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TOTM “Just when I thought I was out, they pull me back in!” says Al Pacino’s character, Michael Corleone, in Godfather III. That’s how Facebook and . . .
“Just when I thought I was out, they pull me back in!” says Al Pacino’s character, Michael Corleone, in Godfather III. That’s how Facebook and Google must feel about S. 673, the Journalism Competition and Preservation Act (JCPA).
Read the full piece here.
Popular Media America is deeply polarized, increasingly split into two, roughly equal, political camps. Each side blames the other for causing the situation. In a speech last . . .
America is deeply polarized, increasingly split into two, roughly equal, political camps. Each side blames the other for causing the situation. In a speech last week, President Biden accused Republicans of being a threat to democracy itself.
ICLE Issue Brief Introduction Over the past few years, several pundits and politicians have proposed introduction of German-style “sectoral bargaining” in the United States. In such a system, . . .
Over the past few years, several pundits and politicians have proposed introduction of German-style “sectoral bargaining” in the United States. In such a system, unions representing all employees in a sector bargain over the terms and conditions of employment for employees at all firms in that sector.
Several candidates in the 2020 U.S. Democratic Party presidential primaries included proposals for labor-market reforms that were based explicitly on such ideas.[1] Meanwhile, in California, Gov. Gavin Newsom recently signed the Fast Food Accountability and Standards Recovery Act (FAST Act), which creates a “fast food council” comprising a mix of government officials, fast-food franchisors and franchisees, and representatives of fast-food workers.[2] Among other duties, this council would be responsible for determining wages and working conditions in the fast-food industry.[3] If implemented, such government-mandated industry-level bargaining would be unique in the United States and, as we discuss in this issue brief, borrows important features from European sectoral-bargaining models, even as such models have been falling out of favor in Europe.
The premise of such proposals is that “sectoral bargaining” is better for workers and could even protect the economy from adversarial labor-market disputes. But would Americans really be better off under sectoral bargaining?
This brief, released in conjunction with a companion piece on the German experience with sectoral bargaining,[4] considers the evidence for and against the introduction of German-style sectoral bargaining in the United States. It begins with a brief explanation of the differences between U.S. and German collective-bargaining systems. Sections 2 and 3 outline the advantages and disadvantages of German-style sectoral bargaining. It should be stressed at the outset that Germany’s experience is very much a function of that nation’s history and constitution. But even in Germany, sectoral bargaining has been forced to adapt to the changing nature of employment over the past half-century.
Germany’s unique experience is explored further in Section 5, which contrasts it with other jurisdictions that have implemented sectoral bargaining. This is followed, in Section 6, with a discussion of the prospects for implementing sectoral bargaining in the United States. The discussion focuses on both legal and practical issues that would affect the potential for successful implementation. Finally, Section 7 discusses the likely outcome of implementing U.S. sectoral bargaining.
In the United States, the vast majority of employees in most areas of economic activity are employed under at-will contracts negotiated directly between the employer and the employee.[5] Only about 16 million Americans, 11.6% of employees, currently have their employment contracts negotiated by a labor union.[6] Union membership as a proportion of U.S. employees peaked in 1954 at about 35%.[7]
By contrast, in Germany, the employment contracts of about 52% of the nation’s employees are governed through agreements negotiated by labor unions.[8] Meanwhile, about 40% of German employees have representation in works councils.[9] (These groups likely overlap considerably.)
In the United States, negotiations between labor unions and employers typically occur either at the single-unit level (e.g., a manufacturing plant, warehouse, or other location-specific entity) or sometimes at the firm level. In practice, this means that workers at a particular jobsite or firm delegate responsibility to negotiate the terms and conditions of their employment to a representative or group of representatives, who then undertake such negotiations with the management of that jobsite or firm.
While there are state and national-level organizations representing unionized workers in various U.S. economic sectors (e.g., utilities, transportation, warehousing, movie production), unlike their German counterparts, such groups do not participate in negotiations with state or national employer groups over the terms and conditions of employment. In this context, their role is primarily political. For example, unions persuaded Congress to pass the National Labor Relations Act in 1935, which established certain statutory protections for employees, including the “right to strike,” which amounts to a prohibition on employers from firing employees who refuse to work under certain circumstances.[10] For many years, state legislatures also empowered unions to require employers to garnish the wages of both unionized and non-unionized employees to cover union dues. In 2018, this was ruled unconstitutional by the U.S. Supreme Court.[11]
By contrast, negotiations between German labor unions and employers often occur at the sectoral level.[12] As a result, in many cases, both labor unions and firms have organized themselves into sector-based coalitions, at least for the purposes of negotiating the terms and conditions of employment. In other words, workers effectively delegate responsibility to negotiate the terms and conditions of employment to an organization that represents workers in various fields from various companies. Firms likewise delegate negotiating responsibility to industry groups that may include firms offering a range of products and services that use various technologies.
In addition to sectoral bargaining via unions, German employees have established local (plant) and/or firm-level representation through “works councils.” These councils are independent of the unions and negotiate with individual firms to establish variations from national sectoral arrangements.[13] Furthermore, German companies with more than 500 employees, are in, general required to have employee representation on their supervisory boards (equivalent to boards of directors) as part of a process known as “co-determination.”[14]
Advocates of sectoral bargaining argue that it has numerous advantages over plant or firm-level bargaining. As noted in the companion piece to this brief by Matthias Jacobs and Matthias Münder, the primary reasons for this are:
Figure 1: Comparing German, US, and OECD Labor Markets
Advocates argue that these advantages of sectoral bargaining have generated substantial economic benefits. In particular, they point to the following facts about the German economy:
While sectoral bargaining and other features of Germany’s system of employee representation may have certain advantages and related economic benefits, it also has disadvantages and associated economic costs. The main disadvantages, as noted in the companion piece, are:
These disadvantages of sectoral bargaining have contributed to Germany experiencing several economic costs relative to the United States. Most notably:
Not all the benefits and costs described in Sections II and III can necessarily be ascribed to Germany’s system of sectoral bargaining. Co-determination through works councils and employee membership of company boards likely also played significant roles, as have features of German culture. Unfortunately, it is difficult to parse the roles each of these mechanisms play at a macro level without looking at the micro-level detail, either through cross-sectional comparisons (see Section 5) or by looking at the effects of changes over time.
Figure II: Comparing German, US, and OECD Output per Capita
SOURCE: World Bank. Figures are GDP per capita based on purchasing power parity (PPP) in constant 2017 international dollars.
