Liability of Superintermediaries

Regulation should take into account the particular roles of platforms as superintermediaries with a preeminent role in the markets they intermediate. Such a role should have consequences regarding liability in the relationship with the user of the intermediated service and in terms of fairness in the relationship with the services provider.

The role of platforms as mere intermediaries becomes increasingly blurred as platforms lean forward to set the streamlined conditions of the intermediated transaction. They actively make a personalized selection of supply for each individual and even nudge users into specific content or services. Public authorities have more and more difficulties to determine the legal conditions applicable to such an activity.

The Court of Justice of the European Union considered eBay as a mere intermediary with no liability for the counterfeited goods sold in the platform.3 In the same way, the Court considered Airbnb to be a mere intermediary of an underlying accommodation service, arguing that the facts do not establish that Airbnb “exercises such a decisive influence over the conditions for the provision of the accommodation services to which its intermediation service relates, particularly since Airbnb Ireland does not determine, directly or indirectly, the rental price charged.”4

However, the Court of Justice could not admit Uber as a mere intermediary because a more active role in the definition of the transaction conditions was identified. The Court had a point. They identified Uber as a provider of intermediation services, but also identified that Uber was doing something more: “Uber exercises decisive influence over the conditions under which that service is provided by those drivers. [...] Uber determines at least the maximum fare by means of the eponymous application, that the company receives that amount from the client before paying part of it to the non-professional driver of the vehicle, and that it exercises a certain control over the quality of the vehicles, the drivers and their conduct, which can, in some circumstances, result in their exclusion.”5 Therefore, the Court refused to consider Uber as a mere digital company (providing “information society services” in EU lingo) and classified Uber’s service as “a service in the field of transport.”

The most sophisticated courts and public authorities have identified that platforms play a larger role than traditional intermediaries. Platforms play a larger role in the definition of the terms and conditions of the goods and services to be intermediated. Furthermore, platforms often create the market (the multi-sided market) around them. Real estate transactions existed before agents started intermediating, but many of the services intermediated by platforms did not previously exist or have been fundamentally transformed or even created by platforms.

This difference should have legal consequences. Since platforms are determining some of the conditions for the provision of the underlying service, they should have some liability for such services. For example, they could be obliged to provide insurance and take secondary liability in case the service provider is not in the position to meet its liabilities.

It is common for platforms to assume these kind of commitments on a voluntary basis. These commitments increase security in the transaction, reducing transaction costs and making the platform more attractive. Credit card companies are a good example here: they take responsibility if your card has been used fraudulently. This kind of commitment helps a platform to grow network effects. This is why platforms have been doing some content filtering (Facebook, YouTube), filter drivers with criminal records (Uber) and provide insurance (Airbnb).

The paradox is that the more platforms take voluntary liabilities, the more authorities consider that platforms are not intermediating but actually providing the underlying good or service. This is a mistake that works against consumers and should be avoided. Platforms should not be automatically considered as the providers of the intermediated services and be fully liable for the provision of such ancillary services. Such a position would ignore the reality of the new model of industrial organization and hinder the development of platforms and the benefits derived from them

A new balance has to be identified. Platforms should not be fully exempted from liability, but they should not be made fully liable for the intermediated goods and services. Legislation can impose some obligations and liabilities on platforms. Imposing obligations and liabilities that are already common in the market excludes the risk of over-regulation. At the same time legislation could ensure that these obligations and liabilities do not transform an intermediation service into a fully owned service with full liability.

The European Union is taking this path. Sector-specific regulation in media and telecommunications has extended obligations from editors and carriers to platforms. They are not considered to be the providers of the underlying service, so no full liability for the service is imposed, but some obligations are still directly imposed up platforms.

In media, the review of the Audiovisual Media Service Directive has introduced a new category of service: the “video-sharing platform service,” defined as “providing programmes, user-generated videos, or both, to the general public, for which the video-sharing platform provider does not have editorial responsibility, in order to inform, entertain or educate, by means of electronic communications networks [...] and the organisation of which is determined by the video-sharing platform provider, including by automatic means or algorithms in particular by displaying, tagging and sequencing.”6

Even if providers such as YouTube do not have editorial responsibility, they still “organize” the service, and are therefore obliged to take measures to protect minors, and more broadly, to protect the general public from content inciting to violence or hate against minorities, or in the case of general illegal content. Such measures specifically include age verification mechanisms, mechanisms for users to flag illegal content and redress mechanisms.

In telecommunications, the new European Electronic Communications Code7 defines a specific category for Over The Top service providers (OTTs) such as Skype and WhatsApp, which are also known as “number-independent interpersonal communications services.” These service providers are not subject to all the regulatory obligations imposed upon traditional telecom carriers, as it is recognized that they do not control the conveyance of the signal; however, some security obligations and some obligations on access by disabled users are imposed on them as well as to respect fundamental civil rights. They will not be able to discriminate based on nationality or place of residence. The providers of these services might be even obliged to interconnect their services with other service providers to ensure interoperability.

These might seem like timid steps that do not have much impact on platforms, but they certainly open the way for a more robust regulation of platforms in sector-specific regulation.

 
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