Sony’s decision to stop producing PlayStation discs starting in 2028 was met with a ton of initial backlash, especially in the wake of Sony reminding its customers yet again that a digital purchase of content isn’t actually a purchase of content at all and what you’ve bought can be ripped away from you with the barest of notice. But for some, including this writer, there was an assumption that the initial backlash is where this would all end. After all, the anti-consumer nonsense around digital products has been happening for over a decade now and little if anything has been done about it. Some others assumed that feckless gamers would end up just accepting the fate that Sony has planned for them.
And maybe they still will, but it seems that some folks are at least attempting to put up a fight first. Some activists have organized what they are calling the PSBlackout, attempting to get PlayStation owners to not make a purchase or even log into their consoles for a full calendar week in August, all in protest of Sony going disc-less.
As spotted by Push Square (via Eurogamer), the “PSBlackout” protest was announced by the game preservation and consumer rights group DoesItPlay last night on July 26, and it’s already starting to pick up some steam on social media.
DoesItPlay has scheduled the protest to run from August 23 to August 30, and asks that those who take part refrain from logging into, playing, or purchasing any content on PlayStation-related platforms during the week-long blackout.
“Whether it’s closing beloved studios like Bluepoint, pursuing a misguided live-service strategy, cancelling fan events, leaving PS VRS2 to die, or being completely out of touch with the franchises players want to see return, PlayStation has never felt more disconnected from its community,” reads DoesItPlay’s statement on X. “Ending physical discs in 2028 feels like the last straw.”
Now, Sony’s strategy for dealing with online and customer backlash in the past has been to simply wait it out. The company has also very clearly decided to employ that strategy in this case as well. Given enough time, Sony believes the anger will wane and be replaced by complacency, ultimately allowing the company to have its way.
A week long non-participation protest by PlayStation gamers, even if gets wide participation, is not going to cripple Sony. It’s not going to cripple any of its first-party or secondary studio partners. But it will make a statement at the very least, which might just be enough to make Sony’s ostrich routine no longer tenable.
And it’s not as though PSBlackout is the only form of backlash brewing over all of this.
Plus, provided news of the planned protest reaches enough ears, there’s certainly a sizable enough contingent of pissed-off fans out there ready to mobilize. The “Don’t Kill The Disc” Petition has continued to gain momentum over the last few weeks, having shot up from roughly 120,000 signatures on July 6 to just over 345,000 signatures on July 27.
Physical media shouldn’t go away. Not entirely, at least. The current consumer rules around digital purchases aren’t good enough to protect customers. There’s too much risk in non-preservation of gaming culture if everything is digital, thanks largely to copyright laws. And there’s still a sizable percentage of customers that want their shiny discs.
Now we’ll see if this protest gains momentum, or if the feckless gamer cliche is true.
We spent a few years pointing out the ridiculousness of the whole “TikTok ban” moral panic, and the fact that all of the “concerns” magically melted away after Trump became president and then effectively gifted a controlling stake to some of his friends should raise some pretty big questions. However, most people seem to have accepted the new arrangement without much fuss — even though ByteDance still retains a 19.9% stake in the company, and users at no point needed to switch to a brand new app, continuing instead to use the very app we were told was a security nightmare. All of which suggests the entire moral panic was absolute bullshit.
Either way, prior to the full “ban” that forced further ownership into the hands of Trump’s friends, there was a separate law from Senator Josh Hawley which simply banned TikTok on government devices. That law is still in effect. It’s pretty clear that it applies to “the social networking service TikTok or any successor application or service developed or provided by ByteDance Limited or an entity owned by ByteDance Limited.” It’s also clear that such an application is not allowed on any government devices, with exceptions only “for law enforcement activities, national security interests and activities, and security researchers.”
Now, a plain reading of the law would suggest that the current app is still banned. The law is still in place. ByteDance still owns a significant stake in the new “US joint venture” and the app is absolutely a “successor app” since users never needed to download a new app after the joint venture was established.
But, the Trump administration apparently would like to use TikTok on their devices. So, they’ve had the Office of Legal Counsel put out a decision claiming that, you know, ownership doesn’t really mean ownership and that the Trump administration can ignore the law and start using TikTok on their devices again. First things first, we discover that because Josh Hawley wrote a stupidly drafted law that directly called out “TikTok,” the OLC has to first tap dance around the fact that the law’s clearly named “TikTok” apparently doesn’t mean this TikTok, even though that’s exactly what the statute says:
Blackletter statutory-interpretation principles illuminate which particular “TikTok” Congress sought to prohibit. It is old wisdom that “a general phrase can be given a more focused meaning by the terms linked to it.” Fischer v. United States, 144 S. Ct. 2176, 2184 (2024). Namely, “the canon of noscitur a sociis teaches that a word is ‘given more precise content by the neighboring words with which it is associated.’” Id. at 2183 (quoting United States v. Williams, 553 U.S. 285, 294 (2008)). We apply this rule to “avoid ascribing to one word a meaning so broad that it is inconsistent with its accompanying words, thus giving ‘unintended breadth to the Acts of Congress.’” Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995) (quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307 (1961)). And precisely that kind of unexpected breadth would ensue here, were the Government Ban understood to apply to any future social networking platform based on its name alone.