Germany’s system of sectoral bargaining has undergone some substantial changes over the course of the past quarter-century. Since 1996, the proportion of German employees working under a sectoral-bargaining agreement has fallen by more than 35%.[34] The main drivers of this reduction have been the changing nature of work and increasing exposure of German markets to international competition. Employers have responded in four primary ways:
First, there has been a shift away from formal participation in collective-bargaining agreements and toward more informal “orientation” to such agreements. As noted above, about 20% of establishments report adopting this approach, which provides employers with considerably more flexibility, because the formal rules do not apply.
Second, employers are increasingly choosing to include specific flexibilities in their sectoral-bargaining agreements that allow them to reduce the wages they offer below the formally agreed-upon levels. There are two main types of such flexibility:
Third, many larger firms now outsource work that previously was done by low-paid in-house workers. For example, a 2017 study found that the proportion of retailers employing in-house janitorial staff fell from 82% in 1975 to 20% in 2009.[35]
Fourth, there is a strong correlation between firm size and adoption of collective-bargaining agreements. Fewer than 20% of firms with less than 100 employees are covered by such agreements, while more than 50% of firms with more than 500 employees are covered.[36] This suggests that smaller, more dynamic firms in Germany’s innovative Mittelstand (SME) sector, which accounts for more than 99% of companies in the country, are increasingly avoiding collective-bargaining agreements.[37]
With the decline in sectoral bargaining, the inclusion of hardship and opening clauses in new agreements, and the outsourcing of low-wage jobs, many of the putative advantages of the German system have been eroded. For example:
At the same time, the decline in rigidly enforced sectoral bargaining likely has helped Germany to avoid the problems experienced in jurisdictions with more rigid approaches, such as France and Italy, as Germany has experienced more robust economic growth over the past two decades (see Figure 3). It is also notable, however, that France (since 2008) and Italy (since 2011) likewise have begun to shift away from sectoral bargaining and toward firm-level bargaining.[40]
Figure III: Output per Capita in Germany, France, and Italy
Source: World Bank. Figures are GDP per capita based on purchasing power parity (PPP) in constant 2017 international dollars.
Nonetheless, some attempts to make the German system more flexible have been thwarted. For example, a recent proposal by the Confederation of German Employers Associations to break down complex agreements into modular elements—which would have enabled employers to adopt only those elements that are most relevant to their firms, plants, and employees—was rejected by IG Metall, Germany’s largest labor union.[41]
As noted in the introduction, there has been a recent push to introduce sectoral bargaining in the United States. This section examines whether German-style sectoral bargaining could be introduced here, with particular attention to the legal constraints.
German sectoral bargaining relies, in part, on the existence of national-level bodies to represent employees, on one side, and employers, on the other. Without such national-level representation, there would be incentives for regional organizations to agree to terms and conditions of employment that favored firms and employees in that region. Competition among regional groups would be expected to drive down wage levels and other employment benefits, as each regional group would seek terms and conditions that are likely to attract business locally. With national representation, labor unions and employer groups can negotiate region-specific terms and conditions that limit such competition.
The functioning of such national-level bodies and associated agreements are facilitated by German federal law; specifically the Collective Agreements Act, which is explained in the companion piece to this brief.[42] In the United States, some federal protections—including the First Amendment—guarantee the rights of individuals to associate, and hence to join unions. The National Labor Relations Act (NLRA) established a federal right to strike and reasserts the right of individuals “to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”[43] As such, employees could delegate their rights to bargain over terms and conditions of employment to sectoral unions at state, regional, or national levels.
Notwithstanding these rights to associate, however, there is a strong possibility that agreements made by sectoral unions with groups of firms that otherwise compete on the market would run afoul of U.S. antitrust law.
U.S. antitrust law, broadly speaking, prohibits competitors from coordinating their behaviors in ways that set prices or that otherwise manipulate the competitive landscape in ways that cause anticompetitive harm to consumers.[44] The early history of the U.S. labor movement illustrates the basic problem. For decades, U.S. labor activists ran up against “antitrust law and its common law precursors, which established a baseline presumption in favor of competition within labor markets.”[45]
The result was a consistent onslaught of criminal and civil charges, usually resulting in injunctions that prevented workers from organizing in order to “restrain trade or competition within the labor market” through collective bargaining.[46] The U.S. Supreme Court even held that the terms of the Sherman Antitrust Act—nominally focused on business trusts—covered any combination in restraint of trade, including labor-union activities.[47] With passage of the Clayton Act, Congress created an explicit exception to the antitrust laws for the organizing activities of labor unions.[48] This protection was expanded with passage of the Norris-LaGuardia Act and the National Labor Relations Act, both of which clarified and expanded the statutory antitrust exemptions that applied to labor unions.[49]
Agreements between competitors—that is, the employer side of the sectoral-bargaining analysis—do not have any such explicit exemptions in U.S. law. Indeed, the current position of both the Federal Trade Commission (FTC) and the U.S. Justice Department (DOJ) is that such agreements likely violate the law.[50] Indeed, both federal antitrust agencies have brought cases on the basis of impermissible collusion among employers to set wages and other employment conditions.[51]
The U.S. Supreme Court has recognized some non-statutory antitrust exceptions that could be extended to employers. Two examples of non-statutory exemptions are particularly relevant here. In Brown v. Pro Football Inc, the Supreme Court recognized an exception for employers that collectively bargain with a labor union.[52] Brown arose when the owners of National Football League teams were unable to reach an agreement with the football players’ union over the creation of “development squads” that could provide substitute players to the teams.[53] The union wanted players on those squads to be able to negotiate their salaries, but the club owners wanted to set the weekly rate at $1,000.[54] When talks stalled, the club owners went ahead with the proposed plan.[55] The players’ union sued, alleging that the agreement among employers to set the wage rate was a restraint of trade that violated the Sherman Act.[56] The Supreme Court disagreed with the union because the agreement:
…took place during and immediately after a collective-bargaining negotiation. It grew out of, and was directly related to, the lawful operation of the bargaining process. It involved a matter that the parties were required to negotiate collectively. And it concerned only the parties to that collective-bargaining relationship.[57]
The facts of Brown counsel caution when trying to construe this precedent more broadly beyond professional sports, let alone at the level of an entire sector of the economy. First, as noted above, the Supreme Court construed the labor non-statutory exemption as extending to the group of employers that were already involved in the collective bargaining in question. That is, the nature of professional football is that there are member teams that are bound by the collective bargaining of the football players. Thus, the employers are already compelled to partake in the collective activity. Further, although not explicitly an aspect of that case, it is nonetheless true that the small collection of employers involved were all identical and similarly situated, and all generate the same output of “professional football.”
