Economic Value of Internet Intermediaries and the Role of Liability Protections

Internet Association released a new analysis that found reducing intermediary liability safe harbor protections would cost the U.S. 4.25 million jobs and reduce GDP by nearly half a trillion dollars over the next decade. Conducted by NERA Economic Consulting, the report represents the first quantitative measure of the value of safe harbor laws that protect internet platforms from being liable for wrongdoing by others.

Internet platforms operate as intermediaries – companies that connect third parties online – providing consumers with platforms to exchange information, book travel, engage in social media, and access countless other beneficial services. Underpinning the success of these platforms are safe harbors, specifically Section 230 of the Communications Decency Act and Section 512 of the Copyright Act.

The report uses consumer surveys and economic analysis to estimate the impact of reduced liability protections and finds that without intermediary liability protections:

  • The U.S. will lose an estimated $44 billion and eliminate over 425,000 jobs each year. That number is equivalent to giving away the annual GDP of Iceland, Jamaica, and Nicaragua combined, and firing all McDonald’s workers in the U.S.
  • Internet startups will face higher entry costs, limiting innovation. Entrepreneurs who drive the U.S. innovation economy rely on the ability to share content and test new ideas without facing unreasonable liability requirements. Reduced liability safeguards would hinder the formation of these startups by raising market entry costs.
  • Consumers will face higher costs and a worsened online user experience. It is economically and technologically unfeasible for platforms to screen third-party content at scale. The threat of liability may turn ISPs and websites into gatekeepers and enforcement agents, incentivizing them to block legal user generated content to avoid unfair and unwarranted legal risk, making the web less open, collaborative, and innovative.

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