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Law Brief: Social Media’s Turn To Surrender

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When emerging tech disrupts a market, disruptive regulation invariably follows.

One of the verities of American society is that success breeds contempt—and regulation.

More than 30 years ago, Sen. Alfonse D’Amato stood before Congress and issued an urgent call to regulate a new, fast-spreading type of technology that threatened a vital industry. “Are we to wait until the American music industry is destroyed or until our local record stores and radio broadcasters are driven from the marketplace, before we act to manage this monumental change?” he asked.

The threat: digital audio tape, or DAT, which allowed users to make multiple, exact copies of recorded music for the first time. Facing what it thought was an existential challenge to its existence, the Recording Industry Association of America threatened to sue Sony, Philips and other manufacturers for copyright infringement unless they prevented consumers from ripping off their music.

Practicing Protection

Electronics manufacturers quickly worked out a deal with politicians and the RIAA. The result was the Audio Home Recording Act of 1992. It protected manufacturers from copyright suits as long as they paid royalties and installed a “Serial Copy Management System” on every recorder to prevent consumers from making digital copies of digital copies.

Nobody under the age of 50 remembers DAT any more. And royalties from that once-threatening technology? They dwindled to nothing years ago as cheaper compact disc players satisfied demand for digital music.

Remember “broadcast flags”? They followed a similar trajectory. This time, the Motion Picture Association of America was terrified that then-new digital broadcast signals would allow consumers to record movies and peddle them online. After negotiations with companies like Sony and Toshiba, the Federal Communications Commission in 2003 ordered TV manufacturers to install chips to detect and prevent copies of digital video content. But like AHRA, the broadcast flag soon faded into obscurity. A federal court struck it down in 2005 as exceeding the FCC’s powers, and the agency quietly eliminated it in 2011.

Legal Catch-Up Time

There’s nothing new about this cycle of emerging technology, entrenched economic interests and government regulation. The railroad industry went through it in the 19th century as farmers and shippers first embraced the new way to get their goods to market, then howled about extortionate rates, while existing railroads complained about newcomers invading their territory. A lawyer for the Philadelphia and Reading Railroad wrote the first bill proposing federal regulation. The Interstate Commerce Commission, created in 1887, represented a compromise between shippers seeking rate controls and incumbent railroads bent on eliminating “destructive” competition.

Now it’s social media’s time to cut a deal. In 1996, Congress helped launch the Internet as a viable business by passing Section 230, protecting social-media platforms against lawsuits for hosting content created by third parties. That compromise is getting tattered at the edges now that companies like Google and Facebook stand atop the S&P 500 Index.

In February, Google was forced to defend itself before the U.S. Supreme Court against claims its algorithms pushed violent content in front of viewers vulnerable to suggestion, inspiring them to commit terrorist acts. School districts are suing social-media companies for poisoning the minds of youth. The entire scenario, from algorithms to video on demand, was virtually inconceivable 50 years ago, just as a steam locomotive would have astounded a farmer in the 1700s. But now that Google and its peers have arrived, they have to play by the rules. And in America, those rules include negotiating with their opponents to establish new regulations in exchange for relief from potentially ruinous lawsuits and government meddling. Welcome to the club.


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