Although it’s possible to imagine stretching this exemption to cover an entire sector—where all unions in that sector simultaneously engage in a collective-bargaining negotiation and all firms in that sector have sufficiently similar interests that they also can collectively bargain—it appears very hard to square with U.S. antitrust law. Decades of antitrust precedent push against the notion that firms that are otherwise competitors can jointly negotiate on wage and related restrictions, rejecting even “special case” exemptions such as those for the “learned professions.”[58] Particularly since a “sector” can encompass a wide variety of firms with differing working conditions, safety concerns, cost drivers, and customers. To easily fit into a similar exemption, a legally relevant “sector” would have to be highly constrained. There would also be a host of fraught questions that attend determining how to decide what a relevant “sector” is, what entity gets to make that decision, and what to do about firms that uncomfortably straddle different sectoral classifications.
The “state action” doctrine in U.S. antitrust law also provides a potential means to develop a sectoral-bargain scheme—though here, too, the path is not easy (to put it mildly). In Parker v. Brown, the Supreme Court held that a California state agriculture program that set certain agricultural prices:
…was never intended to operate by force of individual agreement or combination. It derived its authority and its efficacy from the legislative command of the state and was not intended to operate or become effective without that command. We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.[59]
The state action doctrine has been extended in some ways over the years since Parker v. Brown. Relevant here, under certain circumstances, is that it may permit not only anticompetitive conduct by the sovereign state itself—paradigmatically, acts of the legislature—but by lesser state authorities and state-authorized commissions and boards dominated by market participants, but acting under the color of delegated state authority.[60] Otherwise anticompetitive conduct of state-authorized boards can qualify for the state action exemption only if both prongs of the test articulated in California Retail Liquor Dealers Ass’n v. Midcal Aluminum Inc are satisfied.[61] They are, respectively, that the challenged anticompetitive conduct must be “one clearly articulated and affirmatively expressed as state policy” and that the policy is “actively supervised” by the state itself.[62] The Court’s unanimous opinion in Phoebe Putney further strengthened Midcal’s clear articulation prong, which applies to both lesser state agencies and independent boards dominated by active market participants.[63]
More recently, however, the Supreme Court has suggested that the active supervision prong must be more than merely pro forma. In N. Carolina State Bd. of Dental Examiners v. F.T.C., the Court held that “[i]mmunity for state agencies… requires more than a mere facade of state involvement, for it is necessary in light of Parker’s rationale to ensure the States accept political accountability for anticompetitive conduct they permit and control.”[64] Notably, the Court in N.C. Dental focused on the fact that a controlling number of decisionmakers on the board in question were active market participants.[65] It also described the problem before the Court as considering when “a State empowers a group of active market participants to decide who can participate in its market, and on what terms.” This suggests that the active oversight requirement may apply more broadly.[66]
Thus, any attempt to bring sectoral bargaining to the United States would need either 1) an explicit statutory exemption from Congress or 2) to qualify for one of the existing non-statutory exemptions. Assuming that Congress is not going to enact such an exemption any time soon, the latter option would be required. California’s recently enacted FAST Recovery Act, mentioned above, is one such attempt to thread this needle by qualifying for the state action exemption, and hence to immunize a council against federal antitrust scrutiny.
Section 1471(a)(1) of the California law establishes a “Fast Food Council” consisting of four individuals that own restaurants or franchises, four individuals that represent employees, one representative of the Governor’s Office of Business and Economic Development, and one representative from the state Department of Industrial Relations.[67] The council would have the power to “promulgate minimum fast food restaurant employment standards, including, as appropriate, standards on wages, working conditions” as well as other worker-welfare goals.[68] The FAST Recovery Act requires the council to submit reports to relevant committees of the California Legislature regarding any standards or rules it proposes, in order to give lawmakers the opportunity to enact legislation that would put the proposed change into effect.[69]
But, as noted above, merely putting formal requirements into law will likely be insufficient to satisfy the “active supervision” requirement. For example, it will matter whether the council is regarded as closely affiliated with the state government or if it is more like an independent organization populated largely by industry participants and only superficially overseen by the state.[70] Almost certainly, this law will draw legal attention, very possibly from the FTC or DOJ, and resolution of litigation will turn on very specific factual inquiries into the program’s implementation and operation.
In the decades after World War II, the combination of sectoral bargaining and co-determination appear to have created a more commodious relationship between German employers and employees than was the case in the United States, resulting in fewer industrial disputes and fewer days lost to strikes. As international competition intensified, however, the German system was forced to adapt, with the addition of clauses permitting both temporary and permanent exceptions. Nonetheless, sectoral bargaining has been on the decline in Germany and is now limited primarily to a relatively small number of large firms. While 50-60% of firms with more than 500 employees participate in sectoral-bargaining agreements, less than 20% of firms with fewer than 100 employees do.
Given the waning fortunes of sectoral-bargaining agreements in Germany—and, indeed, throughout Europe—it is ironic that U.S. politicians would now contemplate such a model for American workers. Yet, with California’s passage of the FAST Act, the issue is very much on the table.
The FAST Act applies to establishments that are members of a “fast food chain,” which is defined in the statute as “a set of restaurants consisting of 100 or more establishments nationally that share a common brand, or that are characterized by standardized options for decor, marketing, packaging, products, and services.”[71] By setting minimum wages and working conditions at such establishments, the act is intended to improve the prospects for workers. Unfortunately, it is likely—in many, if not all, cases—to have the opposite effect.
If the council setting wages and working conditions for fast-food chains follows the typical German sectoral-bargaining arrangement, wages and conditions will be set according to the standards of the least productive third of establishments. This would limit the negative impact of the act on franchisees and might even lead to an overall reduction in wages in the sector, especially if such a statutory arrangement is deemed to be a permissible exception to minimum-wage laws.[72]
On the other hand, if the council setting wages and conditions decides to set wages significantly above current market rates, the consequences for franchisees and their employees could be disastrous. Faced with unsustainable wage outlays, franchisees would face a difficult choice: sell off, switch to become a franchise of a smaller chain, or automate.
It is notable that the first attempt to implement sectoral bargaining in the United States is proposed in a sector that is not subject directly to international—or even interstate—competition. But it is subject to technological competition. Already, some fast-food restaurants have begun to automate.[73] In part, this is happening to increase the speed, quality, and consistency of service. But it is also being driven by costs: as labor costs rise, the incentive to switch to more capital-intensive modes of production will increase.
