11:15am PT by Eriq Gardner
U.S. Senator Hits Video App's "Predatory" Practice of Paying People to Watch
Of the many ways to potentially get into legal trouble these days, add paying people to watch video online. On Wednesday, U.S. Senator Josh Hawley (R-Mo.) went after the video app Zynn in a letter to the Federal Trade Commission requesting an investigation.
Zynn is a new TikTok competitor in the short-form video space. The app has been a hot download, although it was recently taken off the Google Play Store due to a problem with copyright infringing material on its network. Zynn's success may be partly attributable to cash rewards for users who sign up, view content, and make referrals.
In his letter, Hawley writes that exponentially growing payments for referrals is "just like a traditional pyramid scheme," adding a dour assessment of Zynn's business model at large.
"On its face, this smacks of a textbook predatory-pricing scheme, one calculated to attain immediate market dominance for Zynn by driving competitors out of the market," he writes. "Competition in the social media platform space is particularly essential for American consumers, given the extent to which Facebook, Twitter, and other tech behemoths have throttled innovation by exerting near-monopolistic control over the social media landscape. Anticompetitive practices in this market cannot be tolerated."
Hawley, who was elected to the Senate in 2018, has developed a particular reputation in Congress as a tech industry antagonist. He's one of the leading voices behind repeal or modification of Section 230 of the Communications Decency Act, which allows digital services to dodge liability for third-party content. He's pushed tech companies to be neutral and back away from supposed censorship even if the CDA's liability shield was written in the mid-1990s to encourage moderation.
In this instance, Hawley seems particularly troubled about Zynn's background as a Chinese start-up.
"The spread of TikTok, given its well-documented ties to the Chinese government, was worrisome enough; now there are two apps for Americans to be concerned about," he writes in his letter, which also raises concern about whether the app is living up to requirements under the Children’s Online Privacy Protection Act and requests the FTC open an inquiry into Zynn’s business practices.
The FTC has gone after arguably similar practices in the past, perhaps most famously against Herbalife, which was charged with deceiving consumers into believing they could earn substantial money selling a diet product. The agency is empowered to prosecute unfair or deceptive acts or practices in or affecting commerce.