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Chokepoints

Global Private Regulation on the Internet

UNIVERSITY OF CALIFORNIA PRESS

Secret Handshake Deals

January 18, 2012, has become famous in certain circles as the date of the "Internet blackout," the climax of the world's largest, most dramatic, and — arguably — most effective online protest to date. On January 18, web giants including Google, Wikipedia, Reddit, Tumblr, and Mozilla blacked out some or all of their web pages, as did thousands of smaller websites.

Over the course of several months leading up to that date, a transnational coalition of academics, technologists, civil-society activists, Internet users, and Internet companies came together to oppose Internet censorship and Draconian rules that they said would impede the functioning of the Internet. The protest focused on two intellectual property bills in the United States: the Stop Online Piracy Act (SOPA) in the U.S. House of Representatives and its sister bill in the U.S. Senate, the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, or Protect Intellectual Property Act (PIPA). These bills targeted websites (or "sites") globally accused of violating U.S. intellectual property laws, which govern the production and use of creative works like movies and music, as well as the commercial manufacture of goods. Such sites offer unauthorized downloads of copyrighted content, particularly movies music, games, or software, or sell counterfeit goods, which are unauthorized reproductions of trademarked products like those bearing the famous Nike "swoosh."

Protesters had reason to be concerned. SOPA and PIPA would have fundamentally altered online efforts to enforce intellectual property rights. The bills proposed requiring Internet intermediaries, which provide or facilitate Internet services, to police intellectual property rights. These intermediaries would be required to act as regulators with the goal of preventing the distribution of counterfeit or copyright-infringing goods on their platforms. Under the proposed bills, rights holders of intellectual property, like the sporting goods firm Nike, could seek court orders to require online payment providers, such as PayPal and Visa, and digital advertising firms like Google and Yahoo, to target sites distributing copyright-infringing content or counterfeit goods. These Internet firms would have been required to withdraw their services from targeted sites for the purpose of disrupting the sites' operations.

Critics of the bills argued — and not without reason — that they would extend punitive U.S.-style enforcement strategies globally. Under the bills, U.S.-based rights holders could have singled out sites worldwide that they claimed violated their intellectual property rights. Censorship was also a central concern. The bills could have endangered free expression on the Internet if actors inadvertently — or, more worryingly, deliberately — targeted legally operating sites and stifled legitimate speech. Moreover, critics claimed the bills could potentially damage Internet infrastructure through the types of technical enforcement measures proposed. SOPA and PIPA were explicitly designed to favor rights holders, particularly large institutional copyright owners in the movie and music industries, and multinational companies like Nike and Pfizer, at the expense of Internet firms that provide essential online services. Largely absent from SOPA and PIPA was any consideration of Internet users who rely upon the Internet to participate fully in economic, social, and cultural life. In articulating their concerns, SOPA protesters tapped into wider societal anxiety over state and corporate actors' power to determine what kinds of content we can access, share, and use, what we can buy and where, and how we can use Internet services, technologies, and platforms.

Until the Internet blackout, intellectual property was not thought of as a subject that triggered widespread public protests or generated heated debate in the mainstream media. In fact, it was generally considered to be an arcane, commercial matter of interest only to large corporations and lawyers (Haggart 2014). The groundbreaking protest against SOPA and PIPA changed that and transformed intellectual property into a topic of popular conversation. At the zenith of the protest, on January 18, over a hundred thousand web pages went dark in protest and 10 million people signed petitions against the bills. So many people attempted to contact their elected representatives in the United States that the surge in traffic temporarily took down some U.S. senators' web pages (McCullagh 2012). Representative Darrell Issa, a Republican from California and a staunch opponent of the bills, described the protest as an "Internet mutiny" (Franzen 2012). Faced with an unprecedented public outcry over intellectual property bills, the U.S. Congress backed down and withdrew the bills on January 20, 2012. The protest was the first major political defeat for U.S. intellectual property proponents in over thirty years, a monumental achievement of Internet activism, particularly given the strong bipartisan support for the issue in the United States (Sell 2013). Opponents celebrated as the anti-Internet policies appeared dead, at least until the next attempt at legislation.

