Online Harms: Could Senior Managers Be Liable?

Social networks and internet companies could be fined if they fail to tackle “online harms” such as terrorist propaganda and child abuse, under government plans.

Their senior managers could also be held liable for breaches, under the Online Harms White Paper – a joint proposal from the Department for Digital, Culture, Media and Sport and the Home Office. (A public consultation on the plans will run for 12 weeks.)

The paper suggests establishing an independent regulator that can write a “code of practice” for social networks and internet companies, and will also possess enforcement powers – including the ability to fine companies (and their executives) if they break the rules.

Key consideration

To ensure their company is prepared for these possible changes, risk managers should consider the following issues:

• Who will the proposal apply to

The proposal would apply to “social networks and internet companies”, but these are very large categories, so much will depend on how they are defined in the legislation. As well as Facebook, Twitter and Google, the rules would apply to messaging services such as Snapchat and cloud storage services. It is unclear, however, whether a company such as Amazon would be counted as a social network or internet company?

Point 29 of the proposal says: “The regulatory framework should apply to companies that allow users to share or discover user-generated content or interact with each other online.” This could potentially include a great many smaller companies that might not anticipate being subject to the rules.

It is also unclear whether there would be a company-size threshold. For example, would the proposal – and possible fines – apply equally to giant social networks and to small organisations such as parents’ message boards?

• How harms will be defined

The plans cover a range of issues that are clearly defined in law, such as spreading terrorist content, child sex abuse, so-called revenge pornography, hate crimes, harassment and the sale of illegal goods. But it also covers harmful behaviour that has a less clear legal definition such as cyber-bullying, trolling and the spread of fake news and disinformation.

• Company procedures

Although social networks and internet companies cannot absolutely prevent harmful material being posted, they will likely be held to account for the extent to which they monitor content and respond speedily (including removing content as appropriate). Companies that may be subject to these proposed rules should review their procedures, including: 1) providing directions to users on what constitutes harmful content; 2) regularly monitoring content; and 3) quickly removing any content considered harmful.

• Individual liability

The consequences for individuals of contravening the act could be severe – a fine or even jail term. Current laws may give a hint as to the approach the legislators may take here. Laws such as the Bribery Act and proposed DPA laws make senior managers liable if they have “connived” or “consented” to the offence. It is possible that the same sort of approach will be taken here – that is, if a senior manager is aware of the publication online of internet harm, they could be prosecuted if they are deemed to have “connived” or “consented” to the harmful material being published.

Insurance implications

Criminal fines are uninsurable as they are against public policy. However, there may be some cover under typical directors and officers liability (D&O) insurance policies for other types of fines and penalties. There is also cover under D&O insurance policies for defence costs that individuals may incur in defending any prosecution for failing to act or prevent harmful material being published.

The criminal act/fraud exclusion in D&O insurance policies will usually only apply upon a final non-appealable adjudication of guilt, which means that defence costs will be paid up until the point that a final judgment is handed down. Typical D&O insurance policies also provide some form of reputational costs cover for directors who may be accused, as well as ongoing legal and other professional costs of defending a claim.