A Chokehold on the Gatekeepers - Identifying and Protecting Potential
Targets of Governmental Aggression
>> By Lawrence G. Walters
While the industry was bracing for an onslaught of obscenity
prosecutions against adult Websites, government officials were one step
ahead, plotting actions against the industry’s Gatekeepers: the billing
processors, AVSes, hosts, ISPs, and merchant banks. Law enforcement
departments have a budget too: they try to get as much bang for their buck
as the average Webmaster. "How can we shut down a thousand Webmasters for
the price of one prosecution?" they may be asking. It didn’t take them long
to figure out that access to adult Websites is critically dependent on the
permission and continued services of a Website’s hosting company,
third-party billing processor (now called ISPS), Age Verification Service
(AVS), and/or merchant bank.
The online gambling industry recently learned how dependent it was on
the good graces of companies like Citibank, Bank of America, and PayPal,
after those transaction facilitators pulled out of the game, so to speak,
in recent months. While those larger financial institutions have not
completely abandoned the adult Internet industry as of yet, their continued
presence leaves the fate of the industry hanging in the balance. The time
has come to recognize our potential vulnerabilities and develop a new
paradigm when considering the industry’s future relationship with these
Gatekeepers, upon which so much depends.
ISPs/Hosts
The vulnerability of hosts and ISPs has been evident since at least
1998, when (shortly before election time) the Attorney General of New York
filed criminal charges against an ISP located in Buffalo, New York, for
allegedly providing access to child pornography, through its hosted news
groups (G. Mariano, "Congress Moves to Protect ISPs," ZDNET.com, Feb. 14,
2002).
Although the particular company involved chose not to fight the
charges, and ultimately plead guilty and paid a fine, the legal concerns
prompted by such a charge became evident: How can an ISP or a host be
expected to monitor, and potentially censor, all of the images and content
contained on its servers, under the threat of imposition of criminal
sanctions? Section 230 of the Communications Decency Act of 1996 provides
immunity to Internet access providers, but only against civil claims, not
criminal charges. This concern prompted Representative Robert Goodlatte,
R-Va., to introduce the Online Liability Standardization Act of 2002, which
would expand the immunity provided to ISPs, and protect such companies not
only against civil lawsuits, but also against criminal charges (H.R. 3716.)
Thus far, the proposed legislation has not yet become law, but has
languished in the Subcommittee on Crime after being referred there in March
of 2002. The Digital Millennium Copyright Act ("DMCA"), also provides a
form of safe-harbor, but only if the dictates of the law are meticulously
followed including prompt removal of infringing materials after notice, and
proper designation of an agent for receipt of DMCA notices (Title 17,
U.S.C.§101, et. seq.).
Despite these various protections provided to hosts and ISPs, the
government knows that these companies are highly vulnerable to the
slightest threat or intimidation concerning criminal liability for hosted
content. Under current law, a host can be held coequally responsible for
content violations under conspiracy or aiding and abetting theories (18
U.S.C. §2.). Just look at the recent threats made by the Pennsylvania
Attorney General against WorldCom, under a questionable Pennsylvania law
that requires ISPs to block any Website containing child pornography within
five business days after being notified by the Attorney General (L. N.
Bowman & D. McCullagh, "WorldCom Blocks Access to Child Porn," CNET News,
Sept. 23, 2002). Although WorldCom required the Attorney General to obtain
a court order enforcing the block request, WorldCom did not put up much of
a fight, and immediately complied upon issuance of the order. Like federal
obscenity law, the Pennsylvania law imposed criminal sanctions against ISPs
who fail to remove the content at issue.
One criminal charge against a large adult industry host may cause the
entire hosting industry to rethink its willingness to host any adult
content. Talk about bang for your buck. Like it or not, adult Webmasters
continue to exist at the pleasure of the hosting companies and ISPs, along
with their legal departments. While the hosting industry as a whole has
found itself in a considerable slump, and hosts may be somewhat dependant
upon the revenue generated from their adult clients, it is the these
companies that can ultimately flip the switch and cause the industry to go
dark.
Age Verification Systems
As we know, the hosts keep the lights on, but the AVSes keep the kids
out and the cash flowing. Large age verification companies have blossomed
as a result of state and federal legislation requiring adult Webmasters to
prevent access by children, along with a moral decision by many
participants in the industry to keep children away from adult content. Such
a decision may not be entirely the result of self-interest, since obscenity
charges are much easier to defend if First Amendment lawyers can argue that
the material was produced by adults, for adults - and that no children were
involved, either as participants or audience.
