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Lilla Nóra KISS: Lex Facebook or Tax Facebook? Options beyond the self-regulation of IT companies

Tech giants might cause headaches… Especially, when we attempt to think simultaneously with the heads of consumers, states and tycoons. This post intends to reveal some dimensions of regulating social media from a legal point of view, or to present the proverbial ‘windmill fight’ against seemingly unapproachable powers.

An unregulated social media environment can lead to interesting debates in many legal dimensions. The reason is that the topic is full of unclear definitions and opaque relationships of different actors. Let’s start by saying that the original purpose and function of social media sites is to connect members of the community and provide them multiple options to keep in touch. The spread of the internet has made it possible to share (and receive) information everywhere and any time. Social media sites became more and more widely spread and offered options for sharing news besides personal information, too. Therefore, the content of the platforms became extended. Thus, the supply has expanded. Human nature (especially our visceral curiosity about the lives of others) has created an ever-widening consumer market for these expanding services. So we can say that demand has also increased. The rapid pace of development and gaining market share has encouraged social media providers to change, provide more, even with an increasing number of specialized platforms. In addition, more and more features have been incorporated into the system, thus improving utilization and – by now,

psychologically proven – strengthening addiction in the daily lives of many people. This effect and the “phenomenon” of social media is well illustrated in the Social Dilemma documentary and in Disconnect.

All these developments have taken place in such a way that each concept has not been clarified or defined, and the (minimum) regulation that seems necessary has not been developed.

The strange situation is that the real concepts of service and consideration and the relationship of the seller the buyer and the product in the world of social media are unclear. I mean that (as Richard Serra put it in a 1973 radio show about television commercials reaching millions) when a product is free, the question arises as to whether we are the product. I believe that Serra’s statement about television advertising is exponentially true in the digital age.

The question shall be asked that if we (consumers, users) are the products, then who the seller is. A social media provider? If the social media sites do not sell, are they just mediate between the products (users) and the real seller(s)? Today, in an increasingly conscious society, it is perhaps no longer news that our personal data (and all the information associated with us) represent economic (monetary) value, it is considered a commodity. (See some thoughts on the surveillance capitalism by Shoshana Zuboff.) It is valuable that buyers unknown to us(ers) can get to know us, including our habits and decision-trends. By knowing us, they have the opportunity to influence us and our decisions via targeted ads, based on our browsing habits and history…

The scientific and social concern behind the analysis is that support the measurement of the behavior, the result could be dangerous as could affect the masses of people even in a cross-border manner. The free (unregulated) use of the know-how of manipulating millions via the internet and applications – such as the social media apps – is more than concerning…

If Artificial Intelligence serves and supports the understanding of the measured behavior of millions, it gives hardly controllable power to those who have control over that information (Big Data). Thus, the result could lead anywhere. As a simple conclusion, we might become a target audience (or – as you like – victims) without even realizing it. The advantages and disadvantages of direct marketing have been exploited by the science for decades. However, with the rise of social media sites, the traditional methods and techniques of direct marketing could make users (consumers) vulnerable with unforeseen efficiency. Especially nowadays, the effect is no longer just an incentive to buy, but even political manipulation. (Sorry, this option for fabricated reality reminds me on the famous movie Wag the Dog from 1997…) And finally, this option of manipulation leads us to the general legal and the constitutional dimensions.

Firstly, it can be seen that we can even get caught up in the clarifications of the concepts. In the context of data profiling, the issues of privacy and related data-protection concerns immediately arise. For example, the data and information we provide may be used (against us). If users of social media sites became aware that their data and profile were of serious property value and the social media sites profit off them, would they provide those personal data (at all)? If they were willing to disclose their personal data and other information knowing the above, would they do so for free? It is clear that the data have real economic potential. Could personal data be considered property? Anyone who knows the consumer (user) can reach him/her, regardless of whether the content is intended (needed) by the user or whether he/she intended to receive e.g. political messages. So, there are those who have an economic interest in learning about personal information or reaching targeted individuals of a specific profile. Thus, in addition to data protection, ownership issues may also arise – in particular with regard to the disposition of the subject matter of the property. While I’m sure that considering “data as a subject of property” opens Pandora’s box in legal thinking, this question cannot be avoided when we are talking about social media regulation(s)… The data protection dimension opens up privacy issues, in which context the right to disconnect that has also become an important aspect since the 2000s. The significance of the right to disconnect has increased especially in the changing work-life environment due to COVID-19.

Clarification of concepts is also important from a consumer-protection point of view. It is necessary to examine the extent to which users could be regarded as consumers. Here, the legal protection to which they are entitled, might be different. The measurability of influence, the protection of minors, and the tightening of the legal and ethical framework of consumer manipulation are particularly important. An essential accessory to both data protection law and consumer protection law is an appropriate level of information provided for the user/consumer. The appropriate level of information includes the liability of leaders to raise the awareness to vital information important to the public that may be understood as a basic need for consumers. The right to be informed shall be treated as minimum requirement of the service providers’.

The constitutional dimension mentioned above is relevant in several respects. On the one hand, users are not only consumers, but mostly citizens of certain states. Democratic states and legitimately elected leaders typically have responsibility for informing citizens in real time about matters of public interest. Here, of course, one can reflect on how information is provided and analyze (and evaluate) certain conceptual elements and levels of matters of public interest, but by abstracting from the questions of detail, perhaps we can examine the “phenomenon” of social media as a whole. By the term phenomenon, I want to express the elusiveness of the social media. Social media used to serve to facilitate getting to know each other and rekindle old relationships. However, by now, social media is playing an active role in providing information by allowing news to be published and shared (disseminated). Public involvement is also important in the active protection of citizens, especially certain vulnerable target groups (e.g., minors).

