Tag Archives: regulators

Twitter misled U.S. regulators on hackers, spam, whistleblower says

Aug 23 (Reuters) – Twitter Inc (TWTR.N) misled federal regulators about its defenses against hackers and spam accounts, the social media company’s former security chief Peiter Zatko said in a whistleblower complaint.

In an 84-page complaint, Zatko, a famed hacker widely known as “Mudge,” alleged Twitter falsely claimed it had a solid security plan, according to documents relayed by congressional investigators. Twitter’s shares fell 7.3% to close at $39.86.

The document alleges Twitter prioritized user growth over reducing spam, with executives eligible to win individual bonuses of as much as $10 million tied to increases in daily users, and nothing explicitly for cutting spam.

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Twitter labeled the complaint a “false narrative.” The social media company has been battling Elon Musk in court after the world’s richest person attempted to pull out of a $44-billion deal to buy Twitter. Musk said it failed to provide details about the prevalence of bot and spam accounts.

Tesla Inc (TSLA.O) Chief Executive Musk had offered to buy Twitter for $54.20 per share, saying he believed it could be a global platform for free speech.

Twitter and Musk have sued each other, with Twitter asking a judge on the Delaware Court of Chancery to order Musk to close the deal. A trial is scheduled for Oct. 17.

Zatko filed the complaint last month with the U.S. Securities and Exchange Commission and the Department of Justice, as well as the Federal Trade Commission (FTC). The complaint was also sent to congressional committees.

“We are reviewing the redacted claims that have been published but what we have seen so far is a false narrative that is riddled with inconsistencies and inaccuracies,” Twitter Chief Executive Parag Agrawal told employees in a memo.

The Senate Judiciary Committee’s top Republican, Chuck Grassley, said the complaint raised serious national security concerns and privacy issues and needed to be investigated.

“Take a tech platform that collects massive amounts of user data, combine it with what appears to be an incredibly weak security infrastructure, and infuse it with foreign state actors with an agenda, and you’ve got a recipe for disaster,” he said.

The FTC declined to comment. A spokesperson for the Senate Intelligence Committee said it had received the complaint and was setting up a meeting to discuss the allegation.

Twitter’s real regulatory risk lies in whether the documentary evidence shows “knowing or reckless misleading” of investors or regulators, said Howard Fischer, a partner at Moses & Singer and a former SEC attorney.

‘GIVE A LITTLE WHISTLE’

Musk could not be reached for comment but reacted on Twitter with memes and emoji of a robot. Musk’s legal team has subpoenaed Zatko, CNN reported after the whistleblower disclosure was made public.

American hackers have admired Zatko since the 1990s, when he was credited with inventing a tool to crack passwords. He later used his hacking chops to become a sought-after security consultant and with other rebellious techies of the era, transitioned to top government and boardroom positions.

The whistleblower document says that after the Jan. 6 riots, the incoming Biden administration offered him “a day-one appointed position as Chief Information Security Officer for the United States,” which he turned down.

Cybersecurity leaders expressed widespread support for Zatko, and many deplored Twitter’s reaction to his revelations.

Robert Lee, founder of industrial cybersecurity company Dragos, said it was “one of the very rare times based on who it is I don’t even need to know a detail to form an opinion,” he said on Twitter. “If Mudge is making this type of claim, it deserves the investigation.”

In January, Twitter said Zatko was no longer its head of security, two years after his appointment to the role.

On Tuesday, a Twitter spokesperson said Zatko was fired for “ineffective leadership and poor performance,” adding his allegations appeared designed to capture attention and inflict harm on Twitter, its customers and its shareholders.

Debra Katz and Alexis Ronickher, attorneys for Zatko, said in a statement that throughout his tenure at Twitter, he repeatedly raised concerns about inadequate information security systems to the company’s executive committee, CEO and board. Twitter did not respond to a request for comment on that statement.

(This story corrects closing price and removes extraneous percentage symbol in paragraph two)

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Reporting by Chavi Mehta, Ankur Banerjee and Tiyashi Datta in Bengaluru, Peter Henderson in Oakland and Raphael Satter in Washington; Additional reporting by Rick Cowan in Washington; Writing by Ankur Banerjee; Editing by Kenneth Li, Saumyadeb Chakrabarty, Sriraj Kalluvila and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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Chinese tech giants share details of their algorithms with regulators

China has introduced rules that aim to govern how technology platforms use recommendation algorithms. It is part of a broader push from Beijing to more closely regulate China’s domestic technology sector.

