President Joe Biden’s nomination of Gigi Sohn to serve on the Federal Communications Commission (FCC)—scheduled for a second hearing before the Senate Commerce Committee Feb. 9—has been met with speculation that it presages renewed efforts at the FCC to enforce net neutrality. A veteran of tech policy battles, Sohn served as counselor to former FCC Chairman Tom Wheeler at the time of the commission’s 2015 net-neutrality order.

Read the full piece here.

 

Comments of Scholars of Law, Economics, and Business

Draft USPTO, NIST, & DOJ Policy Statement on Licensing Negotiations and Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Commitments

Docket ATR-2021-0001

Submitted Feb. 4, 2022

We are scholars of law, economics, and business who work in areas related to intellectual property, antitrust, strategy, and innovation. We write to express our concerns with the December 6, 2021, U.S. Patent & Trademark Office (USPTO), National Institute of Standards and Technology (NIST), and U.S. Department of Justice, Antitrust Division (DOJ) draft statement on remedies for the infringement of standard-essential patents (SEPs) (“Draft Policy Statement”).[1] This statement would effectively repudiate guidance published by these same agencies in 2019.[2]

While the Draft Policy Statement may seem even-handed at first sight, its implementation would have far-reaching consequences that would significantly tilt the balance of power in SEP-reliant industries, in favor of implementers and to the detriment of inventors. In turn, this imbalance is liable to harm consumers through reduced innovation, resulting from higher contract-enforcement costs and lower returns to groundbreaking innovations. And by making it harder for U.S. tech firms to enforce their intellectual property (IP) rights against foreign companies, the Draft Policy Statement threatens to erode America’s tech-sector leadership.

Read the full comments here.

[1] U.S. Patent & Trademark Office, the National Institute of Standards and Technology, and the U.S. Department of Justice, Antitrust Division, Draft Policy Statement on Licensing Negotiations and Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Commitments (Dec. 6, 2021), available at https://www.justice.gov/atr/page/file/1453471/download [hereinafter “Draft Policy Statement”].

[2] U.S. Patent & Trademark Office, the National Institute of Standards and Technology, and the U.S. Department of Justice, Antitrust Division, Policy Statement on Licensing Remedies for Standard-Essential Patents Subject to Voluntary F/RAND Commitments (Dec. 19, 2019), available at https://www.uspto.gov/sites/default/files/documents/SEP%20policy%20statement%20signed.pdf.

In Fleites v. MindGeek—currently before the U.S. District Court for the District of Central California, Southern Division—plaintiffs seek to hold MindGeek subsidiary PornHub liable for alleged instances of human trafficking under the Racketeer Influenced and Corrupt Organizations (RICO) and the Trafficking Victims Protection Reauthorization Act (TVPRA). Writing for the International Center for Law & Economics (ICLE), we have filed a motion for leave to submit an amicus brief regarding whether it is valid to treat co-defendant Visa Inc. as a proper party under principles of collateral liability.

Read the full piece here.

The attached was submitted Jan. 17, 2022, by the International Center for Law & Economics (ICLE) to the U.S. District Court for the Central District of California, Southern Division, as a proposed amicus brief in case of Fleites v. MindGeek in support of co-defendant Visa Inc.’s motion to dismiss.

Introduction

Visa sits outside the boundaries of liability contemplated by statutes like RICO and TVPRA. At the very outer boundaries, liability for indirect actors under these statutes is analogous to the sorts of collateral liability sometimes found in other statutes and in common law tort.[1] But the nature of the relationship between Visa and the alleged direct actors in this case, dictated by the mechanics of payment networks, does not support the traditional economic and policy rationales for assigning collateral liability. This amicus brief elucidates the law and economics of collateral liability and applies it to the circumstances of Visa’s alleged participation in the alleged enterprises at issue. As discussed further below, the general principles of collateral liability counsel strongly against holding Visa liable for the harms suffered by Plaintiffs. To hold otherwise would be sure to generate a massive amount of social cost that would outweigh the potential deterrent or compensatory gains sought.

Read the full brief here.

