Private Ordering Principles, February 2004
PRINCIPLE OF PRIVATE ORDERING
This document was written by Dr. Michael Birnhack, of the Haifa Center of Law &
Technology at the Faculty of Law, Haifa University, for the working group on private
ordering, of the Israeli Internet Association (ISOC-IL).
The document reflects the views of the members of the working group: Mr. Roni Bass, Dr.
Amir Etzioni, Adv. MeyTal Greiver-Schwartz, Ms. Shaula Haitner, Adv. Haim Ravia, Mr.
Daniel Rosenne, Mr. Yehoshua Maor.
A comment for the non-Israeli reader:
The following document is the initial phase of the private initiative of the Israeli
branch of ISOC. Other than administering the .il domain names, ISOC is involved in
several public activities, such as bridging the digital divide, assisting people with
disabilities to access the Internet etc.
The Israeli legal system is one of common law, and is heavily influenced by US law.
Thus far, no specific Internet laws have been enacted (i.e., no CDA, COPA, CIPA
laws, and no DMCA, COPPA ones either). However, several Israeli courts had little
difficulty declaring that the law applies to the digital environment, and turned to the
question of how to enforce such laws. In this course, there is an emerging body of law
regarding various issues, such as ISP liability, copyright, jurisdiction etc.
At the same time, there are attempts by private entities to create "codes of conduct"
for various activities. Most notably, is the Israeli Press Council's (a private, nonstatutory entity) decision to impose its Code of Ethics on to "Online Newspapers", a
term deliberately left undefined, even if these do not accept the Council's authority to
do so.
On this background, ISOC attempted to create a set of general principles for private
ordering. It was made public in February 2004, and a call for comments was
simultaneously issued (http://www.isoc.org.il).
The members of the forum which discussed these principles are from various fields:
Bass and Haitner are members of ISOC's Board; Etzioni is the chairman and GreiverSchwartz is ISOC's legal advisor. Ravia is a prominent attorney who specializes in Internet
law; Rosenne is a former general director of the Ministry of Communications, and Maor is the
former CEO of IBM-Israel. Birnhack teaches law at the University of Haifa, and is the codirector of the Haifa Center of Law & Technology.
-- Michael Birnhack, March 2004.
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Private Ordering Principles, February 2004
PRINCIPLE OF PRIVATE ORDERING
Executive Summary
Private Ordering is the process of setting up of social norms by parties
involved in the regulated activity (in some manner), and not by the State.
Private Ordering aims to achieve public goals, such as efficiency, enhancing
the market, and protecting rights.
Private Ordering has the advantage over public ordering in that it is set by
active players in the market, including citizens and consumers, and in that in
some cases, it can preempt intrusive and populist legislation. Thus, Private
Ordering may protect human rights.
Private Ordering is especially suitable for the dynamic digital environment, in
which most activities relate to information. Private Ordering reduces the
constraints imposed on freedom of speech, while protecting privacy, and
fulfilling the democratic potential of a distributed network.
Private Ordering must adhere to the principle of voluntary acceptance. It can
be imposed only on those who have agreed to subordinate his or her activity
thereto. Non-voluntary imposition of Private Ordering will bring about the
failure of the entire Private Orderings scheme.
Private Ordering aims to express a wide consensus, and hence its details
should be agreed upon in an open, public, transparent process, in which as
many relevant players as possible participate, including commercial parties
and citizens/consumers. The procedures of Private Ordering should include
mechanisms to prevent abuse, and mechanisms to identify consent among
participants.
Private Ordering should be composed with a full awareness of the
possibilities created by technology, its positive as well as negative features,
and only after a clear identification of the goal to be achieved. The social and
technological context of each sector of the activity to be regulated should be
pre-examined, and there should be an attempt to identify possible negative
consequences in advance. Special attention should be given to users' rights,
such as their freedom of choice, free speech rights, the freedom to access free
information, use it and share it with others, protection of privacy and the like.
