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Data Privacy Regulation and Smart Speakers: DealBook Briefing

– Peter Eavis

Smart speakers are listening in. Can we control what’s done with the things they hear?

Something like this was bound to happen: Unbeknown to its owners, an Amazon Echo recorded a couple’s conversation, then sent it to someone on their contact list. But even with sweeping new data laws going into effect in Europe, it’s unclear exactly how the use of data gobbled up by such devices will be regulated.

Amazon blamed the new invasion of privacy on an improbable chain of events. Alexa, says the company, woke up when it thought it heard its name in a conversation taking place between the husband and wife in Portland. Then, it took action upon hearing a “send message” request, the name of a friend, and finally a confirmatory “right,” in that order. Minutes later, an employee of the husband received an audio recording of the couple’s conversation.

Ultimately, the incident wasn’t as awkward as it might’ve been — the couple was discussing hardwood flooring. But it raises questions about the accuracy of the A.I. assistants on these devices, what they do with your data, and how that might be regulated.

Anyone who has used an Amazon Echo (or Google Home, or Apple HomePod) knows that their interfaces can be unreliable. While artificial intelligence has made bounds in recent years, voice recognition is complex, and strange accents, muffled voices, and external noise can lead to mistakes. That means misfires — like the ones Amazon pointed to — can and do happen.

Misidentification of a wake word by a device — on Amazon’s, that’s “Alexa” by default — automatically sends data to the company’s servers. Why? Because the small speakers don’t have the computing power required to make sense of entire sentences, so that must be done on the cloud.

You can’t turn off the always-listening feature of these devices, because, if you could, they wouldn’t be able to respond to your voice, rendering them useless. But misidentification of words can, according to Amazon, set in motion a chain of events that are troubling from a privacy perspective.

The question: What happens to that data? And what should these devices be able to do with it?

In answer to the first question: It will stay on the servers of tech companies indefinitely. (Unless you choose to delete, which isn’t too hard. Here’s how.) And once it’s on those servers, it can be used by engineers to tune their artificial intelligence algorithms so that they can better understand your voice commands in future.

Did you know all that? Maybe not. While companies like Amazon do explain in their terms of service that user data will be stored on servers and used to improve their products, it’s perfectly possible to start using such a device in your home without being alerted to the fact. Data privacy is weakly regulated in the U.S., and there’s no rule that demands Alexa tell you through its speaker what it will do with your data. So many people remain unaware of how their data is being used.

In Europe, that should change Friday, with the introduction of the General Data Protection Regulation — a set of strict data privacy rules that will be enforced across the entire E.U., with harsh penalties for organizations that don’t comply. In theory, the rules could mean that smart speakers have to somehow tell consumers about their information collection—what’s being recorded, how it’s being used, where it’s being stored, and whether it’s being secured, for instance.

Responding to a request for details about the ways in which Amazon is making its Echo devices G.D.P.R.-compliant, a spokesperson told DealBook:

“Protecting the privacy of customers has always been a top priority for Amazon. The Alexa privacy settings give customers insight and control over their data; they can use it to easily manage and delete their audio recordings, configure third-party skill permissions, and opt-out of having their voice data used to develop new Alexa features.”

A spokesman for Google told DealBook that any requests made to the company’s Home devices are treated in much the same way as the search data that is stored about users. In a blog post about its preparations for G.D.P.R., the company points out that “nothing is changing” about the way the firm collects or processes such data in order for it be compliant with the new rules.

So, that’s Europe. What about the U.S.? Big tech firms — in particular, Facebook — say they are responding to those new European rules with policies that will also apply in America. The same is likely to be true of smart speakers.

But for now, the best way to control what’s done with your data is to regularly delete the audio recorded by the devices, and opt out of any arrangement that allows the companies to use it to improve their services.