The industry can only assume that obscenity prosecutors across the
country rejoiced upon reading the decision in Perfect 10 Inc. v. Cybernet
Ventures Inc. , 213 F.Supp.2d 1146 (C.D. Cal. 2002), recognizing the
potential for broad, vicarious, and contributory liability against AVSes
for copyright infringement. Although copyright violations may also
constitute a criminal offense, and can even be prosecuted under RICO
theories, the government probably sees this decision as supporting
authority for the proposition of expanded criminal liability for Internet
Gatekeepers in general. The government will likely argue that the policies
enunciated by the court in the Perfect 10 case are readily transferable to
other criminal theories, such as conspiracy and aiding and abetting. While
this author would strenuously argue to the contrary, particularly where
issues such as obscenity or child pornography are involved, the scope of
liability that can be imposed on an AVS is now an extremely open question.
Unfortunately, the net effect of the unsettled state of any law in this
area benefits the prosecution. All it has to do is cast a wide net over all
the alleged co-conspirators, and let them sort out who should or should not
be held criminally liable for content which they have all touched in some
manner.
The fact that all of the Gatekeepers benefit either directly or
indirectly from the content, and the Webmaster’s business activities, may
be seen as enough to justify filing charges initially, thus dragging the
AVS through the legal process. In legal terms, this is known as
establishing a prima facie case: The government is not required to prove
criminal responsibility beyond a reasonable doubt in order to file formal
criminal charges against a company or individual; it only needs to make
sufficient factual allegations to the effect that a law is being broken,
and that somebody broke it. Even less is required for the government to put
a Gatekeeper "on notice" through some sort of threatening legal
correspondence. This tactic has historically been a favorite trick of
government officials seeking to achieve voluntary self-censorship,
otherwise known as the "chilling effect."
When Internet communications’ Gatekeepers are involved, the chilling
effect can be dramatic and instantaneous. News of a potential governmental
threat against an AVS, host, or billing company spreads like wildfire
through online channels such as message boards, chatrooms and e-mail. It is
conceivable that, upon demand by some government official, a particular
Website or type of content could be blacklisted and removed from virtually
every host, processor, and AVS on the Internet in the matter of days. Such
actions constitute a textbook prior restraint in violation of the First
Amendment.
Third-Party Processors and Merchant Banks
Financial institutions have historically stood shoulder-to-shoulder
with the government on most issues, given the fact that the financial
industry is highly regulated, much like insurance companies. In other
words, the financial industry depends heavily on the government for its
continued viability and profitability. Accordingly, financial institutions
such as VISA and MasterCard are loath to engage in any activity that might
be seen as illegal, shady, or that the government dislikes. Such is likely
the reason why most of the larger financial institutions pulled out of the
online gaming industry after the General Accounting Office reported that
this industry was often connected with money laundering activities.
Third-party billing processors (now known as ISPSs under the new VISA
regulations), occupy a unique position in the financial world, however.
Clearly these companies serve two diverse masters, one being the
conservative merchant banking world, and the other being the fiercely
independent and marginalized adult Internet industry. Both must be kept
happy despite oftentimes competing interests. However, as the industry has
seen most glaringly in recent months, when push comes to shove, the ISPSs
will walk in lockstep with the merchant banks.
While the adult industry presumably makes up the majority of the
online clientele for the billing processors, other mainstream target
markets exist. If the adult Internet industry becomes too hot to handle,
the processors have other options, although none nearly as profitable. The
same cannot be said about the flipside of the transaction - the merchant
banks. VISA and MasterCard are the only legitimate options for the ISPSs.
If they pull out, the billing companies are out of business. While the
PayPal option should be mentioned in passing, its acceptance amongst adult
Webmasters and their clients is not widespread by any means, although it is
growing. In the end, the ISPSs must walk a tightrope of competing
interests, but their loyalty must remain with the merchant banks, as a
matter of survival. This becomes a scary proposition when one considers the
historical attitude that the traditional banking industry has had towards
any form of controversial business transactions. The banking industry is
extremely risk-adverse and equally image conscious. All those bank-owned
skyscrapers did not get built by investing in risky, underground business
opportunities. Should the existing Administration declare that typical
online adult imagery is now illegal, through the institution of obscenity
prosecutions or other means, the reaction by the merchant banks likely
would be drastic and swift. The third-party billing processors might
quickly receive correspondence from various legal departments describing
the new "policy" concerning future processing for adult Website
transactions. We need not speculate what that new policy might be under the
circumstances described.
