Computers, Privacy & the Constitution

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EmilieSchouFirstPaper 3 - 08 May 2022 - Main.EmilieSchou
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Antitrust law will not address misuses of personal data

 
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How antitrust law could address misuses of personal data – the case of Facebook / WhatsApp?

 
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-- By EmilieSchou - 13 Mar 2022
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Introduction

 
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In January 2021, Meta announced an “update” to its privacy policy with respect to WhatsApp? , which would allow WhatsApp to share data pertaining to users’ interactions with businesses on WhatsApp to target ads across its platforms, including Facebook and Instagram.
 
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The legislative gap on federal level concerning data protection

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This form of data sharing (which is by no means new) has far-reaching implications with respect to users’ right to privacy.
 
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WhatsApp? ’s privacy policy as a recent example of misuse of personal data

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Antitrust law as a well-meaning but unrealistic fallback tool

 
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In January 2021, Facebook (now Meta) announced an “update” to its privacy policy with respect to wholly-owned messaging service WhatsApp? . The update would allow WhatsApp? to share data pertaining to users’ interactions with businesses on WhatsApp? to target ads across its platforms, including Facebook and Instagram. The update was met with strong criticism from members of the general public in light of the far-reaching implications with respect to users’ right to privacy (see here).
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In the absence of federal data protection legislation, some have speculated whether antitrust law could be relied on as a fallback tool to address such conduct as unlawful monopolization under Section 2 of the Sherman Act.
 
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This form of data sharing between WhatsApp? and Facebook is by no means new and has in fact been the status quo since WhatsApp? was acquired by and integrated into Facebook in 2014 (see here), despite such practices running counter to Facebook’s pledge at the time to leave WhatsApp? ’s user data policy, which pre-acquisition had been based on a commitment not to collect user data for advertising revenue, untouched.
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A theoretically attractive avenue

 
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Facebook contends that the breach of users’ right to privacy is limited to the extent that Facebook is only collecting metadata, e.g. phone numbers linked to the WhatsApp? account and general profile information, whereas the content of personal messages sent between WhatsApp? users is protected by end-to-end encryption and therefore inaccessible by Facebook or advertisers. Metadata, however, is arguably just as important and valuable, if not more, than data relating to the content of personal messages, and by sharing such information freely with the advertisement-funded Facebook platform and, by extension, third parties, users’ right to privacy are unquestionably violated.
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The benefits of this recourse, relative to Section 5 of the FTC Act (the only currently available tool to deal with data privacy violations), are, first, a greater amount of resources given that antitrust investigations can be brought by the FTC, the DoJ? and even State AGs for violations of federal antitrust law. These agencies moreover have significant experience in taking infringing companies to court as well as in dealing with data-intensive markets through their M&A work. Finally, their enforcement capabilities are greater than those of the FTC’s consumer protection department in that they may request structural separation of companies behaving anti-competitively, which are likely to be more impactful than mere slap-on-the-wrist fines.
 
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The limitations of the FTC in preventing misuse of personal data

 
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In the U.S., in the absence of a nation-wide data protection law, tech companies have tended to resort to self-regulating over the years, with only one obvious legal avenue, at least on federal level, available to contest their conduct. The Federal Trade Commission (“FTC”) is tasked, as per Section 5 of the FTC Act, with investigating and punishing “unfair or deceptive acts or practices in or affecting commerce” under the broader consumer protection umbrella, which the FTC has interpreted broadly to hold businesses to fair and transparent privacy standards. For example, the FTC has held Facebook accountable on several accounts for privacy breaches although arguably with limited success, at the very least with respect to the data harvesting that followed Facebook’s acquisition of WhatsApp? . This was explicitly recognised by one of the FTC commissioners that voted against the FTC’s most recent (2019) settlement with Facebook.
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An unrealistic avenue in practice

 
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The FTC in its current form is, however, not particularly well-equipped for dealing with issues touching on privacy breaches for a number of reasons. First, the FTC has not been given a clear mandate to handle privacy-related claims, which has translated into a lack of resources and technical expertise to do so. Because of this lack of resources, the FTC is also more likely to settle with privacy-infringing companies and for sums that, while facially significant, represent a drop in the ocean for companies like Meta and may therefore not have the same deterring effect as a court-ordered injunction. The 2019 settlement, for example, entailed a penalty of $5 billion, which represents but 4% of Meta’s total turnover in 2021.
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While the antitrust avenue is available in theory, it remains a highly elusive one in practice. This is primarily due to the fact that antitrust enforcement is inherently political and policy-driven, and that structural remedies alone are unlikely to solve the problem.
 
