Increasing monitoring requirements causes industry consolidation, reduces innovation and harms startups

The first scholarly proposal suggests ending any notice and takedown scheme in favor of increasing the monitoring requirements on the intermediaries.122 The goal of this setup is to make it easier to hold Online Marketplaces contributorily liable, thereby incentivizing more proactive actions by Online Marketplaces.123 Arguably, such a legislative decision would have lower enforcement costs than the current judicial approach.124 Shifting the burden toward Online Marketplaces would increase the costs for Online Marketplaces; underlying this proposal is the idea that it is only fair to increase such costs for Online Marketplaces in light of their massive revenues.125

While this proposal is not without merit, it ultimately is not the best solution to this problem. Heightening standards for Online Marketplaces may be theoretically simple and easy to implement, but it is too blunt of an approach to be truly effective. Increasing the standards too much for Online Marketplaces will make it more difficult and expensive for Online Marketplaces to function. This issue is even more severe for potential new Online Marketplaces because such an approach will increase startup costs, limiting the creation of new businesses and disincentivizing potentially economically smart risks (because the specter of liability can lead to safer but less dynamic decisions). Increased startup costs would also further consolidate market power in the largest Online Marketplaces, increasing the likelihood that those Online Marketplaces will use their market power to harm consumers.126 While increasing the incentives for Online Marketplaces to police their marketplaces themselves is important to slow and eventually stop counterfeiting in Online Marketplaces, such a blanket approach is not ideal.