Steve Case, dial-up modems, the PC, Al Gore? These are common answers when listing the most important factors in the rise of today’s internet. Yet, just as a single line of code can upend an industry, a single section of a 1996 law just might rise to the top of that list: Section 230 of the Communications Decency Act. As Georgetown Law professor David Post said, “No other sentence in the U.S. code, I would assert, has been responsible for the creation of more value.” But quantifying just how much value these safe harbor laws create for the internet economy has eluded economists – until now.
New economic analysis conducted by NERA Economic Consulting finds weakening intermediary liability safe harbor protections would significantly reduce economic activity in the internet sector, causing the U.S. economy to lose 4.25 million jobs and almost half a trillion dollars over the next 10 years.
That would be equivalent to losing the combined annual gross domestic product of Iceland, Jamaica, and Nicaragua, and firing all McDonald’s workers in the United States each year.
Despite their immense importance to the health of the U.S. economy, intermediary liability safe harbor protections are largely unknown and underappreciated by most Americans.
Today’s thriving internet sector is driven by internet platforms that operate as intermediaries – services that connect third parties on the internet – and provide consumers with platforms to exchange information, book travel, engage in social media and hundreds of other services. In so doing, these platforms increase consumer welfare by lowering search and transaction costs and increasing transparency between buyers and sellers.
These internet platforms operate in a unique position within the private sector. Their success is driven by user activity and content placed on their platforms by individuals who are not employed by, or answerable to, the companies themselves.
In an environment where it is economically and technologically infeasible for internet platforms to screen all of this user-generated content, intermediary liability safe harbors – established under Section 230 of the CDA and Section 512 of the Copyright Act, instated by the Digital Millennium Copyright Act – ensure users are held responsible for their own actions, so long as the platforms act responsibly and meet certain reasonable standards. This includes removing inappropriate or illegal content when they are given notice.
U.S.-based internet platforms’ ability to host user-generated content without facing the insurmountable legal risks associated with being held responsible for the content of millions of users has fueled free expression and content creation on a massive scale. It has led to the creation of a booming domestic internet sector that has doubled its share of the U.S. economy between 2007 and 2014. This bright spot in the U.S. economy needs support from decision makers across the board, both at home and abroad.
These protections are especially critical for startups relying on investor capital to bring their products to market, when just the threat of litigation makes investors uncomfortable — a 2016 survey found that 94 percent of American investors cite an uncertain legal environment as having a negative impact on investments. Indeed, if digital content platforms were responsible for the content uploaded by users, 81 percent to 85 percent of investors would be less likely to help fuel the innovation engine that is the U.S. startup community.
In addition to the direct economic consequences, weakened protections could lead to reductions in freedom of speech and expression online. If online platforms were to be held responsible for content submitted by their users, they would likely remove large amounts of controversial but legal content, for fear of facing penalties. These proposals would also threaten important balanced provisions of copyright law, including fair use, which is critical to the functioning and development of technology and services.
Oftentimes it is impossible to fully understand the repercussions of policy changes until it’s too late, but that’s simply not the case with intermediary liability safe harbor protections. The new NERA analysis confirms what we in the tech sector already knew: When it comes to weakening intermediary liability, the consequences are as clear as can be. I encourage all policymakers to think critically about the importance of innovation, consumer choice, and economic growth before they challenge existing liability protections.
Abigail Slater is general counsel at the Internet Association.
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