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That Will Be A Disaster

THOSE WHO DON'T UNDERSTAND SECTION 230 ARE DOOMED TO REPEAL IT

Predictions

FROM THE THAT'S-NOT-HOW-ANY-OF-THIS-WORKS DEPT

Wed, Dec 29th 2021 12:08pm — Mike Masnick

It remains somewhat surprising to me how many people who have ideas for Section
230 reforms clearly do not understand the law and how it works. Perhaps much
more surprising is that, when experts try to highlight where their analysis has
gone wrong, these "reformers" double down rather than correct their previous
faulty assumptions. Dean Baker is a fairly well-known economist whose views on
copyright we've highlighted in the past for being quite insightful.
Unfortunately, Baker seems to feel that his insight in these other areas allows
him to skip the basics on Section 230, defamation law, internet business models
and the like. A year ago he wrote two separate very wrong and very confused blog
posts advocating for the full repeal of Section 230. Both of them misunderstand
how 230 works, its interplay with the 1st Amendment, and how defamation law
works.

I had planned to write a response to them last year, but never got around to it.
However, Baker is still at it, and after Jeff Kosseff and I spent some time
trying to explain some fairly basic principles that you need to understand in
order to explore the trade-offs in any Section 230 reform proposal, Baker wrote
a long thread ignoring the points we raised, and insisting that his plan for 230
reform wouldn't run into any issues. He's wrong, and despite my going back and
forth with him over a dozen times, it's become clear that he has no interest in
exploring or correcting the mistakes in his analysis. That said, I do think that
he makes so many fundamental errors, that it might be useful to go through his
thread to explain to other, more open-minded folks, the very significant
challenges in these plans to reform Section 230.

Baker's latest proposal is apparently no longer the full "repeal" of Section 230
he wanted a year ago, but now just that only subscription supported sites (with
no advertising) get the benefits of Section 230. As laid out in his thread, the
underlying theory is that Facebook is too big, and by removing Section 230, this
would force Facebook to downsize. This is wrong for a bunch of reasons, some of
which we've explained before, but we'll get there. He seems to no longer support
a full repeal of Section 230 because people highlighted how it harms other
sites. So his new version is that Section 230 is only removed for sites that
have advertising as their main business model under the (incorrect) theory that
this will magically create a world where every site other than Facebook moves
away from ads to subscription only, and that somehow makes Facebook smaller.
Substacks for everyone!

So, again, the keys to Baker's plan seem to be that by removing Section 230 for
ad supported sites, it somehow (1) forces Facebook to shrink and (2) forces
paywalls all over the internet. And this is somehow good. Both assumptions are
fundamentally wrong -- but it's important to understand why, because this
mistake is made by too many people who haven't bothered to take the time to
understand Section 230.

Section 230 does not provide an outsized benefit to Facebook -- instead, it
protects everyone else significantly more than it protects Facebook.

This is one thing that many, many people fundamentally misunderstand about
Section 230. They think that because Section 230 "protects" Facebook and
Facebook is so big, that Section 230 protects Facebook more than it protects
others, and therefore any removal of 230 protections will have a greater impact
on Facebook than other sites.

The problem with this is that the real benefit from Section 230 is not the
underlying protection from liability, rather it's the procedural benefits that
230 provides that help companies get out of frivolous lawsuits at an earlier
stage. We've discussed this before a few times, but many people seem to miss it.
There are two important issues as it relates to liability for websites in cases
that try to drag them in: (1) what is the likelihood of any underlying cause of
action actually leading to liability (outside of Section 230) and (2) how
expensive is it to find out whether or not that liability sticks.

In the vast majority of cases, there is no underlying cause of action that will
create liability. We've actually seen this in action in the few cases that get
past the Section 230 hurdle. One of the most famous cases that chipped away at
Section 230 protections was Fair Housing v. Roommates, in which the court
determined that, while Section 230 protected Roommates.com from content that
other users created, it did not protect the company from liability for the pull
down menus that it created itself.

Many people think this means that Roommates.com lost the case, and very, very
few people realize that years later Roommates.com still won, when the courts
determined that even though 230 didn't kick the case out early, Roommates.com
still didn't actually violate the law. The same is true of the other big 230
exception case, the more recent Enigma Software v. Malwarebytes case, in which
the court (somewhat bizarrely) argued that Malwarebytes doesn't get Section 230
protections in cases where a malware designation might be deemed
anti-competitive. But, in the end, many years later, Malwarebytes still won.