Michigan Attorney General Jennifer Granholm knew who to target in
order to rid the Internet of alleged child pornography: the billing
processors. She realized that, without the processors’ facilitating the
financial transactions, the sites would have no monetary incentive to
continue operation no matter how insulated from prosecution they might be.
Historically, the government has followed the money when it comes to
prosecuting vice crimes including adult entertainment and obscenity. A
generation ago, tangible erotic fare was wrapped in brown paper bags and
exchanged for cold hard cash. Following the money was substantially more
difficult in the underground world of early erotica given the lack of,
shall we say, "business formalities." Although the Internet has allowed
adult materials to be distributed with greater speed and precision, online
transactions inherently generate specific financial records that are
difficult if not impossible to avoid. Thus, in some ways, the strengths of
doing business on the Internet are also its weaknesses. Law enforcement
officials know precisely where to go to restrict the flow of money
associated with specific online erotica, and very little investigative work
is required. Gone are the days when the government was required to conduct
months of undercover surveillance to trace the flow of greenbacks in those
plain brown bags. Now, the industry’s billing processors and merchant banks
keep all the necessary records in convenient computer folders, available
for inspection upon issuance of a simple investigative subpoena.
The Chokehold
The Gatekeepers must straddle a unique line between mainstream
business and the adult Internet industry. Some companies tend to lean one
way or the other in their loyalties, but all are extremely susceptible to
government pressure, threats and intimidation. Webmasters have as much to
fear from the voluntary actions of these Gatekeepers as they do from
government prosecution. While much can still be done by the Webmasters in
the industry to achieve some semblance of legal compliance, attention
simply must be paid to the relationships with, and vulnerability of, the
Gatekeepers.
None of the vulnerabilities identified in this article come as a
surprise to law enforcement. Prosecutors have historically focused on those
in ultimate control of profitability, regardless of the crime or the
industry involved. Evidence that this strategy has already been implemented
can be gleaned from the Michigan warning letters, the WorldCom court order,
and the manner in which the federal government has prosecuted online child
pornography.
The Solutions
The solutions to this problem are by no means simple. Competition
amongst the Gatekeepers helps to alleviate these problems to a certain
extent since upstart competitors may be willing to take risks, or oppose
government overreaching more so than the Gatekeepers who are entrenched
with mainstream concerns.
Solidarity and support is also part of the solution: Webmasters must
communicate to the various Gatekeepers that they are willing to stand
behind their content and their business activities. The first time that a
Gatekeeper is the subject of a criminal threat or prosecution, the rest of
the industry cannot turn their backs and rejoice that they have dodged the
bullet, for the time being. The Gatekeepers must know that they can turn to
the webmasters and the content producers for help and assistance with their
defense. Remember, again, the Gatekeepers have two places to turn in a
crisis, and they must be given a reason to stand behind their clients when
the going gets tough.
The end user also plays a part in the solution. Choking off the supply
of available erotica by attacking the Gatekeepers may not play well with a
significant percentage of red-blooded Americans who have a healthy interest
in sex. While the government might be able politically to pull off a
prosecution against a particularly extreme Website or content type, any
government action that significantly reduces the flow of popular erotica to
the end user could result in a popular backlash. Even pro-law enforcement
Americans who rally around the flag during threats to national security or
horrific sniper attacks, take a dim view of government regulation of
speech. Thus, while a stray prosecution here or there against borderline
content may not ruffle our collective feathers much, the kind of
prosecutorial success that can result from coordinated threats against the
Gatekeepers may prove to be the undoing of those officials responsible for
the success.
Consequently, those in power must proceed with caution when seeking to
exploit the adult Internet industry’s vulnerabilities. Fleeting success
today, while attractive in the short term, may result in long-term failure.
It should also not be forgotten that the Gatekeepers’ control of
significant online traffic puts them in a position to influence many minds
should a political battle ensue. Time will tell whether they will exploit
this power to the benefit of the industry, or whether their vulnerabilities
will be the industry’s undoing.
Lawrence G. Walters, Esq., is a partner with the law firm of Weston, Garrou
& DeWitt, which maintains offices in Orlando, Los Angeles, and San Diego.
Mr. Walters represents clients involved in all aspects of adult media. The
firm handles First Amendment cases nationwide, and has been involved in
significant Free Speech litigation before the United States Supreme Court.
All statements made in the above article are matters of opinion only, and
should not be considered legal advice. Please consult your own attorney on
specific legal matters. You can reach Lawrence Walters at
[EMAIL PROTECTED], www.firstamendment.com, or AOL Screen Name:
"Webattorney."
http://www.avnonline.com/issues/200301/legal/legal_0103_002.shtml
