Policy – Page 12

GirlsDoPorn owner Michael Pratt gets 27 years for sex trafficking conspiracy

GirlsDoPorn, Michael Pratt, Policy / Kris Guyer / September 9, 2025

“For almost a decade, the Defendant led the scheme to systematically coerce and defraud women into engaging in filmed sexual activity for profit,” the sentencing recommendation said. “A sentence of 260 months is warranted, given the longevity of the scheme, the amount of profit, and the extent of the damage to the victims.”

Pratt’s plea agreement limited his rights to appeal the sentencing, but said he “may appeal a custodial sentence above 260 months.” The 27-year (324-month) sentence exceeds that. While the government agreed to recommend no more than 260 months, the plea agreement said the government “may support on appeal the sentence or restitution order actually imposed.”

Pratt fled the US in 2019, shortly before being charged with sex trafficking crimes. “He was named to the FBI’s Ten Most Wanted list and lived as an international fugitive for more than three years until his arrest in Spain in December 2022 and extradition to San Diego in March 2024,” the DOJ said.

Pratt tried to minimize his role

Pratt is the fourth person to be sentenced in the GirlsDoPorn case. Pratt’s business partner, Matthew Wolfe, received 14 years. Ruben Andre Garcia was sentenced to 20 years, and Theodore Gyi was sentenced to four years. Defendant Valorie Moser is scheduled to be sentenced on Friday this week.

Pratt’s sentencing memorandum tried to minimize his role in the conspiracy. “Circa 2014, Mr. Pratt’s childhood friend, Matt Wolfe, took over as the cameraman and Mr. Pratt spent more time in the office doing post-production work and other business related activities,” the filing said.

Pratt argued that Garcia exhibited “erratic and unpredictable” behavior and that “much of this conduct occurred outside of Mr. Pratt’s presence.” Pratt’s filing said he should not receive a sentence as long as Garcia’s.

Garcia “was a rapist,” Pratt’s filing said. “Mr. Pratt had no involvement in Garcia’s sexual activities with the models before or after filming, nor did he condone it. When he received some complaints about Garcia’s behavior, Mr. Pratt took precautions to ensure the safety of the models, including setting up nanny video cameras, securing hotel incidental refrigerators, and ensuring everyone left the hotel as a group.”

The government’s sentencing memorandum described Pratt as “the ringleader in a wide-ranging sex-trafficking conspiracy during which many women were defrauded into engaging in sex acts on camera, destroying many of their lives.” The “scheme would never have occurred” if not for Pratt’s actions, “and hundreds of women would not have been victimized,” the government filing said.

GirlsDoPorn owner Michael Pratt gets 27 years for sex trafficking conspiracy Read More »

Judge: Anthropic’s $1.5B settlement is being shoved “down the throat of authors”

AI, AI training, Anthropic, Artificial Intelligence, copyright, copyright act, copyright infringement, generative ai, libgen, piracy, Policy / Mike M. / September 9, 2025

At a hearing Monday, US district judge William Alsup blasted a proposed $1.5 billion settlement over Anthropic’s rampant piracy of books to train AI.

The proposed settlement comes in a case where Anthropic could have owed more than $1 trillion in damages after Alsup certified a class that included up to 7 million claimants whose works were illegally downloaded by the AI company.

Instead, critics fear Anthropic will get off cheaply, striking a deal with authors suing that covers less than 500,000 works and paying a small fraction of its total valuation (currently $183 billion) to get away with the massive theft. Defector noted that the settlement doesn’t even require Anthropic to admit wrongdoing, while the company continues raising billions based on models trained on authors’ works. Most recently, Anthropic raised $13 billion in a funding round, making back about 10 times the proposed settlement amount after announcing the deal.

Alsup expressed grave concerns that lawyers rushed the deal, which he said now risks being shoved “down the throat of authors,” Bloomberg Law reported.

In an order, Alsup clarified why he thought the proposed settlement was a chaotic mess. The judge said he was “disappointed that counsel have left important questions to be answered in the future,” seeking approval for the settlement despite the Works List, the Class List, the Claim Form, and the process for notification, allocation, and dispute resolution all remaining unresolved.

Denying preliminary approval of the settlement, Alsup suggested that the agreement is “nowhere close to complete,” forcing Anthropic and authors’ lawyers to “recalibrate” the largest publicly reported copyright class-action settlement ever inked, Bloomberg reported.

Of particular concern, the settlement failed to outline how disbursements would be managed for works with multiple claimants, Alsup noted. Until all these details are ironed out, Alsup intends to withhold approval, the order said.

One big change the judge wants to see is the addition of instructions requiring “anyone with copyright ownership” to opt in, with the consequence that the work won’t be covered if even one rights holder opts out, Bloomberg reported. There should also be instruction that any disputes over ownership or submitted claims should be settled in state court, Alsup said.

Judge: Anthropic’s $1.5B settlement is being shoved “down the throat of authors” Read More »

Supreme Court Chief Justice lets Trump fire FTC Democrat, at least for now

ftc, Policy, Trump / Tim Belzer / September 8, 2025

1935 Supreme Court is key precedent

The key precedent in the case is Humphrey’s Executor v. United States, a 1935 ruling in which the Supreme Court unanimously held that the president can only remove FTC commissioners for inefficiency, neglect of duty, or malfeasance in office. Trump’s termination notices to Slaughter and Bedoya said they were being fired simply because their presence on the commission “is inconsistent with my Administration’s priorities.”

The Trump administration argues that Humphrey’s Executor shouldn’t apply to the current version of the FTC because it exercises significant executive power. But the appeals court, in a 2-1 ruling, said “the present-day Commission exercises the same powers that the Court understood it to have in 1935 when Humphrey’s Executor was decided.”

“The government has no likelihood of success on appeal given controlling and directly on point Supreme Court precedent,” the panel majority said.

But while the government was found to have no likelihood of success in the DC Circuit appeals court, its chances are presumably much better in the Supreme Court. The Supreme Court previously stayed District Court decisions in cases involving Trump’s removal of Democrats from the National Labor Relations Board, the Merit Systems Protection Board, and the Consumer Product Safety Commission.

In a 2020 decision involving the Consumer Financial Protection Bureau, the court said in a footnote that its 1935 “conclusion that the FTC did not exercise executive power has not withstood the test of time.” If the Supreme Court ultimately rules in favor of Trump, it could throw out the Humphrey’s Executor ruling or clarify it in a way that makes it inapplicable to the FTC.

But Humphrey’s Executor is still a binding precedent, Slaughter’s opposition to the administrative stay said. “This Court should not grant an administrative stay where the court below simply ‘follow[ed] the case which directly controls,’ as it was required to do,” the Slaughter filing said.

