Social Media Slithers Through the Gauntlet of Regulation


Today’s hearings of the Senate Judiciary Committee involving the CEOs of the nation’s five big tech companies about potential harms from their products on teenagers are excellent news copy, but they are not new.

Since the creation of the bulletin board, the first interactive stage of the Internet, in the mid-1990s, the industry has been largely unregulated.  Maybe because of the super-duper novelty of computers and home and business-based communications, federal and state regulators were in awe of its power.  They did not understand how it worked, its unintended consequences, and its profound, undiscovered impact on global society.

Now, 30 years after its creation, the genie was out of the bottle.  Social media has created some of the wealthiest people in the history of the world and transformed society.  Critics say its deregulation and Wild West antics have damaged democracy, made a mockery of free speech, devalued societal norms, and ignited debates about free speech, morality, and predatory criminal behavior. Supporters say social media has democratized government and facilitated communications among people who never would have met. Both positions are valid.

Yet while that’s true, where does that leave the members of the Senate Judiciary Committee and their ability (or inability) to regulate social media?

Not in a good place.

Existing laws, including Section 230 of the Communications Act of 1934, enacted as part of the Communications Decency Act of 1996, have made it possible for companies that deliver interactive computer services with limited federal immunity from defamatory or libelous content provided by someone else.  Section 230 applies to websites, blogs, and social networks.  This provision means that social media providers are not publishers, such as newspapers or magazines, that must prevent defamatory statements from appearing on their pages. 

While this law has been amended since then, Section 230 still governs how internet companies have no responsibility for the illegal things posted on their website and have no liability for the threats.  This is unique to the tech industry.  According to a Radio Lab program on this topic, it makes the tech industry “untouchable” from a legal perspective.

Yet, when Section 230 was passed, the Internet was in its infancy.  While this law has made the growth of the Internet possible since it protects them from civil suits from aggrieved victims, it wasn’t always this way.

In 1992, when the Internet was in its infancy, I was the board leader for the Prodigy Money Talk bulletin board.  Prodigy, a billion-dollar partnership between IBM, Sears, and CBS, was one of the largest early bulletin boards (along with AOL) that allowed anyone with an internet modem connection to post information on its bulletin boards.

At the time, as board leader for the Prodigy Money Talk bulletin board, I worked alone.  I had the software provided by Prodigy in my house in Glencoe, Illinois, to create new pages and investment topics (options, futures, small-cap stocks, macroeconomics, trading tips, technical analysis, etc.) at will.  While I appointed others with expertise in a topic to get a free membership and post notes, only I had the software to remove offensive notes.

At its peak during my tenure, the Money Talk board had about 30,000 notes posted per month.  The notes were posted 24 hours a day, seven days a week, from members worldwide.  As board leader, receiving a small monthly salary and a bonus based on the number of notes posted monthly, Prodigy considered me responsible for the board’s content.

One night in 1995, while walking my miniature poodle, a man approached me on the street, handed me an envelope, and told me to have a nice night.  When I entered the house, I saw that it was a subpoena to appear in  Federal court in Chicago to testify at a nearing between a Lond Island, New York, penny stock brokerage firm, Stratton Oakmont, and Prodigy.  The lawsuit contended that the president of Stratton Oakmont was libeled by a Prodigy Money Talk member who posted insulting, inflammatory notes against its president, Daniel Porush.  The suit said Porush “had committed criminal and fraudulent acts” in connection with the initial public offering of Solomon-Page, Ltd., according to the Digital Media Law Project.

As a result, Stratton and Porush sued Prodigy and anonymous defendants in New York state court for defamation.  The lawsuit was filed in New York on May 24, 1995, asking for $100 million in damages.

After arguing the case, both parties settled in July 1995 before the case could go to trial.  But the case also had a massive appeal since the antics of penny stock trading, greed, and the downfall of regulation had great public appeal.  The Stratton Oakmont story was later made into the movie The “Wolf of Wall Street,” starring Leonardo DiCaprio.

Hung Out to Dry

As the leader of the Prodigy Money Talk Board, Prodigy contended that I alone was responsible for the content of the bulletin board.  After going downtown to testify in a videotaped testimony, the Prodigy lawyer told me that if Stratton Oakmont wanted to sue me for the $100 million, it was okay with them.

So, watching the hearing today in which five CEOs of the largest social media companies were asked to testify about their efforts to curtail online child sexual aggression, it is worth noting that accountability for the malicious and lewd posting on social media sites, the current generation of bulletin boards, is still the Wild West almost 30 years after the Stratton Oakmont libel lawsuit.

During that time, the Internet has developed online video, tremendous graphic capabilities, artificial intelligence, and instantaneous messaging capabilities.  However, it still has no accountability for bad people to be prosecuted and for top social media sites to prevent predatory behavior.

The 30 years of development in internet history have been historic.  Internet companies came of age during the neoliberal phase of deregulation. Market forces would control the industry, according to the efficient market hypothesis, even when it was not factually proven.  and while market forces, boosted by private equity, formed the industry, it was not concerned about its social impact.

However, because of the industry’s tremendous profitability, it still does not want to be held accountable when its customers die or suffer from online postings.  Today’s hearing shows the financial benefits of an industry that has never been regulated and how it has shaped society while producing the richest CEOs in the world.

Even the Robber Barons of the 1900s eventually faced the Progressive reformist wave led by Republican Teddy Roosevelt.  That has never happened to the social media industry, so the complaints and victims’ stories accompanying today’s hearing should all be expected collateral damage from an unregulated industry.



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