Thomas White | Reuters

Chinese technology giants shared details of their prized algorithms with the country’s regulators in an unprecedented move, as Beijing looks for more oversight over its domestic internet sector.

The Cyberspace Administration of China, one of the country’s most powerful regulators, released a list on Friday of 30 algorithms alongside a brief description of their purpose from companies including e-commerce firm Alibaba and gaming giant Tencent.

It comes after China brought in a law in March governing the way tech firms use recommendation algorithms. The rules include allowing users to opt out of recommendation algorithms, as well as requiring companies to obtain a license to provide news services.

Algorithms are the secret sauce behind the success of many of China’s technology companies. They can be used to target users with products or videos based on information about that customer.

But during the past nearly two years, Beijing has tightened regulation on China’s technology sector in areas from data protection to antitrust in a bid to rein in the power of the country’s giants that have grown, largely unencumbered, over a few years.

The March law also requires companies to file details of the algorithms with the cyberspace regulator.

Details are thin in the public filing. For example, the algorithm made by ByteDance for Douyin, the Chinese version of TikTok, is used for recommending graphics, videos, products and services that may be of interest to users through behavioral data such as clicks and likes, according to the CAC filing.

The algorithm for Taobao, Alibaba’s Chinese marketplace, is used for content recommendation on the homepage and other parts of the app through a user’s historical search data, the filing says.

While the public filing from the CAC keeps things brief, it’s unclear how much insight the regulator had into the inner workings behind the algorithms from the technology companies.

CNBC has reached out to Alibaba, Tencent, Baidu, ByteDance and NetEase for comment.

China’s move to create a registration system for algorithms is unprecedented. The U.S. and European Union have yet to introduce anything like the law seen in China, although European lawmakers are currently debating rules around the use of artificial intelligence.

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Senate Plan Would Put Bitcoin, Ether Under Commodity Regulator’s Watch

WASHINGTON—Leaders of a Senate committee are pitching legislation that would assign oversight of the two largest cryptocurrencies, bitcoin and ether, to the federal agency that regulates milk futures and interest-rate swaps.

Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) and top-ranking Republican John Boozman of Arkansas unveiled a plan Wednesday that would empower the Commodity Futures Trading Commission to regulate spot markets for digital commodities, a newly created asset class. Currently the CFTC has authority to police derivatives, such as futures and swaps, rather than underlying commodities.

The bill marks the latest salvo in an intensifying battle among federal agencies and congressional committees that oversee them over who will regulate crypto. Thirteen years after bitcoin was created, cryptocurrencies remain largely unregulated by the federal government, leaving investors without key protections from fraud and market manipulation.

The competition for jurisdiction heated up in recent months as a meltdown in crypto markets underscored the need for guardrails in the eyes of many policy makers. The competition also reflects the industry’s ramped-up lobbying presence in Washington and its push to reach more mainstream investors through Super Bowl ads and other high-profile marketing initiatives.

‘When there’s a topic as hot as crypto, everybody wants a seat at the table.’


— Aaron Klein, Brookings Institution senior fellow

“When there’s a topic as hot as crypto, everybody wants a seat at the table,” said

Aaron Klein,

a senior fellow at Brookings Institution who focuses on financial regulation. “The question is, are we going to have regulatory turf paralysis?”

In practical terms, for federal agencies such as the CFTC, Securities and Exchange Commission, and Federal Reserve, adding crypto to their remit would bring bigger budgets, greater influence and more job opportunities for officials who leave public service. For members of the congressional committees that oversee such regulators, a new industry in their sandbox would create another stream of lobbyists and campaign donations.

“We need to treat this seriously and take our responsibilities seriously for protecting consumers,” Ms. Stabenow said in a virtual press conference alongside Mr. Boozman.

Washington has introduced a flurry of bills in recent months to draw jurisdictional lines. Sens.

Cynthia Lummis

(R., Wyo.) and

Kirsten Gillibrand

(D., N.Y.) unveiled a proposal in June that would create exemptions for cryptocurrencies in securities laws, banking statutes and tax code. In July, leaders of the House Financial Services Committee said they were working on a bill to grant the Federal Reserve a greater role in regulating some stablecoins, crypto tokens pegged against the dollar and other official currencies.

