Feb 292012

PayPal recently made news for implementing a policy denying its payment processing services to publications including obscene content.  There are several things objectionable about this policy, including the lack of any clear way of delineating what content would qualify as “obscene,” and its overall censorious impact.

But I’m not entirely sure that PayPal is necessarily the appropriate target for criticism of this policy.  It may be, to the extent that it is a truly discretionary policy PayPal has voluntarily chosen to pursue.  If it could just as easily chosen not to pursue it it can be fairly criticized for the choice it did make.  For this policy is not as simple as banning certain objectively horrible content 100% of all people would agree should be stricken from the face of the earth.  After all, there *is* no objectively horrible content 100% of all people would agree is objectionable.  Instead this policy has the effect of denying market opportunities to all sorts of writers producing all sorts of valid content, even if some people may not happen to like it.  And it does this not just by denying particular publications access to its services but by forcing electronic publishers to overcensor all the works they publish lest PayPal services be shut off to their entire businesses.

Of course, PayPal is a private party.  It is a private party with few effective competitors, however.  PayPal’s move leaves those who might write more provocative content with few choices of alternative revenue-generation possibilities.  Thus this decision can cause widespread chilling of all sorts of speech dependent on access to payments in order to be produced.

But PayPal *is* a private party.  And as a private party it has the right to intermediate whatever content it chooses.  A concern that arises from criticism of PayPal is the implicit idea that PayPal should somehow be compelled to intermediate any content.  The idea is generally as offensive as compelling it to censor content.  On the other hand, perhaps PayPal provides a particular type of service for which the principles of common carriage should instead apply.  These rules generally require certain integral utilities to take all comers, to provide service to all without discrimination.  Perhaps payment processors provide a similarly necessary utility and should be obligated to act similarly.  But they are not currently under such obligation and thus, like any other private party, they should retain their discretion to intermediate only the content that they should wish to.

In fact, it’s the threats to that discretion that may have prompted the PayPal policy.  Under 47 U.S.C. Section 230 (as well as First Amendment principles regarding compelled speech) intermediaries have the right to choose what content passes through their systems without fear of liability.  But that right has been under threat lately.  People who dislike the online publication of content have discovered that it can be eliminated not by taking direct action against it, but by attacking any intermediaries who allowed for its publication, including payment processors.  And, as relevant to the blog, they often leverage state power to do this.  We see this mostly in the “piracy” wars, but if payment processors can be forced to stop providing payment processing services to allegedly infringing content, they can be forced to stop providing payment processing for any other type of content someone might deem objectionable.  It’s therefore hard to fault intermediaries like PayPal from making whatever business decisions they think they need to make to get them out of this line of fire.

  One Response to “The PayPal Problem – a comment on intermediary liability”

Comments (1)
  1. One sees the same hitting on financial intermediaries in the attacks on Internet gambling.

    I think we need statutory common carrier status for payment intermediaries – a status that would survive government witch-hunts like those against WikiLeaks, where PayPal, Visa and Master Card were compelled (informally, extra-legally, but effectively) to stop processing donations to WikiLeaks because it had embarrassed the government.

    The government *likes* being able to shut the pipes, though, so I doubt that we’ll see effective statutory protection. Which means that the chill will continue, unless PayPal gets some backbone and chooses to defend freedom of expression (possibly with the understanding that there aren’t so many alternatives around for the puritans to use.)

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