[….]
We have considered the counterargument that, under the Dictionary Act, “words importing the singular include and apply to several . . . things,” 1 U.S.C. § 1—thus indicating that the Government Ban’s use of the phrase “the social networking service TikTok” could denote multiple unrelated variations or iterations of social media companies named TikTok. But the Dictionary Act itself provides that its general prescriptions do not apply when “context indicates otherwise,” id., and context does so in this case. “In context[,] the phrase ‘[the social networking service TikTok]’ should not be interpreted to mean literally ‘any [social networking service called TikTok],’ but must be understood against the background of what Congress was attempting to accomplish in enacting the [Government Ban].” Gustafson, 513 U.S. at 575 (cleaned up) (quoting Reves v. Ernst & Young, 494 U.S. 56, 63 (1990)). Here, the plain text of the Government Ban indicates Congress was attempting to address a particular national security threat posed by the presence on federal government devices of software “developed or provided by ByteDance Limited or an entity owned by ByteDance Limited.” Government Ban § 102(a)(1), 136 Stat. at 5258. TikTok USDS thus is covered by the ban only if it, like the version of TikTok operative when the ban was passed, falls into that category of software.
Call me pedantic, but if Congress didn’t want to ban an app “based on its name alone” maybe they shouldn’t have drafted and then passed a law that banned an app based on its name alone. And if Congress thinks that the new TikTok is somehow safer, they should repeal the original, poorly drafted law. Instead, the OLC has to start asking “what is ownership, really, other than a concept”?
For three reasons, we conclude that “ownership” in the context of the Government Ban is best understood as referring to a controlling stake, such that TikTok USDS falls outside the prohibition’s scope.
First, the “control” sense of the word “own” is most “consistent with the way that an appropriately informed speaker of the language would understand [that term’s] meaning” in the specific context of corporate structure. Van Buren v. United States, 141 S. Ct. 1648, 1657 (2021) (quotation marks omitted). The United States is home to “large numbers of firms with widely dispersed share ownership.” Henry Hansmann & Reinier Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439, 443 (2001). But it would be unusual for someone to say that a person or even an institutional investor “owns,” for example, Meta, simply because the investor holds some of its stock. Cf., e.g., Van Buren, 141 S. Ct. at 1657 (“In the computing context, ‘access’ references the act of entering a computer ‘system itself[.]’”). Instead, in the corporate context, we generally recognize Mark Zuckerburg as the “owner” of Meta because he retains control of the company through so-called “super-voting” shares. See Nathan Reiff, Top Facebook (Meta) Shareholders, Investopedia (Mar. 21, 2026), https://perma.cc/XQ6V-ZNTT; Gregory H. Shill, The Social Costs (and Benefits) of Dual-Class Stock, 75 Ala. L. Rev. 221, 224 & n.6 (2023).
So, hear me out, if Josh Hawley and Congress meant for the law to only apply if ByteDance “controlled” the company, then it could have (and arguably should have) written that into the law. But they did not. They said ownership. And that mattered because, technically before the “divestiture” and new US “joint venture” Western investors already owned about 60% of ByteDance, with employees and ByteDance’s founder holding most of the rest. The goal of the various laws to ban TikTok was to get ByteDance out of owning any of the company.
And that didn’t work. But we all have to pretend this “fixed” things, so the OLC just says “eh, because US entities now control it, we can ignore the law and pretend it said “control” rather than “own.”
Our textual interpretation is confirmed by the facts on the ground, which indicate that the TikTok USDS joint venture is wholly controlled by American interests as a functional as well as a formal matter—and thus exhibits none of the concerning security features that initially motivated the Government Ban. As our prior advice to you highlighted, if facts did not bear out that conclusion, then our understanding of “ownership” as used in the Government Ban could be called into question. But where, as here, the facts demonstrate that ByteDance Limited’s status as a minority shareholder in the joint venture has no impact on the exercise of control over the venture by United States investors, the inference runs the opposite way. Congress had no need to target minority ownership by ByteDance Limited in the Government Ban because that state of affairs is wholly compatible with the joint venture “operat[ing] [TikTok USDS] under defined safeguards that protect national security.”