When cryptocurrency lending platform Celsius froze user accounts amid a plunge in valuations, it sent ripples across the industry and raised questions about what happens to user assets if a crypto platform files for bankruptcy. WSJ’s Vicky Ge Huang explains. Photo illustration: Jordan Kranse

Agencies also are seeking to claim territory. CFTC Chairman

Rostin Behnam,

a former staffer to Ms. Stabenow, said last week his agency is “ready and well situated” to oversee spot markets for some cryptocurrencies. He has worked with his former boss for months to help craft legislation that would authorize the CFTC to do so, people familiar with the matter say.

Meanwhile, SEC Chairman

Gary Gensler

has repeatedly demanded that cryptocurrency-trading platforms such as

Coinbase Global Inc.

register with the agency as securities exchanges akin to the New York Stock Exchange or Nasdaq. In May, the SEC nearly doubled the staff of an enforcement unit focused on cryptocurrencies.

“Four years ago when I started this job, there were some people that just thought this thing was all going to blow up and go away, that this was sort of a passing fad,” said Kristin Smith, executive director of the Blockchain Association, a trade group representing crypto firms.

Now, she said, “We’ve got all these regulators suddenly vying for control.”

After the SEC alleged in an insider-trading case in July that at least seven cryptocurrencies listed on Coinbase should have been registered as securities, Republican CFTC Commissioner

Caroline Pham

accused the SEC of “regulation by enforcement.”

“The SEC is not working together with the CFTC,” Ms. Pham said in an interview. “They go out unilaterally to try to establish precedent that’s going to dramatically reshape the landscape as to what’s a security and what’s a commodity.”

Ms. Pham has posted photos to her

Twitter

account of herself posing alongside crypto lobbyists and executives including

Sam Bankman-Fried,

the billionaire founder of trading platform FTX.

Ms. Pham said that crypto is one of the areas she is focused on, and, “I take pictures with everybody. Like, literally, everybody.”

At the heart of the turf war are questions about how cryptocurrencies fit into the definition of a security, the legal classification that includes stocks and bonds.

Coinbase and other firms have lobbied Congress to create a new category for digital commodities and empower the CFTC to regulate it.



Photo:

Shannon Stapleton/REUTERS

A 1946 Supreme Court case created a test that focuses on whether investors buy an asset in hopes of profiting from the efforts of other people. If so, the issuer is required to register with the SEC and publicly disclose any information that may be material to the security’s price.

Even though investors in bitcoin and ether rely on a network of users and programmers to validate transactions and perform software updates, cryptocurrency enthusiasts insist those groups are too decentralized for the assets to be regulated like securities. Instead, they argue, the assets should be considered commodities, which have a broader definition and no full-time regulator.

Firms such as Coinbase, FTX and Ripple have spent millions of dollars over the past year lobbying Congress to create a new category for digital commodities and empower the CFTC to regulate it. The agency has roughly one-sixth the head count of the SEC, and its rules are seen by the industry as easier to comply with than securities laws.

“When you ask the people that are in the industry…almost all feel like the regulator should be primarily the CFTC,” Mr. Boozman said. “The fact that they’re fairly united on that makes it easier on members.”

Crypto skeptics worry that creating a new legal concept for cryptocurrencies could create an alternative to securities registration for a wider variety of assets.

“People who are taking action that could undermine our securities law are playing with fire,” said Dennis Kelleher, president of investor-advocacy group Better Markets. “You may love or hate the SEC, but transparent disclosure, clear rules…and enforcement is what builds trust and confidence in our markets.”

The legislation being unveiled Wednesday would seek to exclude securities from the definition of digital commodities, making it narrower in scope than that of other crypto-related bills floated in recent months, such as the Lummis-Gillibrand proposal.

Ms. Stabenow said she expects the Agriculture Committee to hold a hearing on the bill as early as September.

SHARE YOUR THOUGHTS

How should the two largest cryptocurrencies, bitcoin and ether, be regulated? Join the conversation below.

The bill would require any entity acting as a digital commodity platform—including crypto exchanges such as Coinbase and FTX—to register with the CFTC as trading facilities, dealers or brokers. The exchanges would have to monitor trading, protect investors from abuse and only offer assets that are resistant to market manipulation, among other requirements.

