Digital Files Dealers and Prohibition in the Context of the French 3 Strikes (HADOPI) Law

Abstract

Illegal digital file consumption is widely believed to influence sales of cultural goods. Online piracy is now regulated and prohibited in some countries, especially in France, where HADOPI is a legal authority in charge of Peer-to-Peer (P2P) protocol monitoring. We claim that prohibitions on digital markets share some characteristics of other criminal activities such as those of the drug market. Prohibition of a good or service can lead to the emergence of a black market embedded in a social network. Based on an original and representative 2012 French survey, we show that such a social and offline organisation is observed. Indeed, offline swapping is now the largest way to exchange digital files. We show that offline swapping is embedded in a hierarchical social network where different behaviours are observed. On one hand, there are wholesalers of digital files who provide more than they receive from this offline network and maintain online downloading activity through P2P technology. On the other hand, there are also the “simple” consumers who consume only from offline swapping and never provide files to others. They never use monitored P2P technology because HADOPI acts as a deterrent. Our econometric analysis suggest that this “fear” of HADOPI plays a significant role in structuring this offline swapping network, as the position in the swapping network is driven by the feeling of being threatened by HADOPI.

Keywords: HADOPI, social network, piracy, prohibition, offline swapping

JEL Classification: K42, L82, O34