Mandel Ngan/Pool via AP
Amazon CEO Jeff Bezos testifies remotely during a House Judiciary Subcommittee hearing on antitrust, July 29, 2020, in Washington.
Congress should be reluctant to grant liability shields, especially for dominant firms. Whether it’s monopoly meatpackers seeking exemption from worker safety rules, the athlete-exploiting NCAA seeking a waiver from antitrust laws, giant corporations enjoying immunity from public scrutiny in open court, or Amazon seeking a carve-out from product liability rules, the answer to each of these asks should be a resounding No. There is one set of rules, and we all should play by them.
Due to an exemption granted at the dawn of the internet, online platform companies did get a liability shield, which their counterpart brick-and-mortar retailers do not enjoy. The resulting regulatory asymmetry, when combined with other forces such as the coronavirus, is perversely accelerating the demise of Main Street. If a mom-and-pop retailer sold an exploding hoverboard that killed its customers, it would face severe liability, and it should. There is no reason why Amazon should be treated differently.
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The Big Tech liability shield was written into Section 230 of the Communications Decency Act of 1996. In the last few years, Section 230 has been widely criticized as a tool to evade regulation. Vice President Biden recently said Section 230 “immediately should be revoked,” blaming it for enabling misinformation and hate speech. Sen. Josh Hawley (R-MO) offered legislation that extends Section 230 protections only to platforms “operating in good faith.”
Last week, the Department of Justice submitted a proposal to Congress that would pare back legal protections if internet platforms facilitate criminal activity, know of unlawful conduct but do not restrict and report it, or fail to spell out content-moderation policies and follow them consistently. Plus, Sens. Joe Manchin (D-WV) and John Cornyn (R-TX) are expected to introduce legislation to hold platforms responsible for any illegal purchases that happen on their websites.
The original intent of Section 230 was to immunize online service providers from liability when posting third-party content. “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,” it reads.
The plain language of Section 230 is consistent with the obligations of a non-integrated neutral bulletin board. When the law passed in the mid-1990s, CompuServe offered news and weather as part of its basic internet service, but it was not integrated into its must-have input of user-driven forums. AOL eventually expanded into content with its purchase of Time Warner in 2000, but at the time the law was drafted, AOL was not integrated into the content of its killer Instant Messenger app. For forums and chat rooms, the user provided the content, not the platform.
In that dial-up era, Congress could not have contemplated that massive, vertically integrated platforms could host third-party microbloggers and commenters (Facebook, Twitter), videos (Google’s YouTube), or reviews and merchandise (Amazon). But these companies have come to dominate the modern internet.
Vertical integration into content distorts a platform’s curation decisions by injecting a financial incentive into the equation. As a content creator, the platform has a deep economic interest in how it designs its algorithm to steer users to the “best” results. After operating as a neutral platform for more than a decade, Google figured out that delivering clicks to third parties was not as profitable as steering users to Google-affiliated properties. Amazon similarly steers shoppers to products that are fulfilled using its logistics service, and recently launched its own private-label line to appropriate the best-selling products on its platform, and steered shoppers to the clones. In just a few years, Amazon-owned clothing and apparel brands came to command a staggering 9 percent market share of all the clothes sold on Amazon.com.
Vertical integration also perverts the ways in which the immunity shield is used. Amazon allegedly retaliated against certain sellers that it now directly competes against, by recruiting and then unleashing Chinese counterfeits. Then Amazon claims Section 230 immunity from any harms caused by the knockoffs sold by the recruits.
Because Section 230 shields Amazon from certain legal liability, Amazon possesses a unique, unfair, and anti-competitive advantage over traditional brick-and-mortar distributors in our courts.
Ordinary retailers can be sued for selling a defective product and marketing it to customers. Amazon routinely argues that it cannot be held liable for defective goods according to state law, and even if it is, it cannot be held liable for its actions because Section 230 offers it complete immunity.
The success of Amazon’s defense depends upon the laws of the various states. In California, New Jersey, Texas, Pennsylvania, or Wisconsin, Amazon can be held liable for the sale of defective products, even those that were sold by third-party sellers and not by Amazon itself. But in other states, such as New York or Maryland, Amazon’s activity as the facilitator of online transactions renders it immune from being held strictly liable.
If a mom-and-pop retailer sold an exploding hoverboard that killed its customers, it would face severe liability, and it should. There is no reason why Amazon should be treated differently.
Section 230 has been a successful shield, even in states where Amazon has been found to be strictly liable, in preventing accountability for promoting, advertising, or communicating information to Amazon customers about third-party products. For example, a Texas judge recently ruled that Amazon could not be held liable for failing to warn shoppers that a knockoff Apple TV remote control did not have a childproof seal on the battery compartment, because the product description was provided by the seller (a Chinese manufacturer) and not Amazon, giving Amazon immunity under Section 230. In light of this legal reality, Amazon cannot be held liable for its failure to warn its customers or for breaching any express or implied warranties with respect to products sold on its platform and from which it derives a hefty profit.
The ultimate result of this legal maze is this: In certain states, victims obtain some redress, while in other states Section 230 essentially provides Amazon with a get-out-of-jail card. In this sense, Amazon, which claims to be “Earth’s most customer-centric company,” has used Section 230 to circumvent consumer product safety regulation that every other business must comply with.
As the Sixth Circuit recently observed, in Tennessee, brick-and-mortar stores can be held liable for breaching warranties to customers, even if they are not considered the “sellers” of the product. That means that Amazon would be liable under that standard—if Section 230 did not exist.
The law should not make one entity liable for another entity’s illegal speech. That’s the policy at the heart of Section 230, relied on by tens of thousands of atomistic bloggers and websites and online publishers of every kind, including online newspapers. That shield should be preserved for most online platforms. But for dominant platforms that manipulate and monetize content, such as Amazon and Google, which have morphed into something completely different than a neutral online bulletin board, the shield should be pared back.
Most urgently, the shield should be removed for any platform selling physical goods, which unlike digital content, can physically harm users when used or consumed. This would affect e-commerce platforms such as Amazon and eBay, but would leave the shield in place for platforms that exclusively serve digital content. Moreover, any platform that is meaningfully vertically integrated into the must-have content it delivers should not be able to partake in the immunity shield. So if Google wanted to preserve its shield, it would have to divest its local search properties to which it currently steers its users.
It’s going to be difficult to change a single word of Section 230, now that the Trump administration has placed it into the U.S.-Mexico-Canada trade agreement. Google and Amazon could simply charge the United States with a trade violation if the law was altered. This was an enormous mistake, but it should be a priority of this or the next government to find a way out of that conundrum.
In the end, every firm, regardless of whether brick-and-mortar or online, should play by the same rules. Exemptions to our laws should be rarely offered. And they should never be afforded to the most powerful companies in our economy.