Again, the key benefit to Section 230 is not that it removes all liability, but
rather that it gets cases dismissed very early on, cases that would have almost
no chance if they went through the full litigation process. In other words, it's
a form of protection against frivolous lawsuits, and the main mechanism involved
is getting cases dismissed earlier, rather than years (and millions of dollars
later). That helps smaller companies way more than it helps Facebook. Facebook
has all the money in the world and it can afford to litigate these cases all the
way through. It would cost the company pocket change, but the company would
likely still win in the end.

Smaller companies, on the other hand, cannot afford the costs. Getting a case
dismissed on 230 grounds might cost six figures. Having to go all the way
through the full litigation is more like 7 or 8 figures (depending on
circumstances). Facebook can find that money in the seat cushions of their
office couches. Smaller companies cannot.

Dean also appears to not understand how defamation law works at all. In his
thread, he seems to think that without Section 230, if someone posted something
defamatory that would automatically make Facebook liable for the defamation:

Except, that's wrong. First off, the actual bar for defamation is quite high,
especially for public figures. Baker, incorrectly, seems to think that merely
saying something false about a public figure is defamatory. That's not how it
works. It has to meet the standard of defamation, including the actual malice
standard (which is not just that you were really mad when you said it). Second,
and much more important for this situation, is that if the speaker was liable,
that does not automatically mean that the intermediary would be liable. Under
the two key cases prior to Section 230 becoming law, Cubby v. Compuserve and
Stratton Oakmont v. Prodigy, the courts had to wrestle with what makes 3rd party
intermediary liability consistent with the 1st Amendment.

And the ruling in both cases would go directly against Baker's ideas here. In
Cubby, the court determined that the website needed to know about the content
before it became liable for it. So, in Baker's hypothetical above, Facebook
wouldn't face automatic liability unless it was first provided notice that the
content was potentially defamatory. And, in Stratton Oakmont, the court said
that any moderation meant you were admitting to knowledge of what you left up --
thereby encouraging no moderation at all (if you don't look, you wouldn't be
liable). So Baker's insistence that he'd want more moderation to happen under
his plan isn't necessarily supported by the historical precedents under the 1st
Amendment.

If the courts (as would be most likely) followed a Cubby-like precedent, then
all it would do is create a very expensive process for any website to handle
moderation, because each "notice" would likely require adjudication. As we've
seen in the copyright space, this greatly favors big companies who can hire
teams to review takedown notices, meaning... it favors Facebook and would
destroy smaller competitors. On the other hand, if courts actually moved to a
Stratton Oakmont style standard, then it would create massive incentives for
every website to do no moderation at all, filling websites with garbage (which
goes against Baker's desired situation in which Facebook took down more
content). But in such a world, there would be so much garbage on any site that
inevitably users would rely much more on recommendation algorithms to find the
content they actually want to see -- and that again favors the largest companies
who can invest in such tools. Like Facebook.

I asked Baker privately why he ignored these historical precedents, and he
insisted that since he's talking about a new law, it doesn't matter. But any law
has to comply with the basic principles of the 1st Amendment, and if you're
going further than this in automatically placing liability (rather than simply
removing the procedural benefits of 230) as Baker seems to want, well, that's
not going to survive any level of 1st Amendment scrutiny. The NY Times v.
Sullivan sets the bar for defamation very, very high. You can't just wipe that
out and claim that your new lower standard ("someone said something false!")
automagically applies to third party distributors.

And, in fact, we know how this plays out in practice because we've seen it in
the copyright context. Given Baker's earlier research and writings into
copyright, you'd hope he'd understand this, but he seems to have not bothered.
In the early days of user-generated video content online, there were a large
number of companies that rushed into the space. YouTube took an early lead, but
there were many others, including Veoh. Both YouTube and Veoh were sued for
copyright infringement. In copyright, there's no Section 230. Rather there's the
DMCA 512 safe harbors, but (unlike Section 230) you have to fight out in court
as to whether or not you comply with the factors to get the 512 safe harbors.

