Large, established corporations love the protections they receive from cronyism; as evidenced by the major telcom companies in Canada.

December 30, 2019

By: Bobby Casey, Managing Director GWP

cronyism telcomA lot of people like to conflate capitalism with cronyism or corporatism. I can’t tell if it’s ignorance or willful rebranding, but there is a hard line distinction between free market capitalism and the crony nonsense masquerading as free market capitalism.

Free market capitalism is when competitors get in the ring and the best wins. No one is hopped up on steroids. No one paid off the referees. No one fixed the match. It’s just skill versus skill.

Cronyism is when someone is paid to throw the match, a referee is paid to look the other way on fouls, and the whole thing is rigged against the underdog from the start.

If your company manages to stay outside politics and becomes successful, you’ll be reminded that you need to pay to play. This happened with Microsoft.

If you can’t grow because of the lobby of your larger competitors, then the lobby served its purpose.

It’s repulsive because as a consumer, you want choice. You want more affordable, better value, higher performing choices. That is usually the byproduct of competition. You can’t have healthy competition if there are regulations and lobbyists muddying those waters.

Large corporations obviously love the benefits of keeping smaller competitors at bay, and even go so far as to use the government for the purposes of regulatory capture.

One such case is out of Montreal, Canada, that of Adam Lackman. He founded TVAddons.

TVAddons was a “website that hosted unofficial apps (referred to as “addons”) for Kodi, a popular open-source media center that allows users to stream media from their devices and over the internet.”

Kodi is open-sourced. While its stated purpose is to only host LEGAL sources of video, its open-source model allows for people to illegally access copyrighted material.

Kodi has an official repository of addons, which it verifies and screens for any piracy enabling products; but, there are also unofficial repositories, which are managed separately.

TVAddons was one of those.

Very important: TVAddons did not host any streams or link to video. It was a platform for user-generated content, much like social media, only instead of lines of text for a status update, it had Kodi addons developed by the users.

Both Kodi and TVAddons knew that the unofficial apps mostly consisted of contributions by up and coming developers. In the same way Medium is used for up and coming writers and journalists, these unofficial repositories were used by app developers.

Lackman’s mistake was being hands-off with the repository. The managers of Kodi screened the addons first and verify them, TVAddons did not.

According to Vice, “Lackman maintains that TVAddons’ purpose was to host addons that ‘scrape’ the many free and legal video streaming services online, such as Kanopy or Pluto TV. The idea, he says, was to avoid ad trackers, popups, malware, and other common online annoyances.

Was TVAddons a piracy enabling platform, or a platform for innovative streaming addons? Put another way, are kitchen knives murder enabling weapons, or culinary tools? In both cases, it depends on the users.

On June 12, 2017, Adam Lackman was visited by a team of lawyers and a court bailiff, and told he was being sued for copyright infringement by the major telcom corporations: Bell, Rogers, Vidéotron, and TVA. They searched his house, copied drives, and demanded logins. Court-authorized technicians took down TVAddons and locked Lackman out of his own Twitter account.

Lackman called the police that day, because he initially believed the lawyers and court officials were there to hurt him, and the cops did indeed come. They left when the team of court officials and technicians explained who they were and why they were there.

How did this team of lawyers and court officials manage to legally ransack Lackman’s home?

An Anton Pillar Order. This order received its moniker from a case in the 70s regarding the theft of trade secrets, and defendant destroyed evidence by the time the due process of a warrant was completed.

This order was obtained through an ex parte hearing with a judge where the plaintiffs presented their case, and the defendant didn’t know they were a defendant, much less that this was happening, so they were not able to present their side.

Here is the worst part: Anton Pillar Orders are not criminal search warrants. Technically, Lackman did not have to let anyone in the day of the execution of the order. However, as the laws are written, if he hadn’t let them in, he would be in violation of a court order and could have been subjected to fines or imprisonment.

One judge ruled against the validity of the Anton Pillar Order; but that was promptly appealed by the major telcoms’ legal team, and overturned by a panel of three judges.

Adam Lackman was ordered to pay $75,000 in legal fees to the plaintiffs along with the thousands of dollars he’s paying for his defense. All this happened prior to this case even going to trial. He still hasn’t gone to trial, as seems the telcom corporations are looking to break him financially rather than see the inside of a courtroom.

Lackman is crowdfunding his defense and defending himself, as his original legal team could no longer work on credit.

Meanwhile, these large, established corporations are seeking even harsher regulations from the legislature. They are asking web hosts to take down sites, search engines to delist them, payment processors to stop collecting money for it, or a registrar to revoke its domain. They also wish to make copyright infringement a criminal act rather than a civil violation, asking that federal and local police make it a priority, as the current due process is too slow and tedious for them to follow.

Adam Lackman isn’t the only victim of such a legal assault, but he is a perfect example for anyone wondering why proper corporate structuring is so important. There are two sides to every predatory act — and what the telcom companies did to Lackman was predatory.

First is fault or blame. That falls squarely on the shoulders of the telcom companies. They are without question crony corporatist bullies using the cloak of legality to mask their unethical practices.

Then there’s responsibility. That belongs to the victim, Adam Lackman. Unscrupulous predators like Bell exist with the full backing and support of the legislature. To believe and behave as though it were otherwise is naive and irresponsible.

For the same reason you get car insurance in case an uninsured individual does harm to your property, so too should you get proper corporate structuring in the event some large conglomerate wants to rake you across the coals.

Lackman was not totally ignorant:

  • He has an offshore company which holds his domain names as well as a bank account he apparently never used.

  • He used a web service that hides his site’s hosting provider called Cloudflare. Among the many services it provides, is VPN and security services.

He took some measures. But there’s a reason why he’s on the brink of bankruptcy: he left himself totally exposed and vulnerable. He believed these conglomerates would be willing to settle amicably if any issues arose.

They were not.

A lot of this could have been prevented or at the very least mitigated.

From what I’ve read about this case, he’s as guilty of facilitating piracy as a car dealer is for facilitating drunk driving. He’s done nothing wrong. I doubt that opinion offers any consolation to him given his very difficult and trying circumstances, though.

If you are a small business owner, or are thinking of starting a business, please take care in how you set up your corporate and offshore structures. Protecting your identity and privacy is of the utmost importance.

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