FROM CONTROVERSIAL BILLS TO HANDSHAKE DEALS

The anti-SOPA uprising and surprising defeat of SOPA and PIPA have been widely reported in academic and mainstream sources. Without doubt they will be the subjects of important studies of online activism and transnational social movements for years to come. What is less well known, however, is that the Internet blackout failed to kill the provisions contained with SOPA and PIPA. While protesters were campaigning against these bills, a small group of U.S. policy makers, rights holders supportive of SOPA and PIPA, and their trade associations were active behind the scenes. In closed-door meetings, they quietly drafted a series of informal, non-legally binding handshake agreements with Internet firms and online payment providers that incorporate some of SOPA's toughest and most controversial provisions, which were opposed by tens of millions of people in the United States and around the world.

The United States is not alone in creating non-legally binding agreements to regulate intellectual property on the Internet. The United States and the United Kingdom are the epicenters of these nonbinding agreements, as each has multiple agreements. Officials from the European Commission also crafted their own agreement. As happened in the United States, small groups of multinational corporations and officials from the U.K. government and European Commission conducted negotiations outside democratic, legislative processes, between 2010 and 2013.

Government policy makers describe these nonbinding agreements as "voluntary, industry-led initiatives" (Espinel 2013). Industry participants refer to them as "best practices." As these "best practices" are identified and determined by industry, however, they do not represent objectively evaluated measures. Negotiations occurred in closed-door meetings with little participation from consumer or civil-society groups, despite the fact that the agreements broadly affect how people can use popular — and indeed, essential — Internet services. Signatories are major U.S.-based Internet companies and payment providers with global operations: PayPal, Visa, and MasterCard, along with Google, Yahoo, Microsoft, and eBay.

One of the agreements' key targets is websites and marketplaces aimed at consumers in the United States and Europe but located elsewhere, especially China. For rights holders, China is of particular concern because it is the primary manufacturer of counterfeit goods that are exported to North America and Europe. Rights holders are also concerned with counterfeit goods sold through the China-based Taobao marketplace, which is the equivalent to eBay in China. U.S. and European rights holders not only want to combat the manufacture of counterfeit goods in China, but they also want to expand sales of legitimate versions of their brands in China's burgeoning e-shopping environment, particularly through key venues like Taobao.

At their core, the informal agreements are intended to push large Internet intermediaries to go beyond what they are required to do by law in the protection of intellectual property rights. Advocates of this position, including the European Commission, approvingly refer to it as a "beyond-compliance" regulatory strategy (European Commission 2013, 5–6).

The puzzle at the heart of this book is why powerful, globally dominant Internet firms and payment providers adopted non-legally binding agreements to police the online market in copyright-infringing and counterfeit goods on behalf of rights holders. At first glance, this type of regulation does not appear to be in intermediaries' material interests. Further, why did these intermediaries agree voluntarily to go beyond what they are required to do by law? The answer is governmental pressure. Despite government officials' use of the terms voluntary and industry-led initiatives, the agreements are neither voluntary nor wholly private. State actors — the U.S. and U.K. governments, along with the European Commission — threatened the intermediaries with legislation and legal action to compel the companies to adopt non-legally binding enforcement measures. These state actors did so in response to lobbying from prominent rights holders keen to expand the online enforcement of their intellectual property rights.

State pressure was necessary to encourage — and compel — intermediaries to exceed their legal responsibilities. This is because, while the intermediaries did not entirely oppose increased enforcement of intellectual property rights, they did not consider this problem to be primarily their responsibility. In addition, the intermediaries largely resisted rights holders' efforts to revamp their enforcement efforts. Intermediaries' adoption of the nonbinding agreements lessened their risk of being subject to legislation or legal action. However, intermediaries also had another motivation. State actors and intermediaries have some overlapping interests in exerting greater control on the Internet. Intermediaries want not only to expand their markets but also to influence state standard-setting in relation to issues important to them, such as data collection and storage policies and rules regarding privacy of users' personal information.

More broadly, this book explores the growing practice of states designating powerful corporate actors as global regulators to set and enforce rules on the Internet. This regulation increasingly occurs in the absence of any meaningful public or judicial oversight, through non-legally binding arrangements. Such practices raise critical questions of fairness, due process, legitimacy, and the degree to which relying upon private-sector actors to deliver public-policy objectives is good for democracy. Core questions guiding my argument in this book are: what effects may informal corporate regulation have on how we access and use Internet services, applications, and technologies; and what are the associated problems?

New Global Regulators

A valuable and intriguing lens through which to examine the growing practice of informal regulatory practices carried out by corporate actors on the Internet is the regulation of intellectual property. Regulation in this context refers to the practice of nonstate organizations, including private companies and nongovernmental associations, setting and enforcing rules, standards, and policies that guide the provision of important Internet services, such as search or payment processing. The online regulation of intellectual property is an important case study because it is a key area of Internet governance, since it involves setting rules that govern the global flow of information and goods.