— Jamie Condliffe

What’s happened since Europe’s new data rules went into action

We’re not even a full day into a new era in which the E.U.’s General Data Protection Regulation clamps down on what organizations do with the data of European citizens. But it’s already causing headaches. So far:

• Some U.S. news outlets have blocked European readers

• A nonprofit has filed official complaints about Google, Facebook, WhatsApp and Instagram with E.U. privacy regulators

• Read-it-later app Instapaper is currently not accessible by European users


Doug McMillon, Walmart’s C.E.O.

Mark Lennihan/Associated Press

It’d take the average worker 275 years to earn a C.E.O.’s annual pay

It’s not surprising to hear that many C.E.O.s are handsomely paid — Doug McMillon of Walmart, for example, earned $22 million last year. (That said, the $102 million collected by Frank Bisignano of the credit card processor First Data is still eye-popping.)

But now corporate America is required to disclose pay ratios, which reveal how the C.E.O.’s pay stacks up to that of median workers. (The median ratio is 275.) Here’s what the NYT uncovered as part of its annual executive pay report:

• The median Walmart employee would need 1,188 years to match Mr. McMillon’s 2017 compensation.

• At Live Nation, it would take 2,893 years.

• At Time Warner, it’s a comparatively low 651 years.

The caveats: Some companies reporting high ratios rely on overseas workers who earn far less than counterparts in the U.S. Some reporting low ratios achieve high median incomes by outsourcing labor. And many C.E.O. pay packages rely on stock, which could make their payouts smaller — or much larger — in the end.


Harvey Weinstein.

Steve Crisp/Reuters

A day few in Hollywood thought possible

The once-untouchable Hollywood mogul Harvey Weinstein turned himself in to Manhattan police today. The NYT reports was charged with rape and a first-degree criminal sex act, continuing a downfall that led to a global reckoning with sexual harassment and assault.

As part of a bail package negotiated in advance, Mr. Weinstein will have to put up $1 million in cash, surrender his passport and agree to wear an ankle-monitoring device. But the charges may not be the last against him, according to the NYT:

An investigative grand jury, still convened, will look into other sexual assault allegations against Mr. Weinstein as well as possible financial crimes relating to how he paid women to stay silent, people familiar with the proceedings said.

The fallout from the #MeToo movement hasn’t stopped yet. The actor Morgan Freeman apologized after several women accused him of sexual harassment.

Fiat Chrysler: Don’t use cruise control

Fiat Chrysler is recalling 4.8 million vehicles in the United States, saying in rare circumstances drivers may not be able to turn off the cruise control, the Associated Press reports.

The auto maker warned owners not to use cruise control until the cars, S.U.V.s and trucks can be fixed with a software update. The recall includes 15 Jeep, Dodge, Chrysler and Ram models from six model years.


Mark Zuckerberg of Facebook.

Yves Herman/Reuters

Europe is now the world’s data cop

Today, the E.U. introduced its strict new data rules, known collectively as G.D.P.R. Though meant to define how citizens’ data is handled, the borderless nature of the internet means that the effects will be felt globally.

Silicon Valley firms, in particular, must change their ways to accommodate the regulations, and could feel their power crimped. President Emmanuel Macron of France urged those firms to embrace the rules. (Mark Zuckerberg insisted that Facebook had “always shared” their spirit.)

The sweeping nature of the new rules means that many organizations — and regulators — aren’t ready to comply. Some websites are simply blocking E.U. users for now.

But the E.U. is just getting started: Plans for tougher antitrust laws and tax policies are next. And other nations, including Brazil, Japan and South Korea, are expected to follow the E.U.’s stead.

A business opportunity: G.D.P.R. offers privacy experts a chance to make serious money.

The political flyaround

• The Congressional Budget Office estimates that revenue from the White House’s latest proposed budget would fall short by $1.9 trillion over the next decade. (WSJ)

• Randy Quarles, the Fed’s vice chairman, is worried about tech companies moving into unregulated financial services. (Bloomberg)

• The Senate confirmed Jelena McWilliams as the new head of the Federal Deposit Insurance Corporation. (WSJ)

• The E.U. dismissed Britain’s current hopes for Brexit as a “fantasy,” while the Bank of England’s chief, Mark Carney, warned of financial disruption if negotiations don’t run smoothly. (FT)

• Senator Tom Carper, Democrat of Delaware, has asked the Pentagon for more details about the security of President Trump’s smartphones. (Politico)


Behrouz Mehri/Agence France-Presse — Getty Images

No North Korea talks? China would love that.