Supreme Court Chief Justice lets Trump fire FTC Democrat, at least for now Read More »

“First of its kind” AI settlement: Anthropic to pay authors $1.5 billion

AI, Anthropic, Artificial Intelligence, copyright infringement, generative ai, piracy, Policy, torrenting / Mike M. / September 6, 2025

Authors revealed today that Anthropic agreed to pay $1.5 billion and destroy all copies of the books the AI company pirated to train its artificial intelligence models.

In a press release provided to Ars, the authors confirmed that the settlement is “believed to be the largest publicly reported recovery in the history of US copyright litigation.” Covering 500,000 works that Anthropic pirated for AI training, if a court approves the settlement, each author will receive $3,000 per work that Anthropic stole. “Depending on the number of claims submitted, the final figure per work could be higher,” the press release noted.

Anthropic has already agreed to the settlement terms, but a court must approve them before the settlement is finalized. Preliminary approval may be granted this week, while the ultimate decision may be delayed until 2026, the press release noted.

Justin Nelson, a lawyer representing the three authors who initially sued to spark the class action—Andrea Bartz, Kirk Wallace Johnson, and Charles Graeber—confirmed that if the “first of its kind” settlement “in the AI era” is approved, the payouts will “far” surpass “any other known copyright recovery.”

“It will provide meaningful compensation for each class work and sets a precedent requiring AI companies to pay copyright owners,” Nelson said. “This settlement sends a powerful message to AI companies and creators alike that taking copyrighted works from these pirate websites is wrong.”

Groups representing authors celebrated the settlement on Friday. The CEO of the Authors’ Guild, Mary Rasenberger, said it was “an excellent result for authors, publishers, and rightsholders generally.” Perhaps most critically, the settlement shows “there are serious consequences when” companies “pirate authors’ works to train their AI, robbing those least able to afford it,” Rasenberger said.

“First of its kind” AI settlement: Anthropic to pay authors $1.5 billion Read More »

Warner Bros. sues Midjourney to stop AI knockoffs of Batman, Scooby-Doo

AI, Artificial Intelligence, batman, copyright, generative ai, image generator, MidJourney, Policy, scooby doo, Superman, Warner Bros., warner bros. discovery / Tim Belzer / September 6, 2025

AI would’ve gotten away with it too…

Warner Bros. case builds on arguments raised in a Disney/Universal lawsuit.

DVD art for the animated movie Scooby-Doo & Batman: The Brave and the Bold. Credit: Warner Bros. Discovery

Warner Bros. hit Midjourney with a lawsuit Thursday, crafting a complaint that strives to shoot down defenses that the AI company has already raised in a similar lawsuit filed by Disney and Universal Studios earlier this year.

The big film studios have alleged that Midjourney profits off image generation models trained to produce outputs of popular characters. For Disney and Universal, intellectual property rights to pop icons like Darth Vader and the Simpsons were allegedly infringed. And now, the WB complaint defends rights over comic characters like Superman, Wonder Woman, and Batman, as well as characters considered “pillars of pop culture with a lasting impact on generations,” like Scooby-Doo and Bugs Bunny, and modern cartoon characters like Rick and Morty.

“Midjourney brazenly dispenses Warner Bros. Discovery’s intellectual property as if it were its own,” the WB complaint said, accusing Midjourney of allowing subscribers to “pick iconic” copyrighted characters and generate them in “every imaginable scene.”

Planning to seize Midjourney’s profits from allegedly using beloved characters to promote its service, Warner Bros. described Midjourney as “defiant and undeterred” by the Disney/Universal lawsuit. Despite that litigation, WB claimed that Midjourney has recently removed copyright protections in its supposedly shameful ongoing bid for profits. Nothing but a permanent injunction will end Midjourney’s outputs of allegedly “countless infringing images,” WB argued, branding Midjourney’s alleged infringements as “vast, intentional, and unrelenting.”

Examples of closely matching outputs include prompts for “screencaps” showing specific movie frames, a search term that at least one artist, Reid Southen, had optimistically predicted Midjourney would block last year, but it apparently did not.

Here are some examples included in WB’s complaint:

Midjourney’s output for the prompt, “Superman, classic cartoon character, DC comics.”

Midjourney could face devastating financial consequences in a loss. At trial, WB is hoping discovery will show the true extent of Midjourney’s alleged infringement, asking the court for maximum statutory damages, at $150,000 per infringing output. Just 2,000 infringing outputs unearthed could cost Midjourney more than its total revenue for 2024, which was approximately $300 million, the WB complaint said.

Warner Bros. hopes to hobble Midjourney’s best defense

For Midjourney, the WB complaint could potentially hit harder than the Disney/Universal lawsuit. WB’s complaint shows how closely studios are monitoring AI copyright litigation, likely choosing ideal moments to strike when studios feel they can better defend their property. So, while much of WB’s complaint echoes Disney and Universal’s arguments—which Midjourney has already begun defending against—IP attorney Randy McCarthy suggested in statements provided to Ars that WB also looked for seemingly smart ways to potentially overcome some of Midjourney’s best defenses when filing its complaint.

WB likely took note when Midjourney filed its response to the Disney/Universal lawsuit last month, arguing that its system is “trained on billions of publicly available images” and generates images not by retrieving a copy of an image in its database but based on “complex statistical relationships between visual features and words in the text-image pairs are encoded within the model.”

This defense could allow Midjourney to avoid claims that it copied WB images and distributes copies through its models. But hoping to dodge this defense, WB didn’t argue that Midjourney retains copies of its images. Rather, the entertainment giant raised a more nuanced argument that:

Midjourney used software, servers, and other technology to store and fix data associated with Warner Bros. Discovery’s Copyrighted Works in such a manner that those works are thereby embodied in the model, from which Midjourney is then able to generate, reproduce, publicly display, and distribute unlimited “copies” and “derivative works” of Warner Bros. Discovery’s works as defined by the Copyright Act.”

McCarthy noted that WB’s argument pushes the court to at least consider that even though “Midjourney does not store copies of the works in its model,” its system “nonetheless accesses the data relating to the works that are stored by Midjourney’s system.”

“This seems to be a very clever way to counter MJ’s ‘statistical pattern analysis’ arguments,” McCarthy said.

If it’s a winning argument, that could give WB a path to wipe Midjourney’s models. WB argued that each time Midjourney provides a “substantially new” version of its image generator, it “repeats this process.” And that ongoing activity—due to Midjourney’s initial allegedly “massive copying” of WB works—allows Midjourney to “further reproduce, publicly display, publicly perform, and distribute image and video outputs that are identical or virtually identical to Warner Bros. Discovery’s Copyrighted Works in response to simple prompts from subscribers.”

