The measure is part of Germany's fierce crackdown on illegal online content, which includes libel, incitement to commit a crime, hate speech against a particular social group, and threats of violence, among other things.
Under the new legislation, companies operating in Germany will be given 24 hours to delete content that obviously violates the country's speech laws.
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In less clear-cut cases, they will have seven days to examine the reported posts, with an obligation to inform the person who filed the complaint of how the problem was tackled.
Failure to comply with the new requirements could cost the companies up to 50 million euros. The offending network's chief representative in Germany would also face a fine of up to 5 million euros.
Supporters of the law say it is a must, noting that even companies like Twitter that have signed a code of conduct including a pledge to delete hate speech within 24 hours fail to adhere to it. A German government survey found that in January and February of this year, Twitter only deleted 1 percent of content deemed illegal.
But digital and human rights advocates oppose the initiative, saying the right to decide the legality of content shouldn't be privatized by social media managers. They also fear the new regulations would have a negative effect on freedom of expression, pointing out that companies are likely to delete legitimate posts over fear of being fined.
German Justice Minister Heiko Maas (SPD), however, insisted freedom of speech wouldn't suffer, as the legislation also stipulates the establishment of an independent regulatory institution to which the companies can pass on content they're not sure represents a speech violation.
"Experience has shown that, without political pressure, the large platform operators will not fulfill their obligations, and this law is therefore imperative," Maas said in a statement. The Network Enforcement Act will go into effect in October.