Intermediary

What is Intermediary

Dictionary meaning of intermediary refers to a mediator that acts as the facilitator between two sides. As per the numerous legislations in India, intermediaries are primarily defined as a third-party service provider, these service providers facilitate numerous processes in the internet based ecosystem such as the transmission, storage, processing, or access to digital content or online services on behalf of users. They act as a middle ground between users and the information they seek by enabling activities like communication, storage, and online transactions.

The areas covered by such intermediaries span from communication to data management, that also includes online storage services, messaging services, digital wallet in terms of financial services etc,.

Official Definition of the Term

Intermediary as defined in legislations

Information Technlogy Act, 2000

Initially intermediaries, as per Section 2(w) of the Information Technology Act, 2000 (hereinafter ‘IT Act’), were defined with respect to any particular electronic message, meaning any person who on behalf of another person receives, stores or transmits that message or provides any service with respect to that message.

However, post the 2008 amendment, "intermediary", with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.

The new definition is comparatively broader in nature, because of the replacement of the term electronic message with electronic records. Further, the meaning of the term has been made inclusive in nature by providing a list of intermediaries. Currently the approach in defining intermediary is whether an entity transmits or stores third party content.

Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021

The role of intermediary has been recognised specifically in the context of digital media by the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. Here, digital media is referred to as digitized content that can be transmitted over the internet or computer networks. The role of intermediary in case of digital media includes receiving the content, storing it, transmitting, editing or processing.

The rules define ‘online gaming intermediary’ as well, in section 2(qb) it means any intermediary that enables the users of its computer resource to access one or more online games. Further, section 2 (w) defines the ‘social media intermediary’ and it refers to that intermediary which primarily or solely enables online interaction between two or more users and allows them to create, upload, share, disseminate, modify or access information using its services;

The common defining characteristic of an intermediary in these definitions is that they are a third-party entity that facilitates or enables the transmission, storage, processing, or access to digital content or online services, on behalf of another party.

Copyright Act, 1957

India follows the vertical approach in case of determining and imposing the intermediary liability. Hence, even though the primary statute governing the framework for addressing the issue of intermediary liability, is the IT Act 2000. However, apart from the IT Act, Sections 51(a) (ii), (b) and 63 of the Copyright Act, 1957 and Section 104 of the Trade Marks also forms part of this framework.

 The Copyright Act, 1957 does not explicitly provide for any provision that highlights the meaning of social media sites or intermediaries. It only provides for remedies against general copyright infringement of the copyright holder. Thus, if any creative or literary work is available online then on that subject matter Copyright Act will apply.

Consumer Protection (E-commerce) Rules

The rules provide definitions for ‘e-commerce entities’ and the ‘marketplace e-commerce entity’. As per section 2(b) “e-commerce entity” refers to any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity. The section 2(g) defines “marketplace e-commerce entity” as an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers. Further, it mentions the circumstances in which these marketplace platforms are to be exempted from liability under the IT Act, under section 5 of these rules.

Digital Personal Data Protection Act

Under section 36 of the the Digital Personal Data Protection Act, 2023, the central government is given the authority to ask the data fiduciaries or intermediaries to furnish any information as required. Additionally,  the Central Government can direct any intermediary to block public access to information generated, transmitted, received, stored or hosted by a data fiduciary, if certain conditions are met. In order to define the intermediaries for this purpose, the definition of IT Act is to be relied upon.

Intermediary as defined in official government reports

With regards to the Internet service providers (hereinafter ‘ISP’), before 2012, the Copyright Act, 1957 did not have any provision which dealt with the ISPs or intermediaries, however, the 2012 amendment of the said Act introduced two new provisions under the ‘fair-dealing provision’ which excludes the ‘transient or incidental storage of a work to be considered as copyright infringement, unless, ‘the person responsible is aware or has reasonable grounds for believing that such storage is of an infringing copy’

Although, the Copyright Act doesn’t specifically provide for the term ‘ISP’ or ‘intermediaries’, however, the Standing Committee Report provided that the said provisions were introduced with a view to deal with ISPs liability.

ISPs provide Internet Connectivity for accessing any Website or application on the Internet. They are not authorized to monitor the content transmitted on their network and hence they are like a dumb pipe providing transmission of data and information over the Internet and are not aware of any IPR infringing content or the website of their own. ISPs are Intermediaries within the definition of IT Act and are exempted from any punishment as they are not aware of any unlawful content flowing over their network unless they are made aware of it.

