Allied Telecommunications Act, which was similarly authorized in 2021. Across these two sets of appropriations, over $40 billion are allocated for direct financial assistance in the form of competitive grants for which private companies will be able to apply. The law also authorizes over $200 billion in new programs across the federal government, paving the way for additional grants, public-private partnerships, and technology transfer opportunities.

Continue Reading Significant Funding and Tax Credit Opportunities in the CHIPS and Science Act

It was a Republican President who inaugurated America’s openness to China 50 years ago, but it is Republicans in Congress who seem poised to begin closing the door. With the likelihood of a Republican takeover of the House and possibly the Senate in November, American businesses should prepare for a raft of anti-China measures that are likely to pass the House in the new Congress.

House Republican Leadership intends to include China decoupling legislation among its top 10 priorities in 2023. Unlike many foreign policy issues on which voters express little interest, this new decoupling fervor is being driven by Republicans’ most enthusiastic voters.

In one recent unpublished poll, almost half of Republican voters agreed that the U.S. government should prohibit American companies from doing business in China, and fewer than one-third disagreed. Three times as many Republican voters strongly agreed with this view than strongly disagreed, demonstrating that voter intensity for decoupling is high.

In a time of heightened partisanship leading into another divisive election, 26 Republican Senators sent a letter supporting Speaker Nancy Pelosi’s trip to Taiwan – despite the fact that Pelosi is anathema to Republican voters. The subtext to the letter was that Republicans’ eagerness for a muscular confrontation with China trumps even election-year partisanship in some circumstances.

Continue Reading Republicans Likely to Push for Decoupling from China

Policymakers and candidates of both parties have increased their focus on how technology is changing society, including by blaming platforms and other participants in the tech ecosystem for a range of social ills even while recognizing them as significant contributors to U.S. economic success globally.  Republicans and Democrats have significant interparty—and intraparty—differences in the form of their grievances and on many of the remedial measures to combat the purported harms.  Nonetheless, the growing inclination to do more on tech has apparently driven one key congressional committee to have compromised on previously intractable issues involving data privacy.  Rules around the use of algorithms and artificial intelligence, which have attracted numerous legislative proposals in recent years, may be the next area of convergence. 

While influential members of both parties have pointed to the promise and peril of the increasing role of algorithms and artificial intelligence in American life, they have tended to raise different concerns.  Legislative proposals from Democrats have frequently focused how deployment of algorithms and artificial intelligence affects protected classes, while Republican proposals have largely, but not exclusively, been aimed at perceived unfairness in how algorithms treat Republicans and those expressing conservative views.  For instance, Republican Whip John Thune (R-SD), the former chair of the Senate Committee on Commerce, Science, and Transportation, has sponsored the Political BIAS Emails Act (S. 4409), which would address technology companies reportedly filtering Republican campaign emails.  Meanwhile, Senator Ron Wyden (D-OR) introduced the Algorithmic Accountability Act (S. 3572) that, among other things, requires that “automated decision systems” be subject to an “evaluation of any differential performance associated with consumers’ race, color, sex, gender, age, disability, religion, family status, socioeconomic status, or veteran status.”

Continue Reading ARTIFICIAL INTELLIGENCE AND ALGORITHMS IN THE NEXT CONGRESS

The Department of Enterprise Trade and Employment has published a draft new law to protect Irish critical technology and infrastructure from potentially harmful non-European foreign investment.  The Screening of Third Country Transactions Bill 2022 legislatesto curb so-called “third country” (meaning non-European Union/non-European Economic Area countries) hostile actors using ownership of, or influence over businesses and assets in the Irish state to harm Ireland’s security or public order. 

First time to screen

It will be the first time Ireland has screened investment from a non-European country with a view to halting that investment if it poses such a threat.  The draft new law responds to the EU Investment Screening Regulation (EU) 2019/452 (“Regulation” – see more in Covington blogs here and here) which allows – but does not oblige – European Union Member States to screen foreign investment for risks to their security or public order.  

EU fears

The Regulation reflected a growing concern within Europe about the purchase of strategic European companies by foreign-owned firms, those concerns now heightened as a result of Covid and, more recently, by the war in Ukraine. 

The European Commission (“EC”) guided on June 22 2021, that “(s)uch transactions may put European collective security or public order at risk, especially when foreign investors are state owned or controlled, including through financing or other means of direction…while remaining open to investment, the EU is equipped to protect its essential interests.” 

Continue Reading Ireland to screen non-European foreign investments

Gazprom reduces supplies again

Gazprom’s 27 July decision to reduce the gas it supplies through Nord Stream 1 to 33 mcm means it is now delivering just one-fifth of the pipeline’s capacity. This reduction ensures Europe will continue paying (ever higher prices) for (just enough) Russian gas in order to service its day-to-day needs, whilst leaving insufficient extra to fill storage units before the winter (in late June, the Commission mandated that EU gas storage facilities should be 80% full by 1 November).  The Gazprom reductions come against the backdrop of a historically hot summer, where consumer demand, including for air conditioning, is significantly higher than normal[i].

Ironically, given the IPPC report and COP27 at the end of the year, the major beneficiary of the Russian gas supply crunch appears to be coal: the IEA forecasts a 7% rise in global coal consumption to reach the all-time record set in 2013, with electricity demand for coal likely to increase by as much as 16%.

Continue Reading Europe’s Gas Crisis