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Private Ordering Principles, February 2004
A. General Principles
1. Definition: Private Ordering is the process of setting of social norms by
parties involved in the regulated activity (in some manner), and not by the
State. Regulation, whether public ordering or private ordering, aims to achieve
certain public goals, such as efficiency, enhancing the market, and protection
of human rights.
2. Public Ordering: Regulation which stems from the State is public ordering,
since its authority derives from the public, which acts through official state
organs, such as the legislature, the executive and the judiciary.
3. Types of Public Ordering: Public Ordering can be in the form of
Parliamentary legislation, executive regulations, executive orders, and judicial
precedents. The common feature is that the State sets the legal norm, and
usually backs it with criminal sanctions or it creates a system of civil
enforcement.
4. Private Ordering vs. Public Ordering: Private Ordering differs from Public
Ordering in that it develops in the form of "bottom-up", and is not imposed in
a "top-down" manner. Private Ordering is an expression of the Civil Society,
therefore, its source of legitimacy does not stem from the government, and can
be viable only when the subordinated players so agree.
5. The Advantages of Private Ordering over Legislation: One of the main
advantages of Private Ordering is that it can better represent and reflect the
needs of the relevant players, their difficulties and possible avenues of
response than legislation. Furthermore, Private Ordering avoids many of the
failures which often characterizes law making in democratic states, like the
excessive interference of interest groups (i.e., public choice theory), political
compromises and the like. However, Private Ordering is subject to other
constraints (see infra, section C.)
6. Limiting Governmental Involvement in the Market: Another advantage of
Private Ordering is that it minimizes the State's interference in the regulated
field. This fact is considered an advantage by two main groups: One group is
the Libertarians, who support the free market and wish to limit the State's
interference with the market only to situations of market failure. The other
group is that of Civil Libertarians, who believe that State interference often
violates human rights. According to the latter view, human rights protect the
minority from the majority, where the majority often operates through the
State. Hence, public ordering should be minimized.
7. The Flexibility of Private Ordering: Another advantage of Private Ordering is
that it is much more flexible than Public Ordering, and can be changed in a
relatively easy manner. This feature is especially crucial in the digital
environment (see infra, section B.4).
8. A Conceptual Comment: This document applies the term Private Ordering,
rather than Civil Ordering or Self-Help, since these alternative terms have
different legal connotations.
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Private Ordering Principles, February 2004
B. Private Ordering in a Digital Environment
1. The digital environment has several unique characteristics, which differentiate
it from other markets. Most of these features strengthen the preference of
Private Ordering over public ordering.
2. The Importance of Public Ordering: It should be emphasized that Public
Ordering is not wrong per se and is not irrelevant. On the contrary. In many
fields of human activity, the most effective way to achieve a desired public
goal (economic, social or other) is still legislation or another form of public
ordering. Furthermore, in some circumstances, Private Ordering is not the
best approach. It may suffer from various weaknesses.
3. The Kind of Ordering depends on the Regulated Field: The choice between
Public Ordering or Private Ordering should be determined according to the
field to be regulated, according to that field's unique circumstances.
4. The Dynamic Digital Environment: The digital environment is characterized
by rapid changes. It is an exceptionally dynamic environment: technology
keeps changing, new technologies appear while others disappear. New
applications are developed, old applications are embedded in new systems and
so on. This accelerating rate of change is a difficulty for the system of public
ordering. Private Ordering is apt for such a dynamic environment.
5. The Dynamic Commercial Environment: As a result of the speedy
technological changes, the commercial environment also changes rapidly. The
commercial effect that follows the new technology has not yet reached
maturity. In evolving markets the argument in favor of a free market approach
gains power. Here too, Private Ordering has an advantage over Public
Ordering.
6. Interests and Human Rights: Social interests, worthy of protection, are also
relevant in the intermediate period, in which the markets evolve. These
include, but are not limited to, free speech, privacy, consumer protection,
protection of minors etc. Furthermore, even according to supporters of the free
market, there might be market failures which justify interference, such as anticompetitive behavior. Therefore, the social interests at stake should be
identified and protected.