With respect to the Social media intermediaries, the Joint Parliamentary Committee on the PDP Bill, 2019 mentioned the key concerns associated with the social media intermediaries, it includes, 1) Transparency and accountability of social media platforms; and 2) Categorisation·of such platforms as intermediaries. It was observed that social media platforms neither take any responsibility for the content hosted on their platforms nor is there any mechanism to regulate them. While contemplating on the point of intermediary, the committee were of the view that the social media platforms may not be designated as intermediaries, because they act as publishers of content. Thus having the ability to select the receiver of the content, as well as control the access to any content posted on their platform. Therefore, it was opined that such platforms should be made accountable for the content that they allow to be posted/hosted on their platforms. For this purpose, they should allow users to officially identify themselves and voluntary verification must be made mandatory.

The Committee, therefore, recommends that all social media platforms, which do not act as intermediaries,should be treated as publishers and be held accountable for the content that they host.

2.3. Term as defined in “Case laws”

Avnish Bajaj v. State of Delhi case - The Amendment Act of 2008 is considered a reaction to the decision in Avnish Bajaj vs State ( hereinafter "Bazee case"), to the extent it relates to the intermediary liability provision. In the decision, the Delhi High court rejected a petition for annulling the criminal prosecution of the Managing Director of a website, Bazee.com. The allegation against the website was carrying a listing for sale of a mobile phone video clip containing pornographic content involving teenagers. The court found that it prima facie appeared that the website had failed to exercise due diligence because it did not provide filters to screen pornographic content, and it also did not have any policy in place to prevent the listing, display or sale of such content on the website. This decision invited extensive criticism across India as well as from various parts of the world, as it highlighted the slippery ground on which intermediaries stood in India, even with respect to user-generated content. The Delhi High Court also observed that there was no legislation to adequately handle such issues of liability arising from dissemination of information over the internet A significant amendment of Section 79 was brought it, which provided for a more comprehensive rule on exemption from liability for intermediaries.

Shreya Singhal v. Union of India - With respect to the subject of Intermediaries and the removal of data from their platform, the Court held that Intermediaries are required to take down or block content only upon notification. This clarified that the takedown of content can happen only upon receipt of an order from a government agency or a court and not at the discretion of the intermediary or on receipt of request by an affected person. This provided the proper interpretation of the term ‘actual knowledge’ requirements. The knowledge of intermediary has to be interpreted as per section 79(2) and (3), not otherwise.

Myspace v. Super cassette -  “Intermediary” is a broadly defined term, catering to all perceivable kinds of service providers on the Internet and is similar to the definition of intermediaries as found in the European Copyright Directives. Under ECD the range of enterprises covered under “ISP” is much larger and includes not just traditional service providers but also hosting services, e-commerce merchants, social networking sites, cloud computing services, mobile hosts etc. Further, the court held that for an intermediary to access safe harbor, it must not initiate the transmission of data, having a sharing option does not imply that the transmission or alteration has been done by the intermediary. Thus, an intermediary is to be understood as the one that does not initiate the transmission of data, it is under the control of the user.  

One of the problems arising with intermediary liability under the IT Act is the effect of the proviso to Section 81 that was inserted by way of the Amendment Act of 2008. The section gives the Act overriding effect over all other statutes, but the proviso creates an exception for any rights conferred under the Copyright Act, 1957 or Patents Act, 1970. This means that the immunity conferred under Section 79 would not cover intermediaries in cases of claims of copyright or patent. This exception defeats the purpose of providing immunity to intermediaries under Sec 79.

However, the judgment passed in the year 2016 by a division bench of the Court reversed an earlier 2012 of a single bench of the Court that had held MySpace was liable for the infringement despite it having no specific knowledge of the infringement. In the 2016 judgment, the Court held that in case of internet intermediaries, Section 51(a)(ii) of the Copyright Act, 1957 stipulates actual knowledge of the infringement and not general awareness.Thus, this judgment strengthened the safe harbor immunity provided to intermediaries, as earlier observed by the case of Shreya Singhal as well, in India under Section 79 of the Information Technology Act, 2000 and relieved Myspace from pre-screening user-generated content.

Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Other’s -  A Division Bench of the Delhi High Court has permitted e-commerce platforms to sell and advertise products of Direct Selling Entities ("DSEs") without their consent.