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Could antitrust laws help fill the gap?

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The FTC and the DoJ? are political creatures

 
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Against this background and barring legislative changes to introduce federal data protection laws or further empowering the FTC, a possibly more compelling and less obvious legal avenue presents itself through antitrust enforcement. Misuse of personal data could, in theory, be treated as unlawful monopolization as prohibited by Section 2 of the Sherman Act or could be taken into account as a consideration in either prohibiting a merger ex ante or contesting it ex post on the basis of Section 7 of the Clayton Act.
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The enforcement priorities of the FTC and the DoJ? are largely dictated by whoever is in power at the time given that the FTC Commissioners and the USAG are nominated by the President and confirmed by the Senate. This means that in order for those agencies to demand that Big Tech actors be broken up, there must be some political consensus that that is a desirable outcome.
 
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Section 2 of the Sherman Act prohibits companies with market power from engaging in wrongful conduct. Provided harm to consumers or to the market can be shown and Facebook’s market power can be established, this provision could then be relied upon to condemn the data transfer from WhatsApp? to Facebook. Section 7 of the Clayton Act prohibits mergers where the effect may be substantially to lessen competition, or to tend to create a monopoly. This provision could then be relied upon to contest the merger which led to the data transfer and related misuses of personal data.
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Such consensus does not currently exist. The very foundation of the U.S. economy is based on profit-maximization, and the fact that the Metas of the world have succeeded in growing into the behemoths they are today is laudable in that context and they should not be punished for now exercising the market power they have earned in the pursuit of profit-maximization. This combined with the Chicago school of thought largely colors how antitrust law has been approached in the U.S. since the 1970s. Many elected politicians still adhere to those principles and will not condone tampering with some of the greatest success stories of Silicon Valley and, by extension, the U.S.
 
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The benefits of opting for an antitrust approach compared to the Section 5 FTC Act approach can be summarized as follows. First, antitrust investigations can be brought not only by the FTC, but also by the Department of Justice (“DoJ”) and even State Attorney-Generals for violations of federal (as well as State) antitrust law. Thus, the sheer number of agencies empowered to take action against potentially infringing companies is greater. Their combined resources relative to the FTC’s consumer protection department also tend to be greater. In addition, these agencies tend to not only be more experienced in pursuing potentially infringing companies in court, but have moreover become well-versed in the complexities of data markets over the years and arguably more so than the FTC’s consumer protection department.
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The current political climate moreover does not lend itself well to supporting the breakup of those companies that the government is currently relying on heavily to access data that is extremely useful to its foreign policy and defense efforts. Several reports (see here and here) have confirmed that the authorities can and do access e.g. WhatsApp? users’ data and metadata and, in that context, that "US intelligence [has] used faulty encryption to spy on [countries] across the globe" (see here). Those practices likely extend to the U.S.’s involvement in the Ukrainian war (see e.g. here). U.S. politicians therefore currently have no incentive to aggravate the companies that feed them this valuable information.
 
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Consequently, to the extent that data protection and antitrust law both strive towards the same goal of safeguarding consumer protection, misuse of personal data may be best addressed by antitrust law until such a time where federal data protection legislation is enacted.
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Political bias in the judiciary

 
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The best way to improve this draft would be to put it in touch with reality. You don't cite anything, other than stray statutory provisions invoked as amulets Your theories about how US antitrust law could work don't correspond to how things actually work, which is what the distinctively US form of law-thought we grandly call "American Legal Realism" leads us to be concerned with. It causes me a moment of despair every time I am faced with renewed proof of how poorly we are teaching what we have most of value to teach to non-US students. What a formalist will see as a "gap" in the law a realist (who is concerned with what things do, not what they are called) a realist recognizes as a carefully-tailored and extremely expensive legislative abstention, constantly maintained against other social parties with contrary interests at a high price representing rational value and subject to disruption by social forces not describable in rational-choice or interest-group terms.
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An additional hurdle comes from the role of the judiciary in antitrust law. Under the chairmanship of neo-brandeisian Lina Khan, the FTC is currently demanding the breakup of Meta through divestiture of Instagram/WhatsApp to remedy its alleged violation of Section 2.
 