Of course, all this really does is confirm Calvinball rules: the definitions change exactly as often as it takes to get the outcome someone in power wants. When “ownership” needed to mean any ByteDance stake to justify a ban, it meant that. Now that the administration wants TikTok back on its phones, “ownership” apparently means “controlling stake,” and 19.9% doesn’t count.
The real lesson here appears to be that the earlier concerns were exaggerated. Josh Hawley and Congress wanted to get headlines about how they were “taking on China” and “big tech” more than they wanted to write a clear law. They had a moral panic about one specific app, dressed up in national security language, and now that the political winds have shifted, the Office of Legal Counsel is left doing contortions to make the text say what the moment requires.
In all of our discussions about how the digital revolution has created a system in which people don’t actually own the things they think they’re buying, I get particularly frustrated by the lack of change in it all. We’ve spilled much ink complaining that this clearly anti-consumer practice needs to be done away with, where an unsuspecting public thinks they’re buying “a thing” only to learn months or years later that “the thing” they bought was actually a license to use/view/listen to another “thing”, and that license exists at the pleasure of the company that collected the money for it. And if you want to see the lack of change or action really honed in upon, let’s take a look at Sony’s PlayStation Store.
In 2022, due to “evolving licensing agreements” with distributor StudioCanal, German and Austrian users had hundreds of movies disappear from their PS accounts, long after buying them through Sony. Then in 2023, it happened again in America, specifically when Sony ended its licensing agreement with Discovery after the Warner Bros. merger, which, of course, has since been bought by Paramount Skydance. That resulted in customers having hundreds and hundreds of episodes of TV shows deleted from their accounts. Nowhere in any of this were there refunds, of course. No recompense at all, actually. Just a thing you thought you’d bought taken away from you by the very people you thought you bought it from.
And now it’s happening again. Due to another licensing agreement fallout with StudioCanal, hundreds of movies and TV shows are being ripped from the accounts of PS Store customers, and there appears to be fuck all that they can do about it.
This news was brought to people’s attention by X user somatyk, who posted the notification they had received from PlayStation this week. Along with the unapologetic news that the purchased movies would be deleted from their account on September 1, the message concluded with, “Click here for a full list of affected titles that will no longer be supported. Thank you.” The same warning is now reproduced in full on the PlayStation website, along with the list of 551 films and TV series that are being pulled from people’s libraries.
As Kotaku notes later in their post, part of what is striking in all of this is the sheer mundanity of the announcement. Because there have been no consequences, or any action at all from the public or government, Sony treats this all as if it’s perfectly normal and no big deal. You can tell me all you want about how the Ts and Cs in these purchases do in fact note that the nature of the purchase is a temporary licensing of the content for an undetermined time period… but I can promise you that the public in general doesn’t understand that. They think they’re buying a thing, not a license.
And that’s because of the purposeful obfuscation of that fact. Sony damned well knows that the vast majority of people don’t read those Ts and Cs. It knows that the public largely doesn’t understand how these backend licensing agreements with distributors work, or that they even exist. And Sony isn’t exactly putting out a big blinking sign on its store pages informing the public of all of this. Instead, the company is only too happy to collect money from a public that is being purposefully kept ignorant of what they’re buying.
Of course, when you scroll past the endless EULAs when you first use your PlayStation, and click “Agree” the first time you load the store, you’re unwittingly agreeing that nothing you buy is really truly bought, and that it can be taken away from you at any point, and there’s nothing you can do. The same is true of your games.
This, too, will probably pass without any real action. The government has done its best to gut our consumer protection agencies, so they won’t be any help. Angry customers won’t coalesce into activism or action, most likely. And I’ll probably be writing another one of these posts in a couple of years when it all happens again.
But it shouldn’t be that way. There are common sense things that can be done to better inform the public. Rules for how the store should inform people with each and every purchase. Someone just needs to demand it be done.
It’s hard to believe that the same people who spent the Biden years screaming that Democrats were “socialists” out to destroy free market capitalism are now cheerfully handing the federal government ownership stakes in private companies.
And yet here we are.
Just as Trumpists have decided that their go-to strategy for trying to rile up their base for the midterms is to accuse every left-leaning Democrat of being a “communist” like it’s 1950, those very same Trumpists are taking on a genuinely terrible socialist idea: nationalizing industries.
We’ve already talked about how hypocritical Trump has been in attacking the left as being “socialist” while simultaneously giving his own government stakes in both US Steel and Intel, and now he’s talking about taking ownership of the various big AI companies as well.
US President Donald Trump is planning to meet the bosses of some of the country’s most notable artificial intelligence (AI) companies to discuss the government taking a financial stake in their future.
Speaking on Air Force One, Trump said the goal of the US government investing in AI companies was to “create almost a partnership with the American public”.