One of the primary questions discussed in this case pertains to whether e-commerce platforms can be considered as intermediaries, if yes then will they be eligible for the safe harbor clause under IT Act. The court clarified that if an entity provides value added services then that is not sufficient to take away the protection provided under the safe harbor clause. The IT Act along with the press note 2 of 2018 clearly permits the market-place based models to claim the protection as intermediaries. It was categorically held that there is no distinction between active and passive intermediary when the protection is claimed under safe harbor clause, and as long as it complies with Section 79(2) and (3).  While interpreting the types of services that are covered under section 2(1)w, it was observed that the intermediaries need not to be limited to being neutral platforms under the IT Act.

In the case of M/S Ernst and Young Ltd v. Additional Commissioner, CGST, the court clarified that the term intermediary under IGST Act. As defined by section 2(13) of IGST Act 2017, "intermediary" means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

The court held that intermediary refers to the entity that “facilitates or arranges” the supply of goods or services between the buyer and the seller. The court distinguished the intermediaries from the main supplier of the service and limited their actions to the role of being a mere facilitator. Thus, intermediary services are those which involve facilitating the supply of goods or services between two parties without making any alterations in them.

2.4. Legal Provision(s) related to the term

Provision under the IT Act, 2000 provides for-

2(b) "addressee" means a person who is intended by the originator to receive the electronic record but does not include any intermediary;

2(za) "originator" means a person who sends, generates, stores or transmits any electronic message; or causes any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary

2(t) "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;

2 ['(ta) "electronic signature" means authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital signature;

(tb) "Electronic Signature Certificate" means an Electronic Signature Certificate issued under section 35 and includes Digital Signature Certificate;'

Under the Press and Registration of Periodicals Act, 2023, the section 2(n) provides that, “publisher” means a person responsible to publish any periodical. Herein ‘publish’ as referred under section 2(m) means the process of making a work available to the public by issuing or causing to be issued the copies thereof or in any other manner, whether for a price or free of charge, and the word “publishing” shall be construed accordingly.

“Social media intermediary” - Rule 2 Clause (w) of sub-section (1) of the 2021 Intermediary Rules, define  ‘social media intermediary’ as an intermediary which primarily or solely enables online interaction between two or more users and allows them to create, upload, share, disseminate, modify or access information using its services;

The Rules have primarily introduced two sub-categories within the larger set of intermediaries, 1) the “social media intermediary” and 2)“significant social media intermediary” (SSMI) comprising social media intermediaries with more than five million registered users in India.

Platform - As per Consumer Protection (E-Commerce) Rules, 2020, section 3(i) “platform” means an online interface in the form of any software including a website or a part thereof and applications including mobile applications;

Section 2(17) of Integrated Goods and Services Tax Act 2017, defines Online Information and Database Access or Retrieval Services as services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply impossible to ensure in the absence of information technology and includes electronic services such as,--

(i) advertising on the internet;

(ii) providing cloud services;

(iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;

(iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;

(v) online supplies of digital content (movies, television shows, music and the like);

(vi) digital data storage; and

(vii) online gaming, excluding the online money gaming as defined in clause (80B) of Section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017);] Substituted online gaming with this extended provision.

Thus, OIDAR Services are the ones that provide services digitally through the internet to a recipient without a physical interface and tax is levied on these services. The supplier of these services uses a medium supported by the internet and the receiver of the service can download it from that medium.

Principal Commissioner of Central Tax, Bangalore v. M/s NCS Pearson Inc, the Karnataka Appellate Authority for Advance Ruling, which is constituted under section 99 of the Karnataka Goods and Services Tax Act, 2017 answered the question pertaining to the status of a service to be considered as OIDAR services. The service was related to a specific test wherein multiple-choice sections were to be graded entirely by computer. Even essay writing was getting an initial automated score generated by a computer. Human graders in the US only step in when the computer score and the initial automated score have a big difference. This automation extends to registration and payment too.

The court observed that this Test qualified as an OIDAR service (digital service) despite some human involvement in grading essays, the decision was based on the “minimal human intervention” factor. For interpretation of this phrase the  European Commission VAT Committee Working Paper No 896 was referred to. It was observed that European guidelines focus on the service provider's actions, not the customer's. In the concerned Test, a computer program grades the MCQs and the essays first. Humans only step in to verify the accuracy of the program's scoring, not the other way around. Additionally, most aspects of the test are automated, including registering, taking the test, and the initial scoring. Even if a test-taker requests a re-grading, it's done electronically with minimal human interaction. Because the main test is done by computer and human involvement is minimal, the court ruled Test 3 an OIDAR service.

Hence, the main pillar in identification of any service as OIDAR is based on its high reliance on the internet or other electronic network, and this ensures very minimal human involvement in the entire process.

