Regulation of Online Platforms and the Effect on Advertising – Including Section 230 Reforms

Next week, I will be discussing regulatory issues for media companies with Eriq Gardner of the Hollywood Reporter (who covers legal issues on their must-read THR, Esq site) in a “Candid Conversation” hosted by Matrix Solutions (more information here, including a registration link).  The sponsor of this conversation consults on media advertising matters, so the content will likely be geared toward the impact of changes on the advertising industry.  While the conversation will cover structural media regulation issues, like broadcast ownership, the relationship between television and various multichannel video providers (both traditional, like cable and satellite television, and online), and similar matters, I think one of most interesting topics will be a discussion of the proposed regulation of tech platforms.  In thinking about that issue (about which we have written many times, including recent articles here and here), it occurs to me that such regulation could have a huge impact on the digital and social media giants that have arisen in the modern media world.

Much has been written, particularly in recent days, about the antitrust regulation to which these tech giants may be subject – with calls for action from both the political right and left (see, for instance, this article drawing parallels between the books recently written about this subject by Amy Klobuchar and Josh Hawley).  Even if such sweeping changes are not adopted, there are more targeted regulatory proposals that could have a direct impact on the advertising on these online platforms.  As we have noted before, advertising on online platforms is now estimated to constitute over 50% of the local advertising sales in virtually every geographic market.  Certainly, privacy regulation limiting the ability of companies to track users across various online platforms could affect such sales.  Less publicized has been the impact of Section 230 reform, which in at least one bill would exempt advertising from the protections afforded companies for the online content that they host.

As we wrote here, Section 230 of the Communications Act was designed to insulate online platforms from liability for content created by others that is hosted on their sites.  Section 230 provides broad protections to providers or users of an “interactive computer service” who, according to the Act, shall not be treated as the “publisher or speaker of any information provided by another information content provider.”  An interactive computer service is defined broadly to cover virtually all websites and any other electronic platform that makes available content accessible by the public.  An information content provider is essentially anyone who develops content that is posted on one of these interactive computer services.  While there are some exceptions to these protections, they are narrow, and have provided social media sites and other online platforms the ability to host user-generated content with little fear of liability for the contents of that content.  Advertising inserted by third-parties, too, can be hosted on a site with little fear of liability for the content of those ads.  In a bill introduced in Congress earlier this year, the SAFE TECH Act, that would change.

The SAFE TECH Act would, among other things, create an exception from the protections afforded by Section 230 where “the provider or user has accepted payment to make the speech available…”   In a fact sheet provided by the sponsors of this legislation, they made clear that this was meant to apply to advertising to prevent online platforms from profiting from potentially objectionable or illegal content:

The SAFE TECH Act would make clear that Section 230:

    • Doesn’t apply to ads or other paid content – ensuring that platforms cannot continue to profit as their services are used to target vulnerable consumers with ads enabling frauds and scams;

While this legislation has been introduced in the Senate and discussed in various committee hearings, it has not moved through those committees yet, and its ultimate disposition is uncertain.  But with the clamor about tech regulation in Washington and in other political discussions across the nation, watching whether these concepts are adopted in this bill or incorporated into other legislation will be important.  These changes could have a profound impact on the online advertising industry – not just for the huge online platforms, but potentially for anyone that hosts any website or other internet-based content that features programmatic advertising inserted by various ad servers over which the site owner may have little or no control.  All of those ads would need to be monitored for potential liability issues, as we have warned before for broadcasters and other companies taking such advertising (see, for instance, our articles here and here).

This will be just one of the many topics to be discussed in our webinar next week.  Consider joining the conversation next Tuesday.


Courtesy Broadcast Law Blog