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So the US has a non-law system tightly integrated into other forms of social policy, affecting world-wide technical design and other "non-law/non-politics" social processes that have profound second order effects it is complicated and interesting to trace and describe. What federal legal officials at FTC and the Justice Department will do isn't to "fill gaps" in a non-law system representing a strong political consensus that there are nowhere near a majority in the US House let alone sixty votes in the US Senate to disturb. Even a White House that for some reason thought it would be politically beneficial to attempt to force a professional Justice Department and an independent FTC into expensive, draining and distracting years-long litigation with the largest possibler adversaries with the deepest pockets, biggest outside litigation staffs, and total satisfaction with endless delay—a White House populated by criminal morons with a totalitarian aspiration with respect to Big Tech—would find it impossible to let slip the dogs of war. I know that's true because the last Administration tried precisely that, being precisely who, and made no significant progress in their chosen direction whatever.
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Even assuming that the FTC will follow through on that request, such radical remedies would then need to be approved by a court which is highly unlikely, once again as the result of political bias even within the judiciary. While federal judges are supposed to uphold the sanctity of the principle of separation of powers and “make decisions based on a dispassionate application of the law to the facts at hand, with no regard for the political ramifications of that decision,” the reality is that judges are also "political actors who want to shape the world to match an ideology, and who use law [as] a tool to achieve that goal” (see here). Federal judges are also nominated by the President and confirmed by the Senate, and will evidently seek to push the political agenda of whoever appointed them.
 
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There are some technical problems with your antitrust analysis. As usual the biggest actual barrier to successful litigation is proof of market definition by which measurement the defendant has a monopoly, near-monopoly, or ghost of a chance of ever attaining one. Before bringing such an action at such an immense inevitable cost, the plaintiff agency's lawyers will be subjected to deadly pressure from above to prove that they will win that initial objective, without which everything will be for naught. Political layers will want them to fail that test, which means that DoJ? senior levels (not to mention FTC commissioners) will gladly take the opportunity to be more prudent than their staffs. Nobody is going to do what you suggest because proving sufficient market power for a credible attempt to monopolize or make a tie-in sale will cost $10s millions and half the length of an Administration, completely devoting tons of agency bandwidth that could be used for many better things that wouldn't cause the rest of the first two branches to be mad at you.
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The inefficacy of structural remedies

 
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Which doesn't change the fact that you still have a point: the US has a federal non-law system of "data protection" which makes European prissy pretending look pretty silly and shows no sign of change under existing political circumstances. If Brussels ran the US, no doubt the DoJ? and FTC would do as you suggest. Being here, however, you can imagine larger questions than law so long as you are willing to be clear-eyed about your politics.
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Finally, even assuming that the breakup of Meta is granted by a court, experts argue that this would have no meaningful impact.

First, a potential spin-off of WhatsApp? would not affect personal data that Meta has already collected. Second, Meta can easily “enter into a B2B “data-sharing agreement providing them with the exact same data they held prior to the spinout.”” In order to be effective, the divestiture would need to be coupled with some “mechanism so people could opt-out of sharing or specify what they […] don't want shared” (see here), a highly unlikely outcome.

Conclusion

Whether Big Tech is held accountable for misuse of personal data on the antitrust or consumer protection arena will therefore depend on whether there is political appetite to tamper with some of the most powerful and revenue-generating companies in the country. Such political appetite does not currently exist and the ongoing Ukrainian crisis, in which the U.S. has taken an active role and in the context of which it relies heavily on Big Tech, is likely to further feed into that general disinterest.

The majority of U.S. voters moreover do not want greater intervention. In order to disrupt the status quo, a radical change in how members of the general public, and in particular younger generations, perceive data violations by Big Tech is warranted so as to in turn awaken the political appetite to act.

 
You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable.

