From Contract Law to Online Speech Governance

The Sound of Silence

For years, contract law has been a hidden protagonist in the in the discourse on platform governance. Although it would be hard to doubt that the platform–user relationship is contractual in nature, very few practical conclusions have been drawn from this in practice. The consent a user indicates to a platform’s terms and conditions (ToS), which forms the backbone of this relationship, has usually been on the margins, a purely formal act to access the platform’s infrastructure and submit to its regulatory framework. Admittedly, contract formation in the platform economy is usually almost negligible (limited to merely ticking ‘I accept´ in the ToS box) and hence may not seem to be the most imminent concern for platform regulation. The sound of this silence is especially salient against the backdrop of recent European case law that uses the contractual toolbox to infuse social media ToS with fundamental rights, in particular the freedom of expression. In this way, contract law has produced – somewhat counterintuitively – one of the most telling responses to the key constitutional issue of social media: how to reconcile freedom of expression as a public value with the private nature of social media platforms. The following observations offer a preliminary glimpse into this overlooked and yet surprisingly dynamic pathway of platform regulation.

Terms of Service Review

The trend in question was spearheaded in the EU by the CJEU and the German Federal Court of Justice (Bundesgerichrshof – BGH), with other national legal orders following suit. All of them built on the contractual backdrop of online platforms in order to facilitate protection of individual users (or of clusters of users) vis-à-vis a platform. The bulk of these solutions utilize tools that allow for contracts to be reviewed and for terms that disfavor platform users to be discharged. From the European perspective, review of B2C contracts on the basis of domestic rules implementing the UCTD Directive played the most prominent role. The UCTD Directive introduces a general scheme for reviewing standard (i.e., non-negotiated) terms in consumer agreements. If they violate the standard of good faith and at the same time create ‘a significant imbalance in the parties’ rights and obligations’ to consumers’ detriment (Article 3 (1) UCTD), such terms can be declared unenforceable against a consumer. With this scheme, EU law provided a targeted tool for addressing imbalances in the B2C contractual relationship. Besides the UCTD, similar effects can be also achieved, beyond consumer rules, under general instruments in civil law (e.g., invalidation of clauses due to breach of good faith) as well as in common law (e.g., unconscionability) jurisdictions.

The premise that a platform’s ToS form part of a B2C contract did not raise any substantive doubts in the CJEU case law. Long before platform regulation rose to the top the EU digital markets agenda, the 2016 Amazon judgment had already clearly confirmed it. Responding to a preliminary reference on the choice-of-law clause in the Amazon ToS, the Court expressed no doubt that Amazon’s ToS should be subject to review for unfairness under the UCTD, just as the terms of any other pre-formulated consumer contracts would be. Beyond a doubt, the same logic applies to social media platforms. The CJEU clearly confirmed that the liaison between platform and user is based on a consumer contract, and it may lose this feature where the user’s online activity turns ‘predominantly professional’ (Schrems judgment).

The follow-up came down in German case law. In a number of decisions, German courts grappled with claims of individual social media users who deemed a platform (in most instances: Facebook) to have infringed on their rights. In all these disputes, the pivotal point of contention was a ToS clause that vested the platform with various entitlements vis-à-vis the user. Ultimately, German courts of various instances had no doubt that the proper yardstick for reviewing these cases was the unfairness test under §§ 305–310 BGB (which implemented the UCTD). Due to the specific subject matter and the individual rights involved, most of these cases had the potential to be groundbreaking. Indeed, some of them sparked intense academic discussion and proposals for legal reform.