[1] This amicus brief uses the term “collateral liability” to encompass a range of theories of civil liability aimed at secondary actors not directly responsible for causing harm. Thus, the term contemplates causes of action like premises liability for third-party injury, distributor liability for defamation, civil aiding and abetting liability for fraud, contributory and inducement liability for copyright infringement, and various theories of vicarious liability under the doctrine of respondeat superior. See generally Reiner Kraakman, Third-Party Liability, in 3 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 583 (Peter Newman ed., 1998).

 

 

Written Testimony of

Geoffrey A. Manne
Founder and President,
International Center for Law & Economics

Hearing on
“Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply”

before the
U.S. House of Representatives
Committee on the Judiciary,
Subcommittee on Antitrust, Commercial, and Administrative Law
January 19, 2022

Introduction

There is a wide range of possible explanations for the rise in consumer food prices over the past year: Increased demand driven by fiscal stimulus, disruptions arising from an unprecedented set of simultaneous supply and demand shocks, the incentive effects of government responses to the COVID-19 pandemic, and an increase in the money supply, among others. Each of these factors is interrelated, and each has surely contributed in varying degrees to current headline inflation woes.

What is not a plausible explanation is increased concentration and the exercise of market power in the food supply chain.

Between December 2019 and September 2021, the U.S. money supply (driven primarily by the Federal Reserve’s purchases of Treasuries and mortgage-backed securities), grew by approximately $5.5 trillion—a 36% increase. Likewise, the federal government has approved about $4.5 trillion in pandemic relief and stimulus payments since the beginning of COVID-19. The government also injected a huge amount of money into the economy and added about $5 trillion to the federal debt.

Massive debt spending isn’t inherently inflationary as long as people understand that taxes will increase or spending will decrease to “pay off” the debt. But today it seems that people do not have much of an expectation that taxes will meaningfully increase or that spending will meaningfully decrease. Indeed, the discourse around the administration’s “Build Back Better” legislation gives the impression of a virtually endless spending binge with little additional revenues to offset the spending. This feeds inflation expectations, and expectations can be self-fulfilling.

To make matters worse, the pandemic was not a standard demand-driven recession. Pre-COVID, the U.S. economy was more or less roaring. Unemployment was at its lowest rate in 50 years. Labor force participation among the working age populations was back to pre-Great Recession levels. The Dow Jones Industrial Average was at an all-time high. Americans may have needed relief to get through the pandemic, but the economy did not need any stimulus.

We should also be clear that the current 7% headline inflation rate is a measure of past price- level changes between December 2020 and December 2021. It’s not a measure of the rate at which prices are increasing right now, however. And while the 7% number grabbed all the headlines, the CPI rose at a slower rate in December than it did in November, meaning the monthly inflation rate (as well as the implied annualized inflation rate) actually fell in December. The point is that, problematic as they are for actual consumers, current consumer prices and trends do not provide a sound basis for massive, economy-wide government intervention.

It is hardly surprising that shifting consumption patterns and the post-vaccine re-opening of the economy have led to short-term frictions, such as backlogs at ports, a shortage of truckers, and disruption throughout the supply chain, all of which are associated with important relative price movements. But they aren’t “inflation” in the sense that all prices and wages aren’t increasing together. These shocks are most likely transitory, and higher prices will recede as the supply chain returns to normal. That is, as long as sensible economic and fiscal policies predominate. But in the face of the harsh political realities of the current state of affairs, there is no guarantee that reason will prevail.

Rather than accepting these extremely likely causes of the recent increase in prices, some blame inflation on a widespread pandemic of “greed” and “collusion” by businesses. Wide swaths of American industry have been hit with these allegations, including oil companies, natural gas producers, health care providers, meat packers, and grocery stores.

Critics of American business blame years, if not decades, of so-called “rising concentration.” It’s claimed that the increase in concentration stems from mergers and acquisitions over the years that were blessed by lax antitrust regulators or merely overlooked by overworked agencies. These critics give the impression that in virtually all corners of the American economy lurk sleeper cells of colluding cartels that activated their plans just as the country went into lockdown.