Types of Intermediaries

Network Service providers

Network service providers (hereinafter ‘NSP’) were focused in the initial IT Act of 2000 because of the fact that at that time the primary work undertaken by intermediaries was to facilitate the connection of users with the internet. The safe harbor clause was available to NSPs only, as they were construed as intermediaries. Prior to amendment in 2008, section 79 provided immunity to NSP, which was defined as intermediary. The amended section looked to address the issue of intermediary liability based on the nature of the services they offer. Therefore, we see reference to temporary storage and the role played by intermediaries in relation to third-party data. The section suggests that intermediaries are not expected to play an active role; instead, they need to stay away from the content available on their network

4. International Experience

4.2 International Frameworks

All communication carried out on the internet takes place with the assistance of a number of intermediaries, which ensures that the communication reaches the audience.

Intermediary from the economic perspective has been described to be an entity that acts as economic agent for both buyer and seller so that they can execute a transaction because in various markets the transaction cost turns out to be huge and with the help of intermediary the same can be reduced. Furthermore, they assist in classifying and distributing market information and information of goods.

From communication and technology perspective, the term can refer to an entity which enables transmission of information from one party to another.

The report by UNESCO has focused on services and platforms that host, give access to, index, or facilitate the transmission and sharing of content created by others, while capturing the role of intermediaries. The intermediaries have been categorized based on the different functions that they perform. The process and the part played by various entities in this entire phenomenon has been explained as follows:

Internet service providers have their utility in the very beginning of the transmission of data, wherein the ISPs connect with the user’s devices to a network which is known as the internet. After being connected with the network, web hosting providers or the domain registrars make it possible for the websites to publish their data online and make it accessible to all. Now the information has been placed on the internet, the same can be accessed by way of search engines. Furthermore, the social networks allow the individual to share one-on-one communication pathways by exchange of texts,photos and videos etc.

Article19 had put forth the position, as third party submission, that online newspapers, even if they consist of user generated content, have to be considered as intermediaries.

As per the understanding provided by Council of Europe Portal on Recommendation CM/Rec(2018)2 ,of the Committee of Ministers to member States on the roles and responsibilities of internet intermediaries, the services providers that deal with facilitating interactions on the internet among both legal as well as natural persons are considered as internet intermediaries. This ever-growing field includes a wide variety of such service providers. Some connect people online, manage data, and host websites where people can leave comments. Others collect information, assist in searching things online, and even facilitate buying and selling.  It is to be understood that these intermediaries can perform a number of functions at a time thus doing more than just connecting users. They can sort and rank information, often using complex computer programs (algorithms). In some cases, these actions appear similar to what a publisher does.

The Organization for Economic Co-operation and Development defines the internet intermediaries as the organizations that facilitate transactions between third parties on the internet. They give access to, host, transmit and index content, products and services originating from third parties on the internet or provide internet-based services to third parties.

4.3. Domestic Laws

• UK

Electronic Commerce Directive

“Information Society Service'' as defined by the The Electronic Commerce Directive and the Electronic Commerce (EC Directive) Regulations 2002, refers to “any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, and at the individual request of a recipient of a service. This covers a wide range of economic activities that take place online, including selling goods online, as well as video on demand and services consisting of the transmission of information via a communication network, providing access to a communication network, hosting information provided by a recipient of the service or providing commercial communications by e-mail. However, the use of e-mail or equivalent electronic communications is not an information society service e.g. personal e-mail exchanges or a website with no commercial content would not be covered by these Regulations. The application of this definition is across the entire European Economic Area.

• USA

Communication Decency Act, section 230 with respect to the modern internet intermediaries provides for the exceptions wherein defamation liability cannot be imposed on them. In order to claim defense under this section, the defendant has to firstly prove that it falls within the phrase “provider or user of an interactive computer service”. This phrase means “provides or enables computer access by multiple users to a computer server.” Secondly, the claimant must not be responsible, in whole or in part, for the creation or development of information provided through the Internet, the role of such person or entity has to be limited in providing the service and must not extend to the creator of the content itself. Finally, the plaintiff in the case must be accusing the defendant of being the speaker or publisher of the content.

This exception was carved out after recognition of the distinction between the publishers and the distributors. Hence, here the intermediaries are treated more like distributors and differentiated from the publisher of the content.

• Brazil

Brazilian Civil Rights Framework for the internet -

This law primarily deals with two types of intermediaries; 1) those dedicated to providing Internet access also known as “connection providers” or “access providers” and 2) those that provide the most diverse services to the network or the “application providers”. The definition of these intermediaries can be found under Article 5 of the legislation.