OpenAI has proposed handing the U.S. government a 5% stake in the company, the Financial Times reported Thursday, as the artificial intelligence startup seeks to defuse mounting political pressure in Washington.
A 5% holding would be worth roughly $42.6 billion, after the AI lab closed a record-breaking funding round in March at a post-money valuation of $852 billion.
It’s fun to watch the media frame this as “giving the public access to a dividend from the AI companies” rather than “Donald Trump demanding a cut to avoid attacking these companies.” Just look at the NY Times’ framing:
In the Oval Office on Wednesday, Mr. Trump said he would soon host a meeting with the top “12 or 15 executives” in the A.I. industry to discuss the idea of companies’ “giving back something to the public.” He added, “If we do that, the public will become very rich.”
The comments built on Mr. Trump’s remarks on Friday when he was first asked about the U.S. government’s acquiring stakes in A.I. companies. He said then that he wanted to meet with the companies to discuss providing the United States with stakes in their business, which “could be given to the American public.”
Yeah, sure, the public will become very rich, says the man who has used his position as president to inside trade his way to insane wealth. And how, exactly, will “the public” get back this money? And how will the government ensure that if the currently quite-inflated AI market drops that “the public” isn’t left holding the bag?
And, sure, there are some potentially interesting questions regarding how more people could benefit from the potential wealth that AI companies might generate. But it’s all highly speculative and still massively unlikely. But if there actually is evidence and an idea for actual redistribution of wealth because of AI company dominance, that would involve a way more nuanced, complex, and thoughtful discussion than Donald Trump saying “gimme 5%.”
But, really, what gets me most about all of this is, as I keep pointing out, how many of the AI VC bros during the Biden era, went absolutely apeshit over the Biden admin’s very weak policies on AI, which were basic guidelines and voluntary agreements that had no whiff of nationalizing the industry. But, with Trump talking about literally demanding cuts of these companies… you don’t see any complaining.
Instead, they’re out there whining about how some left-leaning politicians in NY are winning elections and how that’s the coming rise of “socialism.” Literally a couple months ago Marc Andreessen was on Joe Rogan talking about how these dumb young progressive kids support “socialism” even though “it never works.” Meanwhile, Andreessen was just appointed by Trump to some government policy board. As Trump literally nationalizes parts of the AI industry that Andreessen insisted the prior administration was going to destroy through its woke anti-capitalist policies.
Keep all this in mind the next time you hear Silicon Valley VC bros going around pointing at Democrats and screaming about the “creeping threat of socialist ideology.” If they’re not pointing out that Trump demanding equity from every AI company is way worse than anything that any Democrat has done or even proposed, just know that they’re totally fine with “socialism” where they’re the ones in power.
Sony just gave the world another lesson in how they don’t actually own the content they’ve bought digitally generally, and particularly not through Sony’s digital storefronts. Instead, as readers here will largely know, what is actually being bought is a temporary license to download and play these games, movies, music, whatever. Sony has done this sort of thing before, disappearing bought items from people’s accounts when licensing agreements expire. Many are surprised to find their shit gone.
This doesn’t happen when you buy physical media, typically, unless it relies on backend servers to operate. But for movies on disc, books on pulp, music on physical media, and physical games this generally isn’t a concern.
Some gamers are concerned about the future of game ownership after Sony’s announcement today that it won’t produce physical discs for PlayStation games as of January 2028. On that date, “new games will be available on PlayStation Store and at retailers in digital formats only,” Sony said in a blog post.
Ditching discs is “a natural direction” for Sony “to adapt to consumer trends as the general preference for digital media significantly outpaces physical discs,” the post said.
Now, for some numbers to chew on. The reality is that nearly 80% of PlayStation games are bought digitally these days. This is pretty much a perfect example of companies following the 80/20 rule, where you plan and account for 80% of the reality you face and de-prioritize the 20% of the outliers. If you left it there, this plan might make some sense.
But in this case, that 20% of the market is both a sizable chunk of revenue and almost certainly made up in no small amount of people who will not move to digital purchases instead. There is a very passionate, vocal community who believes in ownership rights that you can’t get currently with digital purchases, or who believes in video game preservation efforts that can’t exist at the pleasure of gaming companies that haven’t shown a ton of interest in the topic.
For example, the official Sony account on Twitter posted a simple tweet teasing the upcoming release of the next Spider-Man movie with a single spider emoji. Normally, this account gets a few hundred replies at most, but the Spider-Man tweet now has over 3,000 replies, and most of them are from people yelling at Sony for killing PlayStation game discs.
Similarly, over on the official PlayStation Instagram account where most posts get around 200 to 300 replies, the most recent video shared by the company has amassed over 2,000 comments. And once again, most of them are very angry about PlayStation abandoning physical media, begging the company to reconsider, or threatening to boycott future Sony products and games if it doesn’t.
