Requiring Web Sites to Post and Report Terms of Service Doesn't Violate First Amendment

So holds Judge William Shubb (E.D. Cal.) in X Corp. v. Bonta:

AB 587 requires that social media companies post their terms of service "in a manner reasonably designed to inform all users of the social media platform of the existence and contents of the terms of service." The law also requires that such companies submit twice yearly "terms of service reports" to the Attorney General containing, inter alia, the current version of the terms of service for their platform, as well as a description of content moderation practices used by the social media company for that platform, including, but not limited to, how the company addresses (A) hate speech or racism; (B) extremism or radicalization; (C) disinformation or misinformation; (D) harassment; and (E) foreign political interference.

The "terms of service" as defined in AB 587 appear to bear all of the hallmarks of commercial speech. Under Bolger v. Youngs Drug Products Corporation (1983), there is "strong support" for finding that the speech is commercial where "(1) the speech is an advertisement, (2) the speech refers to a particular product, and (3) the speaker has an economic motivation."

Although the terms of service may not literally be advertisements in the sense of proposing a commercial transaction, they are directed to potential consumers and may presumably play a role in the decision of whether to use the platform. They refer to the company's product or service, i.e., the social media platform, and communicate important information concerning the platform and how users may utilize the product.

There is also an economic motivation implicated by communicating information about the platform in the company's terms of service—which social media companies, including X Corp., typically do voluntarily—so that individuals can decide whether they want to use it.

Because the terms of service are part of a commercial transaction and appear to satisfy the Bolger factors, the court will treat the terms of service requirement as a provision requiring commercial speech. Considered as such, the terms of service requirement appears to satisfy the test set forth by the Supreme Court in Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (1985), for determining whether governmentally compelled commercial disclosure is constitutionally permissible under the First Amendment. The information required to be contained in the terms of service appears to be (1) "purely factual and uncontroversial," (2) "not unjustified or unduly burdensome," and (3) "reasonably related to a substantial government interest." …

The reports to the Attorney General compelled by AB 587 do not so easily fit the traditional definition of commercial speech, however. The compelled disclosures are not advertisements, and social media companies have no particular economic motivation to provide them. Nevertheless, the Fifth and Eleventh Circuits [in the Netchoice cases] recently applied Zauderer in analyzing the constitutionality of strikingly similar statutory provisions requiring social media companies to disclose information going well beyond what is typically considered "terms of service."

Following the lead of the Fifth and Eleventh Circuits, and applying Zauderer to AB 587's reporting requirement as well, the court concludes that the Attorney General has met his burden of establishing that that the reporting requirement also satisfies Zauderer. The reports required by AB 587 are purely factual. The reporting requirement merely requires social media companies to identify their existing content moderation policies, if any, related to the specified categories. The statistics required if a company does choose to utilize the listed categories are factual, as they constitute objective data concerning the company's actions. The required disclosures are also uncontroversial. The mere fact that the reports may be "tied in some way to a controversial issue" does not make the reports themselves controversial.

While the reporting requirement does appear to place a substantial compliance burden on social medial companies, it does not appear that the requirement is unjustified or unduly burdensome within the context of First Amendment law. "A disclosure is 'unduly burdensome' when the [disclosure] 'effectively rules out' the speech it accompanies." Plaintiff argues that adopting the specified content categories and creating mechanisms to monitor the required metrics would require a vast expenditure of resources, rendering the reporting requirement unduly burdensome. However, AB 587 does not require that a social media company adopt any of the specified categories. Further, Zauderer is concerned not merely with logistical or economic burdens, but burdens on speech.

Finally, the court concludes that the Attorney General has met his burden of showing that the compelled disclosures are reasonably related to a substantial government interest in requiring social media companies to be transparent about their content moderation policies and practices so that consumers can make informed decisions about where they consume and disseminate news and information. This interest is supported by the legislative history. The state's transparency interest is "more than trivial," because social media content moderation is a topic of public concern.

The court also concluded that AB 587 wasn't preempted by § 230:

AB 587 only contemplates liability for failing to make the required disclosures about a company's terms of service and statistics about content moderation activities, or materially omitting or misrepresenting the required information. It does not provide for any potential liability stemming from a company's content moderation activities per se. The law therefore is not inconsistent with section 230(c) and does not interfere with companies' ability to "self-regulate offensive third party content without fear of liability."

Note that, unlike the law that was preliminarily enjoined in Volokh v. James (now on appeal to the Second Circuit), which was focused in a viewpoint-based way on supposed "hate speech," AB 587 requires posting of content moderation policies generally, and requires reporting of all such content moderation policies as well. On the other hand, as the opinion notes, AB 587 does target particular viewpoints to some extent: It requires reports to the AG to separately include "A statement of whether the current version of the terms of service defines each of the following categories of content, and, if so, the definitions of those categories, including any subcategories: (A) Hate speech or racism. (B) Extremism or radicalization. (C) Disinformation or misinformation. (D) Harassment. (E) Foreign political interference." I expect that plaintiff will appeal.

The California Attorney General is represented by Gabrielle Downey Boutin.