7. Defining the Goal of Regulation: The above statements provide us with some
instructions (guidelines) as to the content of the regulation (whether public or
private ordering): clear identification of the goal or interest to be protected, is
of supreme importance. The means should be tailored to fit the goal. There is
an advantage for technology-neutral rules, since the alternate) choice would
soon render the rules irrelevant. In other words, there is an advantage to state
the regulation as general principles or standards, rather than as particular rules.
There is of course a price of ambiguity in such a choice.
8. Information: The main resource in the digital environment is information.
Information is the core of the Internet in at least two ways. Firstly, the flow of
information is essential for the successful functioning of the market, and
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Private Ordering Principles, February 2004
especially of e-commerce. The transparency of information minimizes
situations of abuse of power and enables greater competition. Secondly, much
of the online activity is that of transferring information: browsing, uploading
and downloading files, sharing files of various sorts, e-mail etc.
9. The Economic and Democratic Value of Information: The meaning of the
previous section is that almost any online activity affects the functioning of the
market. Supporters of the free market are in favor of the free flow of
information. Another central aspect, is that almost any communicative
activity, i.e., transfer of information, raises fundamental constitutional issues.
Transferring information is a matter of freedom of speech. Free speech is a
basic human right in liberal democracies. The principle of free speech has
many aspects, and it is meant to assure, inter alia, the right of every person to
express him/herself freely (where the expression can be literal, textual or in
the form of writing code), the right to access information, and the right to
know about the government's actions (i.e., FOIA).
10. The Limits of Free Speech: It is important to recall that the existence of a
principle of free speech, and the very existence of speech, does not imply that
the activity cannot be regulated. Freedom of speech, as the Supreme Court
dictated, is not absolute [originally, this was written in regard to the Israeli
Supreme Court, but applies to many other courts in liberal democracies,
including the US - MB]. The exact ways in which these limitations can survive
scrutiny was carved in the case law, and need not be rehearsed here. However,
the very existence of speech in the regulated arena requires extra caution in
any kind and form of regulation. The speech at stake should first be
recognized, a task which is not always that easy.1
11. The Importance of Free Speech: Civil libertarians' observation of the presence
of speech in the digital environment, and hence of the principle of free speech
is yet another reason to keep the State out of the digital sphere. When the State
regulates activities that also have speech elements, this is often viewed as
censorship. Here lies yet another advantage of Private Ordering: since it does
not stem from the State, there is no governmental abridgment of free speech.
12. The Threats to Free Speech: It is crucial to realize that threats to free speech
stem not only from the State, but from the private sector as well. This threat
has been identified in close contexts and addressed. Limitations on crossownerships of media outlets serve as an example. The concern here is that
market powers will harm free speech. The advantage of Private Ordering is
that it reflects a wide consensus of the various players. Hence, the importance
of voluntary acceptance of Private Ordering (see infra, section D.1), and
hence we should be aware of the notion of non-governmental harm to free
speech. This latter insight should guide the process of accepting particular
Private Ordering (see infra, section D.2).
1
See e.g., the DMCA, which limits the development of certain kinds of technology (anticircumvention). If we accept the argument that code is speech, than the DMCA is a limitation of
speech.
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Private Ordering Principles, February 2004
13. Code is Law: Behavior and social norms in the digital environment are
determined not only by various legal rules, but by technology itself. This is the
argument that has gained much attention as phrased by Professor Lawrence
Lessig: that Code is Law. The argument is that our behavioral leeway is often
marked by the opportunities embedded in technology, both the positive and
the negative, whether intended by the code designer or not. The practical
implication of this insight is that while designing law (either Public Ordering
or Private Ordering) technology should be acknowledged.