Perhaps further strengthening the WB’s argument, the lawsuit noted that Midjourney promotes allegedly infringing outputs on its 24/7 YouTube channel and appears to have plans to compete with traditional TV and streaming services. Asking the court to block Midjourney’s outputs instead, WB claims it’s already been “substantially and irreparably harmed” and risks further damages if the AI image generator is left unchecked.

As alleged proof that the AI company knows its tool is being used to infringe WB property, WB pointed to Midjourney’s own Discord server and subreddit, where users post outputs depicting WB characters and share tips to help others do the same. They also called out Midjourney’s “Explore” page, which allows users to drop a WB-referencing output into the prompt field to generate similar images.

“It is hard to imagine copyright infringement that is any more willful than what Midjourney is doing here,” the WB complaint said.

WB and Midjourney did not immediately respond to Ars’ request to comment.

Midjourney slammed for promising “fewer blocked jobs”

McCarthy noted that WB’s legal strategy differs in other ways from the arguments Midjourney’s already weighed in the Disney/Universal lawsuit.

The WB complaint also anticipates Midjourney’s likely defense that users are generating infringing outputs, not Midjourney, which could invalidate any charges of direct copyright infringement.

In the Disney/Universal lawsuit, Midjourney argued that courts have recently found that AI tools referencing copyrighted works is “a quintessentially transformative fair use,” accusing studios of trying to censor “an instrument for user expression.” They claim that Midjourney cannot know about infringing outputs unless studios use the company’s DMCA process, while noting that subscribers have “any number of legitimate, noninfringing grounds to create images incorporating characters from popular culture,” including “non-commercial fan art, experimentation and ideation, and social commentary and criticism.”

To avoid losing on that front, the WB complaint doesn’t depend on a ruling that Midjourney directly infringed copyrights. Instead, the complaint “more fully” emphasizes how Midjourney may be “secondarily liable for infringement via contributory, inducement and/or vicarious liability by inducing its users to directly infringe,” McCarthy suggested.

Additionally, WB’s complaint “seems to be emphasizing” that Midjourney “allegedly has the technical means to prevent its system from accepting prompts that directly reference copyrighted characters,” and “that would prevent infringing outputs from being displayed,” McCarthy said.

The complaint noted that Midjourney is in full control of what outputs can be generated. Noting that Midjourney “temporarily refused to ‘animate'” outputs of WB characters after launching video generations, the lawsuit appears to have been filed in response to Midjourney “deliberately” removing those protections and then announcing that subscribers would experience “fewer blocked jobs.”

Together, these arguments “appear to be intended to lead to the inference that Midjourney is willfully enticing its users to infringe,” McCarthy said.

WB’s complaint details simple user prompts that generate allegedly infringing outputs without any need to manipulate the system. The ease of generating popular characters seems to make Midjourney a destination for users frustrated by other AI image generators that make it harder to generate infringing outputs, WB alleged.

On top of that, Midjourney also infringes copyrights by generating WB characters, “even in response to generic prompts like ‘classic comic book superhero battle.'” And while Midjourney has seemingly taken steps to block WB characters from appearing on its “Explore” page, where users can find inspiration for prompts, these guardrails aren’t perfect, but rather “spotty and suspicious,” WB alleged. Supposedly, searches for correctly spelled character names like “Batman” are blocked, but any user who accidentally or intentionally mispells a character’s name like “Batma” can learn an easy way to work around that block.

Additionally, WB alleged, “the outputs often contain extensive nuance and detail, background elements, costumes, and accessories beyond what was specified in the prompt.” And every time that Midjourney outputs an allegedly infringing image, it “also trains on the outputs it has generated,” the lawsuit noted, creating a never-ending cycle of continually enhanced AI fakes of pop icons.

Midjourney could slow down the cycle and “minimize” these allegedly infringing outputs, if it cannot automatically block them all, WB suggested. But instead, “Midjourney has made a calculated and profit-driven decision to offer zero protection for copyright owners even though Midjourney knows about the breathtaking scope of its piracy and copyright infringement,” WB alleged.

Fearing a supposed scheme to replace WB in the market by stealing its best-known characters, WB accused Midjourney of willfully allowing WB characters to be generated in order to “generate more money for Midjourney” to potentially compete in streaming markets.

Midjourney will remove protections “on a whim”

As Midjourney’s efforts to expand its features escalate, WB claimed that trust is lost. Even if Midjourney takes steps to address rightsholders’ concerns, WB argued, studios must remain watchful of every upgrade, since apparently, “Midjourney can and will remove copyright protection measures on a whim.”

The complaint noted that Midjourney just this week announced “plans to continue deploying new versions” of its image generator, promising to make it easier to search for and save popular artists’ styles—updating a feature that many artists loathe.

Without an injunction, Midjourney’s alleged infringement could interfere with WB’s licensing opportunities for its content, while “illegally and unfairly” diverting customers who buy WB products like posters, wall art, prints, and coloring books, the complaint said.

Perhaps Midjourney’s strongest defense could be efforts to prove that WB benefits from its image generator. In the Disney/Universal lawsuit, Midjourney pointed out that studios “benefit from generative AI models,” claiming that “many dozens of Midjourney subscribers are associated with” Disney and Universal corporate email addresses. If WB corporate email addresses are found among subscribers, Midjourney could claim that WB is trying to “have it both ways” by “seeking to profit” from AI tools while preventing Midjourney and its subscribers from doing the same.

McCarthy suggested it’s too soon to say how the WB battle will play out, but Midjourney’s response will reveal how it intends to shift tactics to avoid courts potentially picking apart its defense of its training data, while keeping any blame for copyright-infringing outputs squarely on users.

“As with the Disney/Universal lawsuit, we need to wait to see how Midjourney answers these latest allegations,” McCarthy said. “It is definitely an interesting development that will have widespread implications for many sectors of our society.”

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Warner Bros. sues Midjourney to stop AI knockoffs of Batman, Scooby-Doo Read More »

Harvard beats Trump as judge orders US to restore $2.6 billion in funding

Harvard, Policy, Science, trump administration / Mike M. / September 4, 2025

Burroughs’ footnote said that district courts try to follow Supreme Court rulings, but “the Supreme Court’s recent emergency docket rulings regarding grant terminations have not been models of clarity, and have left many issues unresolved.”

“This Court understands, of course, that the Supreme Court, like the district courts, is trying to resolve these issues quickly, often on an emergency basis, and that the issues are complex and evolving,” Burroughs wrote. “Given this, however, the Court respectfully submits that it is unhelpful and unnecessary to criticize district courts for ‘defy[ing]’ the Supreme Court when they are working to find the right answer in a rapidly evolving doctrinal landscape, where they must grapple with both existing precedent and interim guidance from the Supreme Court that appears to set that precedent aside without much explanation or consensus.”

