CCIA Releases Study on the Financial Impact of Repealing Section 230

With the mainstream media talking off and on about repealing Section 230, the CCIA has released a study that puts a dollar figure on such a move.

One of the common themes we’ve seen in the mainstream media (and with certain US politicians) is that social media is this ominous threat to society in every level. The solution to this is to repeal Section 230 and all of societal problems will magically be solved and go away like a bad dream. For them, this is the cure-all solution to all of our problems. If we repeal Section 230, the mental health crisis will magically get fixed, the problems in the political system will get fixed, people will finally start being nice with each other, climate change will be solved, disease will be a thing of the past, wars will finally end, space travel will be a regular thing for civilians, poverty will end, rainbows and unicorns, etc. OK, slightly exaggerated, but you get the idea of that mentality.

Generally speaking, a vast majority of people who advocate for repealing Section 230 to “fix” perceived problems with social media have no clue what Section 230 actually does and what the negative implications would be should it be repealed. The rest are intentionally misleading people about what Section 230 does and have a financial incentive to push for this repeal in the first place.

Background of What Section 230 Really is About

The surprising thing about all of this is the fact that understand Section 230 is not really that hard. You can see the text of it on Wikipedia and the whole thing can be read below:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

That’s it. That’s Section 230. To put it another way, when someone posts something on a website, who is responsible for that content? Is it the website itself or the person who posted that material? Section 230 is quite clear and says that it’s the person posting the content that is responsible for that material, not the service itself.

This is basic common sense here. Yet, codifying into law was necessary. The reason for this was because there was caselaw that looked at whether or not a web service was liable for the users content. The name escapes me (and my Google searching apparently sucks today), but essentially, a website had a user post something illegal on their services. The website was subsequently sued for hosting that material in the first place. When the courts looked at the case, they looked at whether the website content was moderated or not. Because that service was moderated, the courts decided that because the material was left up, the website actively chose to showcase that content, making them liable.

That basically leaves a web service with what is sometimes referred to as the moderator’s dilemma. Either the service moderates it’s content and risks legal liability or allows an “anything goes” service where anyone can post anything (legal or not) and the web service simply turns a blind eye to it so that they don’t get held liable for that material. It’ll be an awful service, but one that allows the owner to wash their hands of the legal liability. It’s a damned if you do, damned if you don’t scenario. Section 230 solves this and many other related legal problems. With liability falling on the person who published that material, web services could thrive, moderating as they see fit, and permit the modern internet we know and love today.

Recent Attacks on Social Media

With social media, there have been a number of attacks on the very concept in recent years. Media and lawmakers alike have pushed some very dubious claims that social media is inherently harmful. Probably one of the more famous examples is the notoriously cherry picked statistic about how one in three teenage girls feel worse about their bodies thanks to using social media. This highly misleading claim has been amplified repeatedly over the years through mainstream media reports that frequently provide absolutely no context from which that statistic came from. We’ve posted the full context many times before, but here is that full context below for convenience (note: this is from 2021):

At the time, Facebook was offering an assessment of where they are at with making sure the experience with their users was positive or not. They were surprisingly transparent with their figures and shared slides showing where they were succeeding and where they needed to improve. So, this was Facebook itself providing this information and, what is actually kind of amusing is the fact that no one that I’m aware of disputed these findings.

The problem was that the media decided to cherry pick the one data point that painted social media in the worst possible light and run headlines and articles saying how inherently harmful social media was. A more recent wave of moral panic pushed by the media came from the UNESCO report which, like the mainstream media, simply ignored the context from which that number came from and repeatedly just said that one data point multiple times.

The latest wave of moral panic, however, came, unfortunately, from the US Surgeon General who called for warning labels to be placed on social media. In the process, he basically ignored all the available evidence and relied heavily on anecdotal evidence about how members of his family suffered from bullying, and that was all the evidence he wanted to work from. Many members of the mainstream media, for their part, simply either chose to take him at his word or even pile on with additional claims about how social media is a menace to society without checking the facts first on this (which is, sadly, pretty typical for the mainstream media these days when it comes to tech related stories).