The most recent video on the PlayStation YouTube account, a trailer for a World of Tanks update, has over 300 comments, most of them yelling at Sony over the news. Usually these videos, outside of the biggest trailers, get less than 50 comments.
This has been going on for a week. Somewhat amazingly, Sony has been running with a typical playbook of ignoring the backlash entirely and waiting for it to just go away. The PlayStation ExTwitter account went fully silent for nearly a week after the news broke, which is one more giant middle finger to its own customer base. At the time of this writing, July 7th, the account finally posted again… to pitch a new wireless flight stick. The reaction to that was, well…
In less than an hour, Sony’s fight stick video received over 12,000 negative comments and nearly 4,000 angry quote-tweets. If there is anyone in there defending the company’s move to all-digital, I couldn’t find it. “As was evident, PlayStation has followed the strategy of acting as if nothing had happened,” one fan wrote. “They think we’re going to forget it easily, but we can’t allow that. They’re trying to kill physical games with lies and using us players as an excuse. It’s shameful.”
The level of tone-deaf going on at Sony over all this is fairly astounding. There is no support for ending all physical media on PlayStation consoles. None whatsoever that I can find. There is either silence or hatred.
For ownership rights, for preservation efforts, for collectors, and for many others, this may be a “Give me physical media or fuck all the way off” type scenario. We’ll now have to wait and see if Sony bothers to listen.
If I had to pick one iconic line spoken by Darth Vader in the Star Wars franchise, it would be this one.
The confident evil of a villain who calmly acknowledges that the deal struck with him is changing and there is nothing that can be done about it strikes a chord. What’s odd is that we don’t seem to want to acknowledge that this is precisely what is going on across the world of IoT devices that are updated and changed after the purchase of a device has been made.
Weeks ago, we discussed a pilot program from Samsung to inject advertisements onto the screens of its smart fridges. Based on public feedback, the pilot program went over like a fart in church, with many people complaining that this was a material change to a purchased product with consumers having to jump through hoops to not have to suddenly suffer an advertisement barrage. This wasn’t the deal that customers made when they bought their fridge.
Samsung’s response has been Vader-esque: “I’m altering the deal. Pray I don’t alter it further.” What was a pilot program is now an official update from the company, with the ad program going live this week.
The ads will be shown on Samsung’s 2024 Family Hub smart fridges. As of this writing, Samsung’s Family Hub fridges have MSRPs ranging from $1,899 to $3,499. The ads will arrive through a software update that Samsung will start issuing this month and display on the fridge’s integrated 21.5- or 32-inch (depending on the model) screen. The ads will show when the fridges are idle and display what Samsung calls Cover Screens.
The software update will also introduce “a Daily Board theme that offers a new way to see useful information at a glance,” Samsung said. The Verge reported that this feature will also include ads, something that Samsung’s announcement neglected to state. The Daily Board theme will show five tiles with information such as appointments and the weather, and one with ads.
It will be interesting to track sales of these fridges over time. I don’t believe that most people want ads showing up on their fridge. I believe that if people are informed that their fridge will advertise to them to generate revenue for Samsung, most will be less likely to buy the product. Sales numbers will demonstrate whether I’m right or wrong.
Which is entirely besides the central point here: if I exchange money for a product, the product ought to be mine. I shouldn’t have to jump through hoops and lose out on product features simply because I don’t want to be your product for advertisers.
Samsung fridge owners can also opt to avoid the latest software update altogether. However, they would miss out on other features included in the software update, such as a UI refresh and the ability for the internal camera inside some fridges to identify more fruits and vegetables inside the fridge.
Is there any doubt that the ability to opt out of this will eventually be pared back as well? And is anyone going to do literally anything to protect the consumer from this sort of trespass into already-bought products.
Or are we just going to let Vader alter the deal and pray he doesn’t alter it further?
Techdirt has long lamented how in the modern era, you don’t really “own” what you buy. That game console, smart lock, or smart refrigerator can quickly become less useful (or completely useless) with a firmware update, bankruptcy, or addition of annoying subscription paywall.
The problem is particularly bad when it comes to digital rentals. In streaming video, you often have the option to “rent” or “buy” a video. But the latter is misleading given you don’t really “own” the purchase; you’re given a license — subject to the whims of an amoral, giant corporation — that can be revoked or changed by profit-seeking executives with an eye on enshittification.
