Judge Silberman's Straight Talk on New York Times v. Sullivan and One-Sided Media

On April 8, Free State Foundation President Randolph May posted a blog bout Justice Clarence Thomas's concurring statement in Biden v. Knight First Amendment Institute at Columbia University. Justice Thomas's concurring statement is both intriguing and provocative. For another intriguing and provocative judicial opinion, look no further than Senior Judge Laurance Silberman's dissent in Tah v. Global Witness Publishing, Inc. 

 

The D.C. Circuit's decision in Tah was released on March 19. The court affirmed a dismissal of a defamation case for failing to plausibly allege actual malice. Senior Judge Silberman's partial dissent gets really interesting in Part III, in which he calls into question the legal standard for proving defamation of public figures that was created by the Supreme Court in New York Times v. Sullivan (1969): 

I am prompted to urge the overruling of New York Times v. Sullivan. Justice Thomas has already persuasively demonstrated that New York Times was a policy-driven decision masquerading as constitutional law. See McKee v. Cosby, 139 S. Ct. 675 (2019) (Thomas, J., concurring in denial of certiorari). The holding has no relation to the text, history, or structure of the Constitution, and it baldly constitutionalized an area of law refined over centuries of common law adjudication. See also Gertz v. Robert Welch, Inc., 418 U.S. 323, 380–88 (1974) (White, J., dissenting). As with the rest of the opinion, the actual malice requirement was simply cut from whole cloth. New York Times should be overruled on these grounds alone.  

The foregoing paragraph is only the warm-up, as Senior Judge Silberman has much more to say about the Supreme Court making up new legal standards and leveraging its institutional legitimacy to resist any subsequent careful re-evaluation of its precedents. 

 

Senior Judge Silberman's dissent gets more interesting still when he identifies the effects of New York Times v. Sullivan in increasing the power of one-sided professional mass media organizations. Here is his first paragraph dealing with those effects: 

As the case has subsequently been interpreted, it allows the press to cast false aspersions on public figures with near impunity. It would be one thing if this were a two-sided phenomenon. Cf. New York Times, 376 U.S. at 305 (Goldberg, J., concurring) (reasoning that the press will publish the responses of public officials to reports or accusations). But seeSuzanne Garment, The Culture of Mistrust in American Politics 74–75, 81–82 (1992) (noting that the press more often manufactures scandals involving political conservatives). The increased power of the press is so dangerous today because we are very close to one-party control of these institutions. Our court was once concerned about the institutional consolidation of the press leading to a "bland and homogenous" marketplace of ideas. See Hale v. FCC, 425 F.2d 556, 562 (D.C. Cir. 1970) (Tamm, J., concurring). It turns out that ideological consolidation of the press (helped along by economic consolidation) is the far greater threat. 

No blog summary can do justice to Senior Judge Silberman's dissent in Tah. Part III of his dissent deserves a full reading – and some pondering. 

Uber's New Feature Likely Caused de Blasio to Drop Bill

On Wednesday, July 22, New York City Mayor Bill de Blasio dropped his proposed legislation which would have slowed the growth of Uber in NYC by limiting the number of drivers it could add over the next year, according to a New York Times article. This is very good news for the NYC economy. Prior to the bill’s cancellation, according to a TechCrunch article, David Plouffe, Chief Advisor for Uber, said the regulation would “cost 10,000 jobs, hurt underserved areas, and make wait times for Uber cars skyrocket.”

Mayor de Blasio likely dropped the proposed legislation due to an outcry from consumers and drivers, which Uber helped enable through use of its application. Even a couple famous celebrities jumped in on the action.

Proposed bill will result in longer wait times, higher prices, and less reliable service for riders. #deBlasioUber pic.twitter.com/5R2ToNhEuY

— ashton kutcher (@aplusk) July 21, 2015

.@BilldeBlasio Why do you want to return to days when only those in Midtown & Lower Manhattan could get a ride? #UberMovesNYC

— Kate Upton (@KateUpton) July 22, 2015

In response to the bill, Uber added a so-called “de Blasio’s Uber” feature to its application for over 2 million NYC users. When NYC users clicked on this feature it showed either no available drivers or a wait time of 25 minutes, representing how Mayor de Blasio’s proposed legislation would have severely impacted the market. (Uber rarely has a wait time over 5 minutes in populated cities.)

Then, instead of contacting a driver, the feature prompted an email to Mayor de Blasio and NYC’s City Council Members with an automatic statement opposing the bill. 

