Secondary liability substantially reduces enforcement costs against counterfeiting

This example suggests that liability can also be introduced to induce some agents to take actions that stop or mitigate the harmful conduct of other players. The setting we have discussed is quite traditional, rooted around the bilateral relationship between buyers and sellers or manufacturers. In markets featuring the presence of online intermediaries, a prominent role can be played by the platform’s owner. This is especially true if direct enforcement of primary liability becomes too expensive (e.g., millions of buyers and sellers in a marketplace). One possible way to deal with this problem is to impose liability on the party that can help to prevent an accident or, in the case of illegal activities, misconduct. The law and economics literature has referred generally to these cases as secondary, indirect, or collateral liability. Most relevant for our analysis is the notion of “gatekeeper liability” (Kraakman, 1986). This is a special case of liability imposed on intermediaries whose characteristics and role enable them to disrupt misconduct by “withholding support” and prevent any infringement. Undoubtedly, platforms are nowadays key players that have developed tools and capabilities to monitor, identify, and to some extent, mitigate illegal activities and misconduct in their ecosystem.13 Moreover, introducing liability for intermediaries might lead to a considerable reduction in enforcement costs. Landes and Lichtman (2003) discussed whether a manufacturer producing a decoder box should be held liable for third parties’ infringements of copyright. According to the authors, holding the manufacturer liable would result in substantial enforcement and administrative savings for the harmed party, which would therefore directly sue the manufacturer rather than multiple infringers.14 Fagan (2020) showed instead that lawmakers’ decision about the introduction of a liability regime for platforms relative to a safe harbor provision depends on the relative size of different costs, such as the cost of enacting and enforcing a new law versus the cost of maintaining existing law.15