That recently appears to have gotten Amazon in trouble via a new lawsuit that alleges that Amazon is misleading consumers by misrepresenting the word “buy.” From the lawsuit:
“On its website, Defendant tells consumers the option to ‘buy’ or ‘purchase’ digital copies of these audiovisual works. But when consumers ‘buy’ digital versions of audiovisual works through Amazon’s website, they do not obtain the full bundle of sticks of rights we traditionally think of as owning property. Instead, they receive ‘non-exclusive, nontransferable, non-sublicensable, limited license’ to access the digital audiovisual work, which is maintained at Defendant’s sole discretion.”
Ars Technica notes that a similar lawsuit was filed in the same court back in 2020, but was dismissed in 2021 for lacking standing. The website notes this new lawsuit stands a slightly better chance of success thanks to a new California law that bans the the sale of a “digital good to a purchaser with the terms ‘buy,’ ‘purchase,’ or any other term which a reasonable person would understand to confer an unrestricted ownership interest in the digital good, or alongside an option for a time-limited rental.”
The fight has parallels to efforts to hold telecom giants accountable for abusing the dictionary definition of words like “unlimited,” by promising users unlimited data, then imposing restriction, caps, and overage fees to drive up profits.
Such cases generally struggle due to companies that hide such restrictions in overlong fine print, then successfully argue this constitutes an effective and clear warning for consumers. In this instance, plaintiffs have to prove that it was clearly communicated to them that they would enjoy permanent, restriction-free “ownership” in perpetuity, and were harmed when that ownership was taken away.
Of course, it is also terrible policy. While there are sometimes compelling arguments that companies should be in public hands, like for utilities, where there is inadequate competition otherwise, or perhaps companies about to fail, where equity in exchange for a publicly-funded bailout might make sense. But none of those arguments apply to a private company that, wobbly though it may have been recently (as are so many), nevertheless remains capable of participating in a competitive environment. Instead, in this case all the reasons not to have the state control the means of production apply, and none of the reasons why an exception should ever be made come anywhere near to it.
Here it is simply Trump openly helping himself to a share of a going concern.
Trump: "I said, 'You know what? I think the United States should be given 10% of Intel.'"
Because he thinks he can, for this company and many others.
Q: During the campaign, you called Kamala Harris a communist, but the Biden-Harris admin never called for nationalizing a private company like you're proposing with Intel. Is this the new way of doing industrial policy?TRUMP: Yeah. Sure it is. I want to try to get as much as I can.
But he can’t. Because (among potentially lots of other reasons) it’s a taking.
The Fifth Amendment of the Constitution closes with the prohibition, “nor shall private property be taken for public use, without just compensation.” And yet, if Trump were to succeed with this arrangement vis a vis Intel, that foreclosed scenario is exactly what would be happening.
First, there has been no actual compensation. Details are slowlyemerging (and note, if this arrangement were truly above board then everyone would have been very clear on what was happening and why from the outset, so this sketchiness just adds to why it’s unconstitutional, if for no other reason than it obviates any notion of fairness) but it appears that Trump wants to convert $11.1 billion in grants and pledges that Intel was eligible for (and possibly already paid, or at least due), into the “payment” for an equity stake in the company.
About $7.8 billion had been been pledged to Intel under the incentives program, but only $2.2 billion had been funded so far. Another $3.2 billion of the government investment is coming through the funds from another program called “Secure Enclave.”
But this purpose is not what Congress authorized the grant payments for, which means that Trump would effectively be impounding that money and using it for a purpose other than what Congress had earmarked it for, even if nominally still involving the same recipient. For example, Congress, with the CHIPS Act (the apparent source for at least some of these grants), wanted to support American companies so they could continue to effectively compete in the world as private enterprises. Not buy them.
The deal also got the government for the stock at a discount, turning that money to which Intel was entitled to into equity in greater proportion than the closing stock price would have equated to.
The U.S. government is getting the stake through the conversion of $11.1 billion in previously issued funds and pledges. All told, the government is getting 433.3 million shares of non-voting stock priced at $20.47 apiece — a discount from Friday’s closing price at $24.80. That spread means the U.S. government already has a gain of $1.9 billion, on paper.
Even if Trump had the authority to snatch back any money from the government Intel was due by converting it into payment for the equity, he wouldn’t have the authority to demand the discount. All the equity he obtained above what the share price would have equaled he got for free, or, to put it in Constitutional terms, without compensation.
But even to the extent that some form of compensation could be construed from the arrangement, nothing about it qualifies as “just compensation” because there’s nothing just (or compensating) about forcing someone to do a deal that gives up something they had of value at the point of a gun, either literally or proverbially. Here Trump has been very busy very loudly and publicly loading up the metaphoric gun with groundless pressure against the CEO and the company if they did not do this deal. And everyone knows how his pressure is far from an idle threats given how he has already come after other people and their businesses when he’s set his sights on them.