Free State Foundation Scholars submitted comments to the FTC prior to its June 9 workshop, warning against burdensome “sharing economy” regulations that did not serve legitimate health and safety objectives. FSF Scholars stressed that policymakers should focus on how the sharing economy has brought consumers efficiency, affordability, and convenience. So, it is good that consumers and drivers stood up against Mayor de Blasio’s protectionist legislation that would have inhibited Uber’s growth.

This example may dampen efforts by government officials in this country and around the world to restrict innovative new sharing economy businesses that benefit consumers by creating more competition and choice.

Airbnb Is Important for European Tourism

In July, Free State Foundation President Randolph May and I published a paper regarding the positive impact the sharing economy has on consumers. Despite this, many state and local governments still consider banning or at least restricting the services provided by leading sharing economy companies like Airbnb.

Airbnb is an application that connects hosts who are willing to share their living space with guests who are looking for a place to stay. For example, Airbnb lowers the cost of going on vacation and incentivizes tourism. Not only can vacationers often find cheaper alternatives than hotels and/or cleaner alternatives than hostels, they can also capitalize off of the service by sharing their living space and earning some extra income while they are gone.

Airbnb may be especially helpful in Europe, where more than half of its business occurs according to a New York Times article. Airbnb’s service is a great complement to the European Union’s (EU) free migration policy. For individuals who want to travel throughout many European countries, staying at someone’s house or apartment is good way to experience the local culture.

In our paper, we specifically discussed Airbnb’s regulatory battle in New York. But unfortunately, Airbnb is not just being regulated in the United States; it’s receiving fights from European governments as well. But the policies are not consistent throughout the continent. For example, Berlin and Barcelona have banned Airbnb’s service, while Paris and Amsterdam have encouraged more sharing.

Airbnb faces regulatory hurdles because policymakers see the company as a threat to local businesses. But as we described in our paper:

“It always harms consumers when public policymakers attempt to ‘level the playing field’ by subjecting entities to regulatory restrictions that are not needed. The proper way to respond to ‘level the playing field’ claims is to remove unnecessary regulations wherever they apply, not to expand them to new entities.”

But even legitimate concerns for regulating Airbnb, such as consumer protections, should be dismissed because markets have self-regulating mechanisms:

“If purveyors of sharing applications engage in harmful, unhealthy, or unsafe activities, competition is probably the most important regulatory mechanism to address any real problems. In competitive markets, poor consumer satisfaction generally means that a company will lose market share, or even fall out of the market. If a company is not operating safely or if it is putting its users in unhealthy conditions, a competitive market allows for unsatisfied consumers to choose alternatives.”

And the market is quite competitive. Airbnb, HouseTrip, VRBO and Roomorama all offer similar services in Europe.  

Since many EU countries are small and contiguous, inconsistent policies on sharing services, like the ones offered by Airbnb, add significant costs to individuals who want to travel freely throughout the EU. Whether the traveler avoids cities like Berlin and Barcelona or visits them but is forced to pay more money for a traditional hotel, policies restricting or banning sharing services in European cities make “free” migration much more costly.

Propelling the Internet Backwards in Time

New York Times columnist Eduardo Porter's piece, "Keeping the Internet Neutral," just as easily could have been – should have been -- titled "Propelling the Internet Backwards in Time."

At bottom, Mr. Porter's piece is an argument for public utility-type regulation of private broadband Internet providers. Such regulation would be imposed in the name of protecting network neutrality to ensure all content is required "to travel through the Internet on equal terms."

This may sound appealing, at least superficially. But, in fact, the regime that Mr. Porter prefers likely would suppress investment and innovation in the Internet ecosystem.

Why does Mr. Porter insist all Internet traffic should be treated equally? Primarily, it seems, to protect the preferred business model of Netflix, which Mr. Porter describes as an "online video powerhouse." As Scott Cleland recently pointed out, Netflix's annual revenues are $3.36 billion, with gross profits of $1.16 billion.

I understand why Netflix is conducting what Mr. Porter describes as a "budding lobbying effort" trying to ensure that Internet service providers, like Verizon, Comcast, AT&T, and Time Warner Cable, must continue to carry Netflix's video streaming traffic -- which amounts to approximately 33% of all peak hour Internet traffic -- on the most favorable terms possible. For now, Netflix is protected by the FCC's recently adopted net neutrality regulations from having to pay any charges for delivering its videos over the Internet service providers' last-mile facilities. Instead, Netflix simply rides free "on top of" the broadband networks that Internet providers have constructed over the past decade by investing over $350 billion of private capital.

Constructed with no government funding, government guarantees, or government bail-outs.