Under this thinking, vigorous antitrust enforcement will punish the colluders and stop the scourge of rising prices. But this thinking is misplaced.

First, antitrust is simply not the proper tool. The purpose of antitrust law in the U.S. is to protect competition, rather than to guarantee low prices in and of themselves. That’s why it is illegal to conspire to raise prices or attempt to monopolize a market. Conversely, this also explains why high or rising prices are not an antitrust violation—because these prices may be the result of the undistorted competition antitrust ultimately protects. Even price gouging during a disaster rarely merits antitrust scrutiny because it’s understood that that is how markets work—especially competitive markets. That is because it is widely understood that the price system is the most effective system for allocating resources, even when the process itself is painful.

Second, and more practically, antitrust enforcement often moves at a glacial pace. Even successful prosecutions of anticompetitive behavior take years to resolve. The DOJ’s investigations of price fixing in the broiler chicken market and the packaged seafood market were announced several years after the alleged collusion began. While the investigations led to guilty pleas and a criminal conviction, they did nothing to reduce prices at the time the conspiracies were active.

All of this is not to say that some producers are not monopolizing a market or conspiring with competitors to raise prices. If they are, there is an important role for an antitrust investigation and enforcement—that is the purpose of our antitrust laws. But even relatively rapid and vigorous antitrust investigations will do little to reduce the prices consumers are paying today, especially if they are the perfectly predictable, if messy, result of market competition in the midst of a global pandemic. As much as some would like antitrust to be the Swiss Army knife of public policy, it is an entirely inappropriate tool to address economy-wide inflation.

At the same time, even within the industries that have seen particularly newsworthy price increases, and which are the subject of today’s hearing, the complex competitive dynamics of those industries offer far more plausible explanations of current prices than do unsubstantiated claims of anticompetitive conduct or collusion. But they don’t offer convenient scapegoats to quell the political consequences of these price increases.

It is difficult not to see the pursuit of a scapegoat in the administration’s focus on concentration and market power as a culprit for today’s higher food prices.

Read the full written testimony here.

Section 230 of the Communications Decency Act continues to play a surprisingly large role in our political discourse, given its status as the last remaining vestige of a quarter-century-old law that was largely struck down by the courts long ago. The immunity shield the law grants to online platforms has been implicated in issues as broad-ranging as Twitter’s decision to ban former President Trump to whether Instagram exacerbates eating disorders among teens.

Read the full piece here.

Executive Summary

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 116^th 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.

The Law & Economics of Online Intermediary Liability

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.

A Proposal for Reform

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.

Proposed Basic Liability Rules

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.

Proposed Procedural Reforms

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.

INTRODUCTION

Petitioners in this proceeding have called for the FTC to use its rulemaking authority pertaining to unfair methods of competition to prohibit employee non-compete clauses and various forms of exclusive dealing. These rulemaking proposals are deeply misguided from both a procedural and substantive standpoint, however.

Bright-line competition rules, as opposed to broader judicially enforced standards, are appropriate only when it is possible to isolate a category of identical practices that routinely harm competition. This is not the case for the categories of conduct currently under consideration. More fundamentally, these calls ignore positive and significant consumer benefits generated by vertical agreements, in general, and exclusive dealing and non-competes, more specifically. Critics seem to assume that powerful firms foist these exclusive agreements upon their helpless commercial partners (whether employees or other companies). Yet a vast body of economic literature clearly rejects this premise. Instead, it shows that these clauses entail costs and benefits that each party must carefully weigh when they a enter into a commercial relationship.

Of course, this does not mean that non-compete clauses or exclusive dealing should be categorically out of bounds for antitrust authorities. Rather, they should be assessed on a case-by-case basis (i.e., under the rule of reason), accounting for both their pro- and anti-competitive potential. This would limit enforcement efforts only to the limited instances where those clauses harm consumers, thereby preserving the tremendous aggregate benefits they generate.

Read the full public comments here.

ICLE President Geoffrey Manne joined the Tech Policy Podcast to discuss the recent Epic Games decision, what it means for Apple, and how it could shape the future of antitrust policy. The full show is embedded below.