In YouTube's case, with the help of Google money, it had to fight Viacom in
court for seven whole years, and it would have gone on longer, but after Viacom
kept losing every single legal argument it made, the company finally agreed to
settle without any money changing hands. Veoh, on the other hand, a site founded
by Hollywood insiders like former Disney boss Michael Eisner, fought for many
years in its similar lawsuit which it eventually won, but only three years after
the company had shut down, citing the expensive litigation as driving the
company out of business.

So, to recap: Section 230 gets you out of frivolous litigation much sooner,
saving smaller companies millions of dollars. Without 230, the internet websites
would likely still win most such cases (as they have basically every time a
plaintiff gets around 230), but it would be a lot more expensive. That's a
nuisance to Facebook, but it's deadly to many, many other websites.

So, Baker's initial assumption that more lawsuits from the removal of Section
230 would somehow force Facebook to shrink and aid smaller competitors is simply
wrong. Beyond explaining all the reasons why above, we have practical examples
from the copyright realm with YouTube and Veoh. And if that doesn't convince
you, we even have examples from Section 230 itself. In 2018, as you'll recall,
FOSTA became law -- the first major attempt to chip away at Section 230. We've
spent tons of time explaining the societal damage that FOSTA has created, but it
also didn't "shrink" Facebook. Instead, it did the opposite.

Right after FOSTA passed, a bunch of dating websites closed down, including
Craigslist shutting down its dating vertical -- explicitly stating that the
threat of liability from FOSTA made it too expensive to run. A year later,
Facebook jumped in to launch its own dating app. So, smaller competitors get out
of the market, and Facebook gets to jump in.

The same would happen under Baker's "reform" plan here. Smaller ad supported
providers would shut down, because the cost of litigation risk would be too
high. Facebook would corner the market from the few competitors out there.

Subscriptions don't magically solve any of this, they mostly make it worse

But Baker insists none of this is an issue, because his plan would encourage an
internet of paywalls and subscriptions, and by incentivizing that business
model, mighty Facebook would be brought to its knees. Except there's no evidence
to support that either. His entire basis for arguing that this would happen is
that historically people subscribed to newspapers.

But that fundamentally misunderstands the nature of the internet, social media,
what makes them work, and what makes this all so important for speech.

He later suggests that if sites couldn't get enough subscription support, then
that fundamentally shows they're not valuable and it's okay for them to go away.

But all of that is mixing up some very, very basic concepts. First of all,
social media only works well thanks to network effects. Metcalfe's Law matters.
If I subscribed to the NY Times, it makes no difference to me if you subscribe
to the NY Post. There is no fundamental value difference in that case.

But for the vast majority of incredibly valuable online services -- especially
those involving user-generated content that need Section 230 -- a huge part of
the value is proportional to how many other people are also using that service.
And that doesn't work in a subscription world. Right now, I already use a half a
dozen different messaging services because different friends and family tend to
rely on different ones. If I had to pay $5 to $10 a month for each one, that
would not work at all. Instead, the most likely scenario is that everyone would
standardize on the one that everyone uses the most. And, horrifically for me (as
someone who minimizes my use of Facebook), that would mean Facebook.

Also, I really wish that Dean spoke to someone who actually had some experience
in the ad business and in the subscription business. Going back a decade or so
it was common for people with experience in neither to insist that the two were
somehow interchangeable, and you could easily convert ad-based businesses to
subscription models. Except that's not true at all, in part because of the
network effects point above. For the vast, vast majority of users of any
particular online service, the value they get out of the site is way below
$5/month. Relatedly, the value they provide to those sites by themselves is way
less than $5/month in terms of ad revenue. But the collective aspect of their
usage of the site, combined with the aggregate advertising model, is what makes
it work.

If you had to go subscription, you'd wipe out tons of useful services that today
rely on Section 230: I can't see how Reddit, Craigslist, Nextdoor, Glassdoor,
Pinterest, Yelp, Travelocity, Eventbrite, Stack Overflow, Ravelry, DuoLingo,
Fandom, WikiHow, Glitch and tons of other websites would survive. Baker seems to
think that you'd just need one "social media" website, and so people would
subscribe to the one they like best. But so much of the internet relies on
Section 230 and ads to survive, and changing them all into subscription services
would be untenable for the vast majority.