Internet connection: the enabling of a terminal for sending and receiving data packets over the Internet through the assigning or authentication of an IP address;  

Internet applications: the set of functionalities that can be accessed through a terminal connected to the Internet.

• Canada

Elections Modernization Act, 2018 -

The Act provides for measures to prevent the spread of any disinformation and bring transparency with respect to the electoral processes. In furtherance of these objectives and identifying the subject matter of application of the rules, the Act defines the term online platform Under section 319 online platforms are referred as an Internet site or Internet application whose owner or operator, in the course of their commercial activities, sells, directly or indirectly, advertising space on the site or application to persons or groups.

Copyright Act, 1985

Under section 2.4(1)(b) the Copyright Act, provides for an exception for the intermediaries in cases of copyright infringement. The Act provides that in case the intermediary is acting only as a means to provide any necessary telecommunication to others through digital content, then no liability can be imposed.  Further telecommunications is defined as any transmission of signs, signals, writing, images or sounds or intelligence of any nature by wire, radio, visual, optical or other electromagnetic system.

• Singapore

Electronic Transactions Act, 2010

Under this Act, section 6 mentions the liability regime of Network service providers, by which the state recognises the importance of network service providers in providing information infrastructure and content.

6. Research that engages with ‘intermediary’

Report on intermediary liability in India -

The scope of this report covers the regulations for online intermediaries in India, and the obligations of these intermediaries regarding unlawful content.

An intermediary under the Information Technology Act (IT Act) is any entity that receives, stores or transmits electronic records on behalf of another person. This can be illustrated as telecom service providers, internet service providers, search engines, online marketplaces etc. The intermediary status is determined in relation to a specific function, rather than all the functions of an entity. For example, a website can be considered an intermediary for a particular content uploaded by a user but not for its own content.

The report highlights that courts have not always followed a consistent approach to determine if an entity is an intermediary. There have been instances where courts have assumed a website to be an intermediary without further scrutiny. On the other hand, in cases of disputes, courts have ruled that the intermediary status needs to be determined during the trial.

A Taxonomy of Internet Intermediaries

The chapter explains the position of internet intermediaries within the multi-layer online network. The services providers of the internet are considered in its widest understanding, however not all of them are classified as intermediaries. The primary guiding principle behind the definition being, classification of intermediaries in order to understand the subject matter of blocking injunctions.

Who are Internet Intermediaries?

The chapter analyzes laws of various countries in order to explain and define the term online intermediaries. Furthermore, while defining the term, the author has also classified certain terms as the sub set of the primary term of online intermediaries. The “I” between G and C: E-government intermediaries in developing countries -

Intermediaries are understood as a tool in linking citizens to the government. Accordingly, Sein has classified intermediaries into four types depending on the role they play,

1)  facilitating intermediaries, those that only enable the physical access such as computers, networks and the internet, etc to access e-government websites;

2) direct intermediaries, they facilitate the use of online services or digital government information and these can be NGOs, local organizations, or citizens;

3) enabling intermediaries, it is the combination of the previous roles, they provide physical access and facilitate the use of services;

4) transforming intermediaries, those that support groups of disadvantaged citizens, act as activists.

7. Challenges

1. The fluidity of the roles and functions of intermediaries. The functions of intermediaries are going to be ambiguous at times and is likely to change over time, which is the major hurdle to keep track with and extend the legislation according to these changing functions.
2. Ensuing that while catering to the specific needs of its users, the privacy of those users’ data is fully protected by the intermediaries.
3. Because of the world wide expansion of these intermediaries, the data is getting disseminated without boundaries across the globe, thus the regulations of a region specific are not sufficient in dealing with these intermediaries. It is imperative to a strong global regulatory regime.
4. The identification of what constitute as hate speech can lead to two contrasting consequences, on one hand where these intermediaries are called for regulating such content on the other hand they might be viewed as private censors to freedom of speech.

8. Way Forward

The new IT rules have introduced a self-regulatory system for Online Curated Content Platforms. Whereas the industry had already attempted to create a self-regulatory code, which suggests that the new system might be unnecessary from a regulatory perspective. Further, It's unclear if those affected by the rules (OCCPs and potentially news publishers) were consulted while bringing these rules in effect, as the entire chapter on regulation was missing from earlier drafts and included without public consultations. Additionally, the wider definition of intermediary as well as the associated terms must be in tune with the international standards, in order to achieve results according to specific circumstances of India, sub-categorisation can be done taking in consideration Indian nuances.