Our Data, Our Selves: Jeremy Lieberman on Valuation and the Cost of “Free” Tech

Lieberman’s cases against Alphabet, Nikola Electric Trucks and Bed Bath & Beyond, among others, are highlighting big issues of privacy, bubble valuation, consolidation and third-party data sharing.

We know by now that Alexa is listening. We might even know that once the floodgates are open, there is no official “off” switch when it comes to companies collecting our data. But Jeremy Lieberman believes that if we knew more about how our data was being repurposed, leveraged, and wielded in the wild west of our modern tech era, we might be a little angrier about it. We might even demand compensation.

“They're selling access to us. They're selling us, and we don't have a whole lot of control on how that's being done,” says Lieberman. “And if we don’t understand it, have we really even consented to it?”

As Managing Partner of Pomerantz – a firm famous for its dedication to representing defrauded investors and championing shareholder and consumer rights – Lieberman is a natural leader. He’s been with the firm for over 20 years and his vast portfolio boasts corrective corporate governance and front-page securities class action suits, securing billions of dollars in results for his clients.

Lieberman is trailblazing many headline-making cases featuring the ubiquitous tech giants we’re all familiar with. Lieberman’s current case against Amazon alleges that the company deceived investors through the anti-competitive misuse of confidential third-party seller data. According to Lieberman, the data collected from competitors was used to directly benefit Amazon’s private-label business. These claims raise poignant questions as to the legitimacy of a business model that seems obviously in breach of antitrust laws. Further discovery also revealed disturbing insight about the nature of the company's data collection methods.

“Information came out in our case against Amazon, that Alexa was actually listening to our conversations even when it was off, she was still collecting data,” says Lieberman. While some of us may be familiar with the idea that we are the product in any free service, Lieberman is urging less complacency, and has concrete ideas about how to reset the balance. “They're making a whole lot of money for giving it to us “for free,” but at what cost – and why aren’t we participating in the profits?”

With a new administration making waves on the world stage, Lieberman is interested to see how – and if – Big Tech will be held to task. Lieberman’s current cases against Alphabet, Nikola Electric Trucks and Bed Bath & Beyond, among others, are highlighting big issues of privacy, bubble valuation, consolidation and third-party data sharing.

“The FTC has been active and brought a lot of these cases to light, as have the state attorney generals. On the one hand, I think there's a lot of appeal to attacking Big Tech,” says Lieberman. “On the other hand, all these tech companies just gave millions to the inauguration committee.”

Lawdragon: Let’s jump right in. What can you tell us about the Google case?

Jeremy Lieberman: Google has become such a household name. Colloquially if we’re searching for something online, we “Google” it. Our case deals with how Google basically served in an exchange both as a purchaser of ads and the seller of ads. They are kind of on all three sides of the transaction, as it were. Our case alleges that Google used their dominance in the field of internet searches, and its related advertising business, to disadvantage web publishers and advertisers who use competing products. The case details the company's failure to disclose those issues. There were even statements made to Congress saying they were not engaged in such practices and that it didn't matter which exchange you used, if it was Google or another exchange, but it turned out that Google was clearly favoring its own exchange where it could make more money and charge its own prices.

LD: And how about the case against Amazon?

JL: Similarly, our case against Amazon is regarding the access they had to their sellers' manufacturing and sales point data that they used in order to compete against the sellers. They also made statements to Congress and to the DOJ saying that they weren't engaged with such practices, but it turned out they were and are now facing heavy scrutiny as a result.

Our case alleges that Google used their dominance in the field of internet searches, and its related advertising business, to disadvantage web publishers and advertisers who use competing products.

LD: What attracts you to these types of cases?

JL: You have to look at these tech companies and ask why they are making so much money. It's not a crime to make a lot of money, but what's the business model? They're not manufacturing anything and most of the services are free. The only way they're making this money is from our information. They're essentially selling our personal information – so how much are they doing that and how much are they profiting from it and at whose expense? Are we really aware as to how our information is being used, what's being tracked, what's not being tracked?

They're selling access to us. They're selling us, and we don't have a whole lot of control on how that's being done. So that's really the attraction for me. These tech companies are darlings of the U..S economy, but you have to understand that the source of their money is really advertising revenues that are based upon our information, our habits, what we say and what we write. I could be talking on the phone to someone about buying furniture and boom, I magically see an advertisement for furniture on whatever website I’m next on. I don't think that's a coincidence. The issue there is really that we don’t fully know how we’re being manipulated and used. So if we don’t understand it, have we really even consented to it? I think if anyone really, fully understood how their information can be used, they probably would not consent to it.

In our case against Facebook, they used to get access to Apple’s user IDs for their consumers on the Apple app. At some point, due to a lot of scrutiny, Apple ceased giving Facebook that access. The 14 version of the iPhone had a new feature that made it so consumers needed to consent in order for Facebook to access that data. Eighty-five percent of customers said, no, they didn’t want to share that data with Facebook. That's very telling. Most people don’t want this. There's a whole lot of money being made off of our backs without our consent. Probably if we really understood it, we wouldn't consent. That business model is really the problem with Big Tech and it’s something that has to be explored. Should we share those profits? It is our customer ID and they're making revenues on it, so should we get a piece of that? When you raise that question, a whole host of other questions arise.

Information came out in our case against Amazon, that Alexa was actually listening to our conversations even when it was off, she was still collecting data and information. It’s so ubiquitous, we're all using this stuff, we can't function without these technologies in our modern society. On the other hand, they're making a whole lot of money for giving it to us “for free,” but at what costs and why aren’t we participating in the profits?