Platforms also would be obliged to disclose some information about the assets they list, such as operating structure and conflicts of interest. Such information would likely fall short of the extensive disclosures required by the SEC for securities.

The derivatives markets the CFTC currently oversees are dominated by professional investors, such as banks and hedge funds. Crypto markets, by contrast, draw legions of small investors who are more vulnerable to scams.

If the agency wins jurisdiction over bitcoin and ether, the CFTC would have to write rules from scratch to protect such investors.

“How robust would they be and how long would that take?” asked Tyler Gellasch, executive director of the Healthy Markets Association, an investor trade group.

Write to Paul Kiernan at paul.kiernan@wsj.com

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Alibaba seeks to work with U.S. regulators over audit problems

Alibaba has faced growth challenges amid regulatory tightening on China’s domestic technology sector and a slowdown in the world’s second-largest economy. But analysts think the e-commerce giant’s growth could pick up through the rest of 2022.

Kuang Da | Jiemian News | VCG | Getty Images

Chinese e-commerce giant Alibaba said it will comply with U.S. regulators and work to maintain its listings in New York and Hong Kong.

“Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong bourse on Monday.

The statement came after Alibaba was added to the U.S. Securities and Exchange Commission’s list of Chinese companies at risk of being delisted for not meeting auditing requirements on Friday. As a result, U.S.-listed Alibaba shares plunged 11% in the Friday trading session.

On Monday, the stock was down more than 5% in Hong Kong, but recovered to trade around 2.2% by midafternoon.

Under the Holding Foreign Companies Accountable Act law, the SEC identifies public companies that have retained a registered public accounting firm to issue an audit report where the firm has a branch or office.

Read more about China from CNBC Pro

On Monday, Alibaba said it was added to the SEC’s list, indicating its audits for the fiscal year ended March 31, 2022 could not be fully reviewed by the U.S. Public Company Accounting Oversight Board.

Under the HFCAA, if the PCAOB cannot fully inspect audits of a U.S.- listed company’s financial statements for three consecutive “non-inspection” years, the SEC is required to bar the company’s securities from being traded on U.S. markets.

Last week, the Chinese tech giant said it will apply for a dual primary listing in Hong Kong. The tech giant’s shares are already traded on both U.S. and Hong Kong exchanges, but the current listing in Hong Kong is a secondary one.

The primary listing process in Hong Kong is expected to be completed before the end of 2022, the company said in statement.

— CNBC’s Abigail Ng contributed to this report

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Apple’s giving up ground in its App Store fight with Dutch regulators and Tinder

Apple announced on Friday that it’s once again updated its rules about how Dutch dating apps can use third-party payment systems, after the company had “productive conversations with the Netherlands Authority for Consumers and Markets (ACM).” The updated rules give developers more flexibility about which payment systems they use, change the language users see when they go to pay, and remove other restrictions that the previous rules put in place.

While the rules aren’t wide-reaching (again, they only apply to Dutch dating apps), they do show what Apple’s willing to do to comply with government regulation — which it could be facing a lot more of as the EU and US gear up to fight tech monopolies, and potentially even force the company to ditch the iPhone’s Lightning port.

In December the ACM announced a ruling that Apple had to let dating apps use payment services besides the one built into iOS, after the regulator received a complaint from Match Group, the company behind dating services like Tinder, Match.com, and OkCupid. Since then, Apple has proposed a variety of solutions for complying with the order, which the regulator has said aren’t good enough. In May, the ACM said that Apple’s most recent rules, the ones prior to the Friday update, were improvements over its past ideas, but that they still didn’t comply with Dutch and European laws.

There’s been increasing pressure for Apple to comply: even while the company works on changes, it’s been racking up tens of millions of Euros in fines.

The changes Apple announced on Friday are a significant update to its previous proposal, which it published in March. The rules still make developers show users a message before they’re shown the third-party payment screen, which can be either in the app, or on an external website, but Apple’s new proposed language is less likely to scare potential customers off in my opinion.

Originally, the proposed language read:

This app doesn’t support the App Store’s payment system.

All purchases in this app will be managed by the developer “.” You will no longer be transacting with Apple. Your stored App Store payment method and related features, such as subscription management and refund requests, will not be available. Apple is not responsible for the privacy or security of transactions made with this developer.

Now, it reads:

Your payment will be managed by the developer. You will no longer be transacting with Apple.