EmilieSchouFirstPaper 2 - 11 Apr 2022 - Main.EbenMoglen
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*How antitrust law could address misuses of personal data – the case of Facebook / WhatsApp? *
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How antitrust law could address misuses of personal data – the case of Facebook / WhatsApp?

 

-- By EmilieSchou - 13 Mar 2022

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 Consequently, to the extent that data protection and antitrust law both strive towards the same goal of safeguarding consumer protection, misuse of personal data may be best addressed by antitrust law until such a time where federal data protection legislation is enacted.
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The best way to improve this draft would be to put it in touch with reality. You don't cite anything, other than stray statutory provisions invoked as amulets Your theories about how US antitrust law could work don't correspond to how things actually work, which is what the distinctively US form of law-thought we grandly call "American Legal Realism" leads us to be concerned with. It causes me a moment of despair every time I am faced with renewed proof of how poorly we are teaching what we have most of value to teach to non-US students. What a formalist will see as a "gap" in the law a realist (who is concerned with what things do, not what they are called) a realist recognizes as a carefully-tailored and extremely expensive legislative abstention, constantly maintained against other social parties with contrary interests at a high price representing rational value and subject to disruption by social forces not describable in rational-choice or interest-group terms.

So the US has a non-law system tightly integrated into other forms of social policy, affecting world-wide technical design and other "non-law/non-politics" social processes that have profound second order effects it is complicated and interesting to trace and describe. What federal legal officials at FTC and the Justice Department will do isn't to "fill gaps" in a non-law system representing a strong political consensus that there are nowhere near a majority in the US House let alone sixty votes in the US Senate to disturb. Even a White House that for some reason thought it would be politically beneficial to attempt to force a professional Justice Department and an independent FTC into expensive, draining and distracting years-long litigation with the largest possibler adversaries with the deepest pockets, biggest outside litigation staffs, and total satisfaction with endless delay—a White House populated by criminal morons with a totalitarian aspiration with respect to Big Tech—would find it impossible to let slip the dogs of war. I know that's true because the last Administration tried precisely that, being precisely who, and made no significant progress in their chosen direction whatever.

There are some technical problems with your antitrust analysis. As usual the biggest actual barrier to successful litigation is proof of market definition by which measurement the defendant has a monopoly, near-monopoly, or ghost of a chance of ever attaining one. Before bringing such an action at such an immense inevitable cost, the plaintiff agency's lawyers will be subjected to deadly pressure from above to prove that they will win that initial objective, without which everything will be for naught. Political layers will want them to fail that test, which means that DoJ? senior levels (not to mention FTC commissioners) will gladly take the opportunity to be more prudent than their staffs. Nobody is going to do what you suggest because proving sufficient market power for a credible attempt to monopolize or make a tie-in sale will cost $10s millions and half the length of an Administration, completely devoting tons of agency bandwidth that could be used for many better things that wouldn't cause the rest of the first two branches to be mad at you.

Which doesn't change the fact that you still have a point: the US has a federal non-law system of "data protection" which makes European prissy pretending look pretty silly and shows no sign of change under existing political circumstances. If Brussels ran the US, no doubt the DoJ? and FTC would do as you suggest. Being here, however, you can imagine larger questions than law so long as you are willing to be clear-eyed about your politics.

 
You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable. To restrict access to your paper simply delete the "#" character on the next two lines:

EmilieSchouFirstPaper 1 - 13 Mar 2022 - Main.EmilieSchou
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META TOPICPARENT name="FirstPaper"
*How antitrust law could address misuses of personal data – the case of Facebook / WhatsApp? *

-- By EmilieSchou - 13 Mar 2022

The legislative gap on federal level concerning data protection

WhatsApp? ’s privacy policy as a recent example of misuse of personal data

In January 2021, Facebook (now Meta) announced an “update” to its privacy policy with respect to wholly-owned messaging service WhatsApp? . The update would allow WhatsApp? to share data pertaining to users’ interactions with businesses on WhatsApp? to target ads across its platforms, including Facebook and Instagram. The update was met with strong criticism from members of the general public in light of the far-reaching implications with respect to users’ right to privacy (see here).