However, the involvement of the state and politics appeared in a completely different dimension as we might have imagined. Previously, information spread through the press and classical channels of media. By now, politicians and the state institutions became active users of social media. However, the legal framework was not tightened at the same time. In particular, the role of the sites in disseminating information has grown in importance over the last few years (see e.g. Trump’s election as president, migration, the Brexit referendum, the COVID-19 pandemic, and the Trump-Biden “election war”). The fact is that political actors and state representatives have become active users of social media in order to share information. Here, however, the basic legal requirements of liability are lacking. Who is responsible for the shared content? Who needs to verify the verity of the content? Who is responsible for spreading false (fake) news? A free press comes with state guarantees and strict accountability rules in our modern democracies. However, what about social media?

In addition to civil liability, misinformation and even its criminal consequences (e.g. incitement to possible crimes, incitement against the community, hate speech and other hate crimes) are also important regulatory considerations. The other side of the constitutional dimension is freedom of speech and freedom of expression. There are well-established civil law rules for this, determining the limits of freedom of expression (e.g., violations of the right to privacy). There are also criminal law frameworks that primarily address the categories of defamation and hate crimes.

It could be seen that there are substantive public and private law aspects of this topic. Constitutional law, criminal law, civil law, data protection, and consumer protection all allow for a legal assessment of possible regulation of social media.

In procedural terms, however, we face serious shortcomings. On the one hand, the cross-border nature of the phenomenon raises questions of competence: who is entitled to regulate social media and by what means, to what extent, with what personal-territorial-temporal scope and who is entitled to control the effectiveness of regulation, deal with possible abuses and, finally, how could the rules be enforced.

Could a global phenomenon be addressed with local (state or regional) solutions? The European Union is ready to regulate social media. The Member States agreed that the regulation of the social media is necessary. Some, including Hungary and Poland, have a stricter approach to the issue (see concepts of a so-called Lex Facebook). In parallel with the EU, the regulation, accountability, and controllability of social media in the USA is of public and professional interest. Social media (and other online services) have so far operated in slightly different way on the two continents due to the GDPR. For example, imposes significantly stricter rules on the processing of personal data than U.S. federal and state-level solutions. Fragmented legal solutions always raise dilemmas related to efficiency and powers (or the fear of them).

However, the question arises as to whether globally operating platforms can be judged and regulated at a regional level without compromising consumer rights. By the latter, I mean, for example, the consumer protection aspects of geoblocking, which also raise the theoretical question of categorizing citizens in terms of access to content.

From now on, another question to be asked will be whether the regulatory framework can be effective from the top-down or just bottom-up. There are many areas of self-regulation in social media and there are soft legal solutions for other digital companies as well. Recent political events have highlighted that these are not necessarily effective solutions, self-regulation is only a smoothing away of the conflicts that might arise without effective solution. However, forcing a regulation at the state level could be risky and the efficiency could be questioned due to the cross-border nature of the platforms. Are there tools for regulation that could be borrowed from other areas in an inclusive manner?

Could tax sanctions work (e.g. a kind of ‘Tax Facebook’ instead of Lex Facebook?)? In my view, taxation (by states) could be risky without a common European tax scheme for digital companies. This is a rough road that has been impassable for decades because of competence issues of the EU and the Member States. However, EU tax-rules on dotcoms would allow social media providers to be taxed on the part of states (or the EU) and sanctioned through tax instruments if they wish to participate in informing citizens (and citizens) about news of public interest. I raise the issue of sanctions along the lines of spreading dis- or misinformation… Financial instruments could force social media to pay tax on its income from the use of citizens’ data if the platforms want to become an active information- and content-sharing site (and not just a site for connecting people). This could be interpreted as poking Facebook and other social media instead of punching them with strict rules… However, this is difficult to achieve in a fragmented framework with different tax rules and rates in different Member States who do not want to harmonise tax rules due to sovereignty claims. The common tax issue, even if only in the digital field, leads us to constitutional dilemmas. The ​​division and transfer of competences/powers is a sensitive area of EU law. The Gordian knot could be cut through with a cheap Chinese solution: geoblocking on social media. With that we could say: “Mischief Managed”!

The problem there is that both the European and American systems are designed to meet the needs of consumers (in trade and politics, too). Modern politics wants not only to serve citizens in this regard, but also to use social media interfaces for information or even campaigning…

All this requires the development of common minimum standards in the areas indicated above, both in substantive and procedural terms. The regulation and the taxation of the companies are seemingly not the best possible solutions… Maybe new solutions could be borrowed from other fields, in an inclusive manner… Well, the clarification of concepts can be a good starting point in that change!

Lilla Nóra KISS is a counselor on EU legal affairs at the Ministry of Justice. Formerly, she has been a researcher and lecturer at the University of Miskolc (Hungary), Institute of European and International Law for five years, where she taught European Union law.

Lilla obtained her Ph.D. degree in 2019. The topic of the dissertation is the legal issues of the withdrawal of a Member State from the EU.

Her current research interests cover the legal dimensions of Brexit, the interpretation of the European Way of Life, and the Digital Single Market.

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