The BGH’s ‘Horizontal Effect’ and Beyond

The first notable stage of this story was the 2018 BGH judgment in what is known as the “digital inheritance” case. The plaintiffs sought access to their late daughter’s Facebook account, which the platform refused to provide, contending that its ToS forbid it. The BGH concurred with the parents’ claim, finding the relevant clause in the ToS unfair (within the meaning of UCTD) and hence granting access to the deceased’s account. Apart from sparking immense interest for its inheritance law implications, the judgment was the first to trace the outline of an approach that subsequent German rulings would develop into a full-fledged pattern. The BGH referred, amongst other reasons for the unfairness of a post-mortem clause in Facebook’s ToS, to the contradiction with the protection of heirs under Article 14 (1) of the German Constitution (Grundgesetz). In this way, the BGH invoked a fundamental right (protection of proprietary interests of heirs) as a benchmark for its assessment of the good faith and reasonableness of a ToS clause for a platform user/consumer.

The cases that followed, which pertained to various kinds of governance of online communities as practiced by online platforms, made this way of thinking even more plain. All these cases build upon the seminal idea, which originated with[10] the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG), that the creation of a space for public discourse entails a higher degree of responsibility for respecting fundamental rights. Although none of these decisions tackled social media directly, their conceptual blueprint was directly adopted in the platform-related cases. Several BGH decisions delved more deeply into platforms’ speech moderation schemes. The court in these decisions made liberal use of fundamental rights – in particular freedom of expression – as a benchmark for review of whether the speech moderation rights, set one-sidedly by platforms in their ToS, met the expected standard of user protection. This approach was voiced, first and foremost, in the 2021 ‘hate speech’ BGH judgments (III ZR 179/20 and III ZR 192/20), two cases in which the BGH addressed the claims of Facebook users who had experienced temporary account suspensions and removals of comments they had left under other users’ posts. In attempting to justify these sanctions, Facebook pointed out that in both cases users had violated the platform’s community standards by using hate speech. According to the BGH, this regulation of speech was contrary to good faith and amounted to an excessive intervention into the users’ freedom of expression. The BGH further pointed out that this right must be balanced with the platform operator’s right to carry out a business activity, which the German constitution equally guarantees. The checklist for reviewing Facebook’s ToS, which the Federal Court of Justice established in this case, therefore consists of three main building blocks: freedom of speech, market liberty, and the interests of platform users as consumers. Hence, despite the seeming simplicity of the question posed by online freedom of speech, resolving it requires balancing a broader and more diverse array of rights that juxtapose the speech- and economy-related layers of the issue.

Soon afterwards, the BGH resorted to similar reasoning in another pair of cases: III ZR 3/21 and III ZR 4/21, with judgments issuing in early 2022. These cases dealt with the Facebook ToS provision (currently no longer in force) that mandated that users use their real names on the platform and banned their hiding behind false names or ‘nicks’. In both cases, the BGH found that blocking a Facebook account for violation of this rule constituted a disproportionate violation of freedom of expression under the Grundgesetz. And a clause that required using one’s own name on Facebook the BGH found to be unfair towards the user because the freedom of expression also guarantees liberty in choosing how one wants to present herself publicly.

Similarly to the earlier cases, the fundamental rights argument was the key criterion for review of a social media site’s ToS. Although the foundational question in the latter judgments was different, in that it concerned not what can be said online but rather how a speaker may present herself, all these problems fit under a common umbrella of freedom of speech as a tenet of consumer interest. Behind this conclusion, however, is a backdrop as thought-provoking as the Court’s reasoning itself.

Freedom of Speech as a Consumer Service

The application of the UCTD-based unfairness test by the BGH presupposed that the clauses it was scrutinizing shared two parallel features: that they arose in a business-to-consumer contract; and that they directly addressed the interests of consumers. Although the reason for the former assumption is clear, the reason for the latter assumption, which the BGH subsumes without any substantial explanation, is less apparent, especially given the conceptual framework of consumer law up to now. The tacit assumption of consumer protection so far has been its clear economic vector. Under this view (which the UCTD shares), the consumer has been protected from excessive prices, substandard goods and services, market barriers and other factors that threaten her interests in the market and can be expressed in pecuniary terms. The emergence of social media opened a new perspective for understanding consumption patterns in modern society.