White House blasts “activist Obama-appointed judge”

White House spokesperson Liz Huston issued a statement saying the government will immediately appeal the “egregious” ruling. “Just as President Trump correctly predicted on the day of the hearing, this activist Obama-appointed judge was always going to rule in Harvard’s favor, regardless of the facts,” Huston said, according to the Harvard Crimson.

Huston also said that “Harvard does not have a constitutional right to taxpayer dollars and remains ineligible for grants in the future” in a statement quoted by various media outlets. “To any fair-minded observer, it is clear that Harvard University failed to protect their students from harassment and allowed discrimination to plague their campus for years,” she said.

Harvard President Alan Garber wrote in a message on the university’s website that the “ruling affirms Harvard’s First Amendment and procedural rights, and validates our arguments in defense of the University’s academic freedom, critical scientific research, and the core principles of American higher education.”

Garber noted that the case is not over. “We will continue to assess the implications of the opinion, monitor further legal developments, and be mindful of the changing landscape in which we seek to fulfill our mission,” he wrote.

Harvard beats Trump as judge orders US to restore $2.6 billion in funding Read More »

FCC chair teams up with Ted Cruz to block Wi-Fi hotspots for schoolkids

brendan carr, FCC, Policy, ted cruz, wi-fi / Tim Belzer / September 4, 2025

“Chairman Carr’s moves today are very unfortunate as they further signal that the Commission is no longer prioritizing closing the digital divide,” Schwartzman said. “In the 21st Century, education doesn’t stop when a student leaves school and today’s actions could lead to many students having a tougher time completing homework assignments because their families lack Internet access.”

Biden FCC expanded school and library program

Under then-Chairwoman Jessica Rosenworcel, the FCC expanded its E-Rate program in 2024 to let schools and libraries use Universal Service funding to lend out Wi-Fi hotspots and services that could be used off-premises. The FCC previously distributed Wi-Fi hotspots and other Internet access technology under pandemic-related spending authorized by Congress in 2021, but that program ended. The new hotspot lending program was supposed to begin this year.

Carr argues that when the Congressionally approved program ended, the FCC lost its authority to fund Wi-Fi hotspots for use outside of schools and libraries. “I dissented from both decisions at the time, and I am now pleased to circulate these two items, which will end the FCC’s illegal funding [of] unsupervised screen time for young kids,” he said.

Under Rosenworcel, the FCC said the Communications Act gives it “broad and flexible authority to establish rules governing the equipment and services that will be supported for eligible schools and libraries, as well as to design the specific mechanisms of support.”

The E-Rate program can continue providing telecom services to schools and libraries despite the hotspot component being axed. E-Rate disbursed about $1.75 billion in 2024, but could spend more based on demand because it has a funding cap of about $5 billion per year. E-Rate and other Universal Service programs are paid for through fees imposed on phone companies, which typically pass the cost on to consumers.

FCC chair teams up with Ted Cruz to block Wi-Fi hotspots for schoolkids Read More »

Ars Live: Consumer tech firms stuck scrambling ahead of looming chip tariffs

ars live, consumer tech, Donald Trump, game console prices, laptop prices, Policy, smartphone prices, tariffs, us-china trade war / Kris Guyer / September 2, 2025

And perhaps the biggest confounding factor for businesses attempting to align supply chain choices with predictable tariff costs is looming chip tariffs. Trump has suggested those could come in August, but nearing the end of the month, there’s still no clarity there.

As tech firms brace for chip tariffs, Brzytwa will share CTA’s forecast based on a survey of industry experts, revealing the unique sourcing challenges chip tariffs will likely pose. It’s a particular pain point that Trump seems likely to impose taxes not just on imports of semiconductors but of any downstream product that includes a chip.

Because different electronics parts are typically assembled in different countries, supply chains for popular products have suddenly become a winding path, with potential tariff obstacles cropping up at any turn.

To Trump, complicating supply chains seems to be the point, intending to divert entire supply chains into the country to make the US a tech manufacturing hub, supposedly at the expense of his prime trade war target, China—which today is considered a world manufacturing “superpower.”

However, The New York Times this week suggested that Trump’s bullying tactics aren’t working on China, and experts suggest that now his chip tariffs risk not just spiking prices but throttling AI innovation in the US—just as China’s open source AI models shake up markets globally.

Brzytwa will share CTA research showing how the trade war has rattled, and will likely continue to rattle, tech firms into the foreseeable future. He’ll explain why tech firms can’t quickly or cheaply divert chip supply chains—and why policy that neglects to understand tech firms’ positions could be a lose-lose, putting Americans in danger of losing affordable access to popular tech without achieving Trump’s goal of altering China’s trade behavior.

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Delete, Delete, Delete: How FCC Republicans are killing rules faster than ever

brendan carr, direct final rule, FCC, fcc delete delete delete, Features, Policy / Mike M. / September 2, 2025

FCC speeds up rule-cutting, giving public as little as 10 days to file objections.

FCC Chairman Brendan Carr testifies before the House Appropriations Subcommittee on Financial Services and General Government on May 21, 2025 in Washington, DC. Credit: Getty Images | John McDonnell

The Federal Communications Commission’s Republican chairman is eliminating regulations at breakneck speed by using a process that cuts dozens of rules at a time while giving the public only 10 or 20 days to review each proposal and submit objections.

Chairman Brendan Carr started his “Delete, Delete, Delete” rule-cutting initiative in March and later announced he’d be using the Direct Final Rule (DFR) mechanism to eliminate regulations without a full public-comment period. Direct Final Rule is just one of several mechanisms the FCC is using in the Delete, Delete, Delete initiative. But despite the seeming obscurity of regulations deleted under Direct Final Rule so far, many observers are concerned that the process could easily be abused to eliminate more significant rules that protect consumers.

On July 24, the FCC removed what it called “11 outdated and useless rule provisions” related to telegraphs, rabbit-ear broadcast receivers, and phone booths. The FCC said the 11 provisions consist of “39 regulatory burdens, 7,194 words, and 16 pages.”

The FCC eliminated these rules without the “prior notice and comment” period typically used to comply with the US Administrative Procedure Act (APA), with the FCC finding that it had “good cause” to skip that step. The FCC said it would allow comment for 10 days and that rule eliminations would take effect automatically after the 10-day period unless the FCC concluded that it received “significant adverse comments.”

On August 7, the FCC again used Direct Final Rule to eliminate 98 rules and requirements imposed on broadcasters. This time, the FCC allowed 20 days for comment. But it maintained its stance that the rules would be deleted automatically at the end of the period if no “significant” comments were received.

