Are Hosting Companies and Online Platforms Liable for Illegal User-Generated Information and Actions?
Airbnb, eBay, Amazon, Tinder, YouTube. you name it… Online platforms are dominating the digital airwaves. They allow millions of users to upload text, video, and audio, and share it with the world. Owners of these platforms are increasingly nervous about their liability for illegal information or actions by users (just ask the owner of Telegram…). In this note, we will dive into the European legal liability framework within which online platforms must operate.
Hosting Companies and Online Platforms
Before we get to that, let's first address the terminology. What is the difference between a hosting service and an online platform?
A hosting service is in the business of storing (that is to say, holding in its servers' memory) information provided to it by the recipients of its service. An online platform is also a hosting service but with the added functionality of not just hosting, but also disseminating the user-generated information to the public.
So both AWS and Tinder are hosting services, but Tinder also qualifies as an online platform because it not only stores user data but disseminates it to the public. The difference matters because the 2022 EU Digital Services Act (the “DSA”) imposes different obligations on services depending on whether they are a hosting service or an online platform. But from a legal liability perspective, they both enjoy the same liability exemption for hosting services codified in Article 14 of the 2000 E-Commerce Directive and essentially mirrored in Article 6 of the DSA.
The Principal Exemption from Liability for Online Platforms
Article 14 of the E-Commerce Directive, under certain conditions, exempts online platforms from liability for illegal user-generated information or actions. Let’s call this the “Article 14 Liability Exemption.” This important liability exemption is the reason why many companies (such as Uber and Airbnb) seek classification as ‘online platforms’, so they can make use of the Article 14 liability protection shield.
But let’s clarify something right away: it is up to the EU Member States to determine the conditions under which a hosting service or online platform may be held liable for illegal user data or actions. The Article 14 Liability Exemption provides the conditions under which online platforms cannot be held liable for illegal user-generated information and actions. If these conditions are not met, the online platform is exposed to liability, and national laws will determine whether it should indeed be held liable.
Neutrality: a Requirement for Liability Exemption
The Article 14 Liability Exemption only offers protection to online platforms that process user-generated information in a technical, automated, and passive manner i.e., in a manner that implies they have no knowledge or control over the user-generated data and actions.
This should be your first exercise in your quest to determine whether your online platform is exempt from liability under Article 14 of the E-Commerce Directive: examine whether you are providing your service in the described ‘neutral’ manner. If so, you are halfway to qualifying for the liability exemption.
But you're not fully there yet. Even if the online platform provides its service in a neutral manner, it must still be examined whether the provider of the platform nevertheless has *actual knowledge* of illegal user data or actions on its platform or, in the context of a damages claim, is aware of facts from which the illegality is apparent.
After all, you may have encountered illegal content as part of a voluntary investigation, or you may have been notified by a user. Regardless of how you became aware of the illegality, if you fail to take quick action to remove or disable access to the illegal information, your online platform will not be protected under the Article 14 Liability Exemption.
To Summarize:
Your online platform will be exempt from liability for illegal user-generated information or actions if:
The platform provides its services in a neutral, technical, automated, and passive manner; and
Upon becoming aware of any illegality on the platform, the provider promptly takes action to remove or disable access to the illegal content.
eBay: an ‘Active’ Platform
Many online platforms fail to meet the initial neutrality criterion and are thus deprived of protection under the Article 14 Liability Exemption. For example, consider eBay’s electronic marketplace. eBay stores listings by its users, in which products are offered for sale to other users. So eBay is clearly an online platform.
But is it a neutral platform that provides its services in a technical, automated, and passive manner, implying a lack of knowledge or control vis-à-vis user content, such that it cannot be held liable for (in casu) intellectual property right infringement by its users?
In its landmark L’Oréal v. eBay decision, the European Court of Justice held that eBay could not benefit from the liability exemption under Article 14 of the E-Commerce Directive. The Court found that eBay functioned as an active online platform, rather than a neutral intermediary. This was due to its involvement in optimizing the presentation of user listings and actively promoting them to boost sales.
By engaging in these activities, eBay went beyond merely (and passively) hosting user-generated content, thereby forfeiting the protection afforded to passive hosting providers. As a result, the platform was potentially liable for intellectual property infringements committed by its users.
Anyone setting up an online platform would be prudent to legally structure the platform in a way that enhances its chances for protection under the Article 14 Liability Exemption.
If you would like to explore how to structure your online platform to benefit from liability protections, contact us at marianne@starkslegal.nl.