It is, of course, possible that the council will prohibit such automation in an effort to maintain jobs. But doing so would merely make it more difficult for covered fast-food restaurants to compete with smaller chains that are not covered by the FAST Act. Beyond that competitive distortion, such action by the council would entail a covert tradeoff that further diminishes consumer welfare. Faced with other inflationary pressures, competitive threats from smaller chains not subject to the FAST Act, and ordinary cost increases, larger chains will be forced to raise prices. In the short term, this might shift surplus toward workers. Over the medium to long term, however, it would suppress demand, harming consumers by providing them with fewer goods and services than they would otherwise demand, and harming workers by shrinking the industry overall.
If the FAST Act is, indeed, a harbinger of the future of employer-employee bargaining in the United States, then the prospects for the U.S. economy look even bleaker than many portend. To see why, one need only refer back to Figure 3. Does the United States really want to shift toward a low-growth trajectory like those of France or Italy? Moreover, it bears repeating that, in an environment of international competition, Germany’s model required all manner of tweaks in order to make it “work.” Even then, Germany’s rate of economic growth has been considerably lower than that of the United States, as can be seen in Figure 2.
To address the other main argument made for a switch to sectoral bargaining: reduced numbers of days lost to industrial action. As demonstrated in Figure 4, the United States has already achieved that.
Figure IV: Annual U.S. Worker-Days Lost to Strikes, 1947-2021
Source: Work Stoppages, U.S Bureau of Labor Statistics, https://www.bls.gov/web/wkstp/annual-listing.htm (last visited Aug. 23, 2022)
In short, if the United States were to import the German model of sectoral bargaining at this stage, it is unlikely to benefit from any of the advantages that the model offered to Germany early in its adoption. It would instead suffer the disadvantages and associated costs that Germany now seeks to avoid by unwinding this model at the margins. As the United States heads further into unstable economic times, it would be unwise to adopt a bargaining model that would make its labor market less flexible and more subject to the disruptive effects of competition from overseas and from new technology.
No system is perfect, but U.S. labor markets have consistently outperformed those in Germany in terms of output per worker. The wider consequence of shifting to a German sectoral-bargaining model would be to push the United States behind much nimbler competitors, ultimately hurting both consumers and the workers that such otherwise well-intentioned reforms are intended to help.
[1] Alexia Fernández Campbell, The Boldest and Weakest Labor Platforms of the 2020 Democratic Primary, Vox (Oct. 29, 2019), https://www.vox.com/2019/9/5/20847614/democratic-debate-candidatelabor-platforms.
[2] Assem. Bill 257, Food facilities and employment, ch. 246 (2021-2022), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB257.
[3] Id. at 1471(d)(1)(A). Notably, this is not a pure sectoral-bargaining scheme, where there would be true negotiations between industry representatives on one side and labor representatives on another. Instead, it represents a hybrid approach that, at least theoretically, allows the bargaining to happen within the auspices of this council.
[4] Matthias Jacobs and Matthias Münder, A Worthy Import? Examining the Advantages and Disadvantages of Sectoral Collective Bargaining in Germany, International Center for Law & Economics (Sep. 25, 2022), https://laweconcenter.org/resource/a-worthy-import-examining-the-advantages-and-disadvantages-of-sectoral-collective-bargaining-in-germany.
[5] At-Will Employment, Betterteam, https://www.betterteam.com/at-will-employment#:~:text=At%2Dwill%20employment%20means%20that,are%20considered%20at%2Dwill%20employees (last visited Sep. 23, 2022).
[6] Union Members Summary, USDL-22-0079, US Dep’t of Labor (Jan. 20, 2022), https://www.bls.gov/news.release/union2.nr0.htm.
[7] Drew Desilver, American Unions Membership Declines as Public Support Fluctuates, Pew Rsch. Ctr. (Feb. 20, 2014), https://www.pewresearch.org/fact-tank/2014/02/20/for-american-unions-membership-trails-far-behind-public-support.
[8] Simon Jäger, Shakked Noy & Benjamin Schoefer, The German Model of Industrial Relations: Balancing Flexibility and Collective Action 10, NBER Working Paper No. 30377 (2022).
[9] Id. at 23.
[10] 29 U.S.C. § 151–169; see also: The Right to Strike, National Labor Relations Board, https://www.nlrb.gov/strikes (last visited Sep. 23, 2022).
[11] Janus v. American Federation of State, County, and Municipal Employees, Council 31, 138 US 2448, (2018).
[12] See, generally, Jacobs & Münder, supra note 4 and Jäger, et al., supra note 8.
[13] Jäger et al. supra note 8, at 22.
[14] Id. at 20.
[15] Jacobs & Münder, supra note 12 .
[16] Id. at 7.
[17] Id.
[18] Jäger et al. supra note 8 at 11 and 12.
[19] Id. at 12
[20] Jacobs and Münder, supra note 4 at 8.
[21] Id. at 9.
[22] Jäger et al. supra note 8 at 11.
[23] Id. at 1.
[24] See, Hagen Lesch, Changes in Industrial Action: A Comparison Between Germany and Other OECD Countries, CESifo Forum 4, 68 (Dec. 2015) (From 1995-2014, an average of four days per 1,000 were lost to strikes in Germany; in the United States, the figure was 24 per 1,000 days).
[25] See Figure 1 above.
[26] Id.
[27] Robot Density Nearly Doubled Globally, International Federation of Robotics (Dec. 14, 2021), https://ifr.org/ifr-press-releases/news/robot-density-nearly-doubled-globally; Wolfgang Dauth, Sebastian Findeisen, Jens Suedekum & Nicole Woessner, The Adjustment of Labor Markets to Robots, 19 J. Eur. Econ. Ass’n 3104 (2021).
[28] Daron Acemoglu & Pascual Restrepo, Robots and Jobs: Evidence from US Labor Markets, 128 J. Pol. Econ. 2188 (2020).
[29] Figure 1, above.
[30] Id.
[31] Jäger et al. supra note 8, at 1.
[32] Jäger et al. supra note 8, at 11.
[33] See Figure 2 below.
[34] Jacobs & Münder, supra note 4, at 1.
[35] Deborah Goldscmidt & Johannes F. Schmieder, The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure, NBER Working Paper No. 21366 (2015), https://www.nber.org/papers/w21366.
[36] Jäger et al. supra note 8 at 12.
[37] Morad Elhafed, Stuck in the Middle No More: How German Mittelstand Companies Can Break Out and Go Global, Forbes (Feb. 24, 2022), https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/24/stuck-in-the-middle-no-more-how-german-mittelstand-companies-can-break-out-and-go-global.
[38] Markus Grabka, Income Inequality in Germany Stagnating Over the Long Term, but Decreasing Slightly During the Coronavirus Pandemic, DIW (2021), https://d-nb.info/1238598374/34; Karl Brenke, Real Wages in Germany: Numerous Years of Decline, 5 German Inst. Econ. Rsch. 1 (2009).