End result? Again, you wipe out most of the more innovative competition, and
especially clear the field for new entrants. Under this model, new entrants
would need to start with a subscription model, and it's difficult to get people
to subscribe to a service that has no track record... and has no users.

And, of course, Baker brushes off the idea that another impact of this is that
it would only serve to help the wealthy at the expense of the poor, but it's
absolutely true. There's so much value on the internet that is readily available
to everyone, and Baker's plan would lock that all up... because he's mad at the
amount of control Mark Zuckerberg has. But locking up all those useful services,
and leaving it so that Facebook can clean up and provide all those services for
free (while paying the pesky litigation costs to show that it's not liable)
seems like a great long term deal for Facebook.

Just as it helped get competing dating services, like Craigslist's, shut down
before opening its own service, this is why Facebook is running ads and telling
Congress that it's time to "update Section 230." Facebook knows that the
long-term impact of such things may raise some direct costs (litigation) in the
short run, but over the long run, it wipes out the thing that Mark Zuckerberg
has always feared the most: disruptive innovation that competes with Facebook
and takes away their userbase.

Baker's reform plan misunderstands how and why Section 230 works and where it
provides the most benefit. And he misunderstands how and why network effects
work online, and what his plan would do to much of the open internet. His plan
would, clearly, provide Facebook significantly more power, while wiping out a
stunning amount of competition. It's a dangerous plan.

Thank you for reading this Techdirt post. With so many things competing for
everyone’s attention these days, we really appreciate you giving us your time.
We work hard every day to put quality content out there for our community.

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–The Techdirt Team

Filed Under: competition, copyright, dean baker, intermediary liability, section
230

22 Comments | Leave a Comment

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READER COMMENTS

Subscribe: RSS

View by: Time | Thread

* Samuel Abram (profile), 29 Dec 2021 @ 12:19pm

RE: DEAN BAKER'S SUBSCRIPTION IDEA

> If there were not large numbers of people prepared to make modest payments
> to get access to websites that did not limit their posting, then we can
> assume that most people do not care and that this is not a major issue.

Dean Baker says this as if I don't subscribe to Video Streaming Services,
Artists on Patreon, Journalists on Substack, Adobe's software and other
subscriptionware, and to rent digital music on TIDAL.

People are already paying a monthly fee. Could Dean Baker be that out of
touch, or are the pro-sec.-230 children wrong?

[ reply to this | link to this | view in chronology ]

* Stephen T. Stone (profile), 29 Dec 2021 @ 12:44pm

> If you had to go subscription, you'd wipe out tons of useful services that
> today rely on Section 230: I can't see how Reddit, Craigslist, Nextdoor,
> Glassdoor, Pinterest, Yelp, Travelocity, Eventbrite, Stack Overflow,
> Ravelry, DuoLingo, Fandom, WikiHow, Glitch and tons of other websites would
> survive.

Then there are artdump sites like DeviantArt, FurAffinity, and the
less-popular brethren of both those sites⁠—many, if not all, of those sites
would crumble if they were forced to turn into subscription-only sites.
That’s to say nothing of imageboards/chansites (e.g., 4chan), all of which
would immediately die if they turned on a paywall.

Paywalling services like Netflix and Spotify makes sense. Paywalling every
other site on the Internet? Not so much.

[ reply to this | link to this | view in chronology ]

* sumgai (profile), 30 Dec 2021 @ 11:34am

RE:

Aside from the "tortious intereference with a legal business method" that
will inevitably come before the courts, there are also a raft of non-profit
websites that already depend on donations, with or without ads. Making them
go 'paywall' just because they share user-generated content will almost
certainly spell their doom from a public point of view. Plus, I'm pretty
certain that the IRS would have something to say about how, and for what
purposes, they receive income of this nature. That may kill them off even
more quickly.

It's highly unlikely that any of the proposed changes to 230 will be
reconciled with IRS laws vis-a-vis NPO's, and thus I foresee another host
of lawsuits in this realm.

(Disclosure: I am on the BoD for a small, low-profile animal shelter.
Personal agenda proposals like Bakers that are so poorly thought out are of
great concern to me.)

