Liability of online platforms STUDY Panel for the Future of Science and Technology EPRS | European Parliamentary Research Service Scientific Foresight Unit (STOA) PE 656.318 – February 2021 EN Liability of online platforms Given the central role that online platforms (OPs) play in the digital economy, questions arise about their responsibility in relation to illegal/harmful content or products hosted in the frame of their operation. It is therefore necessary to assess the adequacy and efficiency of the extant EU legal framework, in particular with respect to the liability exceptions provided by the e-Commerce Directive, and to ensure adequate protection for users and their fundamental rights and freedoms (e.g. freedom of expression and of information). Against this background, the study reviews the main legal/regulatory challenges associated with the operation of OPs and analyses the incentives for OPs, their users and third parties, to detect and remove illegal/harmful and dangerous material, content and/or products. To create a functional classification which can be used for regulatory purposes, it discusses the notion of OPs and attempts to categorise them under multiple criteria. The study then maps and critically assesses the whole range of OP liabilities, taking hard and soft law, self-regulation, as well as national legislation into consideration. To do so, the study distinguishes between liabilities connected with the activities performed or the content uploaded by OP users – from the liability exemptions established by the e- Commerce Directive, to the sectoral rules provided in media law, intellectual property (IP) law, product safety and product liability, protection of minors, hate speech, disinformation and voting manipulation, terrorist activities – and alternative sources of liability, such as OPs' contractual liability towards users, both businesses and consumers, as well as that deriving from infringements of privacy and data protection law. Finally, the study drafts policy options for an efficient EU liability regime: (i) maintaining the status quo; (ii) awareness-raising and media literacy; (iii) promoting self-regulation; (iv) establishing co-regulation mechanisms and tools; (v) adopting statutory legislation; (vi) modifying OPs' secondary liability by employing two different models – (a) by clarifying the conditions for liability exemptions under e-Commerce Directive, or (b) by establishing a harmonised regime of liability. STOA | Panel for the Future of Science and Technology AUTHORS This study was written by Andrea Bertolini, Assistant Professor of Private Law of the Scuola Superiore Sant'Anna (Pisa), and Director of the Jean Monnet Centre of Excellence on the Regulation of Robotics and Artificial Intelligence (EURA), Francesca Episcopo and Nicoleta-Angela Cherciu, Research Fellows in Private Law of the Scuola Superiore Sant'Anna (Pisa), and Junior Fellows of the Jean Monnet Centre of Excellence (EURA), at the request of the Panel for the Future of Science and Technology (STOA) and managed by the Scientific Foresight Unit within the Directorate-General for Parliamentary Research Services (EPRS) of the Secretariat of the European Parliament. ADMINISTRATOR RESPONSIBLE Mihalis Kritikos, Scientific Foresight Unit (STOA) To contact the publisher, please e-mail [email protected] LINGUISTIC VERSION Original: EN Manuscript completed in February 2021. DISCLAIMER AND COPYRIGHT This document is prepared for, and addressed to, the Members and staff of the European Parliament as background material to assist them in their parliamentary work. The content of the document is the sole responsibility of its authors and any opinions expressed herein should not be taken to represent an official position of the Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. Brussels © European Union, 2021. PE 656.318 ISBN 978-92-846-7499-2 doi: 10.2861/619924 QA-03-20-811-EN-N http://www.europarl.europa.eu/stoa (STOA website) http://www.eprs.ep.parl.union.eu (intranet) http://www.europarl.europa.eu/thinktank (internet) http://epthinktank.eu (blog) II Liability of online platforms Executive summary 1. Introduction Online platforms (OPs), although not an entirely new phenomenon, have gained significant economic and societal importance in the last decade and the public debate on their responsibilities and liability has reached an unprecedented level. OPs have penetrated all product and service markets and have changed the way in which goods are sold and purchased, and in which information is exchanged and obtained, allowing a shift from the offline world to the online environment, where they provide a myriad of digital services. Hosting platforms have reached a central role in allowing access to and exchange of information permitting the mass diffusion of any type of content, both legal and illegal. This raised pressing questions on their responsibility in preventing its diffusion, detection and subsequent removal, and platforms' role in the digital realm has morphed, from that of mere hosting providers to that of actors governing how content is displayed and shared online, undertaking certain actions such as moderation, curation and recommendation. Moreover, next to plainly illicit material, other harmful content emerged, potentially affecting the social and political discourse, as well as everyday interactions occurring increasingly online. This has led to the need to assess the adequacy and efficiency of the extant EU legal framework, in particular with respect to the e-Commerce Directive and the liability exceptions it provides. This, in turn, raised the necessity to understand the correct balance between the need to ensure adequate protection for users, and of their fundamental rights and freedoms (e.g. freedom of expression and of information). Finally, OPs challenge both consumers and more traditional business models alike. Indeed, the emergence of large OPs or marketplaces, enabling direct interaction between producers and consumers, poses new challenges to product safety, consumer protection and unfair business practices, raising the issue of the adequacy of the extant legal framework, conceived primarily for traditional businesses and retailers, and a less life-pervasive internet in general. Against this background, after having described the EU policy approach to OPs (Chapter 3), the study: (i) provides a classification of existing platforms; (ii) identifies and assesses the relevant legal framework at the European level, discussing the policy issues that deserve consideration; and (iii) provides a set of policy options, addressing such concerns and discussing the available alternative approaches to tackle them. 2. Online platforms: a functional definition and classification The term 'online platform' is used in a variety of ways to indicate extremely broad and diversified sets of services and tools (section 4.1). For the purposes of this study, they are defined as entities which: (i) offer 'over the top' digital services to users; (ii) are or can be operated as two- or multi-sided market business models; and (iii) allow the overall facilitation of interaction between the different sides of the market, even when there is no direct interaction among them (section 4.2). Therefore, to conduct a legal analysis, an effort needs to be made to classify and therefore describe the different kinds of entities that fall under this notion. Indeed, platforms differ pursuant to (see section 4.3.1): the activities and functions they serve; the actors they involve and the ways in which they interact with them in their operation; their different III STOA | Panel for the Future of Science and Technology sources of revenue and associated business models; the way in which they use and exploit data; and the level of control they exercise on users' activities. Different combinations of such criteria allow for the identification of the possible policy issues and concerns, with respect to the application of the existing legal framework – comprised of both hard- and soft-law initiatives – deserving discussion and, in some cases at least, even regulatory intervention. The classification proposed in the study is presented in the table below: OPs' Classification Web-hosting providers Search engines Social media, networking and discussion forums Online media sharing providers Activities Messaging platforms Matchmaking and transaction e-commerce platforms (subcategory: collaborative platforms) Other matchmaking platforms File storage and sharing providers Online advertising platforms e-Commerce Fintech Transport Accommodation Sector of Personal services relevance Advertising News and media Electronic communication Health care Data-enabled OPs Use of data Data-enhanced OPs OPs Users Actors Advertisers/Targeters Economically interested third-parties Collaterally affected third-parties Revenue from the supply side of the market Revenue from the demand side of the market: subscription fees; users' ad-free use fee; transaction fees Sources of Revenue from the advertisement and third-party side of the market: subscription fees for revenues advertisement placement; pay-per-click fees, pay-per-impression; pay-per-transaction Other data-generated revenue: selling the data to data brokers; and/or using the data to create new services and products and/or improve existing services, which is also referred