[39] Id.
[40] Collective Bargaining, worker-participation.eu, https://www.worker-participation.eu/National-Industrial-Relations/Countries/France/Collective-Bargaining (last visited Aug. 23, 2022); Collective Bargaining, worker-participation.eu, https://www.worker-participation.eu/National-Industrial-Relations/Countries/Italy/Collective-Bargaining (last visited Aug. 23, 2022).
[41] Jacobs & Münder supra note 4, at 15.
[42] Id.
[43] 29 U.S.C. §§ 151-169, Section 7.
[44] See, e.g., 15 USC § 1 (“prohibiting any combination… in restraint of trade or commerce”). This language notwithstanding, the Sherman Act doesn’t prohibit “any… restraint.” Simple coordination may or may not be unlawful, for example, while horizontal agreements among competitors to fix prices or allocate markets is per se unlawful. See, e.g., United States v. Socony-Vacuum Oil Co. Inc., 310 U.S. 150, (1940). See also, Arizona v. Maricopa County Medical Society, 457 U.S. 332, (1982); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons Inc., 340 U. S. 211, (1951).
[45] Cynthia L. Estlund & Wilma Liebman, Collective Bargaining Beyond Employment in the United States, 42 Comp. Lab. L. & Pol’y J. 371, 373 (2021).
[46] Id. at 373–74.
[47] In re Debs, 158 U.S. 564 (1895); Loewe v. Lawlor, 208 U.S. 274 (1908)
[48] 15 U.S.C. § 17.
[49] 29 U.S.C. § 151–169; 29 U.S.C. § 104; see also, United States v. Hutcheson, 312 U.S. 219 (1941) (Reaffirming that legislation had created a strong antitrust exception for labor unions).
[50] Antitrust Guidance for Human Resource Professionals, DOJ Antitrust Division (October 2016), https://www.justice.gov/atr/file/903511/download (“An agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision- making with regard to wages, salaries, or benefits; terms of employment; or even job opportunities.”)
[51] See, e.g., United States and Arizona v. Arizona Hospital and Healthcare Association and AxHHA Service Corp., Case No. CV07-1030-PHX, (2007) (DOJ sued the Arizona hospital association for attempting to bargain collectively for most hospitals in the state in order to set rate schedules for per-diem nurses.); In the Matter of the Good Guys Inc., 115 F.T.C. 670 (1992) (FTC sued a group of nursing homes that had collectively agreed to not use the services of a particular nursing registry that had raised the prices it was charging for its per-diem nurse placement); Council of Fashion Designers of America, Federal Trade Commission (Jun. 9, 1995), https://www.ftc.gov/news-events/news/press-releases/1995/06/council-fashion-designers-america (FTC sued the council of fashion designers for colluding to reduce the prices of fashion models).
[52] Brown v. Pro Football, 518 U.S. 231, (1996).
[53] Id.
[54] Id.
[55] Id. at 234.
[56] Id. at 235.
[57] 518 U.S. at 250.
[58] See, e.g., Maricopa, Goldfarb, Professional Engineers, FTC v. AMA.
[59] Parker v. Brown, 317 U.S. 341, 350–51, (1943).
[60] N. Carolina State Bd. Of Dental Examiners v. FTC, 574 U.S. 494, (2015); California Retail Liquor Dealers Ass’n v. Midcal Aluminum Inc., 445 U.S. 97, (1980).
[61] California Retail Liquor Dealers Ass’n, 445 U.S. at 105, (1980).
[62] Id.
[63] FTC v. Phoebe Putney Health System Inc., 568 U.S. 216, (2013).
[64] N. Carolina State Bd. of Dental Examiners, 574 U.S. at 505.
[65] Id. at 511—12.
[66] Id.
[67] Assem. Bill 257, Food facilities and employment, ch. 246 § 1471(a)(1)(A)-(F) (2021-2022), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220AB257.
[68] Id. at (d)(1)(A)
[69] Id. at (d)(1)(B).
[70] This is particularly relevant considering NC Dental’s holding that focused on “the constant requirements of active supervision.” (574 U.S. at 515). See also, Brief for the United States as Amici Curiae, No. 19-12227 (2019), https://www.ftc.gov/system/files/documents/amicus_briefs/smiledirectclub-llc-v-battle-et-al/smiledirectclub-v-battle_ca11_usa_ftc_amicus_brief_9-25-19.pdf (FTC citing NC Dental as requiring a state to undertake the “constant requirement[] of active supervision”).
[71] California AB 257, at 5.
[72] See Id. at 10, s. (k)(1): “The minimum wages, maximum hours of work, and other working conditions fixed by the council in standards promulgated pursuant to subdivision (d) shall be the minimum wage, maximum hours of work, and the standard conditions of labor for fast food restaurant employees or a relevant subgroup of fast food restaurant employees for purposes of state law.”
[73] Felix Behr, The Big Ways Robots Are Quietly Taking Over Fast Food, mashed (Feb. 14, 2022), https://www.mashed.com/433837/the-big-ways-robots-are-quietly-taking-over-fast-food.
Scholarship Abstract Use of the familiar metaphor of the exchange of ideas as a “marketplace” has historically presumed that free and uninhibited competition among ideas will . . .
Use of the familiar metaphor of the exchange of ideas as a “marketplace” has historically presumed that free and uninhibited competition among ideas will reliably arrive at truth. But even the most fervent economic free-market advocates recognize the possibility of market failure. Market failure is a market characteristic (e.g., monopoly power) that precludes the maximization of consumer welfare.
The last few years have witnessed increased calls for censorship of speech and research pertaining to a variety of subjects (e.g., climate change; COVID-19 sources and treatments; and viewpoints concerning race, gender, and sexual orientation) across a variety of fora. The consistent refrain in favor of this censorship is that the spread of false or misleading information is preventing access to or distorting the truth and thereby inhibiting social progress: undermining democracy, fomenting bigotry, costing lives, and even threating the existence of the planet.
Though on their face these calls for censorship appear anti-liberal and contrary to the marketplace model, they can be made consistent with both if they are understood as a response to a market failure in the marketplace of ideas. While recent calls for censorship have not been justified expressly as a response to market failure, reframing the debate in these terms may prevent parties on both sides of the issue from engaging at cross purposes by locating the debate within an otherwise familiar model.