All purchases in this app will be processed by a service provider selected by the developer “developerName”. The developer will be responsible for the payment methods and related features such as subscriptions and refunds. App Store features, such as your stored App Store payment method, subscription management, and refund requests, will not be available.

The options users will see on the prompt are also different. Before, they would see buttons to “Continue” or “Cancel.” Those have been replaced with a button that says “I Understand.” The messages users will see if the developer links them out of the app (to a third-party payment site) have also gotten rewrites in the same vein.

Under Apple’s new rules, developers also won’t have to choose between a third-party in-app payment or an external payment link; they can use both if they want, which wasn’t previously the case. They’ll also be able to show how much something will cost — Apple’s removed a rule saying that a link to an external payment couldn’t include “the price of items available on the website you own or have responsibility for.”

The old rules, which you can read from this web archive here, had specific requirements for third-party payment processors if a developer wanted to use their services in their app. Before Friday’s changes, developers would have to find a processor that supported things like:

  • “Payment method offering and diversity (support for credit cards, debit cards, etc.)”
  • Value-added services such as transaction tax management and handling
  • Payment security and privacy policies that “exceed Level 1 Payment Card Industry compliance”

The rules also dictated how reliable the payment processor had to be, saying that it had to have 99.9 percent availability and respond to requests within 300 milliseconds. Apple still has some requirements for third-party payment processors, but they appear to be significantly broader — now they’re things like “meets Level 1 Payment Card Industry (PCI) compliance for handling credit and debit card data” and “denominates all prices for the sale of digital goods and services to users in the Netherlands in the euro currency.”

Apple also says it’s updated the third-party payments commission structure. The previous rules made it seem like Dutch dating app devs would have to pay a 27 percent commission on third-party transactions no matter what. While that’s a three percent discount from Apple’s standard 30 percent cut on in-app purchases, having to pay 27 percent would be a significant increase from the 15 percent that developers in the App Store Small Business Program pay, or from the 15 percent that developers pay out of their recurring subscription revenue after users have maintained their subscription for a year.

Now, Apple says that it’s offering a three percent discount when you go through a third-party payment processor, period — if you would’ve paid Apple 30 percent, you’ll now pay it 27, and if you would’ve paid 15 percent, you’ll pay 12. While such a small discount is still a clear message from Apple that developers just shouldn’t bother looking elsewhere (especially given the extra work involved, and the fact that third-party payment systems will have their own fees), the change at least means that smaller developers won’t be paying the iPhone maker a higher percentage if they choose to go third-party.

The ACM doesn’t seem to have taken issue with Apple’s commission structure in its previous rebuttals of the company’s proposals.

In its Friday news post, Apple makes it clear that it’s not particularly happy about the situation it’s in. “Because Apple is committed to constructive engagement with regulators, we’re making the additional changes at the ACM’s request,” the company says, but also that it doesn’t believe some of the changes “are in the best interests of our users’ privacy or data security.” The company also reiterates that it disagrees with the original order and is appealing it.

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U.S., Chinese regulators in talks for audit deal -sources

Chinese and U.S. flags flutter outside the building of an American company in Beijing, China January 21, 2021. REUTERS/Tingshu Wang

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HONG KONG, May 6 (Reuters) – U.S. and Chinese regulatory officials are in talks to settle a long-running dispute over the auditing compliance of U.S.-listed Chinese firms, three people briefed on the matter told Reuters.

The standoff, if not resolved, could see Chinese firms kicked off New York bourses.

The U.S. Public Company Accounting Oversight Board (PCAOB) denied an earlier Reuters report that said a team from the agency had arrived in Beijing for talks.

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This week the U.S. Securities and Exchange Commission (SEC) added over 80 firms, including e-commerce giant JD.com (9618.HK) and China Petroleum & Chemical Corp (600028.SS) to the list of companies facing possible expulsion. read more

The talks between officials from the PCAOB and their counterparts at the China Securities Regulatory Commission (CSRC) can be described as “late stage” after China made concessions in recent months, the people said.

But a PCAOB spokesperson said, “Recent reports that PCAOB officials are currently in China, or that PCAOB officials were in China earlier this year to conduct face-to-face negotiations, are untrue. The PCAOB has not sent any personnel to China since 2017.”

He said the board continues to engage with the Chinese authorities but “speculation about a final agreement remains premature.” As a result, the PCAOB is planning “for various scenarios”.