[ reply to this | link to this | view in chronology ]
* Anonymous Coward, 29 Dec 2021 @ 12:50pm

Maybe he does not use the Web much, since most websites I use have ads forum
websites rely on ads on 1000 s of users to post read and content if neogaf
was to go subscription only there be few users did he never hear of the
network effect more users equals more content
The whole podcast medium is mostly based on a few ads which are spoken by the
host and provide revenue our ability to have free speech online depends on
section 230
As we saw with fosta any changes to section 230 reduce
free speech in this case wiping our online forums which helped sex workers
communicate and stay safe

[ reply to this | link to this | view in chronology ]

* Anonymous Coward, 29 Dec 2021 @ 12:55pm

How close is Baker 230 repeal plan to happen?

[ reply to this | link to this | view in chronology ]

* Andrew F (profile), 29 Dec 2021 @ 1:11pm

ANTITRUST LAW

I find it weird how people worried about Facebook's size zero in on Section
230 rather than antitrust law. We get all this chatter about advertising and
algorithms and privacy when what people are really worried about is bigness.
And well, we have a legal framework for thinking about bigness and it's not
Section 230.

[ reply to this | link to this | view in chronology ]

* Thad (profile), 29 Dec 2021 @ 2:04pm

RE: ANTITRUST LAW

> I find it weird how people worried about Facebook's size zero in on
> Section 230 rather than antitrust law.

I don't.

We've spent forty years having the Chicago School approach to antitrust
hammered into our heads. Following the breakup of Ma Bell in the early
'80s, Reagan, Greenspan, et al turned us hard toward the notion that any
government interference in the market is bad. Following a disastrous few
elections for Democrats, Clinton and the New Democrats came in in 1992 and
basically ceded the party's economic strategy to the right.

It's taken a very long time for Democratic politicians to even begin to
consider going back to a more aggressive stance on antitrust enforcement.
Republicans probably never will.

[ reply to this | link to this | view in chronology ]

* ECA (profile), 29 Dec 2021 @ 2:53pm

RE: ANTITRUST LAW

I find it interesting that its aimed at the pocket book.
'NO adverts'?
And the biggest thing is they dont see how Big an international corp can
be. We already have other international corps, Most ran away when we asked
them to cleanup after themselves in the 1970's and 80's.
They are Still international. And even Bigger then they were in the past.
Its just that they are polluting Someplace else.

[ reply to this | link to this | view in chronology ]

* Anonymous Coward, 30 Dec 2021 @ 1:10pm

RE: ANTITRUST LAW

Well we have seen how hard it is for them to come up with any model of
division which wouldn't obviously undo itself near immediately. Hell they
apparently spent their years on the antitrust case slacking off because
they just produced table pounding which got rightfully dismissed by a judge
as a terrible definition of the relevant market spaces.

It is the same intellectual sloth and poverty seen among loud online
leftists lamenting that people don't see an alternative to capitalism. They
don't like it so they refuse to think about the implications of what
replacement would actual entail. They just bitch and insist that everything
will be perfectly fine if we metaphorically tear down our houses in the
middle of winter. That will just motivate people to build better houses and
not lead to dying of exposure.

Building viable things is hard and lacks the quick reward of tearing down
what you dislike on an impulsive whim.

[ reply to this | link to this | view in chronology ]
* iBrattleboro.com, 29 Dec 2021 @ 1:50pm

We used Section 230 to protect our little community news site years ago.
Someone wanted to sue us for what a user of the site posted. The judge tossed
our part of the case out right away. 230 made it easy to do.

In the end, months later, it was determined the post writer had written the
truth and the suit had no merit.

Take section 230 away and we'll likely pull the plug on the site. Not worth
the hassle.

[ reply to this | link to this | view in chronology ]

* Samuel Abram (profile), 29 Dec 2021 @ 1:52pm

RE:

Sounds like the case with Stratton Oakmont, except §230 got there first and
you get to see the benefits!

[ reply to this | link to this | view in chronology ]

* Mike Masnick (profile), 29 Dec 2021 @ 2:17pm

RE:

We wrote about that!

https://www.techdirt.com/articles/20080328/134422686.shtml

[ reply to this | link to this | view in chronology ]
* Anonymous Coward, 29 Dec 2021 @ 4:21pm

Paywalls break the Internet by making links hit or miss, depending on who the
person following the link has subscribed to.