The Article proceeds as follows: Part I offers examples of recent calls for (and efforts at) censorship in the market of ideas concerning a variety of subjects and forums. Part II articulates a model of the marketplace of ideas that jibes with contemporary economic concepts, defines its components (e.g., sellers, buyers, intermediaries, etc.), considers the possibility of associated market failures, and highlights some common fallacies in the application of the concept of market failure more broadly. Part III explores the principal philosophical justifications for the utility of freedom of expression, focusing on the arguments articulated in John Stuart Mill’s classic, On Liberty. Part IV argues that, in light of these arguments (and taking into account contemporary critiques), the threat of false and misleading expression does not reflect market failure in the marketplace of ideas as modeled here. To the contrary, Part V argues that the ease with which recent public and private efforts at censorship have succeeded may itself reflect a market failure warranting correction—if not through legislation or the courts, then by social sanction and the court of public opinion.
TL;DR California’s state Assembly earlier this year passed A.B. 2408, which would impose a duty of care on social-media platforms for “any design, feature, or affordance that causes a child user… to become addicted to the platform.”
California’s state Assembly earlier this year passed A.B. 2408, which would impose a duty of care on social-media platforms for “any design, feature, or affordance that causes a child user… to become addicted to the platform.” The bill, which has also cleared the state Senate Judiciary Committee, would empower parents to bring class-action suits against Big Tech platforms, with minimum statutory damages set at $1,000 per class member. California prosecutors also could seek damages of $25,000 per violation, or $250,000 for knowing and willful violations. Liability would attach when a platform becomes aware that an algorithm is potentially addictive.
Not only is the theory of social-media addiction strongly contested, but it would be difficult, if not unconstitutional, to enforce the bill’s terms. The line differentiating fomenting user addiction and making a platform more attractive to users is exceedingly blurry. Moreover, a strong case can be made that A.B. 2408 violates the First Amendment.
Read the full explainer here.
Presentations & Interviews The Federalist Society – ICLE Director of Competition Policy Kristian Stout took part in a webinar organized by the Federalist Society on Section 230, common law, . . .
The Federalist Society – ICLE Director of Competition Policy Kristian Stout took part in a webinar organized by the Federalist Society on Section 230, common law, and free speech. The full video is embedded below.
Popular Media A conventional wisdom has developed in the U.S. that “something” has to be done about Big Tech. From the barrages of congressional hearings to the . . .
A conventional wisdom has developed in the U.S. that “something” has to be done about Big Tech. From the barrages of congressional hearings to the litany of media exposés, it seems everyone has some complaints about social-media companies.
ICLE White Paper A comprehensive survey of the law & economics of online intermediary liability, which concludes that any proposed reform of Section 230 must meaningfully reduce the incidence of unlawful or tortious online content such that its net benefits outweigh its net costs.
A quarter-century since its enactment as part of the Communications Decency Act of 1996, a growing number of lawmakers have been seeking reforms to Section 230. In the 116th Congress alone, 26 bills were introduced to modify the law’s scope or to repeal it altogether. Indeed, we have learned much in the last 25 years about where Section 230 has worked well and where it has not.
Although the current Section 230 reform debate popularly—and politically—revolves around when platforms should be forced to host certain content politically favored by one faction (i.e., conservative speech) or when they should be forced to remove certain content disfavored by another (i.e., alleged “misinformation” or hate speech), this paper does not discuss, nor even entertain, such reform proposals. Rather, such proposals are (and should be) legal non-starters under the First Amendment.
Indeed, such reforms are virtually certain to harm, not improve, social welfare: As frustrating as imperfect content moderation may be, state-directed speech codes are much worse. Moreover, the politicized focus on curbing legal and non-tortious speech undermines the promise of making any progress on legitimate issues: The real gains to social welfare will materialize from reforms that better align the incentives of online platforms with the social goal of deterring or mitigating illegal or tortious conduct.
Section 230 contains two major provisions: (1) that an online service provider will not be treated as the speaker or publisher of the content of a third party, and (2) that actions taken by an online service provider to moderate the content hosted by its services will not trigger liability. In essence, Section 230 has come to be seen as a broad immunity provision insulating online platforms from liability for virtually all harms caused by user-generated content hosted by their services, including when platforms might otherwise be deemed to be implicated because of the exercise of their editorial control over that content.
To the extent that the current legal regime permits social harms online that exceed concomitant benefits, it should be reformed to deter those harms if such reform can be accomplished at sufficiently low cost. The salient objection to Section 230 reform is not one of principle, but of practicality: are there effective reforms that would address the identified harms without destroying (or excessively damaging) the vibrant Internet ecosystem by imposing punishing, open-ended legal liability? We believe there are.
First and foremost, we believe that Section 230(c)(1)’s intermediary-liability protections for illegal or tortious conduct by third parties can and should be conditioned on taking reasonable steps to curb such conduct, subject to procedural constraints that will prevent a tide of unmeritorious litigation.
This basic principle is not without its strenuous and thoughtful detractors, of course. A common set of objections to Section 230 reform has grown out of legitimate concerns that the economic and speech gains that have accompanied the rise of the Internet over the last three decades would be undermined or reversed if Section 230’s liability shield were weakened. Our paper thus establishes a proper framework for evaluating online intermediary liability and evaluates the implications of the common objections to Section 230 reform within that context. Indeed, it is important to take those criticisms seriously, as they highlight many of the pitfalls that could attend imprudent reforms. We examine these criticisms both to find ways to incorporate them into an effective reform agenda, and to highlight where the criticisms themselves are flawed.
Our approach is rooted in the well-established law & economics analysis of liability rules and civil procedure, which we use to introduce a framework for understanding the tradeoffs faced by online platforms under differing legal standards with differing degrees of liability for the behavior and speech of third-party users. This analysis is bolstered by a discussion of common law and statutory antecedents that allow us to understand how courts and legislatures have been able to develop appropriate liability regimes for the behavior of third parties in different, but analogous, contexts. Ultimately, and drawing on this analysis, we describe the contours of our recommended duty-of-care standard, along with a set of necessary procedural reforms that would help to ensure that we retain as much of the value of user-generated content as possible, while encouraging platforms to better police illicit and tortious content on their services.
An important goal of civil tort law is to align individual incentives with social welfare such that costly behavior is deterred and individuals are encouraged to take optimal levels of precaution against risks of injury. Not uncommonly, the law even holds intermediaries—persons or businesses that have a special relationship with offenders or victims—accountable when they are the least-cost avoider of harms, even when those harms result from the actions of third parties.
Against this background, the near-complete immunity granted to online platforms by Section 230 for harms caused by platform users is a departure from normal rules governing intermediary behavior. This immunity has certainly yielded benefits in the form of more user-generated online content and the ability of platforms to moderate without fear of liability. But it has also imposed costs to the extent that broad immunity fails to ensure that illegal and tortious conduct are optimally deterred online.
