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Safe spaces and regulatory risk

Safe spaces and regulatory risk
April 11, 2019
Safe spaces and regulatory risk

The duty of care provision will compel companies to take “reasonable steps” to keep their users safe – whatever that means – and address any illegal activities on their platforms. Consultations are under way with a view to granting the regulator powers to impose substantial fines, together with the ability to block access to sites.

The government has highlighted the need to combat terrorism and child sexual exploitation as two of the primary drivers of the proposed legislation – and it’s difficult to argue against that – but free speech campaigners may question why public discussion forums are also being targeted and which government agency will determine what constitutes “disinformation”. Happily, for Whitehall bureaucrats, there is no pesky First Amendment to deal with in the UK.

Consideration is also being given to imposing liability on individual members of senior management, a move that will play well with certain sections of the media, but one that could come unstuck simply due to unresolved global issues over online jurisdiction. When you consider how largely ineffectual national regulators have been in the face of online copyright abuse, an issue driven by corporate financial interests, you wonder how effective the UK’s regulatory framework will be in this case.  

‘Safe spaces’ aside, a corporation such as Alphabet may be more vulnerable to anti-trust issues, particularly if the Trump administration, driven by claims of political bias, decides to implement legislation that would render the likes of Google and Twitter regulated public utilities. From an anti-trust perspective, the dominance of a search engine such as Google constitutes a form of market failure; its “inevitable market power” analogous to that of power or water companies, where a proliferation of suppliers is essentially uneconomic.

However, in the rush to tighten regulation, lawmakers need to be careful they don’t throw the baby out with the bath water. Start-up businesses have long been a key driver of innovation and economic growth. Early-stage investment is an essential component in the development of new businesses, but an overzealous (or inconsistent) approach to regulation acts as a disincentive for investors. A survey from Booz & Co – conducted prior to its incorporation within PwC – indicated that 80 per cent of angel investors and venture capitalists would think twice about investing in an area with an ambiguous regulatory framework.

The consultation period on the white paper will conclude in around three months, by which time the UK might have a new Prime Minister, even though the incumbent has nailed her colours to the mast on this issue. But it’s unlikely that the tub-thumping that accompanied the initial press release on the matter will be repeated – we’re likely to see a watered-down set of recommendations once government lawyers determine what is practicable from a legal perspective.

Even if you accept the premise that regulatory intent is often compromised by legal practicality, investors certainly can’t afford to ignore how these issues evolve, while businesses must take account not only of prospective regulatory change, but also of existing legislation – think of the strife Facebook got into when it gave third-party apps unfettered access to its platform.

Whatever finds its way into the statute books from the Online Harms White Papercompanies – and by extension, investors – will need to increasingly tailor their risk management strategies in the face of rapid technological innovation and changing patterns of consumption.