In terms of intellectual property, the two main areas I study are copyright law and trademark law. Copyright law lays out rules that determine how knowledge, and creative and artistic works like music, films, and books can be accessed, used, and shared, by whom, and with what technologies. Trademark law determines the entities that can lawfully manufacture, distribute, advertise, and sell trademarked products. Counterfeit goods are a form of trademark infringement. On the Internet, regulating trademarks entails making rules that determine how and on what platforms goods are sold, by whom, and in what ways, and how goods can be advertised. Rules governing intellectual property fundamentally affect what content people can access, and how they can access this content and exchange goods and services online.

Responsibility for policing those rules is increasingly falling upon Internet intermediaries that act, sometimes reluctantly, as gatekeepers on behalf of rights holders. Intermediaries are typically for-profit entities that provide important commercial and technical services that enable the effective functioning of the Internet. Some intermediaries, such as search engines or web hosts, facilitate access to or the hosting of information on the Internet. Others, such as social media platforms like Facebook and Twitter, or payment providers like PayPal, enable transactions or interactions among Internet users. Internet intermediaries vary widely in size, scope, and market share. Some intermediaries provide services across multiple sectors. Google, Yahoo, and Microsoft, for example, all operate search engines and digital advertising platforms. Certain intermediaries, such as Visa, MasterCard, and PayPal, can be used in both real-world and online environments. Other intermediaries, like domain registrars, exist solely online.

Large intermediaries like Google, eBay, and PayPal can be thought of as "macrointermediaries" owing to their global platforms, significant market share, and sophisticated enforcement capacities that protect their systems and users from wrongdoing like fraud or spam. Macrointermediaries can set rules that govern hundreds of millions of people who use their services. They are in a powerful position to shape the provision of essential Internet services, such as search and payment processing, by virtue of their ability to monitor their platforms, remove unwanted content, and block suspicious transactions and behavior. Given their regulatory capacity, cooperative macrointermediaries can allow rights holders to police mass populations globally in ways that were previously unattainable, technologically unfeasible, or prohibitively expensive.

Why do rights holders want to work with macrointermediaries? These Internet firms act as chokepoints with the capacity to exert significant control over the access to and use of essential online sectors, including payment, advertising, search, marketplaces, and domain name services that enable users to access websites. People commonly — but mistakenly — understand the Internet to be a relatively ungoverned space, a "Wild West" of loosely connected networks that extend globally. Contributing to this perception are frequent claims by various governments and law enforcement agencies that they struggle to enforce laws on the Internet and are relatively powerless to reach outside their legal jurisdictions to target bad actors. Despite this Wild West stereotype, in many ways the Internet is a highly controlled environment. By withdrawing their services, macrointermediaries can disable sites' capacity to process payments, thereby "choking" sites' revenue streams. These intermediaries can also impede users' ability to locate and access counterfeit goods by controlling search and domain services and restricting the operation of marketplaces, thus creating access barriers. In essence, intermediaries use revenue and access chokepoints to deter unwanted behavior and target inappropriate content.

Given macrointermediaries' market dominance and global reach, they have a significant capacity to set rules governing hundreds of millions of people and determining how global flows of information are handled. Further, as these macrointermediaries police and sanction their users, remove certain types of content from their platforms, or withdraw their services from particular sites, they are shaping public policies in areas as diverse as privacy, data collection and retention, intermediary liability, intellectual property rights, and freedom of expression. As a result, through their roles as regulators, intermediaries are becoming de facto policy makers on an array of complex social issues, including obscenity, intellectual property rights, promotion of terrorism, and child pornography (DeNardis 2014). Internet firms' work as regulators or policy makers, however, may not be readily apparent to or fully understood by the general public. Internet users may not realize how intermediaries have changed rules relating to their services until users are unable to access certain information or use particular features. Intermediaries' global reach and sophisticated enforcement practices make them a valuable enforcement partner for rights holders and for states, as the Snowden files show in regard to the NSA's surveillance programs that siphon information from Google, Yahoo, and Microsoft.

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Excerpted from Chokepoints by Natasha Tusikov. Copyright © 2017 The Regents of the University of California. Excerpted by permission of UNIVERSITY OF CALIFORNIA PRESS.
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