The crucial question for any proposed reform of Section 230 is whether it could pass a cost-benefit test—that is, whether it is likely to meaningfully reduce the incidence of unlawful or tortious online content while sufficiently addressing the objections to the modification of Section 230 immunity, such that its net benefits outweigh its net costs. In the context of both criminal and tort law generally, this balancing is sought through a mix of direct and collateral enforcement actions that, ideally, minimizes the total costs of misconduct and enforcement. Section 230, as it is currently construed, however, eschews entirely the possibility of collateral liability, foreclosing an important mechanism for properly adjusting the overall liability scheme.
But there is no sound reason to think this must be so. While many objections to Section 230 reform—that is, to the imposition of any amount of intermediary liability—are well-founded, they also frequently suffer from overstatement or unsupported suppositions about the magnitude of harm. At the same time, some of the expressed concerns are either simply misplaced or serve instead as arguments for broader civil-procedure reform (or decriminalization), rather than as defenses of the particularized immunity afforded by Section 230 itself.
Unfortunately, the usual course of discussion typically fails to acknowledge the tradeoffs that Section 230—and its reform—requires. These tradeoffs embody value judgments about the quantity and type of speech that should exist online, how individuals threatened by tortious and illegal conduct online should be protected, how injured parties should be made whole, and what role online platforms should have in helping to negotiate these tradeoffs. This paper’s overarching goal, even more important than any particular recommendation, is to make explicit what these tradeoffs entail.
Of central importance to the approach taken in this paper, our proposals presuppose a condition frequently elided by defenders of the Section 230 status quo, although we believe nearly all of them would agree with the assertion: that there is actual harm—violations of civil law and civil rights, violations of criminal law, and tortious conduct—that occurs on online platforms and that imposes real costs on individuals and society at-large. Our proposal proceeds on the assumption, in other words, that there are very real, concrete benefits that would result from demanding greater accountability from online intermediaries, even if that also leads to “collateral censorship” of some lawful speech.
It is necessary to understand that the baseline standard for speech and conduct—both online and offline—is not “anything goes,” but rather self-restraint enforced primarily by incentives for deterrence. Just as the law may deter some amount of speech, so too is speech deterred by fear of reprisal, threat of social sanction, and people’s baseline sense of morality. Some of this “lost” speech will be over-deterred, but one hopes that most deterred speech will be of the harmful or, at least, low-value sort (or else, the underlying laws and norms should be changed). Moreover, not even the most valuable speech is of infinite value, such that any change in a legal regime that results in relatively less speech can be deemed per se negative.
A proper evaluation of the merits of an intermediary-liability regime must therefore consider whether user liability alone is insufficient to deter bad actors, either because it is too costly to pursue remedies against users directly, or because the actions of platforms serve to make it less likely that harmful speech or conduct is deterred. The latter concern, in other words, is that intermediaries may—intentionally or not—facilitate harmful speech that would otherwise be deterred (self-censored) were it not for the operation of the platform.
Arguably, the incentives offered by each of the forces for self-restraint are weakened in the context of online platforms. Certainly everyone is familiar with the significantly weaker operation of social norms in the more attenuated and/or pseudonymous environment of online social interaction. While this environment facilitates more legal speech and conduct than in the offline world, it also facilitates more illegal and tortious speech and conduct. Similarly, fear of reprisal (i.e., self-help) is often attenuated online, not least because online harms are often a function of the multiplier effect of online speech: it is frequently not the actions of the original malfeasant actor, but those of neutral actors amplifying that speech or conduct, that cause harm. In such an environment, the culpability of the original actor is surely mitigated and may be lost entirely. Likewise, in the normal course, victims of tortious or illegal conduct and law enforcers acting on their behalf are the primary line of defense against bad actors. But the relative anonymity/pseudonymity of online interactions may substantially weaken this defense.
Many argue, nonetheless, that holding online intermediaries responsible for failing to remove offensive content would lead to a flood of lawsuits that would ultimately overwhelm service providers, and sub-optimally diminish the value these firms provide to society—a so-called “death by ten thousand duck-bites.” Relatedly, firms that face potentially greater liability would be forced to internalize some increased—possibly exorbitant—degree of compliance costs even if litigation never materialized.
There is certainly some validity to these concerns. Given the sheer volume of content online and the complexity, imprecision, and uncertainty of moderation processes, even very effective content-moderation algorithms will fail to prevent all actionable conduct, which could result in many potential claims. At the same time, it can be difficult to weed out unlawful conduct without inadvertently over-limiting lawful activity.
But many of the unique features of online platforms also cut against the relaxation of legal standards online. Among other things—and in addition to the attenuated incentives for self-restraint mentioned above—where traditional (offline) media primarily host expressive content, online platforms facilitate a significant volume of behavior and commerce that isn’t purely expressive. Tortious and illegal content tends to be less susceptible to normal deterrence online than in other contexts, as individuals can hide behind varying degrees of anonymity. Even users who are neither anonymous nor pseudonymous can sometimes prove challenging to reach with legal process. And, perhaps most importantly, online content is disseminated both faster and more broadly than offline media.
At the same time, an increase in liability risk for online platforms may lead not to insurmountable increases in litigation costs, but to other changes that may be less privately costly to a platform than litigation, and which may be socially desirable. Among these changes may be an increase in preemptive moderation; smaller, more specialized platforms and/or tighter screening of platform participants on the front end (both of which are likely to entail stronger reputational and normative constraints); the establishment of more effective user-reporting and harm-mitigation mechanisms; the development and adoption of specialized insurance offerings; or any number of other possible changes.
Thus the proper framework for evaluating potential reforms to Section 230 must include the following considerations: To what degree would shifting the legal rules governing platform liability increase litigation costs, increase moderation costs, constrain the provision of products and services, increase “collateral censorship,” and impede startup formation and competition, all relative to the status quo, not to some imaginary ideal state? Assessing the marginal changes in all these aspects entails, first, determining how they are affected by the current regime. It then requires identifying both the direction and magnitude of change that would result from reform. Next, it requires evaluating the corresponding benefits that legal change would bring in increasing accountability for tortious or criminal conduct online. And, finally, it necessitates hazarding a best guess of the net effect. Virtually never is this requisite analysis undertaken with any real degree of rigor. Our paper aims to correct that.