That the CEO or the company board might have somehow “agreed” to the deal, or even proposed its terms in the face of that pressure, does not make what is happening here any less wrongful. If making someone an offer they effectively can’t refuse could count as appropriate compensation then the Sopranos would have been a show about a Fortune 500 CEO, not a wanted criminal. You can’t do legitimate deals by extorting people. Whatever results is not a deal, and certainly not fair. Which means there cannot be “just compensation.” And without “just compensation” it means that the equity Trump has helped himself to is just an unconstitutional taking.
Perversely, however, the one reason why it might not be a taking is that the likelihood that this equity position will be for “public use” benefiting the public treasury seems small. Trump’s idol Putin is infamous for redirecting shares of previously public industry to cronies, allowing them to become unfathomably rich and powerful oligarchs by co-opting public resources and the benefits of earlier public investments, and there is no reason to believe, based on everything Trump has said and done to date, that Trump won’t try to emulate those kakistocratic tendencies. Nevertheless, because he is ostensibly using public power to further this scheme, it is likely still a taking, because at least for a brief moment there is at least the pretense that the entire enterprise is for the public benefit. It is that presumption that gives him the ostensible power to even attempt it.
But, as Trump regularly demonstrates, not every exercise of lawful power is itself lawful. And this move to seize a portion of a private company is no exception. It is just as much a taking as any case that has ever been litigated, if not more so, given the sheer brazenness and scale. And arguably not the first even this term. For instance, there was the US Steel deal, where Trump obtained a “golden share” as a condition for the merger. And there was his extraction of promises by law firms for free legal work they otherwise had no obligation to provide as a means of avoiding his threats. There were, of course, other constitutional infirmities with the latter deals, aside from the potential takings issue, but those infirmities reflect the modus operandi of his takings based on unconstitutional threats against his targets, until they submit to his demands.
With the US Steel “deal” the quid pro quo of the “golden share” exchange was a little more subtle, where that offer was a means of turning a government “no” to a “yes, but only if…” But there is still something irredeemably corrupt about this sort of bargain, where a company has to barter part of itself to the government for a policy result. The takings clause protects not just those that the government might take from but the public that also has an interest in making sure that the government strikes whatever deals it does fairly.
Which is one reason why it shouldn’t matter for takings purposes if the deal at least appears to produce some value for some, because they may not be all the people who are supposed to be protected from this form of government abuse. But the other reason is because none of these “deals” that Trump is doing is fair, and that some may have somewhat benefited cannot make them fair. Such is the nature of duress, because even if a seemingly good deal results it may still not be as good a deal as the taken party should have been able to benefit from had there been no duress. Duress precludes deals from ever truly being fair, which we can see here, with Intel, where a government ownership interest has resulted after an abuse of government power. The result is inherently tainted, because it is a deal done as an attempt to avoid an even greater cost instead of a result that is truly fair for the company. As this deal obviously isn’t, because it is hard to imagine that anyone could think a deal exchanging money the company was already entitled to for equity would be anywhere near as fair as a deal as being able to keep the promised money without having to surrender anything at all.
This isn’t going to stop happening unless governments finally get involved to do their most basic job: protect their citizens. This habit among digital and tech companies of selling a thing only to claw back some of the function of that thing after the purchase is both rampant and, frankly, getting ridiculous. It’s bad enough when a company goes fully kablooey, has to shut down all their backend servers and gear, and renders their products useless. That sucks, there are ways around it, and it shouldn’t be allowed, but it’s quite different than perfectly healthy companies selling a product that has features and capabilities out of the box, only to claw back those capabilities and either shut them down or stick them behind some subscription paywall.
And that latter of those examples is what is happening again, this time from Futurehome, which makes a series of smarthome IoT products.
Launched in 2016, Futurehome’s Smarthub is marketed as a central hub for controlling Internet-connected devices in smart homes. For years, the Norwegian company sold its products, which also include smart thermostats, smart lighting, and smart fire and carbon monoxide alarms, for a one-time fee that included access to its companion app and cloud platform for control and automation. As of June 26, though, those core features require a 1,188 NOK (about $116.56) annual subscription fee, turning the smart home devices into dumb ones if users don’t pay up.
“You lose access to controlling devices, configuring; automations, modes, shortcuts, and energy services,” a company FAQ page says.
You also can’t get support from Futurehome without a subscription. “Most” paid features are inaccessible without a subscription, too, the FAQ from Futurehome, which claims to be in 38,000 households, says.
That would be potentially nearly a decade of a bought product working one way, only to have its core functionality tucked behind a subscription paywall on the whim of the company. This is one of those situations that, and I don’t care what country you live in, should elicit the common sense reaction of: this shouldn’t be fucking legal. But, due to the apathy of government and the steady erosion of anything remotely representing true consumer protection, this sort of thing is happening more and more frequently.
