The New York Times International - 08.08.2019

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THE NEW YORK TIMES INTERNATIONAL EDITION THURSDAY, AUGUST 8, 2019 | 7

Business

Before his freshman year at the Univer- sity of Connecticut, J.T. Lewis received an unusual gift from his mother: a bulletproof backpack. Mr. Lewis, who this fall will be a sophomore at the university, comes from a family shattered by gun violence: His younger brother, Jesse, was killed in the 2012 shooting at Sandy Hook Elementary School in Newtown, Conn. When his mother, Scarlett, gave him the dark-gray backpack, he said, she did not have to say a word. “We just had a mutual understand- ing,” said Mr. Lewis, 19, who is running for a seat in the Connecticut State Sen- ate. Now he wears the armored backpack on campus because it makes him feel safer, even if it means he sweats a little more under the bulky load. “I don’t know if it’s going to have any effect,” Mr. Lewis said. “But it might if I get shot from behind.” As mass shootings become a tragic fact of life in the United States — at schools, stores, movie theaters and houses of worship — it’s not just the fam- ilies of victims who are investing in pro- tective gear. In a dystopian development, a growing number of companies are offering bulletproof backpacks in back-to-school sales, marketing them to parents who are desperate to protect their children from gunmen. “It’s incredibly depressing,” said Igor Volsky, the director of Guns Down America, a gun-control advocacy group. “The market is trying to solve for a problem that our politicians have refused to solve.” Demand for bulletproof backpacks surged after the shooting at a high school in Parkland, Fla., in 2018. With back-to-school season approaching, the shootings this weekend in El Paso and Dayton, Ohio, have brought renewed attention to the products. In the past, some stores have report- edly sold out of the backpacks, which typically cost $100 to $200. Months before the Parkland shooting, a private Christian school in Miami sold protec- tive panels that could be inserted into backpacks, charging $120. This year, ArmorMe, a personal-defense company run by a former Israeli

commando, Gabi Siboni, started selling a bulletproof backpack that can unfold into a larger covering. “The backpack is designed first of all to be a very stylish and nice-looking backpack,” Mr. Siboni said. “And it has panels that protect you against bullets. It will increase your survival chances.” Another company, Guard Dog Securi- ty, has been selling bulletproof backpacks since shortly after the Sandy Hook shooting. The products are avail-

able at Office Max, Office Depot and Kmart, and the company recently re- leased a model that costs less than $100. In the past, companies have been crit- icized for falsely claiming that their armored backpacks were certified by the National Institute of Justice, which oversees the body armor used by law enforcement. The agency, part of the United States Justice Department, has not certified, or even tested, the bulletproof backpacks and has no plans to do

so, said Mollie Timmons, a department spokeswoman. Still, Yasir Sheikh, who runs Guard Dog, said his company’s backpack is designed to meet the agency’s Level IIIA performance standard for body armor, which would make it resistant to bullets fired from shotguns and handguns. But Mr. Sheikh acknowledged that the backpacks were less effective at block- ing gunfire from powerful semiautomat- ic weapons, like the ones used at Sandy Hook. And gun-control advocates say there is no evidence that armored backpacks, however carefully tested, would keep children safe during a shooting. “We’re asking children to stand up to gunmen because lawmakers are too afraid to stand up to the gun lobby,” said Shannon Watts, the founder of Moms Demand Action for Gun Sense in Amer- ica, a gun-control organization. “There isn’t a parent in this country that isn’t terrified. These companies are capitalizing on that.” Mr. Siboni, who runs ArmorMe, said it was unfair to accuse his company of ex- ploiting national fears about gun violence to turn a profit. “Whatever you do, you’re capitalizing on something,” he said. “We are just re- sponding to a need.” In several recent Twitter posts, Sena- tor Kamala Harris of California, a Demo- cratic presidential candidate, has held up bulletproof backpacks as a symbol of the broader problem of gun violence in the United States. “Parents shouldn’t have to buy a bulletproof backpack for their child just to keep them safe in school,” she tweeted in July. “This shouldn’t be normal.” But for Celeste Green, a senior at the College of Charleston in South Carolina, the backpacks seem like a necessary precaution. The day before the shooting in El Paso, Ms. Green, 22, learned that a teen- ager in her hometown, Columbia, S.C., had threatened to “shoot up” a local school. When she saw the news, she thought of her younger sister, who is starting high school in the fall. Ms. Green sent her mother a few videos and hyperlinks with information about bulletproof backpacks. “Immediately, she was like: ‘Where should I start? Where should I look?’” Ms. Green said. “There was no ques- tion.”