What is called for is a properly scoped reform that applies the same political, legal, economic, and other social preferences offline as online, aimed at ensuring that we optimally deter illegal content without losing the benefits of widespread user-generated content. Properly considered, there is no novel conflict between promoting the flow of information and protecting against tortious or illegal conduct online. While the specific mechanisms employed to mediate between these two principles online and offline may differ—and, indeed, while technological differences can alter the distribution of costs and benefits in ways that must be accounted for—the fundamental principles that determine the dividing line between actionable and illegal or tortious content offline can and should be respected online, as well. Indeed, even Google has argued for exactly this sort of parity, recently calling on the Canadian government to “take care to ensure that their proposal does not risk creating different legal standards for online and offline environments.”
Keeping in mind the tradeoffs embedded in Section 230, we believe that, in order to more optimally mitigate truly harmful conduct on Internet platforms, intermediary-liability law should develop a “duty-of-care” standard that obliges service providers to reasonably protect their users and others from the foreseeable illegal or tortious acts of third parties. As a guiding principle, we should not hold online platforms vicariously liable for the speech of third parties, both because of the sheer volume of user-generated content online and the generally attenuated relationship between online platforms and users, as well as because of the potentially large costs to overly chilling free expression online. But we should place at least the same burden to curb unlawful behavior on online platforms that we do on traditional media operating offline.
Nevertheless, we hasten to add that this alone would likely be deficient: adding an open-ended duty of care to the current legal system could generate a volume of litigation that few, if any, platform providers could survive. Instead, any new duty of care should be tempered by procedural reforms designed to ensure that only meritorious litigation survives beyond a pre-discovery motion to dismiss.
Procedurally, Section 230 immunity protects service providers not just from liability for harm caused by third-party content, but also from having to incur substantial litigation costs. Concern for judicial economy and operational efficiency are laudable, of course, but such concerns are properly addressed toward minimizing the costs of litigation in ways that do not undermine the deterrent and compensatory effects of meritorious causes of action. While litigation costs that exceed the minimum required to properly assign liability are deadweight losses to be avoided, the cost of liability itself—when properly found—ought to be borne by the party best positioned to prevent harm. Thus, a functional regime will attempt to accurately balance excessive litigation costs against legitimate and necessary liability costs.
In order to achieve this balance, we recommend that, while online platforms should be responsible for adopting reasonable practices to mitigate illegal or tortious conduct by their users, they should not face liability for communication torts (e.g., defamation) arising out of user-generated content unless they fail to remove content they knew or should have known was defamatory. Further, we propose that Section 230(c)(2)’s safe harbor should remain in force and that, unlike for traditional media operating offline, the act of reasonable content moderation by online platforms should not, by itself, create liability exposure.
In sum, we propose that Section 230 should be reformed to incorporate the following high-level elements, encompassing two major components: first, a proposal to alter the underlying intermediary-liability rules to establish a “duty of care” requiring adherence to certain standards of conduct with respect to user-generated content; and second, a set of procedural reforms that are meant to phase in the introduction of the duty of care and its refinement by courts and establish guardrails governing litigation of the duty.
Online intermediaries should operate under a duty of care to take appropriate measures to prevent or mitigate foreseeable harms caused by their users’ conduct.
Section 230(c)(1) should not preclude intermediary liability when an online service provider fails to take reasonable care to prevent non-speech-related tortious or illegal conduct by its users
As an exception to the general reasonableness rule above, Section 230(c)(1) should preclude intermediary liability for communication torts arising out of user-generated content unless an online service provider fails to remove content it knew or should have known was defamatory.
Section 230(c)(2) should provide a safe harbor from liability when an online service provider does take reasonable steps to moderate unlawful conduct. In this way, an online service provider would not be held liable simply for having let harmful content slip through, despite its reasonable efforts.
The act of moderation should not give rise to a presumption of knowledge. Taking down content may indicate an online service provider knows it is unlawful, but it does not establish that the online service provider should necessarily be liable for a failure to remove it anywhere the same or similar content arises.
But Section 230 should contemplate “red-flag” knowledge, such that a failure to remove content will not be deemed reasonable if an online service provider knows or should have known that it is illegal or tortious. Because the Internet creates exceptional opportunities for the rapid spread of harmful content, a reasonableness obligation that applies only ex ante may be insufficient. Rather, it may be necessary to impose certain ex post requirements for harmful content that was reasonably permitted in the first instance, but that should nevertheless be removed given sufficient notice.
In order to effect the safe harbor for reasonable moderation practices that nevertheless result in harmful content, we propose the establishment of “certified” moderation standards under the aegis of a multi-stakeholder body convened by an overseeing government agency. Compliance with these standards would operate to foreclose litigation at an early stage against online service providers in most circumstances. If followed, a defendant could provide its certified moderation practices as a “certified answer” to any complaint alleging a cause of action arising out of user-generated content. Compliant practices will merit dismissal of the case, effecting a safe harbor for such practices.
In litigation, after a defendant answers a complaint with its certified moderation practices, the burden would shift to the plaintiff to adduce sufficient evidence to show that the certified standards were not actually adhered to. Such evidence should be more than mere res ipsa loquitur; it must be sufficient to demonstrate that the online service provider should have been aware of a harm or potential harm, that it had the opportunity to cure or prevent it, and that it failed to do so. Such a claim would need to meet a heightened pleading requirement, as for fraud, requiring particularity.
Finally, we believe any executive or legislative oversight of this process should be explicitly scheduled to sunset. Once the basic system of intermediary liability has had some time to mature, it should be left to courts to further manage and develop the relevant common law.
Our proposal does not demand perfection from online service providers in their content-moderation decisions—only that they make reasonable efforts. What is appropriate for YouTube, Facebook, or Twitter will not be the same as what’s appropriate for a startup social-media site, a web-infrastructure provider, or an e-commerce platform. A properly designed duty-of-care standard should be flexible and account for the scale of a platform, the nature and size of its user base, and the costs of compliance, among other considerations. Indeed, this sort of flexibility is a benefit of adopting a “reasonableness” standard, such as is found in common law negligence. Allowing courts to apply the flexible common law duty of reasonable care would also enable the jurisprudence to evolve with the changing nature of online intermediaries, the problems they pose, and the moderating technologies that become available.
Read the full working paper here.
TOTM Words can wound. They can humiliate, anger, insult. University students—or, at least, a vociferous minority of them—are keen to prevent this injury by suppressing offensive . . .
Words can wound. They can humiliate, anger, insult.
University students—or, at least, a vociferous minority of them—are keen to prevent this injury by suppressing offensive speech. To ensure campuses are safe places, they militate for the cancellation of talks by speakers with opinions they find offensive, often successfully. And they campaign to get offensive professors fired from their jobs.