The Attacks on Section 230

At this point, you might be asking, “what does the attacks on social media have to do with Section 230?” Well, you would be correct in questioning it. There isn’t really any connection at all, yet some have tried to make the connection anyway. That has led some lawmakers to push to either curtail or sunset Section 230 altogether. For some, it seems that Section 230 has been associated with building up the internet (which is true), that it gave rise to big platforms (technically true) and that the correct move is to eliminate Section 230 (a REALLY bad idea).

Among the dubious claims we’ve heard include the idea that Section 230 was only made to help start up the internet. However, because there are large platforms today, Section 230 is no longer needed. No, the argument doesn’t make any sense, but that is one that we’ve seen before. The simple truth is that Section 230 applies to every web service operating in the United States. Small websites, for instance, heavily depend on Section 230 to help keep them alive as they grow. Gutting Section 230 would effectively kill those websites in the US.

Another dubious claim is that platforms use algorithms to addict people, so, therefore, killing Section 230 would immediately solve that problem. For one, the jury is still definitely out on whether or not the algorithms do that (and things like sorting comments based on likes or date is technically an algorithm as well). For another, Section 230 has little to do with algorithms specifically. Finally, it’s questionable whether or not so-called “addicting algorithms” would magically go away if Section 230 was ended.

While the arguments for repealing Section 230 are generally highly questionable at best, the arguments against ending Section 230 are very robust and have ample evidence to back them up. The Electronic Frontier Foundation (EFF) has multiple posts on this subject. One post offers the following:

It’s one thing to volunteer your time and resources to create a hospitable place online; it’s another thing entirely to assume an uninsurable risk that could jeopardize your life’s savings, your home, and your retirement fund. Defending against a single such case can cost hundreds of thousands of dollars.

That’s very bad news indeed, because a world without Section 230 will desperately need alternatives to Big Tech.

Big Tech has deep pockets, which means that even if it creates a system of hair-trigger moderation that takes down anything remotely controversial on sight, it will still attract a staggering number of legal threats.

There’s a useful analogy here to FTX, the disgraced, fraudulent cryptocurrency exchange. Like Big Tech, FTX has some genuinely aggrieved users, but FTX has also been targeted by opportunistic treasure hunters who have laid claims against the company totaling 23.6 quintillion dollars.

We know what Big Tech will do in a post-230 world, because some of us are already living in that world. Donald Trump signed SESTA-FOSTA into law in 2018. The law was billed as a narrowly targeted measure to make platforms liable for failing to intervene in cases where they were aware of human trafficking. In practice, the law has been used to indiscriminately target consensual sex work, placing sex workers in harm’s way (just as we predicted).

Without Section 230, Big Tech will shoot first, ask questions later when it comes to taking down controversial online speech (like #MeToo or Black Lives Matter). For marginalized users with little social power (again, like #MeToo or Black Lives Matter participants), Big Tech takedowns will be permanent, because Big Tech has no incentive to figure out whether it’s worth hosting their speech.

Meanwhile, for the wealthy and powerful, a post-230 world is one where dictators, war criminals, and fraudsters will have a new, powerful tool to silence their critics.

The EFF also wrote about how repealing Section 230 would be devastating for users:

The bill introduced by House Energy & Commerce Chair Cathy McMorris Rogers (R-WA) and Ranking Member Frank Pallone (D-NJ) is based on a series of mistaken assumptions and fundamental misunderstandings about Section 230. Mike Masnick at TechDirt has already explained many of the flawed premises and factual errors that the co-sponsors have made.

We won’t repeat the many errors that Masnick identifies. Instead, we want to focus on what we see as a glaring omission in the co-sponsor’s argument: how central Section 230 is to ensuring that every person can speak online.

Let’s start with the text of Section 230. Importantly, the law protects both online services and users. It says that “no provider or user shall be treated as the publisher” of content created by another. That’s in clear agreement with most American’s belief that people should be held responsible for their own speech—not that of other people.

Section 230 protects individual bloggers, anyone who forwards an email, and social media users who have ever reshared or retweeted another person’s content online. Section 230 also protects individual moderators who might delete or otherwise curate others’ online content, along with anyone who provides web hosting services.