By contrast, FCC rulemakings usually allow 30 days for initial comments and another 15 days for reply comments. The FCC then considers the comments, responds to the major issues raised, and drafts a final proposal that is put up for a commission vote. This process, which takes months and gives both the public and commissioners more opportunity to consider the changes, can apply both to the creation of new rules and the elimination of existing ones.

FCC’s lone Democrat warns of “Trojan horse”

Telecom companies want the FCC to eliminate rules quickly. As we’ve previously written, AT&T submitted comments to the Delete, Delete, Delete docket urging the agency to eliminate rules that can result in financial penalties “without the delay imposed by notice-and-comment proceeding.”

Carr’s use of Direct Final Rule has drawn criticism from advocacy groups, local governments that could be affected by rule changes, and the FCC’s only Democratic commissioner. Anna Gomez, the lone FCC Democrat, told Ars in a phone interview that the rapid rule-cutting method “could be a Trojan horse because what we did, or what the commission did, is it adopted a process without public comment to eliminate any rule it finds to be outdated and, crucially, unwarranted. We don’t define what either of those terms mean, which therefore could lead to a situation that’s ripe for abuse.”

Gomez said she’d “be concerned if we eliminated rules that are meant to protect or inform consumers, or to promote competition, such as the broadband labels. This commission seems to have entirely lost its focus on consumers.”

Gomez told us that she doesn’t think a 10-day comment period is ever appropriate and that Carr seems to be trying “to meet some kind of arbitrary rule reduction quota.” If the rules being eliminated are truly obsolete, “then what’s the rush?” she asked. “If we don’t give sufficient time for public comment, then what happens when we make a mistake? What happens when we eliminate rules and it turns out, in fact, that these rules were important to keep? That’s why we give the public due process to comment on when we adopt rules and when we eliminate rules.”

Gomez hasn’t objected to the specific rules deleted under this process so far, but she spoke out against the method used by Carr both times Direct Final Rule method was used. “I told the chairman that I could support initiating a proceeding to look at how a Direct Final Rule process could be used going forward and including a Notice of Proposed Rulemaking proposing to eliminate the rules the draft order purports to eliminate today. That offer was declined,” she said in her dissenting statement in the July vote.

Gomez said that rules originally adopted under a notice-and-comment process should not be eliminated “without seeking public comment on appropriate processes and guardrails.” She added that the “order does not limit the Direct Final Rule process to elimination of rules that are objectively obsolete with a clear definition of how that will be applied, asserting instead authority to remove rules that are ‘outdated or unwarranted.'”

Local governments object

Carr argued that the Administrative Procedure Act “gives the commission the authority to fast-track the elimination of rules that inarguably fail to serve the public interest. Using this authority, the Commission can forgo the usual prior notice and public comment period before repealing the rules for these bygone regulations.”

Carr justified the deletions by saying that “outdated and unnecessary regulations from Washington often derail efforts to build high-speed networks and infrastructure across the country.” It’s not clear why the specific rule deletions were needed to accelerate broadband deployment, though. As Carr said, the FCC’s first use of Direct Finale Rule targeted regulations for “telegraph services, rabbit-ear broadcast receivers, and telephone booths—technologies that were considered outdated decades ago.”

Carr’s interpretation of the Administrative Procedure Act is wrong, said an August 6 filing submitted by local governments in Maryland, Massachusetts, the District of Columbia, Oregon, Virginia, California, New York, and Texas. Direct Final Rule “is intended for extremely simple, non-substantive decisions,” and the FCC process “is insufficient to ensure that future Commission decisions will fall within the good cause exception of the Administrative Procedure Act,” the filing said.

Local governments argued that “the new procedure is itself a substantive decision” and should be subject to a full notice-and-comment rulemaking. “The procedure adopted by the Commission makes it almost inevitable that the Commission will adopt rule changes outside of any APA exceptions,” the filing said.

The FCC could face court challenges. Gerard Lavery Lederer, a lawyer for the local government coalition, told Ars, “we fully anticipate that Chairman Carr and the FCC’s general counsel will take our concerns seriously.” But he also said local governments are worried about the FCC adopting industry proposals that “violate local government rights as preserved by Congress in the [Communications] Act” or that have “5th Amendment takings implications and/or 10th Amendment overreach issues.”

Is that tech really “obsolete”?

At least some rules targeted for deletion, like regulations on equipment used by radio and TV broadcast stations, may seem too arcane to care about. But a coalition of 22 public interest, civil rights, labor, and digital rights groups argued in a July 17 letter to Carr that some of the rule deletions could harm vulnerable populations and that the shortened comment period wasn’t long enough to determine the impact.

“For example, the Commission has targeted rules relating to calling cards and telephone booths in the draft Order as ‘obsolete,'” the letter said. “However, calling cards and pay phones remain important technologies for rural areas, immigrant communities, the unhoused, and others without reliable access to modern communications services. The impact on these communities is not clear and will not likely be clear in the short time provided for comment.”

The letter also said the FCC’s new procedure “would effectively eliminate any hope for timely judicial review of elimination of a rule on delegated authority.” Actions taken via delegated authority are handled by FCC bureaus without a vote of the commission.

So far, Carr has held commission votes for his Direct Final Rule actions rather than letting FCC bureau issue orders themselves. But in the July order, the FCC said its bureaus and offices have previously adopted or repealed rules without notice and comment and “reaffirm[ed] that all Bureaus and Offices may continue to take such actions in situations that are exempt from the APA’s notice-and-comment requirements.”

“This is about pushing boundaries”

The advocacy groups’ letter said that delegating authority to bureaus “makes judicial review virtually impossible, even though the order goes into effect immediately.” Parties impacted by actions made on delegated authority can’t go straight to the courts and must instead “file an application for review with the Commission as a prerequisite to any petition for judicial review,” the letter said. The groups argued that “a Chairman that does not wish to permit judicial review of elimination of a rule through DFR may order a bureau to remove the rule, then simply refuse to take action on the application for review.”

The letter was signed by Public Knowledge; Asian Americans Advancing Justice-AAJC; the Benton Institute for Broadband & Society; the Center for Digital Democracy; Common Sense Media; the Communications Workers of America; the Electronic Privacy Information Center; HTTP; LGBT Tech; the Media Access Project; MediaJustice; the Multicultural Media, Telecom and Internet Council; the National Action Network; NBJC; the National Council of Negro Women; the National Digital Inclusion Alliance; the National Hispanic Media Coalition; the National Urban League; New America’s Open Technology Institute (OTI); The Leadership Conference on Civil and Human Rights; the United Church of Christ Media Justice Ministry; and UnidosUS.

Harold Feld, senior VP of consumer advocacy group Public Knowledge, told Ars that the FCC “has a long record of thinking that things are obsolete and then discovering when they run an actual proceeding that there are people still using these things.” Feld is worried that the Direct Final Rule process could be used to eliminate consumer protections that apply to old phone networks when they are replaced by either fiber or wireless service.