President Trump’s decision to walk away from a summit meeting with North Korea perplexed world leaders. But the move could strengthen Beijing in trade negotiations with Washington, given China’s influence over North Korea.

That theory may be tested when Commerce Secretary Wilbur Ross returns to Beijing on June 2 for another round of trade talks. Among his potential talking points: putting American compliance officers inside ZTE in exchange for lifting penalties on the Chinese telecom company.

Critics’ corner: The White House’s latest trade strategy is a mess, the WSJ editorial board argues. And it’s squandering an opportunity to remake America’s trade relationship with China, according to Scott Paul, the president of the Alliance for American Manufacturing.


A self-driving Uber vehicle.

Natalie Behring/Reuters

Uber’s driverless car saw the woman it killed, but didn’t brake

A report by the National Transportation Safety Board found that the ride-hailer’s vehicle had its emergency braking system turned off when it struck and killed a pedestrian in March. Its sensors and software detected the woman six seconds before impact, but the vehicle didn’t slow down.

Tesla had troubles, too: The Utah police found that a Model S that crashed while in Autopilot mode this month actually sped up before hitting a fire truck and injuring two people.

What this means: Questions about the speed with which autonomous cars are being developed, and the safety issues of testing them on public roads, aren’t going away. The mayor of Pittsburgh, where Uber’s driverless car operations are headquartered, now says that he will limit testing of autonomous vehicles in his city.

The tech flyaround

• An Amazon Echo recorded a couple’s conversation and sent it someone on their contact list. Amazon blamed an improbable chain of events. (Recode)

• The age of Netflix has been lucrative for content creators. (Hollywood Reporter)

• A U.S. jury awarded Apple $539 million in the company’s patent fight with Samsung. (BBC)

• Proposed legislation could force U.S. tech companies to disclose whether they allowed foreign authorities to scrutinize their code. (Reuters)

• Ireland’s abortion vote today is the latest test for Facebook and Google’s attempts to fight foreign online influence. Yesterday, Facebook and Twitter announced new plans for regulating political ads.

• The Justice Department has reportedly begun investigating cryptocurrency price manipulation. (Bloomberg)


About businesses’ uneasy alliance with Trump…

From The Economist’s lead editorial this week:

Now bosses think they have entered a nirvana, when the reality is that the country’s system of commerce is lurching away from rules, openness and multilateral treaties toward arbitrariness, insularity and transient deals.

Revolving door

• United Continental has named Jane Garvey as its chairwoman. She’s the first woman to run the airline’s board. (WSJ)

• JPMorgan Chase has hired two senior Houston-based energy bankers from Morgan Stanley. Jonathan Cox will become JPMorgan’s global co-head of oil and gas investment banking, and Michael Johnson will become a vice chairman of investment banking. (Bloomberg)

• The C.E.O. of Rusal, Alexandra Bouriko, and seven board members, resigned in a bid to ease U.S. sanctions on the Russian aluminum giant. (WSJ)

The speed read

• Commerce Secretary Wilbur Ross says that moon colonies could happen “sooner than you may have ever thought possible.” (NYT)

• Deutsche Bank investors voted to keep Paul Achleitner as chairman. (FT)

• Banks in Estonia may have laundered as much as $13 billion. (Bloomberg)

• Reportedly up for sale: Diageo brands like Seagrams whisky and Goldschlager, and Essential, a device maker founded by a creator of Android.

• Goldman Sachs and Blackstone have settled a fight over an $11 billion derivatives trade. (WSJ)

• Some of Goldman’s senior associates will have to wait until 2019 for promotion. At Merrill Lynch, some brokers are bracing for a big pay cut.

• Americans just won’t put their phones down, even when they’re on vacation. (Skift)

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