14. Law and Technology: Experience in the past decade teaches that there is a
constant dialogue between technology and law. Sometimes the technology fills
a legal lacuna. This is how most of the Net's components evolved. In some
cases, regulation responds to a specific technology,2 and in other cases,
technology responds to the legal rule either by attempting to bypass 3 or assist
it.4
C. The Limits of Private Ordering
1. Private Ordering may have disadvantages, which should be acknowledged,
and be minimized to the extent possible.
2. Abuse of Power: Private Ordering might end up being yet another kind of
power in the hands of strong players in the relevant field of activity, who
attempt imposing their interests while ignoring or overriding others' interests
or rights. Such behavior will harm Private Ordering, its public legitimacy and
enforceability. The harm to Private Ordering might "invite" Public Ordering.
Hence:
a. Voluntary Acceptance: The principle of voluntary acceptance should
be maintained. The option not to participate in the regulatory scheme
enables an important exit to those who are harmed by it, thus creating a
check over abusive behavior of strong players. And,
b. Decision Making Process: The principle of due procedures for
accepting Private Ordering should be maintained.
3. Voluntary Acceptance as a Double-Edged Sword: The principle of voluntary
acceptance might "invite" public-governmental interference, which will be
justified on the grounds that while parts of the market adhere to the Private
Ordering scheme, others refuse to do so, and these should be (publicly)
regulated. This is a real concern, but it does not justify giving up the principle
of voluntary acceptance. On the contrary. A one-sided imposition of the
regulatory scheme will harm its public legitimacy and enforceability. It might
2
E.g., in the case of children's exposure to online pornography.
E.g., the development of Gnutella P2P systems which do not have a central node, in response to the
Napster case.
4
E.g., PICS, P3P.
3
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Private Ordering Principles, February 2004
be intrusive no less than public ordering, and abridge free speech no less than
governmental regulation.
There is no simple solution to this difficulty. It seems that the solution is to
articulate the best possible Private Ordering scheme, which will reflect as
wide a consensus as possible, that reflects the interests of all participants,
while protecting the rights of others and observing due procedures.
D. Guidelines for Private Ordering
The above discussion results in the following principles:
1. Voluntary Acceptance: Private Ordering can govern only those who are parties
thereto and have consented to it. It should not be imposed on a player who is
disinterested therein. The latter act would suffer from all of the difficulties
associated with Public Ordering, with the addition of lack of legitimacy and lack
of democratic checks. The principle of voluntary acceptance might weaken the
power of Private Ordering, but simultaneously it strengthens its legitimacy.
2. Process of Decision Making:
i.
Public Participation: A process of decision-making should be
adopted, that would ensure broad participation of the players
involved in the activity in the regulated area, including users and
consumers.
ii.
Inclusion of Strong Players: The strong players in the regulated
areas should be included in the process, as without them the entire
process might fail. However, checks should be created to supervise
these players' ability to manipulate the process. Possible
mechanisms are the appointment of public figures who enjoy
public status and who are disassociated from the parties in any
manner. The framework which will be created to enable Private
Ordering should be structured in a manner that would prevent
antitrust violations.5
iii.
Transparency: Another kind of check is full transparency of the
process of Private Ordering.
iv.
Consent: A test to identify consent among participants should be
determined. There is no room for specific rules of consent such as
those in the legislature, since this might lead to abuse and
manipulations, and in the absence of a representative system the
latter option lacks theoretical merits. A possible test to identify
consent might by the "hum in the room" test which is used in
various standards' bodies, such as the IETF.
5
Antitrust law might raise additional questions, regarding the initial decision to create Private
Ordering. We do not address these issues here.
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Private Ordering Principles, February 2004
v.
Leading the Process: In any field chosen as a candidate for Private
Ordering, a public figure or figures should be chosen to lead the
process, by setting the agenda, preventing abuse, encouraging
participation, and setting the mechanism of consent. Private
Ordering suffers a weakness at this point, as without public
legitimacy for the leaders of each process, it is doomed to fail
before it begins.