The CSRC on Friday did not respond directly on the status of discussions. It referred Reuters to official statements from both sides but did not specify which statements.

The sources asked not to be identified due to the sensitivity of the issue.

Authorities in China have long been reluctant to let overseas regulators inspect local accounting firms, citing national security concerns.

But in a key concession, Chinese regulators last month proposed revising confidentiality rules for offshore listings and scrapping requirements that on-site inspections of overseas-listed Chinese firms be conducted mainly by domestic regulators. read more

Sources told Reuters last month that a preliminary framework for audit supervision cooperation between the two countries has been formed. read more

The spat over audit oversight of New York-listed Chinese companies, simmering for more than a decade, came to a head in December when the SEC finalised rules to delist Chinese companies under the Holding Foreign Companies Accountable Act. It said there were 273 companies at risk but did not name them.

As of Friday, the PCAOB has identified 128 Chinese firms as at risk of being delisted.

The issue has been a major factor dragging on American depositary receipts (ADRs) issued by Chinese firms, with the Nasdaq Golden Dragon China Index tumbling 57% over the past 12 months.

Goldman Sachs estimated in March that U.S. institutional investors held around $200 billion worth of Chinese ADRs.

In addition to the concessions by Chinese regulators, there have been other signs that a deal is in the offing.

In late March, sources said the CSRC asked some of the country’s U.S.-listed firms, including Alibaba Group Holding Ltd (9988.HK), Baidu Inc (9888.HK) and JD.com, to prepare for more audit disclosures. Late last month, Fang Xinghai, the CSRC’s vice chairman said he expected a deal in the near future.

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Reporting by Xie Yu; Additional reporting by Katanga Johnson in Washington, Selena Li in Hong Kong and Jing Xu in Beijing; Editing by Edwina Gibbs and William Mallard

Our Standards: The Thomson Reuters Trust Principles.

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Elon Musk tested his limits with NHTSA, and now the U.S. regulators are pushing back

The regulators knew Musk could be impulsive and stubborn; they would need to show some spine to win his cooperation. So they waited. And in a subsequent call, “when tempers were a little bit cool,” the official said, Musk agreed to cooperate: “He was a changed person.”

Since that success in 2016, officials have learned to work with Musk, using a combination of pressure, flattery and threats to persuade him to comply with federal safety measures, according to a half-dozen former regulators, some of whom spoke on condition of anonymity to discuss sensitive matters. In the past six months, Tesla has issued at least a dozen voluntary recalls, a dramatic turnaround for a company known to quietly issue software updates direct to cars — without alerting the public — to fix sometimes alarming safety problems.

With about 2 million cars on the road, Tesla recently has experienced a wave of troubles: Cars using its driver-assistance features have slammed on the brakes for no reason and rolled through stop signs — the latter because Tesla programmed them to do so. A string of crashes into parked emergency vehicles is under investigation. And the cars’ batteries have been documented exploding in crashes and while parked in garages.

Such issues typically prompt NHTSA to investigate and sometimes to push for voluntary or mandatory recalls. If an automaker refuses to cooperate, NHTSA can impose cash fines of about $23,000 per day. The threat of fines — which can add up to nearly $115 million — generally works with traditional companies, the former officials said, but hasn’t proven effective when dealing with Tesla, an extraordinarily valuable company owned by the richest man in the world.

So NHTSA officials have turned to less conventional strategies to force the electric vehicle manufacturer to be more transparent about safety issues — a critical matter at a time when more than 50,000 drivers can now use Tesla’s “Full Self-Driving” software to navigate the nation’s public roads.

“Tesla is presumably smart enough to realize when they don’t have the upper hand anymore,” said Phil Koopman, an associate professor at Carnegie Mellon University whose focus includes federal auto regulations. “Tesla has a choice to make — they have to decide whether to cave or go to the mat. And the reality is, on [federal safety regulations] they’re going to lose.”

Tesla and Musk did not respond to specific questions in a detailed request for comment. Musk said in an email, “For the 100th time, please give my regards to your puppetmaster,” referring to Amazon founder Jeff Bezos, who owns The Washington Post. In a subsequent email, he also criticized The Post’s paywall for online articles.

NHTSA declined to make anyone available for an interview, citing ongoing investigations. But the agency issued written statements to The Post expressing its commitment to protect public safety.