“I certainly think that this is about pushing boundaries,” Feld said. When there’s a full notice-and-comment period, the FCC has to “actually address every argument made” before eliminating a rule. When the FCC provides less explanation of a decision, that “makes it much harder to challenge on appeal,” he said.

“Once you have this tool that lets you just get rid of rules without the need to do a proceeding, without the need to address the comments that are raised in that proceeding… it’s easy to see how this ramps up and how hard it is for people to stay constantly alert to look for an announcement where they will then only have 10 days to respond once it gets published,” he said.

What is a “significant” comment?

The FCC says its use of Direct Final Rule is guided by December 2024 recommendations from the Administrative Conference of the United States (ACUS), a government agency. But the FCC didn’t implement Direct Final Rule in the exact way recommended by the ACUS.

The ACUS said its guidance “encourages agencies to use direct final rulemaking, interim final rulemaking, and alternative methods of public engagement to ensure robust public participation even when they rely properly on the good cause exemption.” But the ACUS recommended taking public comment for at least 30 days, while the FCC has used 10- and 20-day periods.

The ACUS also said that agencies should only move ahead with rule deletions “if no significant adverse comments are received.” If such comments are received, the agency “can either withdraw the rule or publish a regular proposed rule that is open for public comment,” the recommendation said.

The FCC said that if it receives comments, “we will evaluate whether they are significant adverse comments that warrant further procedures before changing the rules.” The letter from 22 advocacy groups said it is worried about the leeway the FCC is giving itself in defining whether a comment is adverse and significant:

Although ACUS recommends that the agency revert to standard notice-and-comment rulemaking in the event of a single adverse comment, the draft Order requires multiple adverse comments—at which point the bureau/Commission will consider whether to shift to notice-and-comment rulemaking. If the bureau/Commission decides that adverse comments are not ‘substantive,’ it will explain its determination in a public notice that will not be filed in the Federal Register. The Commission states that it will be guided, but not bound, by the definition of ‘adverse comment’ recommended by ACUS.

Criticism from many corners

TechFreedom, a libertarian-leaning think tank, said it supports Carr’s goals in the “Delete, Delete, Delete” initiative but objected to the Direct Final Rule process. TechFreedom wrote in July comments that “deleting outdated regulations via a Direct Final Rule is unprecedented at the FCC.”

“No such process exists under current FCC rules,” the group said, urging the agency to seek public comment on the process. “If the Commission wishes to establish a new method by which it can eliminate existing regulations without undertaking a full rulemaking proceeding, it should open a docket specific to that subject and seek public comment,” the filing said.

TechFreedom said it is especially important for the FCC to “seek comment as to when the direct final rule procedures should be invoked… What is ‘routine,’ ‘insignificant,’ or ‘inconsequential’ and who is to decide—the Commissioners or the Bureau chiefs?”

The American Library Association and other groups wrote on August 14 that either 10 or 20 days is not long enough for public comment. Moreover, the groups said the two Direct Final Rule actions so far “offer minimal explanation for why the rules are being removed. There is only one sentence describing elimination of many rules and each rule removal is described in a footnote with a parenthetical about the change. It is not enough.”

The Utility Reform Network offered similar objections about the process and said that the FCC declaring technologies to be “obsolete” and markets “outdated” without a detailed explanation “suggests the Commission’s view that these rules are not minor or technical changes but support a larger deregulatory effort that should itself be subject to notice-and-comment rulemaking.”

The National Consumer Law Center and other groups said that “rushing regulatory changes as proposed is likely illegal in many instances, counterproductive, and bad policy,” and that “changes to regulations should be effectuated only through careful, thoughtful, and considered processes.”

We contacted Chairman Carr’s office and did not receive a response.

FCC delegated key decisions to bureaus

Gomez told Ars that Direct Final Rule could serve a purpose “with the right procedures and guardrails in place.” For example, she said the quick rule deletions can be justified for eliminating rules that have become obsolete because of a court reversal or Congressional actions.

“I would argue that we cannot, under the Administrative Procedure Act and the Constitution, simply eliminate rules because we’ve made a judgment call that they are unwarranted,” she said. “That does not meet the good cause exemption to notice-and-comment requirements.”

Gomez also opposes FCC bureaus making significant decisions without a commission vote, which effectively gives Carr more power over the agency’s operations. For example, T-Mobile’s purchase of US Cellular’s wireless operations and Verizon’s purchase of Frontier were approved by the FCC at the Bureau level.

In another instance cited by Gomez, the FCC Media Bureau waived a requirement for broadcast licensees to file their biennial ownership reports for 18 months. “The waiver order, which was done at the bureau level on delegated authority, simply said ‘we find good cause to waive these rules.’ There was no analysis whatsoever,” Gomez said.

Gomez also pointed out that the Carr FCC’s Wireline Competition Bureau delayed implementation of certain price caps on prison phone services. The various bureau-level decisions are a “stretching of the guardrails that we have internally for when things should be done on delegated authority, and when they should be voted by the commission,” Gomez said. “I’m concerned that [Direct Final Rule] is just the next iteration of the same issue.”

Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.

Delete, Delete, Delete: How FCC Republicans are killing rules faster than ever Read More »

Texas suit alleging anti-coal “cartel” of top Wall Street firms could reshape ESG

esg, Policy, Science, syndication, Wall Street / Paul Patrick / August 30, 2025

It’s a closely watched test of whether corporate alliances on climate efforts violate antitrust laws.

This article originally appeared on Inside Climate News, a nonprofit, non-partisan news organization that covers climate, energy, and the environment. Sign up for their newsletter here.

Since 2022, Republican lawmakers in Congress and state attorneys general have sent letters to major banks, pension funds, asset managers, accounting firms, companies, nonprofits, and business alliances, putting them on notice for potential antitrust violations and seeking information as part of the Republican pushback against “environmental, social and governance” efforts such as corporate climate commitments.

“This caused a lot of turmoil and stress obviously across the whole ecosystem,” said Denise Hearn, a senior fellow at the Columbia Center on Sustainable Investment. “But everyone wondered, ‘OK, when are they actually going to drop a lawsuit?’”

That came in November, filed by Texas Attorney General Ken Paxton and 10 other Republican AGs, accusing three of the biggest asset managers on Wall Street—BlackRock, Vanguard and State Street—of running “an investment cartel” to depress the output of coal and boosting their revenues while pushing up energy costs for Americans. The Trump administration’s Department of Justice and Federal Trade Commission filed a supporting brief in May.

The overall pressure campaign aimed at what’s known as “ESG” is having an impact.