[ reply to this | link to this | view in chronology ]

* That One Guy (profile), 29 Dec 2021 @ 4:21pm

'OH NO, NOT THE BRAMBLE PATCH MR BAKER' SAID THE FACEBOOK

Setting aside the incredibly short-sighted spitefulness of trying to gut a
law that applies to everyone just because you want to hurt one platform
Facebook is in favor of 230 'reform'.

When the platform you are trying to take out is on your side regarding a law
being changed maybe you should consider whether you are threatening them or
threatening their competitors with your suggestions.

[ reply to this | link to this | view in chronology ]

* Mike Masnick (profile), 29 Dec 2021 @ 5:20pm

RE: 'OH NO, NOT THE BRAMBLE PATCH MR BAKER' SAID THE FACEBOOK

FWIW, when I presented that to Baker, he insisted it's not accurate,
because Facebook wants "reform" not a repeal of 230, which is just a galaxy
brain level take.

[ reply to this | link to this | view in chronology ]

* That One Guy (profile), 29 Dec 2021 @ 6:26pm

RE: RE: 'OH NO, NOT THE BRAMBLE PATCH MR BAKER' SAID THE FACEBOO

... wow is he stuck in and refusing to admit to being wrong if that's his
excuse for why he's not doing them a huge favor here.

Whether a full repeal or a 'reform' that turns the law into a useless
one(and I've yet to see any that wouldn't do that, including his) the
fact remains that Facebook is in favor of gutting the law, which should
tell the people who are trying to 'get' Facebook for whatever reason that
undermining 230 is not the way to do it.

[ reply to this | link to this | view in chronology ]
* Anonymous Coward, 29 Dec 2021 @ 8:10pm

Huh, will you look at that. Not a k-dawg shitpost to be seen anywhere at all.

[ reply to this | link to this | view in chronology ]

* cattress (profile), 29 Dec 2021 @ 10:06pm

LIKE NEWSPAPER SUBSCRIPTIONS? LOL LOL LOL

What year does this guy think it is? I mean, forget that a subscription only
gets you one site, and and the tremendous destructive impact of not being
able to afford that service for just a few days, and that the people in the
US pay through the nose just to access the internet, but how many of those
same newspapers that used to be booming have failed, or are struggling to
survive in the new media environment?
And how does paying to use a social media site change moderation policies,
the ability to effectively moderate at scale, or what kind of moderation the
customers demand? Or how some may be harmed or perceived that they were
harmed by moderation decisions?
This is the most poorly, well can't say thought out because it obviously
wasn't, so I guess just an altogether shitty idea.

[ reply to this | link to this | view in chronology ]

* WarioBarker (profile), 30 Dec 2021 @ 2:14am

I'm getting the feeling this is willful ignorance (of the "salary depends on
not understanding how this works" type) and Dean Baker's a Facebook shill.

[ reply to this | link to this | view in chronology ]

* That One Guy (profile), 30 Dec 2021 @ 2:49am

SOMETIMES IT'S MALICE, SOMETIMES IT'S JUST STUPIDITY

Entirely possible I suppose, with how much gutting or removing 230 stands
to benefit Facebook(among others) it's all too easy to think that those
arguing against the law are doing so because they want to help the company
for whatever reason, but at the same time it's also quite possible that
he's simply letting his hatred for the company blind him to how much he's
dancing to their tune and barring some evidence to the contrary that would
probably be the more reasonable assumption at the moment.

[ reply to this | link to this | view in chronology ]
* techflaws (profile), 30 Dec 2021 @ 10:50am

Who is Dean Baker?

[ reply to this | link to this | view in chronology ]

* Anonymous Coward, 30 Dec 2021 @ 1:54pm

BIG GLARING HOLE IN HIS ARGUMENT.

He cites newspaper subscriptions as 'proof' that that is a viable alternative
to ad-supported websites.

EXCEPT

* Subscriptions were historically a tiny portion of printed periodical
revenue. They got the majority of their income from ... advertisements!
* TV news, which is much more expensive to produce than print, has always
relied on advertising revenue. For most regional broadcast stations, the
evening news was the only thing keeping them in the black.
* Even public broadcasting has to rely heavily on "local underwriting" to
stay afloat.

[ reply to this | link to this | view in chronology ]

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