Tesla has publicly touted the safety of its vehicles and its driver-assistance technology, boasting that it has won the highest possible score — five stars — in crash tests where NHTSA slams cars into barriers and then examines the results. Tesla also has said its cars have the lowest probability of injury of any car tested, though NHTSA has disputed that characterization.

Musk’s own attitude was part of the problem with efforts to enforce safety, the officials said. Some experienced personal encounters with Musk that escalated into yelling matches or otherwise proved unproductive because of the CEO’s skepticism about their findings.

NHTSA’s experiences with Tesla were unique among major automakers, the officials said. It was not rare for companies under scrutiny to fiercely push back against their findings, sometimes resulting in mandatory rather than voluntary recalls, they said. But with Tesla, issues as simple as a malfunctioning heat pump or noncompliant sound effects to alert pedestrians to a vehicles’ presence could result in stubbornness.

Tesla eventually issued recalls in both cases — decisions influenced by NHTSA, a spokeswoman said.

“NHTSA will ensure that vehicle manufacturers and developers prioritize safety while they usher in the latest technologies,” spokeswoman Lucia Sanchez said.

Regulators have been slow to take action on some software suites that power automated features, in part because they are wary of appearing to stifle emerging technologies, the former officials said. There also are few rules governing these technologies, further hindering efforts at regulation.

Since 2016, NHTSA has opened 31 special crash investigation cases involving advanced driver-assistance technology, according to data provided by the agency. Twenty-four have involved Tesla vehicles.

Safety experts and some of the former regulators who spoke with The Post raised concerns about “Full Self-Driving” in particular because of its experimental nature. Tesla says the software is in “beta,” meaning it is a pilot through which the company hopes to learn and improve its features for an eventual full release.

Lawmakers have pressed for more transparency regarding Tesla’s practices. In February, following a Post report on the cars’ sudden braking, Sens. Richard Blumenthal (D-Conn.) and Edward J. Markey (D-Mass.) criticized Tesla for putting software on the roads “without fully considering its risks and implications.” They urged NHTSA “to continue taking all appropriate action to protect all users of the road.” And they called on the Federal Trade Commission to launch an investigation into what they called “misleading advertising and marketing” of Autopilot and “Full Self-Driving” systems.

During much of the Obama administration, Tesla slid under the radar of federal safety regulators. As a niche automaker delivering at most tens of thousands of luxury cars per year, officials said it would not have ranked on the agency’s priority list, compared with high-volume automakers such as Ford and Toyota. From 2013 to 2015, there was just one recall per year for early Tesla Model S luxury sedans. Those recalls — which involved seat back mountings, charging equipment and incorrectly secured seat belts — compare with a total of 2,261 vehicle recalls over the same period, according to NHTSA data.

One early run-in set the tone for regulators’ interactions with Tesla. In 2013, Tesla claimed its Model S was the safest car ever tested by NHTSA.

Officials at the agency were dumbstruck, according to some of those who spoke with The Post. The agency issues up to 5-star ratings, but it does not take its designations beyond the star score.

At one point, two former officials recalled, NHTSA officials threatened to contact the FTC, which regulates marketing.“If Tesla wasn’t willing to pull the plug, FTC was probably going to take action,” one of the former officials said.

But Tesla continued to make similar claims, including in 2019, when it said its Model 3 had the “lowest probability of injury of any vehicle ever tested” by NHTSA. The agency ultimately referred the automaker to the FTC. The FTC declined to comment.

NHTSA, meanwhile, focused increasing attention on the automaker as it built more and more cars, launching the Model X SUV in 2015 and steadily growing its production in the buildup to the mass market-aimed Model 3. The agency also had to deal with emerging issues, such as fires caused by road debris striking the cars’ underbodies, where the high-voltage battery is located.Musk wrote in a statement at the time that Tesla would introduce a fix to bring that risk “down to virtually zero.”

One official recalled that regulators were confused by Musk’s reluctance to address one battery-related issue. The only evident solution was to appeal to his sense of pride.

“NHTSA staff backs Musk into a corner and challenges his ego and says, ‘Wait, you can’t solve this?’ ” a former official said. “And the next day he has a solution.”

The Trump administration was even less hands-on. The NHTSA website lists only one recall for the 2017 through 2020 Tesla Model 3, then the automaker’s most popular model. Depending on the model year, there were up to eight recalls issued for the same car beginning May 25, 2021, after President Biden took office.