“Over the past several months, through this [lawsuit] and other things, letters from elected officials, state and federal, there has been a chilling effect of what investors are saying,” said Steven Maze Rothstein, chief program officer of Ceres, a nonprofit that advocates for more sustainable business practices and was among the earliest letter recipients. Still, “investors understand that Mother Nature doesn’t know who’s elected governor, attorney general, president.”

Earlier this month, a US District Court judge in Tyler, Texas, declined to dismiss the lawsuit against the three asset managers, though he did dismiss three of the 21 counts. The judge was not making a final decision in the case, only that there was enough evidence to go to trial.

BlackRock said in a statement: “This case is not supported by the facts, and we will demonstrate that.” Vanguard said it will “vigorously defend against plaintiffs’ claims.” State Street called the lawsuit “baseless and without merit.”

The Texas attorney general’s office did not respond to requests for comment.

The three asset managers built substantial stakes in major US coal producers, the suit alleges, and “announced their common commitment” to cut US coal output by joining voluntary alliances to collaborate on climate issues, including the Net Zero Asset Managers Initiative and, in the case of two of the firms, the Climate Action 100+. (All of them later pulled out of the alliances.)

The lawsuit alleges that the coal companies succumbed to the defendants’ collective influence, mining for less coal and disclosing more climate-related information. The suit claimed that resulted in “cartel-level revenues and profits” for the asset managers.

“You could say, ‘Well, if the coal companies were all colluding together to restrict output, then shouldn’t they also be violating antitrust?’” Hearn asked. But the attorneys general “are trying to say that it was at the behest of these concentrated index funds and the concentrated ownership.”

Index funds, which are designed to mirror the returns of specific market indices, are the most common mode of passive investment—when investors park their money somewhere for long-term returns.

The case is being watched closely, not only by climate alliances and sustainability nonprofits, but by the financial sector at large.

If the three asset managers ultimately win, it would turn down the heat on other climate alliances and vindicate those who pressured financial players to line up their business practices with the Paris agreement goals as well as national and local climate targets. The logic of those efforts: Companies in the financial sector have a big impact on climate change, for good or ill—and climate change has a big impact on those same companies.

If the red states instead win on all counts, that “could essentially totally reconstitute the industry as we understand it,” said Hearn, who has co-authored a paper on the lawsuit. At stake is how the US does passive investing.

The pro-free-market editorial board of The Wall Street Journal in June called the Texas-led lawsuit “misconceived,” its logic “strained” and its theories “bizarre.”

The case breaks ground on two fronts. It challenges collaboration between financial players on climate action. It also makes novel claims around “common ownership,” where a shareholder—in this case, an asset manager—holds stakes in competing firms within the same sector.

“Regardless of how the chips fall in the case, those two things will absolutely be precedent-setting,” Hearn said.

Even though this is the first legal test of the theory that business climate alliances are anti-competitive, the question was asked in a study by Harvard Business School economists that came out in May. That study, which empirically examines 11 major climate alliances and 424 listed financial institutions over 10 years, turned up no evidence of traditional antitrust violations. The study was broad and did not look at particular allegations against specific firms.

“To the extent that there are valid legal arguments that can be made, they have to be tested,” said study co-author Peter Tufano, a Harvard Business School professor, noting that his research casts doubt on many of the allegations made by critics of these alliances.

Financial firms that joined climate alliances were more likely to adopt emissions targets and climate-aligned management practices, cut their own emissions and engage in pro-climate lobbying, the study found.

”The range of [legal] arguments that are made, and the passion with which they’re being advanced, suggests that these alliances must be doing something meaningful,” said Tufano, who was previously the dean of the Saïd Business School at the University of Oxford.

Meanwhile, most of the world is moving the other way.

According to a tally by CarbonCloud, a carbon emissions accounting platform that serves the food industry, at least 35 countries that make up more than half of the world’s gross domestic product now mandate climate-related disclosures of some kind.

In the US, California, which on its own would be the world’s fourth-largest economy, will begin requiring big businesses to measure and report their direct and indirect emissions next year.

Ceres’ Rothstein notes that good data about companies is necessary for informed investment decisions. “Throughout the world,” he said, “there’s greater recognition and, to be honest, less debate about the importance of climate information.” Ceres is one of the founders of Climate Action 100+, which now counts more than 600 investor members around the world, including Europe, Asia, and Australia.

For companies that operate globally, the American political landscape is in sharp contrast with other major economies, Tufano said, creating “this whipsawed environment where if you get on a plane, a few hours later, you’re in a jurisdiction that’s saying exactly the opposite thing.”

But even as companies and financial institutions publicly retreat from their climate commitments amid US political pressure, in a phenomenon called “greenhushing,” their decisions remain driven by the bottom line. “Banks are going to do what they’re going to do, and they’re going to lend to the most profitable or to the most growth-oriented industries,” Hearn said, “and right now, that’s not the fossil fuel industry.”

Texas suit alleging anti-coal “cartel” of top Wall Street firms could reshape ESG Read More »

FTC claims Gmail filtering Republican emails threatens “American freedoms”

ftc, Gmail, Google, Policy / Mike M. / August 29, 2025

Ferguson said that “similar concerns have resulted in ongoing litigation against Google in other settings” but did not mention that a judge rejected the Republican claims.

“Hearing from candidates and receiving information and messages from political parties is key to exercising fundamental American freedoms and our First Amendment rights,” Ferguson’s letter said. “Moreover, consumers expect that they will have the opportunity to hear from their own chosen candidates or political party. A consumer’s right to hear from candidates or parties, including solicitations for donations, is not diminished because that consumer’s political preferences may run counter to your company’s or your employees’ political preferences.”

Google: Gmail users marked RNC emails as spam

The RNC’s appeal of its court loss is still pending, with the case proceeding toward oral arguments. Google told the appeals court in April that “the Complaint’s own allegations make it obvious that Gmail presented a portion of RNC emails as spam because they appeared to be spam…. The most obvious reason for RNC emails being flagged as spam is that Gmail users were too frequently marking them as such.”

Google also said that “the RNC’s own allegations confirm that Google was helping the RNC, not scheming against it… The RNC acknowledges, for example, that Google worked with the RNC ‘[f]or nearly a year.’ Those efforts even included Google employees traveling to the RNC’s office to ‘give a training’ on ‘Email Best Practices.’ Less than two months after that training, the last alleged instance of the inboxing issue occurred.”

While the RNC “belittles those efforts as ‘excuses’ to cover Google’s tracks… the district court rightly found that judicial experience and common sense counsel otherwise,” Google said. The Google brief quoted from the District Judge’s ruling that said, “the fact that Google engaged with the RNC for nearly a year and made suggestions that improved email performance is inconsistent with a lack of good faith.”

