9th Circuit's Bad AirBnB Decision Threatens Basic Internet Business Models

Legal Issues

from the "but-wait,-there's-more!" dept

I’m not done excoriating the Ninth Circuit’s recent decision dismissing Homeaway and Airbnb’s challenge of the Santa Monica ordinance that holds them liable if their users illegally list their properties for rent. As I wrote before, that’s what the ordinance in fact does, even though Section 230 is supposed to prevent local jurisdictions from enforcing laws on platforms that have this effect. Perhaps this decision may not be as obviously lethal to the Internet as the EU’s passage of the Copyright Directive with Articles 11 and 13, but only because its consequences may, at the moment, be less obvious ? not because they stand to be any less harmful.

Which is not to say that the court intended to herald the end of the Internet. Indeed there is a somewhat apologetic tone throughout the decision, as if the court felt it had no choice but to reach the conclusion that it did. But there is also a tone of dismissiveness that runs throughout the decision as well. The court largely minimized the platforms’ arguments about how the ordinance will affect them, and by ignoring the inevitable consequences thus opened the door to them, now and in the future, far beyond the facts of this particular case.

Ultimately there are (at least) two big problems with the decision. The earlier post highlighted one of them, noting how chilling it is to speech if a law effectively forces platforms to police their users’ expression in order to have any hope of avoiding being held liable for it. The problem with the court’s decision in this regard is that it kept [see pages 13-14, 17, 20…] incorrectly insisting, over the platforms’ protest, that the Santa Monica ordinance does not force them to monitor their users’ expression when, in actuality, it most certainly does.

The second major problem with the decision is that the court kept trying to create an artificial distinction between imposing liability on platforms for facilitating user expression, which the court acknowledged would be prohibited by Section 230, and imposing liability on platforms for facilitating online transactions ? which, per the court, Section 230 would apparently not prevent.

As the Platforms point out, websites like Craigslist “advertise the very same properties,” but do not process transactions. Unlike the Platforms, those websites would not be subject to the Ordinance, underscoring that the Ordinance does not target websites that post listings, but rather companies that engage in unlawful booking transactions. [p. 20]

Unfortunately it’s a nonsensical distinction, and one that leads to an entirely unprecedented curtailing of Section 230’s critical statutory protection.

If the court’s reasoning were correct, then no platform that profits from transactions between users could ever have been shielded from liability. It always would have been possible to predicate their liability on the brokering of the transaction, rather than on their intermediation of the user expression behind the transaction. In reality, though, over the past two decades plenty of transactional platforms have been able to avail themselves of Section 230’s protection. For instance, EBay and Amazon, like Airbnb and Homeaway, make money from the transactions that result when user expression offering something for sale is answered by users who want to buy. Yet courts ? including the Ninth Circuit ? have found them just as protected by Section 230 as their non-transactional platform peers. Unlike this particular Ninth Circuit panel, these other courts recognized that the liability these platforms were having to face was inherently rooted in the user’s expression, and thus something that Section 230 protected them from. For the Ninth Circuit to now decide that liability for facilitating a transaction is somehow something separate from facilitating the user expression behind it strikes at the heart of what Section 230 is supposed to do ? protect platforms from liability in their users’ activity ? and puts all these transactional platforms’ continued Section 230 protection in doubt.

It also puts in jeopardy the entire Internet economy by so severely limiting the ability of platforms to monetize their services. At minimum it calls into question any monetization model that derives revenue from any transactional user expression that successfully results in a consummated deal, since platforms can now be held to account for any alleged illegality in that user expression. (Oddly, though, a platform would seem to be just fine if its users only posted poorly-crafted listings for terrible properties at unmarketable rents, even if those listings were illegal under the ordinance, because there would be no danger of a rental transaction actually resulting. But as soon as users manage to successfully articulate their offerings such that they could result in real rentals the platform would suddenly find itself on the hook.)

Instead platforms will have to support themselves in other ways, such as by being ad-supported or charging for listings. But not only do these other revenue models raise their own concerns and considerations, but given the logic of this decision it’s not a certainty that they, too, won’t someday be found to put the platform beyond the reach of Section 230 as well. For as long as facilitating the exchange of money is treated as something separate from the facilitation of user expression the exchange is connected to, any method of monetary exchange connected to user content that’s illegal in some way could still put the platform facilitating it beyond the reach of the statutory protection. The court cited Craigslist as an example of a platform that can retain its Section 230 immunity even when its users post illegal listings. But, notably, Craigslist does not charge users to post their listings. Which leaves us with a decision where the only platforms that can be sure to benefit from Section 230 are the ones that provide their services for free, which isn’t consistent with what Congress intended or the commercial potential upon which, until now, the Internet economy has depended.

Furthermore, it stands to put any platform exclusively devoted to facilitating aspects of these transactions completely beyond the protective reach of Section 230, even though any liability connected to that transaction would still be due to others’ expression. In this case the court was fairly indifferent as to what a platform like Homeaway or Airbnb would need to do to cope with liability under the ordinance.

[T]he Platforms argue that the Ordinance “in operation and effect . . . forces [them] to remove third-party content.” Although it is clear that the Ordinance does not expressly mandate that they do so, the Platforms claim that “common sense explains” that they cannot “leave in place a website chock-full of un-bookable listings.” For purposes of our review, we accept at face value the Platforms? assertion that they will choose to remove noncompliant third-party listings on their website as a consequence of the Ordinance. Nonetheless, their choice to remove listings is insufficient to implicate the CDA. [p. 14-15]

Or that the platforms’ attempt to avoid liability might result in undue censorship.

Moreover, the incidental impacts on speech cited by the Platforms raise minimal concerns. The Platforms argue that the Ordinance chills commercial speech, namely, advertisements for third-party rentals. But even accepting that the Platforms will need to engage in efforts to validate transactions before completing them, incidental burdens like these are not always sufficient to trigger First Amendment scrutiny. [p. 20-21]

These are significant concerns, however. It is a functionally impossible task the court sets for them, to put platforms in the position of needing to review and remove just the right amount user expression in order to protect themselves. But this sort of case-by-case, listing-by-listing censorship is at least theoretically within the power of a platform facilitating the expression itself. Whereas it’s not at all within the power of platforms like payment providers that never touch the original user speech. Instead they will be left with a stark choice: leave open the firehose to process all transactions, and thus risk being liable for any transaction related to any illegal listing that comes through, or turn off their service entirely to any service that cannot guarantee to them that every transaction arising from every user listing will be legally compliant with every possible law. No platform can make that promise, of course, and it will inevitably result in the removal of substantial lawful content to even try.

True, the Santa Monica ordinance itself does not invite this full parade of horrors. It is but one ordinance, for one city, with a regulatory ask of the platform that the court somehow seems to think is easy to meet. But this decision and its contorted rationale opens the door to plenty more ordinances, from plenty more jurisdictions, with plenty more regulatory demands. In and of itself it is plenty onerous, and it invites even worse.

Filed Under: 9th circuit, business models, cda 230, santa monica, section 230, transactions
Companies: airbnb, homeaway