Back-to-school item: Bulletproof backpack

ArmorMe, a personal-defense company run by a former Israeli commando, sells a bulletproof backpack that can unfold into a larger covering.

ARMORME

BY DAVID YAFFE-BELLANY

China was on the cusp of the biggest building boom the world had ever seen when Zhang Zhiyang started his architecture firm. It was 2007, and the money rushed in for contracts to design resi- dential complexes and an exhibition hall. These days, with China’s economic growth slowing and his business drop- ping off, Mr. Zhang can’t seem to get paid on time. He now accepts the financial equivalent of i.o.u.s from as many as one-third of his clients instead of cash.

“It wasn’t like this before,” he said. But, he added, “it’s better than nothing.” China’s trade war with the United States has escalated in recent days, pos- ing a growing threat to an already slowing economy. Beijing needs private businesses like Mr. Zhang’s and his clients’ to help rekindle faster growth and provide paychecks to Chinese workers. But many of those private businesses are short of cash. Instead, more than $200 billion in i.o.u.s — known in the dry world of finance as commercial acceptance bills — are floating around the Chi- nese financial system, according to government data. China is not running out of money. But Chinese banks are reluctant to lend to private businesses because they con- sider big, state-owned companies more reliable in paying off their debts. Alter- native sources of money have dried up as regulators have cracked down in recent years on China’s shadowy world of unofficial lending.

So a growing number of companies are issuing i.o.u.s to their suppliers. Some suppliers turn around and use the notes to pay another supplier. And then — in a sign of how desperate some Chi- nese companies have become for money — they sell the notes for less cash than they are worth. Recent Chinese history suggests these financial dealings could end badly. Two decades ago, when the Chinese economy was growing too fast for regulators to handle, so many i.o.u.s were passed around by state-owned companies — an estimated $86 billion in to- day’s money, then totaling nearly one- fifth of China’s annual economic output — that the Chinese business world seized up. The government had to inter- vene, restructuring the debt and writing much of it off. “You had companies holding stacks of paper,” said Dinny McMahon, an author and research fellow at the Paulson Insti- tute in Chicago.

“The fact that these things are prolif- erating again at a time of entrenched economic downturn should be a signal of the degree of distress that companies are finding themselves in,” Mr. McMa- hon said. Commercial acceptance bills are not legal tender. Rather, they are pieces of paper promising payment in the future. Companies owed some $211 billion in these informal notes as of February, the most recent government data available, an increase of more than one-third from the previous year. More debt may be floating around China’s corporate world and goes un- tracked if the notes are being traded for less than their face value. A market has formed around commercial acceptance bills, in which companies buy and sell them based on the prospects for being paid back. The bigger and better known the company, the more secure the bill is considered.

Zhang Zhiyang at his architecture firm in Shenzhen, China. He now accepts the financial equivalent of i.o.u.s from as many as one-third of his clients instead of cash.

LAM YIK FEI FOR THE NEW YORK TIMES

In China, an i.o.u. economy

SHENZHEN, CHINA

Promise notes worth more than $200 billion keep companies afloat

BY ALEXANDRA STEVENSON

AND CAO LI

I .O.U., PAGE 8

When the most consequential United States law governing speech on the internet was created in 1996, Google.com didn’t exist and Mark Zuckerberg was 11 years old. The federal law, Section 230 of the Communications Decency Act, has helped Facebook, YouTube, Twitter and countless other digital companies flourish. But Section 230’s liability protection also extends to fringe sites known for hosting hate speech, anti-Semitic content and racist tropes, like 8chan, the internet message board where the sus- pect in last weekend’s El Paso shooting massacre posted his manifesto. The First Amendment of the United States Constitution protects free speech, including hate speech, but the Section 230 law shields websites from liability for content created by their users. It permits internet companies to moderate their sites without being on the hook legally for everything they host. It does not provide blanket protection from legal responsibility for some criminal acts, like posting child pornog- raphy or violations of intellectual prop- erty. Now, as scrutiny of big technology companies has intensified in Washing- ton over a wide variety of issues, including how they handle the spread of disin- formation or police hate speech, lawmakers are questioning whether Sec- tion 230 should be changed. Here is an explanation of the law’s history, why it has been so consequential and whether it is really in jeopardy.

