Why Repealing Section 230 Will Hurt Startups and Medium-Sized Online Businesses

As Democrats and Republicans seek to rein in Big Tech, Congress is reviewing legislation to repeal Section 230 of the 1996 Communications Decency Act (CDA), which provides immunity for third-party content on websites and social media platforms. Despite arguments from both the left and the right, repealing Section 230 will only entrench the market power of existing Big Tech companies. This repeal will significantly threaten the future of small and medium-sized online businesses and platforms.

Described as the legislation that created the modern Internet, the CDA’s Section 230 provides internet companies immunity for third-party content that users post on online platforms. This provision means that social media companies and websites—like Facebook, Twitter, and Yelp—cannot be sued for allowing, removing, or editing third-party content (note that Section 230 protections do not apply to federal criminal cases).

Since early 2020, the Trump administration and the Republicans have targeted Section 230 for allegedly suppressing conservative speech. Following Facebook and Twitter’s decision to suppress a New York Post article about Hunter Biden’s overseas financial dealings, conservative calls for restricting Section 230 strengthened last October. Encouraged by Trump’s efforts, Republican Senate Minority Leader Mitch McConnell introduced a bill to repeal Section 230 on December 30—tying the legislation to Republican support for $2,000 COVID-19 relief checks. 

For a long time, Democrats opposed Section 230 for inadequately policing hateful content. Last year, President Joe Biden argued that “Section 230 should be revoked, immediately.” This bipartisan consensus means both Democrats and Republicans might cooperate to eliminate Section 230 protections for websites and social media platforms.

Proponents of Section 230 repeal seek to rein in Big Tech, but it will only add to the market leader’s advantage over startups and second-tier tech companies—such as TripAdvisor, Reddit, and Yelp. If Section 230 is repealed altogether, any tech companies can be subject to civil lawsuits for “any material posted by any user.” As a result, repealing Section 230 is expected to result in a barrage of frivolous lawsuits against tech companies.

Only the largest tech companies—equipped with teams of lawyers and deep pockets—can afford to fight such a wave of litigation. Smaller firms may just remove more user-posted material or cease to host third-party content altogether to avoid court costs. By deterring small and medium-sized companies from hosting third-party content, this repeal will further entrench Big Tech’s market dominance and protect them from future competition.

Because of the financial resources available to large companies, they can hire teams of moderators and compliance professionals to guard against potential liabilities. That is even more likely because, compared to traditional companies of similar revenues, large tech companies like Facebook and Netflix employ substantially fewer workers—enabling them to hire additional staff. Compared to startups and medium-sized companies, Big Tech has access to substantially larger volumes of data that may make artificial intelligence-enabled content moderation more feasible.

It is no surprise that, unlike Facebook, second-tier online platforms and businesses—such as the Wikimedia Foundation, TripAdvisor, and Reddit—have strongly opposed removing Section 230 protections. These three companies—along with 21 other websites and platforms—have recently launched the “Internet Works Coalition,” which promotes awareness of the adverse implications for non-Big-Tech online platforms and tech companies if Section 230 protections are removed.

Both Democrats and Republicans are understandably concerned about the increasing role of technology and online platforms in politics. However, in trying to tame Big Tech, Congress and the Biden administration should not be blind to the devasting effects that a Section 230 repeal can bring upon startups and medium-sized online businesses. Instead of repealing Section 230, both parties need to create a pro-competitive environment—where new startups can challenge Big Tech’s current dominance. By disadvantaging startups and medium-sized companies, repealing Section 230 will do the opposite.