This form of data sharing between WhatsApp? and Facebook is by no means new and has in fact been the status quo since WhatsApp? was acquired by and integrated into Facebook in 2014 (see here), despite such practices running counter to Facebook’s pledge at the time to leave WhatsApp? ’s user data policy, which pre-acquisition had been based on a commitment not to collect user data for advertising revenue, untouched.

Facebook contends that the breach of users’ right to privacy is limited to the extent that Facebook is only collecting metadata, e.g. phone numbers linked to the WhatsApp? account and general profile information, whereas the content of personal messages sent between WhatsApp? users is protected by end-to-end encryption and therefore inaccessible by Facebook or advertisers. Metadata, however, is arguably just as important and valuable, if not more, than data relating to the content of personal messages, and by sharing such information freely with the advertisement-funded Facebook platform and, by extension, third parties, users’ right to privacy are unquestionably violated.

The limitations of the FTC in preventing misuse of personal data

In the U.S., in the absence of a nation-wide data protection law, tech companies have tended to resort to self-regulating over the years, with only one obvious legal avenue, at least on federal level, available to contest their conduct. The Federal Trade Commission (“FTC”) is tasked, as per Section 5 of the FTC Act, with investigating and punishing “unfair or deceptive acts or practices in or affecting commerce” under the broader consumer protection umbrella, which the FTC has interpreted broadly to hold businesses to fair and transparent privacy standards. For example, the FTC has held Facebook accountable on several accounts for privacy breaches although arguably with limited success, at the very least with respect to the data harvesting that followed Facebook’s acquisition of WhatsApp? . This was explicitly recognised by one of the FTC commissioners that voted against the FTC’s most recent (2019) settlement with Facebook.

The FTC in its current form is, however, not particularly well-equipped for dealing with issues touching on privacy breaches for a number of reasons. First, the FTC has not been given a clear mandate to handle privacy-related claims, which has translated into a lack of resources and technical expertise to do so. Because of this lack of resources, the FTC is also more likely to settle with privacy-infringing companies and for sums that, while facially significant, represent a drop in the ocean for companies like Meta and may therefore not have the same deterring effect as a court-ordered injunction. The 2019 settlement, for example, entailed a penalty of $5 billion, which represents but 4% of Meta’s total turnover in 2021.

Could antitrust laws help fill the gap?

Against this background and barring legislative changes to introduce federal data protection laws or further empowering the FTC, a possibly more compelling and less obvious legal avenue presents itself through antitrust enforcement. Misuse of personal data could, in theory, be treated as unlawful monopolization as prohibited by Section 2 of the Sherman Act or could be taken into account as a consideration in either prohibiting a merger ex ante or contesting it ex post on the basis of Section 7 of the Clayton Act.

Section 2 of the Sherman Act prohibits companies with market power from engaging in wrongful conduct. Provided harm to consumers or to the market can be shown and Facebook’s market power can be established, this provision could then be relied upon to condemn the data transfer from WhatsApp? to Facebook. Section 7 of the Clayton Act prohibits mergers where the effect may be substantially to lessen competition, or to tend to create a monopoly. This provision could then be relied upon to contest the merger which led to the data transfer and related misuses of personal data.

The benefits of opting for an antitrust approach compared to the Section 5 FTC Act approach can be summarized as follows. First, antitrust investigations can be brought not only by the FTC, but also by the Department of Justice (“DoJ”) and even State Attorney-Generals for violations of federal (as well as State) antitrust law. Thus, the sheer number of agencies empowered to take action against potentially infringing companies is greater. Their combined resources relative to the FTC’s consumer protection department also tend to be greater. In addition, these agencies tend to not only be more experienced in pursuing potentially infringing companies in court, but have moreover become well-versed in the complexities of data markets over the years and arguably more so than the FTC’s consumer protection department.

Consequently, to the extent that data protection and antitrust law both strive towards the same goal of safeguarding consumer protection, misuse of personal data may be best addressed by antitrust law until such a time where federal data protection legislation is enacted.


You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable. To restrict access to your paper simply delete the "#" character on the next two lines:

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Revision 3r3 - 08 May 2022 - 15:37:28 - EmilieSchou
Revision 2r2 - 11 Apr 2022 - 20:07:34 - EbenMoglen
Revision 1r1 - 13 Mar 2022 - 20:03:07 - EmilieSchou
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