The Scotus 230 From the Payfac Perspective

ETA’s PayFac Committee met this month for a panel discussion on The Scotus 230 from the PayFac Perspective with guest speakers Theresa Kananen & Deana Rich.

• The committee reviewed the Telecommunications Act of 1996, which limits the application of defamation, publisher, and distributor.
• A publisher can also be a speaker and can be found liable. However, a distributor cannot be liable. Examples of this could be providing forums where people can express opinions or ideas if the platform is provided in good faith.

Possible Changes
Gonzalez v. Google LLC (Docket 21–1333) is a pending case at the United States Supreme Court regarding whether recommender systems are covered by liability exemptions under Section 230 of the Communications Act of 1934. Telecommunications Act of 1996—for Internet service providers dealing with terrorism-related content posted by users and hosted on their servers.

Possible Implications
This case could impact PayFacs if they win the lawsuit, as the underwriting guidelines for merchants must be adjusted because merchants own or provide forums that trigger malicious acts. Examples of these forums could be online training websites, online schools, and if a PayFac provides any platform that makes online content available.

Dark Patterns
Tricks designed and used in websites and apps make users do things they didn’t mean, such as buying. As a result, consumers can agree to legal terms without intending to do so, affecting PayFacs. The FTC has published a staff report outlining dark patterns for which they will look.

What To Do?
Reviewing websites and apps for these patterns during underwriting merchants has become more critical when facilitating payments.

Key Takeaways

• What is 230? Section 230 of the Communications Decency Act has historically given interactive computer forum providers immunity from liability based on the content contributed by third parties. However, Section 230 is silent on the practice of promoting content.
• What is the challenge? In Gonzalez v. Google , the plaintiffs have argued that promoting content is itself a publication of content, such that the immunity of Section 230 does not apply.
• What is the defense? Google argued that content is promoted through neutral algorithms based on user inputs and that the promotion is not a content publication. It claims the immunity of Section 230 covers the rise of content and the forum’s hosting.
• What is the prediction? The Supreme Court Justices seemed skeptical of the argument that a mere promotion of content was itself content. Instead, the questioning at oral argument focused on how to draw a practical distinction in applying a content-neutral algorithm to decide when Section 230 immunity applied and when it did not. It seems unlikely that the Supreme Court will hold that the mere promotion of content through a neutral algorithm, without more, falls outside the protection of Section 230. But, of course, we won’t know until we get an actual decision.
• What is the takeaway for PFs? If the Supreme Court interprets Section 230 to exclude content promotion from its immunity, then underwriting and monitoring merchants with an internet presence will take on heightened risk and importance. It will be essential to ask (1) does the merchant host any forum that allows the contribution of the third-party content; and (2) does the merchant promote or suggest any content. If the answer to both is yes, then it would be critical in a “new world” of Section 230 to monitor the content promoted, so it does not transgress into illegal content. But, again, we won’t know if there will be any change until the Supreme Court rules.