As EFF has explained, online speech is frequently targeted with meritless lawsuits. Big Tech can afford to fight these lawsuits without Section 230. Everyday internet users, community forums, and small businesses cannot. Engine has estimated that without Section 230, many startups and small services would be inundated with costly litigation that could drive them offline.

Indeed, there would be significant negative implications in a post Section 230 world. It would attack the free and open internet, kneecap innovation, undermine innovation, take an axe to freedom of expression, and would do little to solve any perceived problem with social media today.

The Financial Costs of Repealing Section 230

While the ramifications of repealing Section 230 have been well documented from a users perspective, innovation perspective, and a free expression side of things, what is less talked about is the economic damage such a move would cause. The CCIA (Computer & Communications Industry Association) released a study to talk about the financial toll that would be unleashed across the United States should Section 230 get repealed. In a news release, the CCIA estimated that repealing Section 230 would result in a loss of $1.3 trillion:

Washington – Repealing Section 230 would cost investors at least $1.3 trillion amounting to a 2.9% decline in the S&P 500, according to projections in a new study. The research also finds that repealing Section 230 imposes losses on each state’s average retirement savings of at least $9k per saver, as most people’s retirement savings are invested in stock holdings like S&P 500 Index funds, which include the companies targeted by Section 230 repeal in their top holdings.

As for the legal costs, the study finds Section 230 repeal would lead to more than 655,000 lawsuits per year against digital services, and digital services and their users would pay more than $100k in legal fees per case totaling about $65.6 billion per year. The Computer & Communications Industry Association’s Research Center today released the study, “Repealing Section 230 Would Cost Americans Over $1.3 Trillion,” highlighting the negative impacts of repealing Section 230 of the Communications Act.

Currently Section 230 places legal accountability on communicators of speech, rather than the digital services that publish it. It also allows digital services to safely moderate content to protect kids and keep the internet safer.

The study findings itself isn’t that long. In fact, it is merely two pages long. You can also read the PDF here as well. It uses what they consider to be conservative estimates and speculated that one in a million posts and 1 in a billion message resulted in a lawsuit, the industry as a whole would see over 655,000 lawsuits per year. As the PDF notes, this would disproportionately affect small startups:

Young startups have limited capital runway and cannot endure such legal costs. Even if they ultimately prevail in court, small sites have gone out of business over exorbitant legal fees.

The numbers are quite interesting as it looks at the dollar figures associated with such a move. This isn’t quite as common of a perspective as other’s on this debate.

One thing I will personally note is that if Section 230 were to repeal, there would be a significant motivation to try and set up shop outside of the United States. If you wanted to start a business, the last thing you would want to do is set up shop in the United States. A gift to other countries to be sure, but it would have devastating consequences for the American economy. We don’t even need to rely on theoretical concepts to see this happening.

In 2018, Australia moved to ban effective encryption. When those laws passed, it sparked a massive innovation and investment exodus. This was because companies knew that their information wasn’t secure if that data flowed through Australia. Companies outside of Australia, for their part, began blacklisting Australia as well for very similar reasons.

It’s not that big of a logical leap to assume that a similar exodus would happen in the United States should Section 230 get repealed. Only, the reasons would be, naturally, different. Instead of security concerns, it would be over legal concerns that they would get subjected to millions in legal expenses just for trying to set up shop in the United States. Honestly, ask yourself this: what would stop Facebook from simply setting up shop outside of the United States should Section 230 get repealed? I honestly can’t think of anything on that front.

Further, with the advent of open source social media concepts like Mastodon and Bluesky, servers are likely to pop up all over the world outside of the United States anyway. Even if Section 230 breaks Meta, social media is going to live on in other forms anyway.

Ultimately, there is no upside to repealing Section 230 here. It would be a move to inflict an abundance of pain on everyone involved. What’s more, there is nothing that repealing Section 230 would really solve, either. You want to solve the supposed problem of “addicting algorithms”? Well, they can operate in other countries just fine and you won’t have any of the benefits of the large platforms in the United States. At the end of the day, the effort to repeal Section 230 in response is just a horrible bad idea all around. It’s not a solution here.

Drew Wilson on Mastodon, Twitter and Facebook.