by Mike Masnick

Filed Under:
california, liability, spam

California Appeals Court Says Company Can Be Held Liable For Spam It Didn't Write Or Know About

from the that-doesn't-make-any-sense dept

In a ruling that Eric Goldman correctly refers to as "divorced from reality," a California Appeals court has ruled that two advertising firms can be held liable for actions done by their affiliates (and sub-affiliates). In this case, these sub-affiliates sent out spam, advertising things on behalf of the defendants in the case. There were a few legal questions raised by the case, including yet another attempt to see if CAN SPAM really pre-empts state anti-spam laws, which are interesting, but which we won't discuss right now. Instead, I wanted to focus on that one key issue of putting the blame on a company for what a third party does.

This is a key point that we've been raising a lot around here lately, as more and more people look to blame third parties, often because it's (a) easier and (b) those third parties have more money. While I recognize that we all get annoyed by spam, a ruling of this nature is completely misdirected. It means that if you want to get a company in trouble, just send spam advertising their stuff to California residents. Now those firms are liable for your statements even if it had no idea that you were doing this. Goldman warns that this ruling will "generate lots more of wasteful profit-seeking litigation."

Both Venkat and Eric in the link above question how this ruling could survive a Section 230 analysis -- which should present a perfectly valid safe harbor for the two firms in question. It's not clear if either firm even raised a Section 230 defense, but even without that, I'm troubled by the fact that the court didn't seem to comprehend that it was blaming a company for actions of someone they have no control over. The court -- incorrectly -- claims that this could lead to "take a more active role in supervising" actions of affiliates, but as Eric points out, the strict liability standard put forth by the court means that no matter how active a role they take, if one spam message slips through, they're still liable. That doesn't lead to a more active role in supervising, it leads companies to dump such programs altogether:
Because of strict liability, even advertisers who undertake substantial efforts to police their affiliate network ARE STILL LIABLE FOR ANY PROBLEMS CREATED BY AFFILIATES. Maybe the court got confused about what it meant to impose STRICT LIABILITY. In reality, many advertisers won't rely on affiliates at all if they are strictly liable for what they do. I bet this court would view that as a perfectly fine outcome, but the it's disingenuous to say that strict liability will ratchet up the policing effort. A negligence standard might have done that; strict liability squashes the endeavor altogether.
This is definitely a worrisome trend, as we've seen a growing number of courts get tripped up on ideas surrounding third party liability, not recognizing the consequences of those rulings.

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  1. identicon
    Anonymous Coward, 21 Jan 2011 @ 11:40am

    Re: I don't see this as a problem.

    You hit this one exactly right. Many online marketing companies use "affiliates" to do their dirty work, knowing all along what is happened and how the traffic is sourced.

    In some cases, I have seen affiliate programs who create phantom accounts, and use those accounts as spam landing pages. When someone complains, they "term" the "rogue affiliate" out of the program, and create a new account for spamming. Oh yeah, they still take all the traffic generated by the same, they just tell people they got rid of that horrible (non-existant) affiliate.

    I also agree that TD is on a man run against "third party" stuff this month, but this clearly isn't third party. They are directly in line, not some sideline of the process.

    A complete TD fail this time around.

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