Under the Trump administration, career officials and top staff were reluctant to take a strong stance on a mounting catalogue of safety concerns, wary of appearing to target innovation and already under pressure from the president to ease regulations.

The officials said staffers were reluctant to take on a rapidly emerging automotive power with a massive public platform, worried they wouldn’t have the backing of top officials if they received a browbeating from Musk.

“My former staff felt they had nothing to do — twiddling their thumbs,” one former official said. “The professional staff — the career staff — wanted to do stuff either from a regulatory standpoint or investigation perspective” but were stymied.

Musk praised NHTSA as “great” in April 2021.

Although Labor Secretary Marty Walsh recently met with Musk and took a factory tour in Texas, Axios reported, Musk has criticized President Biden for leaving Tesla out of major events. Musk also has parroted Republican barbs, joking at one point Biden was “sleeping.”

Last summer, NHTSA began requiring companies such as Tesla to report on certain crashes involving automated features within one day of learning of the incident. Then in August, the agency launched an investigation into about a dozen crashes involving parked emergency vehicles while Autopilot was active. In a letter, it called out Tesla for pushing out a software update to help its cars better see emergency vehicles, without formally issuing a recall.

A surge of investigations, recalls and public admonitions has followed.

Former officials who spoke with The Post said Tesla’s haphazard approach has grated on some NHTSA staff, and the enforcement reflects an attempt at a course correction.

“The agency does hold a very firm line on [federal motor vehicle regulations], and I don’t think any of us want to live in a world where the automakers do essential recalls without going through that process,” said Bryan Thomas, who was communications director at NHTSA during the Obama administration. “If the car’s going to react differently at a stop sign tomorrow than it did today, you should know that as a driver.”

The former officials said NHTSA is not singling out Tesla. Instead, they said the agency is using a calculated approach to try to force the combative automaker to recognize findings that can’t be denied. That means picking targets — the seat belt chime, rolling stops, a windshield defroster — that may strike executives and even some owners as trivial. But those narrow targets offer an entree to larger issues that are not yet addressed by federal regulations, which often lag behind the latest software advances.

In February, NHTSA cracked down on a feature known as “Boombox,” which plays sounds that bystanders can hear — such as an ice cream truck jingle — but can drown out sounds that warn pedestrians of approaching vehicles. On Twitter, Musk decried the agency as the “fun police.”

Federal safety investigators from the National Transportation Safety Board have also focused their attention on Tesla. Late last year, NTSB Chair Jennifer Homendy wrote a letter to Musk calling out the company’s “inaction” on recommendations that would have added safeguards to the Autopilot system in response to the fatal 2016 crash with the tractor-trailer.

In a statement posted to its website at the time, Tesla called the death “A Tragic Loss.” The company defended the performance of Autopilot across the tens of millions of miles it had logged and emphasized that drivers should be prepared to take control of the vehicle at any time.

In September, Homendy expressed her concern about Musk’s approach to safety in an interview with The Post.

“I think Elon Musk is an incredible innovator,” she said, expressing hope for “the ultimate success of [autonomous vehicle] technologies — which could save lives.”

But she also encouraged Musk to “really prioritize safety for his company,” adding: “I don’t want to see lives lost in the meantime.”



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U.S. antitrust regulators seek more data from Activision, Microsoft on planned deal

March 21 (Reuters) – The U.S. Federal Trade Commission has sought additional data from Activision Blizzard Inc (ATVI.O) and Microsoft Corp (MSFT.O) related to the antitrust review of their deal, the games developer said in a regulatory filing on Monday.

Microsoft in January agreed to acquire the “Call of Duty” maker for $68.7 billion in the biggest gaming industry deal in history. read more

Microsoft will file for approval of the deal in 17 jurisdictions, the company’s president, Brad Smith, told reporters last month.

In order to woo U.S. and other regulators, the company said in February that it had developed a new set of principles for its app store, including open access to developers who meet privacy and security standards. read more

With the Activision deal, Microsoft will take on industry leaders Tencent Holdings Ltd (0700.HK) and Sony Group Corp (6758.T). Sony Interactive Entertainment recently said it would buy Bungie Inc, creator of the “Halo” videogame, in a deal valued at $3.6 billion.

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Reporting by Diane Bartz in Washington, Yuvraj Malik in Bengaluru
Editing by Shailesh Kuber and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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