With social media, the relationship between the user or consumer and the business is outside the classical concept of consumption. In exchange for their personal data and attention, consumers receive access to a forum of social interactions built by a platform. Such “infrastructure of expression” encompasses not only IT architecture but also the rules contained in a ToS document and accompanying internal documents. This way, freedom of speech shifts from a political value to a consumer service. It follows that consumers may legitimately expect this service to be of a certain quality, encompassing not only a degree of safety vis-à-vis other users on a platform (i.e., protection from hate speech, defamation and certain types of disinformation) but also freedom from excessive interventions by a platform in the role of speech regulator. This issue was the cornerstone of the four BGH judgments, mentioned earlier, that put limits on platforms’ private governance of speech. As the court implicitly assumed, the degree of individual freedom in choosing ‘what’ and ‘how’ to speak in the platform’s forum is a key feature of the ‘speech service’ that consumers could expect from a platform. Although the idea of Facebook being an infrastructure for expression as a consumer commodity (and that platform is an infrastructure for it) clearly looms in the background of the Facebook ToS review. The same intuition also emerges in an earlier decision of the Higher Regional Court (Oberlandesgericht) in Munich that referred to ‘Facebook services’ under the platform-user contract. This epitomizes an ongoing shift in how the legal nature of social media is perceived, from mere networks for social interaction to contract-based consumer commodities.

The DSA Revolution?

This bottom-up review of platform governance via ToS has recently been confronted with a momentous, top-down regulatory attempt: the Digital Services Act. Parts of the two approaches diverge; the mindset differs. Judicial review of unfair terms caters to decentralized platform governance based on case-by-case (hence possibly less coherent) analyses with the individual consumer’s interest in mind. The DSA, on the other hand, adopts a more holistic perspective. It endeavors to embrace all online intermediaries (not only social media) within a uniform set of standards and rules and possibly within consolidated enforcement schemes.

How might these two mechanisms interact after the DSA comes into force? Will the DSA’s targeted rules on private regulation by platforms and online content moderation replace the UCTD-based review of ToS? The simplest and most convincing answer is: Hardly at all. Although the DSA clearly overlaps[20] with several elements of existing consumer law (see, e.g., Article 14 on standard terms), it mostly steers clear of any direct liaisons with consumer protection. In this way, the advent of the DSA shunts online market governance into two silos: content moderation under platform-specific rules on one hand and the older consumer toolbox on the other. Although this bifurcation provides a broader array of tools to protect individuals online, it is not complimented with any coordination scheme. The outcome is that the same issue (e.g., the permissible standard for suspending a user account) may be framed differently by courts performing the unfairness review as opposed to digital market regulators appointed under the DSA. Such incongruences may occur at both the EU and the domestic levels as well as between them. The chances of courts and regulators actually coordinating their approaches at these levels seem rather slim. Consequently, one of the main purposes of the DSA venture – unifying European platform governance and restraining jurisdiction-shopping by tech companies – may be corrupted.

Quite ironically, it was in contract law – which so far has been marginalized in the discourse about platforms – that some of the earliest responses to the social media issue were developed. This pathway of reviewing the content of contracts had been overlooked as a tool of platform regulation. It turns out to be more powerful than might have been expected: not only does it allow the introduction of fundamental rights and other political values into the platform–user relationship, it also provides users themselves with greater agency. The contract law toolbox – with consumer protection in the foreground – brings fundamental rights standards to granular relationships between non-state entities and allows users to invoke them directly vis-à-vis a platform. A similar result would hardly be possible horizontally without the channel of contract law. Infusing social media practices with freedom of speech and other fundamental rights would instead require top-down intervention by public enforcers. And in many instances this would be less expeditious and less sensitive to atypical circumstances than contract law measures.

In Europe, it was thus – rather unsurprisingly – the consumer component of contract law that turned out to be particularly successful in ‘regulating the regulators’ of online speech. The assumption that use of social media constitutes consumption per se opens broad avenues for individuals to seek protection from a ‘speech infrastructure’ that is qualitatively degraded by platforms. With the growing awareness of online speech moderation and the developing body of EU and domestic rules, the consumer toolbox is likely to be intensely explored in the foreseeable future.