Pols to Ad Networks: Pretend We Passed SOPA, and Never Mind About Violating Antitrust Law

By Mitch Stoltz

A group of United States Senators and Representatives is asking Internet advertising networks to create a blacklist of alleged "piracy sites" and refuse to serve ads to those sites. If this idea sounds familiar, that's probably because it was an integral part of the infamous Stop Online Piracy Act, or SOPA, legislation that was stopped in its tracks two years ago after a massive protest by Internet users.

It's disturbing that members of Congress are pressuring ad networks to follow a law that Congress didn’t pass, and probably never will. But it's downright shocking for them to ask ad networks that compete with one another to agree amongst themselves that they won’t do business with certain websites. That sounds a lot like a “concerted refusal to deal” - a classic violation of antitrust law.

The letters came from Representatives Bob Goodlatte and Adam Schiff, and Senators Sheldon Whitehouse and Orrin Hatch. They praise the ad networks for issuing several best practices statements, which called for "commercially reasonable" methods to avoid placing ads on "rogue sites." Those best practice statements were part of a larger push by big entertainment companies, their friends in Congress, and the White House "IP Czar" to coax the Internet's gatekeepers into "voluntary agreements" for making sites disappear from the Internet when Big Content wanted them gone.

The best practices statements by the ad networks and payment companies only promised to use their best individual efforts, but it seems those commitments weren't enough to satisfy the four members of Congress. Their letter claims that "best practices are useful, but greater specificity is needed around preventative measures." The legislators want "a commitment to use actionable and freely updated data, from reliable sources, concerning piracy sites." They want the networks to "prevent the appearance of ads on online piracy sites" based on that data - in other words, to create a blacklist of sites that won't be able to earn revenue by displaying advertising.

Letting commercial companies with their own competitive motivations decide which sites are "rogue" or "pirate" sites is a recipe for abuse. It means that site owners who comply with copyright law could still have their sources of revenue cut off when a company who might be a competitor asks for it. The legislators' letter doesn't define "online piracy sites," but most of the definitions we've seen lately focus on the number of takedown requests a site has received from copyright holders, or the number of requests sent to search engines about the site. Since just a few companies send out a large portion of the takedown requests, those companies would effectively have the power to control who gets deemed a "piracy site."

As a federal law, this scheme would have created serious First Amendment and due process problems. As a private agreement among competing ad networks, it could raise other legal problems. Under the Sherman Antitrust Act, companies that compete with each other aren't allowed to make a pact amongst themselves about who they will refuse to do business with, especially if the purpose of the pact is to squelch competition or punish a rival. It's called a "group boycott" or "concerted refusal to deal," and it can lead to big-money lawsuits and years of trouble. In some cases, groups of competitors sharing a list of companies that they deem to be bad actors, with a wink-wink understanding that no one in the group should do business with those companies, was deemed a violation of the Sherman Act1.

Claiming that an industry-wide refusal to deal is justified by "fighting piracy" doesn't necessarily avoid an antitrust jam. In 2003, the Motion Picture Association of America decided that its members, major movie studios who compete with one another, would no longer send pre-release "screener" copies of films to members of awards committees like the Motion Picture Academy. According to the MPAA, the group boycott of awards committees was needed to stop infringement of pre-release movies. But the group ban put smaller studios at a huge disadvantage in getting award nominations and votes. In just two months, a court decided that the MPAA's screener ban was likely illegal, and that loss may have precipitated MPAA head Jack Valenti's retirement a few months later.

Certainly, there are ways that the Internet advertising networks can cut off ad revenue to truly bad actors without running afoul of the antitrust laws. But the legislators' helpful suggestion that networks "work to bring the industry together to meet this common . . . goal" will raise bright, flashing danger signals in the mind of any corporate legal advisor. Representative Goodlatte et al are inviting the ad networks to take a stroll through a minefield.

• 1. For example, Eastern States Retail Lumber Dealers' Association v. United States, 234 U.S. 600 (1914).