Section 230: Big Tech’s favourite law is running out of time

Uber, Lyft and other gig-economy firms have successfully coopted the legislation. But their efforts to hide behind Section 230 are beginning to unravel.

Smarten up your week

Get the New Statesman's Business email.

Heather Oberdorf was blinded in one eye by a malfunctioning dog lead she bought on Amazon. When she tried to press charges against the Furry Gang, the third party that sold the product, she found it was no longer operational. Instead, she sued Amazon. The court case that followed resulted in a landmark ruling for the internet’s most famous law.

Amazon argued that because it merely provided a platform for independent sellers, it should be able to shelter from liability behind Section 230 of the US Communications Decency Act. This 25-year-old piece of legislation is better known for shielding social media platforms from liability for their users’ posts. But it has played a side role in helping the sharing economy platforms duck responsibility for the conduct of the third-party operators they connect with consumers.

Tech Monitor: The US bills tech giants targeted in 2020 Part of New Statesman Media Group

Before the Oberdorf case, Amazon and other e-commerce platforms including Etsy had successfully used Section 230 to evade product liability for third-party sellers. The Oberdorf case changed that. On 3 July 2019, the federal appeals court in Philadelphia found that although Amazon was protected for “speech” on its platform under Section 230, it wasn’t protected for the sale of goods in the real world.

After Amazon pushed back on the ruling, the case was eventually settled outside court. But it’s one of an increasing number of setbacks for gig economy platforms, including Airbnb and Uber, citing Section 230 protections. Growing backlash against this kind of Section 230 misuse could mean that soon sharing economy companies will be prevented from attempting to pull this trick at all.

Many legal scholars are adamant that this is a perversion of Section 230’s intended use. “Section 230 was enacted to overturn a New York case that held a platform liable for defamation because they monitored the content on their site,” says Kai Falkenberg, a professor at Columbia Law School in New York. The key “safe harbour” provision of the legislation is: “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.”

The legislation was meant to address the “moderator’s dilemma” – allowing platforms to moderate their content without incurring the same liability for it as a “publisher”. “The case was unquestionably focused on speech – not on commercial transactions,” says Falkenberg.

But gig economy platforms have strained the boundaries of the legislation in an effort to dodge accountability. “The broad way the language of the statute has been interpreted has enabled a far more expansive application,” says Falkenberg.

Uber – notorious for the legal challenges to its business model – Lyft and food delivery companies have successfully argued that as middlemen they should not be held responsible for the products or services they help facilitate. Courts have historically accepted the Section 230 argument that these types of platforms should be treated as “distributors” rather than publishers.

This has allowed Uber to dodge accountability for the behaviour of its drivers – including sexual assault charges – as well as the responsibility of affording them employee protections, by arguing that they are not employees of the company but contractors.

Tech Monitor: Europe’s Digital Markets Act is a shift to proactive Big Tech regulation Part of New Statesman Media Group

Airbnb’s success with the Section 230 shield has been patchier. The highly litigious company, for whom suing cities has become a de facto part of its business model, has repeatedly weaponised the legislation to argue that it shouldn’t have to abide by home-renting regulation that would make it liable for illegal listings.

Since 2016, Airbnb has cited Section 230 in seven federal lawsuits against local governments in the US, including San Francisco, Anaheim, Santa Monica, and New York. Of these, only two were successful. In the others, Airbnb settled and agreed to abide by at least some of the cities’ demands. For example, taking a more active role in verifying its users are following the law or risking penalties.

Judges are increasingly making a distinction between content hosted on a site and a business activity – arguing that once it becomes the latter, it falls out of the jurisdiction of Section 230. San Francisco officials working on the Airbnb case argued that while the business couldn’t be held liable for hosting the listing (ie “speech”), it could be held liable for entering business negotiations with short-term rental units that flouted the city’s housing regulation.

In Oberdorf vs Amazon, the court ruled that platforms are required to protect users from third-party harms. Instrumental in the decision was “the extensive record evidence that Amazon fails to vet third-party vendors for amenability to legal process”. In other words, the issue was not that the Furry Gang couldn’t be located, but “rather because Amazon enables third-party vendors such as the Furry Gang to structure and/or conceal themselves from liability altogether”.

This homes in on the legal question that has dogged gig economy companies: in cases of harm, who do you sue? Justin Hurwitz, a professor at Nebraska College of Law, argues that the court’s focus on the ease with which Amazon Marketplace can be used by merchants as a liability shield is unsurprising. He writes, “the law generally does not allow one party to shield another from liability without assuming liability for the shielded party’s conduct. Indeed, this is pretty basic vicarious liability, agency, first-year law school kind of stuff.”

“Amazon, according to the plaintiffs in that case, was implicated because they operated as a seller of the product by virtue of the ways in which they are in partnership with retailers, right through to their fulfilment services,” says Olivier Sylvain, professor of law at Fordham University in New York. “The reason that's important is because they stopped falling into the category of a publisher or distributor under Section 230, and fall into something called a seller. And a seller, under common law, is liable for defective products once they have noticed them.”

The go-to legal defence of gig economy companies, that they are agnostic platforms hosting “content“, is wearing thin. The UK’s Supreme Court recently ruled that Uber’s business model did not fit the definition of a “platform”. The court argued that Uber exerts “significant control over the way in which drivers deliver their services”.

“Most people recognise that these intermediaries are complicit and implicated in wrongdoing, because of the ways in which they administer and design their services,” says Sylvain. “They're not simple conduits between users, they are actually doing far more than that.”

The writing could be on the wall for Section 230 in its current form. While this is driven more by increasing pressure on social media giants to limit content, gig economy companies are likely to be affected too.

Democratic senators recently introduced the Safe Tech bill, which proposes several carve-outs for Section 230 immunity, including any content that companies were paid to host, such as adverts or marketplace listings. In the safe harbour provision, the word “information” would be swapped for “speech”, in an attempt to constrict what Section 230 can feasibly cover.

Tech Monitor: Marietje Schaake on why the EU needs to think bigger than Big Tech Part of New Statesman Media Grou

But like all suggestions for Section 230 reform, any unintended consequences need to be carefully weighed. Critics of this kind of reform have said that the legal burden of Etsy or eBay to police millions of small vendors would raise the bar for small sellers and smother competition. “A better way to address this misuse is to hold platforms accountable only after they have notice of the alleged wrongdoing and an opportunity to redress it,” says Falkenberg. “This limits liability to a much more manageable set of circumstances and would enable consumers to continue benefiting from the services and products the online marketplaces provide.”

Laurie Clarke is a senior reporter at Tech Monitor.

More from New Statesman Media Group

Tech Monitor: How will China handle Big Tech?

Investment Monitor: Big Tech braces for EU regulatory assault

Press Gazette: Facebook takes China cash to promote Uyghur disinformation

This article was co-commissioned with

Part of New Statesman Media Group

Free trial CSS