Insider's View: How Grandstanding State Attorneys General Make Life Miserable For Law Abiding Tech Companies

Politics

from the it's-a-scam dept

For years, we’ve pointed out how various state attorneys general seem to focus much more on grandstanding against certain companies, rather than actually helping in certain situations. What was really amazing was the incredibly clear pattern every time it happened. It would involve an attorney general who was running for higher office, going to the press and threatening some company, even if there was no legal basis whatsoever for the threat. It’s as if every AG running for higher office has taken a page out of the playbook of Eliot Spitzer who used this strategy for years to get him headlines that took him right into the NY governor’s mansion (which, of course, he then left due to a different sort of headline a few years later…).

Among the current crop of AGs playing this game, there’s been Pennsylvania’s Tom Corbett (running for governor) who subpoenaed Twitter to uncover some anonymous critics. There’s South Carolina’s Henry McMaster (who tried to run for governor) threatening Craigslist management with criminal charges. But the two biggest users of this playbook have to be NY’s Andrew Cuomo (running for governor) — who has targeted social networks and ISPs for not censoring content — despite no legal obligation to do so, and Connecticut’s Richard Blumenthal (running for Senate) who has grandstanded with the best of them in going after tons of tech companies with almost no legal basis at all.

So, of course, I wasn’t surprised when I heard, back in February, that Kentucky’s Attorney General, Jack Conway, had started threatening local news/community site Topix. After all, Conway is running for the US Senate. Still, once Conway started the ball rolling, Blumenthal actually stepped in and led the ongoing gameplan. At issue? The company let people pay a small fee to “expedite” the process of reviewing comments for abuse. There is absolutely nothing illegal about this. A website has no legal obligation to monitor its user-generated content, and it doesn’t lose its safe harbor protections if it does monitor such content. So I was a bit surprised to see Topix settle the charges and change its policies.

Thankfully, Topix’s CEO Chris Tolles has written up a detailed post at TechCrunch, that is a nice behind the scenes account of how the whole thing went down, and what an incredible scam it is. It starts out, of course, with an attorney general (in this case Conway) going straight to the press, rather than to the company:

Through this press release, which accused us of requiring payment to review abusive posts, I discovered that the Kentucky Attorney General had allegedly sent a letter asking me to provide information regarding our terms of service and policies around payment for expediting reviews. (The letter to which the press release referred was put in the US Mail and post marked five days after this incident.)

Tolles tried to be totally upfront and open with the various attorneys general who jumped onto the bandwagon (23 in all at the time), explaining to them exactly how Topix worked, how they reviewed comments, why they did things the way they did — knowing full well that nothing Topix did broke the law. How did that work out? Once again, the AGs went to the press and used the info he had given them (again, which showed how what they were doing was legal) to grandstand against Topix:

So, after opening the kimono and giving these guys a whole lot of info on how we ran things, how big we were and that we dedicated 20% of our staff on these issues, what was the response. (You could probably see this one coming.)

That’s right. Another press release. This time from 23 states’ Attorney’s General.

This pile-on took much of what we had told them, and turned it against us. We had mentioned that we required three separate people to flag something before we would take action (mainly to prevent individuals from easily spiking things that they didn’t like). That was called out as a particular sin to be cleansed from our site. They also asked us to drop the priority review program in its entirety, drop the time it takes us to review posts from 7 days to 3 and “immediately revamp our AI technology to block more violative posts” amongst other things.

Eventually, he realized this just wasn’t worth fighting over. The amount of revenue from the prioritized review was minimal, and just not worth the fight. So he gave in to the demands just to make them go away, giving the AGs (now up to 34 of them) another “settlement” headline — even though they never once claimed Topix broke the law:

Pissed off people, not illegality, is the issue to watch — At no time during this process were we accused of breaking any laws. The Attorneys General have interpreted their mandate of consumer protections very broadly, and if a lot of people *think* you are doing something wrong, you are likely to be headed for a problem.

As Tolles notes, this has become such a successful practice for East Coast state AGs to attack California companies, that successful startups need to beware, because it’s going to happen a lot more often, and even when they’ve done nothing illegal, it’s often going to make sense for them to just settle. American politics at work.

Filed Under: chris tolles, grandstanding, jack conway, richard blumenthal
Companies: topix