It’s clear why Netflix is lobbying to continue paying as little as possible for using the Internet providers' facilities. But I fail to understand why the Times’ Mr. Porter doesn't appreciate why Netflix's effort should not succeed, or to put the matter more broadly, why net neutrality regulation is not sound public policy.

In essence, Mr. Porter wants is to regulate today's Internet providers in the same way that Ma Bell was regulated as a monopoly before its pre-1984 breakup. Subject to public utility-like regulation, Ma Bell was not allowed to discriminate among users of its network facilities, and its rates were regulated.

Of course, the marketplace environment in which Internet providers operate today is much different. Granted, the market is not as competitive as the proverbial wheat market – never will be in light of the high fixed costs of building and maintaining multi-billion networks. But it is workably competitive. Cable and satellite operators, and wireless and wireline companies, compete to provide broadband services, including video services that are the focus of Mr. Porter's piece. These services may not be perfect substitutes for one another. They have different capabilities, features, and costs characteristics, which, by the way, are by no means static. They are constantly evolving in response to technological developments, changing consumer demands, and experimentation with different business models.

In the name of ensuring neutrality, Mr. Porter's vision likely will lead to stasis, or worse, even backwardness. This is because, by design, neutrality mandates inhibit market dynamism, which depends upon the freedom to experiment with new business models that differentiate among consumers with distinct demands and needs. And it is this market dynamism that leads to more innovation in products and services and more investment in new facilities.

In his January 2011 Wall Street Journal op-ed, "Towards a 21^st Century Regulatory System," President Obama at least acknowledged that, when regulations get out of balance, they place "unreasonable burdens on business – burdens that have stifled innovation and which have had a chilling effect on growth and jobs." In contrast, Mr. Porter doesn't even nod in the direction of accepting that net neutrality regulation imposes costs that should be considered.

Instead, he retreats into a backwards-looking time warp.

For example, Mr. Porter says, "[i]n the era of the dial-up Internet, [government regulation] ensured that phone companies allowed rival Internet service providers to reach their customers." I'm surprised he didn't go on to repeat the old canard that during the dial-up era there were 6000 Internet service providers! Of course, if ever there were 6000 – or 4000 or 2000 -- dial-up ISPs, everyone knows these resellers offered "plain vanilla" services. These so-called "Internet in a Box" providers existed only at the sufferance of government-enforced “open access” mandates requiring facilities-based providers to share their networks at regulated rates.

Here's the most fundamental point Mr. Porter fails to appreciate: It was not until the FCC abandoned the "open access" sharing mandates after the turn of the century that major Internet service providers began to invest billions dollars to build out today's high-capacity, high-speed broadband networks. Once the facilities-sharing mandates were repealed, almost all of the 6000 resellers disappeared, while actual investment spurted.

Does Mr. Porter really think Americans want to return to last century's dial-up era for the sake of artificially propping up so-called "rivals"?  I don't think so.

Immediately following his wistful invocation of the dial-up era, Mr. Porter says, "Congress might remember that government regulation was crucial for the development of the Internet we know today." It is true that it was the government – not Al Gore – that "invented" the Internet and got it up and running. But by the 90s, there was widespread agreement the Internet should be privatized, and the Clinton Administration played a central role in implementing this privatization policy. The Clinton Administration's "Framework for Global Electronic Commerce," issued in 1997, stated:

Though government played a role in financing the initial development of the Internet, its expansion has been driven primarily by the private sector. For electronic commerce to flourish, the private sector must continue to lead. Innovation, expanded services, broader participation, and lower prices will arise in a market-driven arena, not in an environment that operates as a regulated industry. Accordingly, governments should encourage industry self-regulation wherever appropriate and support the efforts of private sector organizations to develop mechanisms to facilitate the successful operation of the Internet.

When advocates implored the FCC in the late '90s to impose on cable companies the same "open access" mandates Mr. Porter now advocates, Clinton Administration FCC Chairman William Kennard stated he refused "to go to the telephone world, a world that we are trying to deregulate and just pick up this whole morass of regulation and dump it wholesale on the cable pipe. That is not good for America."

As long as there are opportunities for companies like Netflix to lobby in the name of "open access" or "neutrality" or "unbundled networks" or "equal access" – superficially appealing slogans all -- they will do so. They will fight to preserve special regulatory protections that allow them to ride on top of the networks of others under favored financial terms.

But they should not prevail arguing for such a backwards-looking approach. The net neutrality regime adopted by the FCC in 2010 is harmful enough without introducing further regulatory micro-management.

Mr. Porter may wish to propel the Internet backwards to the dial-up era, but we must hope the nation's policymakers don’t agree. If they do, to steal a line from former FCC Chairman William Kennard: "That is not good for America."