The power is huge. The consolidation of the industry alone – certain people own so much of the industry. Elon Musk starts with Tesla, then he buys Twitter which becomes X. Now he's trying to buy Open AI. I'm not trying to weave any conspiracy theories, but that's certainly a situation where there's a whole lot of concentrated power and money – and the money's being made off of the consumer's back. So there's definitely concerns and that has to be properly fought. If they can defend properly what their actions are, then sure, go ahead, that's fine. The thing is if you properly challenge it, you might really hurt the business model of some of these companies. They might have to offer you money in exchange for your data. Shouldn't Google tell us how much money they made off of us?

LD: That's brilliant. How would you rate the federal government's enforcement of Big Tech?

JL: We will really have to see, right? This is a monumental shift in administration. I think tech has been getting a lot of scrutiny – you can't say that no one's on the watch. The FTC has been active, the state attorney generals have been active, and whatever the administration ends up doing, I'm sure state AGs will continue to be active, and we will continue to be actively putting some scrutiny on these things and shedding some sunlight on a lot of these activities. On the one hand, I think there's a lot of appeal to attacking Big Tech. On the other hand, all these tech companies just gave $1M to the inauguration committee – they wanted to make sure there was a good party for the inauguration. I think the idea was maybe pay $1M and you'll evade some scrutiny.

Sometimes I feel like the SEC has been asleep. They focus on certain things and they haven't felt it's their mission to really weed out fraudulent companies. Their view seems a little more limited and they're mandated, which creates a need for the type of work we do. But I feel to some degree that the SEC is failing the American investor and the American public. The SEC looks at it as a disclosure mandate, they're not looking to see whether or not a company is actually viable. They're not really regulating in the sense of the marketplace. The result is a lot of companies that have just gone public, like X, have no real value other than a lot of people that are good at marketing and good at stock promoting.

If we don’t understand it, have we really even consented to it? I think if anyone really, fully understood how their information can be used, they probably would not consent to it.

If you look at all the Special Purpose Acquisition Companies (SPAC) IPOs, the average performance of a SPAC is about negative 80 percent. Those are billions of dollars that have been lost in investments. Who's taking responsibility for that? The SEC should have some type of responsibility to the investors. It’s just not taking a real critical look at the companies and asking the question, “Are we protecting the American public by allowing this security to be traded publicly?” I think if they asked that question, a lot of these stocks would not be put to market.

LD: Do you see that changing?

JL: I think this SEC is definitely going to be more permissive. I think we're all going to see a lot more crypto and more SPAC. I think it's bad for the market, but it's good for big business. I think the mandate is to let more companies go forward to allow crypto to do its thing. Crypto was a very big player in the elections, and I think they're going to get their investment back. I think you're going to find that there’s a much more permissive ecosystem for a lot of these companies. And who knows when those chickens actually come home to roost.

LD: Catch us up on the Bed Bath & Beyond case?

JL: It’s been a very interesting case. We were able to successfully get through a motion to dismiss based upon the smiley moon emoji, but the class certification was denied. It was based upon the short amount of trading time in between the losses and misstatements, and Ryan Cohen building up a big position. Right now we're now asking them to reconsider the denial of class classification, so we'll have to see where the case progresses from there.

LD: How about the Nikola electric truck case?

JL: Nikola – the electric truck that went down a mountain in neutral and took the entire company with it – is still being litigated. The company founder and former CEO Trevor Milton has been convicted of securities fraud by the DOJ, by a jury in the Southern District of New York. That case is proceeding in discovery and we’re really seeing that pandemic rush in a nutshell – a bubble company valued at $13B drops down to having absolutely zero value, basically overnight. Everyone rushed in to invest and GM didn't want to lose a foothold and presumably didn't do due diligence in making sure that there was actually something real there as far as the technology – so it was never a viable business. Unfortunately in those cases, when they go bankrupt the fraud case is too good, and the ability to collect therefore becomes a problem. If you don't have a deep pocket to go with you, you're going to have to collect the judgment potentially against the executives – and that becomes a very long, drawn-out process.

The question is, why didn’t the SEC scrutinize that before they allowed the company to go public and now trade in? Shouldn't they have looked to see if there was a real business model there? Maybe there should be some type of rule that unless the company has a real business model or real prospects and there’s been some examination of that, then they have to remain private for a long period of time. A lot of people would want to assassinate me for making that suggestion, but on the Hong Kong exchange, they actually interview the companies. They ask for more information. It's more of a rigorous process in making sure there's a real company there.

LD: Are you receiving pushback on the cases you’re trying to bring?

JL: I think it's too early to say – it's a real wild west. Usually when you have a wild west situation, you can get lawsuits and cases brought, but the space is just too underdeveloped. People still don't really understand how our data’s being used, and AI is really in its infancy too.

Sometimes courts will claim we’re just piggybacking on antitrust complaints, or defendants might convince the court that it doesn't really belong in a securities fraud class action, though we clearly think it does – like with the Alphabet issues. As far as other tech, it really will depend, everything's so judge dependent, in a way. Certain judges themselves are concerned about how technology is being abused and so they're sympathetic. Other judges might feel differently. Another issue is if the government gets involved, now there’s the question of, is it politically motivated? So judges might think that certain AGs have their own agenda. We've seen some cases where various AGs have brought allegations and the company says, “You can't trust what he said.”

Sometimes I feel like the SEC has been asleep. They focus on certain things and they haven't felt it's their mission to really weed out fraudulent companies.

LD: Did you ever worry about a judge's political leanings when you started practicing law?

JL: It's funny. When I first started, I didn't understand why everyone would ask me who's the judge of a certain case. I'd say, it doesn’t matter, it's all about the facts and the judge will apply the law. I didn't understand it. As I’ve matured, I realized how important that is. People might think that certain judges from certain parties are better and more favorable than other judges from other parties. I find that the exceptions, a lot of times, outweigh the rule – but it's a concern generally as even our courts these days are becoming more partisan.