Introduced by Senators Warner (D-VA), Klobuchar (D-MN), and Hirono (D-HI), the Safeguarding Against Fraud, Exploitation, Threats, Extremism, and Consumer Harms Act (SAFE TECH Act) attempts to reform Section 230 liability. As Republicans and Democrats call for various degrees of action around Section 230 reform, this bill could be slated as a vehicle to garner bipartisan support. However well-intentioned this bill is, its proposed reforms all but gut Section 230 liability protections and could have major negative consequences for startup and established technology companies alike.
The issues the SAFE TECH Act attempts to address are real problems. Scams, fraud, and online harassment can have major financial and personal ramifications for consumers. However, lawmakers should be wary of the far reaching consequences of massive reforms to Section 230 and the effects it will have on consumers and small businesses. For example, the stripping of liability for paid content might make sense at first glance. If a consumer sees an ad that is fraudulent or a scam on their social media, being able to hold the social media company liable for the ad seems logical. In reality, the complexity and interconnectedness of the internet makes a reform like this one far more problematic. As Senator Wyden (D-OR) points out, “creating liability for all commercial relationships would cause web hosts, cloud storage providers and even paid email services to purge their networks of any controversial speech.”
Furthermore, while some lawmakers are keen to target “Big Tech,” the collateral damage for smaller technology companies could be far more devastating. The SAFE TECH Act would open up companies to more lawsuits, and in a perfect world free of frivolous lawsuits, that wouldn’t be a problem. Unfortunately, that’s not the world we live in. Many companies choose to settle lawsuits rather than go through costly legal battles, even if the lawsuit is without merit. Why would companies choose to settle frivolous lawsuits when a court would most likely rule in their favor? According to Engine, the costs of just replying to a demand letter can be $3,000. In total, a lawsuit that could follow if Section 230 was repealed would reach the six figure mark, according to Engine. Large technology companies could most likely absorb this financial blow and afford a high powered legal team, but small startups strapped for cash would be crushed.
This gets at the core issue of Section 230 reform. While some lawmakers seek to punish “Big Tech” for their content moderation enforcement or perceived political bias, the internet is still young and constantly changing. It was not that long ago that Facebook was an idea in a college dorm or Microsoft was working out of a garage. The breakneck pace of innovation isn’t just a perk for the consumer, it is a necessity for the survival and growth of most technology companies. By gutting key Section 230 protections, lawmakers risk shutting the door behind the established technology companies and leaving smaller startups to be crushed under the weight of lawsuits and regulation. Competitiveness in the marketplace is critical, which is why Section 230 protections must be protected.
Overall, legislative proposals for Section 230 reform will continue to miss the mark if the starting point is that liability protections are a “get out of jail free card,” as Senator Warner claims. The rapid innovation online and the benefits it brings consumers would be impossible without Section 230 protections. While these senators may be making an earnest attempt at targeted reforms, the consequences of their proposed legislation demonstrate just how difficult Section 230 reform will be, and how the fervor surrounding “Big Tech” can lead to potentially disastrous consequences for small businesses and consumers.