WHY WAS THE LAW CREATED? We can thank “The Wolf of Wall Street.” Stratton Oakmont, a brokerage firm, sued Prodigy Services, an internet serv- ice provider, for defamation in the 1990s. Stratton was founded by Jordan Belfort, who was convicted of securities fraud and was portrayed by Leonardo Di- Caprio in the Martin Scorsese film about financial excess. An anonymous user wrote on Prodigy’s online message board that the brokerage firm had en- gaged in criminal and fraudulent acts. The New York Supreme Court ruled that Prodigy was “a publisher” and therefore liable because it had exercised editorial control by moderating some posts and establishing guidelines for im- permissible content. If Prodigy had not done any moderation, it might have been granted free speech protections af- forded to some distributors of content, like bookstores and newsstands. The ruling caught the attention of a pair of congressmen, Ron Wyden, a Democrat from Oregon, and Christo- pher Cox, a Republican from California. They were worried that the decision would act as a disincentive for websites to take steps to block obscene content. The Section 230 amendment was folded into the Communications Decen- cy Act, an attempt to regulate indecent material on the internet, without much opposition or debate. A year after it was passed, the Supreme Court declared that the indecency provisions were a violation of First Amendment rights. But it left Section 230 in place. Since it became law, the courts have repeatedly sided with internet companies, invoking a broad interpretation of immunity. Last Wednesday, the United States Court of Appeals for the Second Circuit affirmed a lower court’s ruling that Facebook was not liable for violent at- tacks coordinated and encouraged by Facebook accounts linked to Hamas, the militant Islamist group. In the majority

opinion, the court said Section 230 “should be construed broadly in favor of immunity.”

WHY IS IT CONSEQUENTIAL? Section 230 has allowed the modern internet to flourish. Sites can moderate content — set their own rules for what is and what is not allowed — without being liable for everything posted by visitors. Whenever there is discussion of re- pealing or modifying the statute, its de- fenders, including many technology companies, argue that any alteration could cripple online discussion. The internet industry has a financial incentive to keep Section 230 intact. The law has helped build companies worth hundreds of billions of dollars with a lu- crative business model of placing ads next to largely free content from visitors. That applies most to social net- works like Facebook, Twitter and Snapchat. More recently, Section 230 has also provided legal cover for the complicated decisions regarding content moderation. Facebook and Twitter have recently cited it to defend themselves in court when users have sued after being barred from the platforms. Many cases are quickly dismissed because companies assert they have the right to make decisions on content moderation as they see fit under the law.

WHAT ARE THE LAW’S PROBLEMS? The criticisms of Section 230 vary. While both Republicans and Democrats are threatening to make changes, they dis- agree on why. Some Republicans have argued that tech companies should no longer enjoy the protections because they have cen- sored conservatives in violation of the spirit of the law, which states that the internet should be “a forum for a true di- versity of political discourse.” Facebook, Twitter and Google, which runs YouTube, are the main targets for bias claims and have said they are base- less. On the flip side, some Democrats have argued that small and large internet sites aren’t serious about taking down problematic content or tackling har- assment because they are shielded by Section 230. “It gives immunity to people who do not earn it and are not worthy of it,” said Danielle Keats Citron, a law professor at Boston University who has written ex- tensively about the statute.

IS SECTION 230 IN JEOPARDY? The first blow came last year with the signing of a law that creates an excep- tion in Section 230 for websites that knowingly assist, facilitate or support sex trafficking. Critics of the new law said it opened the door to create other exceptions and would ultimately render Section 230 meaningless. Ms. Citron, who is also vice president of the Cyber Civil Rights Initiative, a nonprofit devoted to combating online abuse, said this was “a moment of re-ex- amination.” After years of pressing for changes, Ms. Citron said there was more political will to modify Section 230. Senator Josh Hawley, a Republican from Missouri and a frequent critic of technology companies, introduced a bill in June that would eliminate the immunity under the law unless tech companies submitted to an external audit that their content moderation practices were politically neutral. “When I got here just a few months ago, everybody said 230 was totally off the table, but now there are folks coming forward saying this isn’t working the way it was supposed to work,” said Mr. Hawley, who took office in January. “The world in 2019 is very different from the world of the 1990s, especially in this space, and we need to keep pace.”

When they were both in the House, Ron Wyden, left, Democrat of Oregon, and Christopher Cox, Republican of California, pushed Section 230 of the Communications Decency Act.

DOUGLAS GRAHAM/CONGRESSIONAL QUARTERLY, VIA GETTY IMAGES

Internet hate speech

and its legal shield

‘Perk’ for tech companies created by Congress in 1996 gets a second look

BY DAISUKE WAKABAYASHI

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