And it’s not as though all of this functionality requires support from backend company assets, either. Some do, sure, but some of the features that suddenly don’t work appear to have nothing to do with centralized corporate servers or services.
I can understand to some extent that they have to do it for services that have ongoing expenses, like servers (even though I actually think it’s their problem, not mine, that they didn’t realize this was a bad idea when they sold me the solution), but a local function that only works internally in the equipment I’ve already paid for shouldn’t be blocked behind a paywall.
So what’s the explanation here? Simple: money! Futurehome recently went through bankruptcy and is blaming that situation for why it needs to suddenly create a cash percolator among the customers that already bought its products with the expectations of the functionality with which they were sold. As always, the company has insisted the subscription fees will allow it to remain solvent and, as the evergreen promise goes, “fund product development, and provide high-quality support.” We’ve seen this movie before and we know how it ends.
As you’d expect, some people are attempting to figure out how to make Futurehome products work without the subscription. Perhaps as a result of that, Futurehome shut down its own user forum in June. In addition, the CEO is complaining about how the company now has to invest time and resources to fight its own customers’ attempts to make the products they bought work like they did at the time of purchase.
Futurehome has fought efforts to crack its firmware, with CEO Øyvind Fries telling Norwegian consumer tech website Tek.no, per a Google translation, “It is regrettable that we now have to spend time and resources strengthening the security of a popular service rather than further developing functionality for the benefit of our customers.”
But is it as regrettable as your own customers suddenly finding out the thing they bought won’t work anymore because your company didn’t business well enough?
Here we go again. The idea that, at least in the realm of digital goods or IoT devices, we no longer own what we’ve bought has been a long-running theme here at Techdirt. While the practice of pulling back features available upon purchase via firmware updates has been a regular occurrence in the video game console space, it’s also reared its ugly, anti-consumer head in the realm of everything from smart home devices, emotional support robots (yes, seriously), and even exercise equipment.
It seems like a simple concept that everyone should be able to agree to: if I buy a product from you that does x, y, and z, you don’t get to remove x, y, or z remotely after I’ve made that purchase. How we’ve gotten to a place where companies can simply remove, or paywall, product features without recourse for the customer they essentially bait and switched is beyond me.
But it keeps happening. The most recent example of this is with Echelon exercise bikes. Those bikes previously shipped to paying customers with all kinds of features for ride metrics and connections to third-party apps and services without anything further needed from the user. That all changed recently when a firmware update suddenly forced an internet connection and a subscription to a paid app to make any of that work.
As explained in a Tuesday blog post by Roberto Viola, who develops the “QZ (qdomyos-zwift)” app that connects Echelon machines to third-party fitness platforms, like Peloton, Strava, and Apple HealthKit, the firmware update forces Echelon machines to connect to Echelon’s servers in order to work properly. A user online reported that as a result of updating his machine, it is no longer syncing with apps like QZ, and he is unable to view his machine’s exercise metrics in the Echelon app without an Internet connection.
Affected Echelon machines reportedly only have full functionality, including the ability to share real-time metrics, if a user has the Echelon app active and if the machine is able to reach Echelon’s servers.
Want to know how fast you’re going on the bike you’re sitting upon? That requires an internet connection. Want to get a sense of how you performed on your ride on the bike? That requires an internet connection. And if Echelon were to go out of business? Then your bike just no longer works beyond the basic function of pedaling it.
And the ability to use third-party apps is reportedly just, well, gone.
For some owners of Echelon equipment, QZ, which is currently rated as the No. 9 sports app on Apple’s App Store, has been central to their workouts. QZ connects the equipment to platforms like Zwift, which shows people virtual, scenic worlds while they’re exercising. It has also enabled new features for some machines, like automatic resistance adjustments. Because of this, Viola argued in his blog that QZ has “helped companies grow.”
“A large reason I got the [E]chelon was because of your app and I have put thousands of miles on the bike since 2021,” a Reddit user told the developer on the social media platform on Wednesday.
Instead of happily accepting that someone out there is making its product more attractive and valuable, Echelon is instead going for some combination of overt control and the desire for customer data. Data which will be used, of course, for marketing purposes.
There’s also value in customer data. Getting more customers to exercise with its app means Echelon may gather more data for things like feature development and marketing.
What you won’t hear anywhere, at least that I can find, is any discussion of the ability to return or get refunds for customers who bought these bikes when they did things that they no longer will do after the fact. That’s about as clear a bait and switch type of a scenario as you’re likely to find.
Unfortunately, with the FTC’s Bureau of Consumer Protection being run by just another Federalist Society imp, it’s unlikely that anything material will be done to stop this sort of thing.