3. Choice of Topics for Private Ordering: Not any field is suitable for Private
Ordering. When choosing the fields to be regulated by Private Ordering, the
current legal situation should be taken into account (see infra, section D.4), the
ripeness of the relevant market and the stage of technological development. As
a preliminary stage, technology should be examined, to see whether there is
any point to regulation. For example, the use of some technologies is global
and universal, and other technologies are more local "by nature." In addition,
the goal of the regulation should be clearly identified. The "race" to regulate
too soon should be avoided. Such regulation will cause more harm than good.
Furthermore, the various interests and rights which might be affected should
be surveyed, especially that of free speech.
4. The relationship between Private Ordering and Public Ordering: In any field,
prior to regulation, the current legal situation should be examined. The
interrelationship between Private Ordering and Public Ordering is complex.
For example:
i. The law is silent. In some cases, the law does not specifically
address the relevant field. This silence should be investigated.
It might be a result of the innovative technology, but it might
also be the result of a deliberate choice, based on substantive
justifications, such as a wish to avoid interference with the
market. In the latter situation, it might be that regulation (of any
type) should be avoided.
ii. The Law regulates the field: In such a situation there is usually
no reason to add Private Ordering. There is no point in
repeating the principles and rules set by the law, and obviously,
a rule which contradicts the law will be void.
iii. Public Ordering and Enforcement Failures: Sometimes, the
field or activity at stake is regulated by the law, but for various
reasons it is not properly enforced (obsolete law, built-in
difficulties, budgetary constraints etc.) Privacy laws are a clear
example [at least in Israel – MB]. In such situations, Private
Ordering can repeat Public Ordering.
iv. Supplementing Public Ordering: In some cases, Public
Ordering sets an inadequate level of behavior. Some issues of
Privacy protection or consumer protection serve as examples.
In such circumstances, Private Ordering can add to the Public
Ordering and supplement it.
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Private Ordering Principles, February 2004
v. From Private Ordering to Public Ordering: It should be
remembered that it often happens that an ethical rule becomes a
legal rule. Courts occasionally adopt the ethical standard as an
indication for the social norm in the relevant field (such as in
the case of interpreting the concepts of negligence, "public
good", "bona fide" and the like). Accordingly, one should be
careful when creating Private Ordering, and especially those
who wish to thwart governmental interference.
5. The Aptness of Private Ordering to the Regulated Field or Activity: The
utmost flexibility should be maintained in regulating each field or activity.
Each topic has its unique considerations, which require specific attention.
i. Standard or Rules: Standards enable flexibility and easy
adaptation to changing circumstances, but suffer from
vagueness. In some cases specific, accurate rules should be
adopted, even though they might be inflexible.
ii. Achieving the Goals: Different topics require different means to
achieve the goals. In some cases an investigation will suffice, in
others a public condemnation or another sanction will suffice.
There is no room for a singular method of achieving the goals.
iii. Seals:6 One of the means to achieve the goals of Private
Ordering can be the creation of a seal program. The seal should
be simple (and can also serve as an image link to another web
site). The seal will indicate that the web site chose to subject
itself to a particular set of the Private Ordering scheme. Thus
for example, in the case of accessibility to people with
disabilities: a web site which follows the rules of Private
Ordering in this field will be able to present the seal. The seal
is a simple manner to address all parties' interests: the site will
be a sign of excellence; able to users will be able to easily
identify the web site's policy. The seal also enables a relatively
easy way to examine whether the site fulfills its commitment to
the Private Ordering scheme. A site which does not fulfill its
commitment will not be allowed to present the seal, and
trademark law will provide enforcement. The seal will be
limited to the particular rules of Private Ordering, and will not
be an approval of the content or of the service provided.
iv. The particular rules of Private Ordering in each regulated field
should include rules as to the relationship between the body
that initiates the rules and the parties that accept them
voluntarily. These should include, inter alia, immunity of the
private regulatory body, ways of joining and exiting the
scheme, details regarding a seal where it is used etc.
6
This method is roughly based on the privacy seal programs in use in the US, such as TrustE. – MB.
9