FTC claims Gmail filtering Republican emails threatens “American freedoms” Read More »

Intel details everything that could go wrong with US taking a 10% stake

chipmaker, Chips Act, chips grants, Donald Trump, intel, Policy, semiconductor / Rejus Almole / August 27, 2025

Intel warns investors to brace for losses and uncertainties.

Some investors are not happy that Intel agreed to sell the US a 10 percent stake in the company after Donald Trump attacked Intel CEO Lip-Bu Tan with a demand to resign.

After Intel accepted the deal at a meeting with the president, it alarmed some investors when Trump boasted that his pressure campaign worked, claiming Tan “walked in wanting to keep his job, and he ended up giving us $10 billion for the United States.”

“It sets a bad precedent if the president can just take 10 percent of a company by threatening the CEO,” James McRitchie, a private investor and shareholder activist in California who owns Intel shares, told Reuters. To McRitchie, Tan accepting the deal effectively sent the message that “we love Trump, we don’t want 10 percent of our company taken away.”

McRitchie wasn’t the only shareholder who raised an eyebrow. Kristin Hull, chief investment officer of a California-based activist firm called Nia Impact Capital—which manages shares in Intel for its clients—told Reuters she has “more questions than confidence” about how the deal will benefit investors. To her, the deal seems to blur some lines “between where is the government and where is the private sector.”

As Reuters explains, Intel agreed to convert $11.1 billion in CHIPS funding and other grants “into a 9.9 percent equity stake in Intel.”

Some early supporters of the agreement—including tech giants like Microsoft and Trump critics like Bernie Sanders (I-Vt.)—have praised the deal as allowing the US to profit off billions in CHIPS grants that Intel was awarded under the Biden administration. After pushing for the deal, Commerce Secretary Howard Lutnick criticized Joe Biden for giving away CHIPS funding “for free,” while praising Trump for turning the CHIPS Act grants into “equity for the Trump administration” and “for the American people.”

But to critics of the deal, it seems weird for the US to swoop in and take stake in a company that doesn’t need government assistance. The only recent precedent was the US temporarily taking stake in key companies considered vital to the economy that risked going under during the 2008 financial crisis.

Compare that to the Intel deal, where Tan has made it clear that Intel, while struggling to compete with rivals, “didn’t need the money,” Reuters noted—largely due to SoftBank purchasing $2 billion in Intel shares in the days prior to the US agreement being reached. Instead, the US is incentivized to take the stake to help further Trump’s mission to quickly build up a domestic chip manufacturing supply chain that can keep the US a global technology leader at the forefront of AI innovation.

Investors told Reuters that it’s unusual for the US to take this much control over a company that’s not in crisis, noting that “this level of tractability was not usually associated with relations between businesses and Washington.”

Intel did not immediately respond to Ars’ request to comment on investors’ concerns, but a spokesperson told Reuters that Intel’s board has already approved the deal. In a press release, the company emphasized that “the government’s investment in Intel will be a passive ownership, with no Board representation or other governance or information rights. The government also agrees to vote with the Company’s Board of Directors on matters requiring shareholder approval, with limited exceptions.”

Intel reveals why investors should be spooked

The Trump administration has also stressed that the US stake in Intel does not give the Commerce Department any board seats or any voting or governance rights in Intel. Instead, the terms stipulate that the Commerce Department must “support the board on director nominees and proposals,” an Intel securities filing said.

However, the US can vote “as it wishes,” Intel reported, and experts suggested to Reuters that regulations may be needed to “limit government opportunities for abuses such as insider trading.” That could reassure investors somewhat, Rich Weiss, a senior vice president and chief investment officer of multi-asset strategies for American Century Investments, told Reuters. Without such laws, Weiss noted that “in an unchecked scenario of government direct investing, trading in those companies could be much riskier for investors.”

It also seems possible that the US could influence Intel’s decisions without the government explicitly taking voting control, experts suggested. “Several investors and representatives” told Reuters that the US could impact major decisions regarding things like layoffs or business shifts into foreign markets. At a certain point, Intel may be stuck choosing between corporate and national interests, Robert McCormick, executive director of the Council of Institutional Investors, told Reuters.

“A government stake in an otherwise private entity potentially creates a conflict between what’s right for the company and what’s right for the country,” McCormick suggested.

Further, Intel becoming partly state-controlled risks disrupting Intel’s non-US business, subjecting the company to “additional regulations, obligations or restrictions, such as foreign subsidy laws or otherwise, in other countries,” Intel’s filing said.

In the filing, Intel confirmed directly to investors that they have good cause to be spooked by the US stake. Offering a bulleted list, the company outlined “a number of risks and uncertainties” that could “adversely impact” shareholders due to “the US Government’s ownership of significant equity interests in the company.”

Perhaps most alarming in the short term, Intel admitted that the deal will dilute investors’ stock due to the discounted shares issued to Trump. And their shares could suffer additional dilutions if certain terms of the deal are “triggered” or “exercised,” Intel noted.

In the long term, investors were told that the US stake may limit the company’s eligibility for future federal grants while leaving Intel shareholders dwelling in the uncertainty of knowing that terms of the deal could be voided or changed over time, as federal administration and congressional priorities shift.

Additionally, Intel forecasted potential legal challenges over the deal, which Intel anticipates could come from both third parties and the US government.

The final bullet point in Intel’s risk list could be the most ominous, though. Due to the unprecedented nature of the deal, Intel fears there’s no way to anticipate myriad other challenges the deal may trigger.

“It is difficult to foresee all the potential consequences,” Intel’s filing said. “Among other things, there could be adverse reactions, immediately or over time, from investors, employees, customers, suppliers, other business or commercial partners, foreign governments or competitors. There may also be litigation related to the transaction or otherwise and increased public or political scrutiny with respect to the Company.”

Meanwhile, it’s hard to see what Intel truly gains from the deal other than maybe getting Trump off its back for a bit. A Fitch Ratings research note reported that “the deal does not improve Intel’s BBB credit rating, which sits just above junk status” and “does not fundamentally improve customer demand for Intel chips” despite providing “more liquidity,” Reuters reported.

Intel’s filing, in addition to rattling investors, likely also serves as a warning sign to other companies who may be approached by the Trump administration to strike similar deals. So far, the administration has confirmed that the US is not eyeing a stake in Nvidia and seems unlikely to seek a stake in the Taiwan Semiconductor Manufacturing Company. While Lutnick has said he plans to push to make more deals, any chipmakers committing to increasing investments in the US, sources told the Wall Street Journal, will supposedly be spared from pressure to make a similar deal.

Ashley is a senior policy reporter for Ars Technica, dedicated to tracking social impacts of emerging policies and new technologies. She is a Chicago-based journalist with 20 years of experience.

Intel details everything that could go wrong with US taking a 10% stake Read More »