I can't tell if the idea makes much sense, but there's a symmetry there, specifically around the personhood of corporations.
Punishing people for something they did not do is wrong, period. And collective punishment is widely regarded as a violation of basic human rights -- it's even banned by the Geneva conventions!
Furthermore, the possibility of such a punishment would have a chilling effect on business to an extent that would seriously damage the economy.
For all these reasons, no responsible government would enforce that kind of punishment on a company, and even if they tried, it would be struck down in court.
Punishments for a lot of corporate rule breaking are viewed as a "slap on the wrist" because sometimes the rules that were broken just aren't that important. Similarly, we don't usually put people in prison for speeding.
The problem is with the scale of punishing an entire company, though. There's a lot of fallout from that, it's true. So the punishment would need to be fair, limiting the offending entity as a whole without unduly harming innocent employees. This could be where the analogy breaks down (which argues towards how unfair the personhood of corporations is, if there's no good recourse for wrongdoing).
As for a chilling effect ... yeah, that's the idea. Employees in a company would be very much more interested in staying on the right side of the law because of the heightened risk to, well, everybody.
I'm reminded of businesses that need to stay accredited, or licensed, or otherwise in legal compliance with something in order to function at all. If one errs enough (criminally, say), it loses that blessing, and could end up folding, and all the innocent employees are out of a job.
No rules for the rich and powerful, draconian rules for everyone else.
This is not about protecting children. This is about clamping down on civilian rights to control the internet and indeed, civilian ability to communicate freely.
If children are being harmed (and they are, more than we’d like to imagine), the answer is simple: shut down social media.
Seriously. Yes we’d lose time wasting places like this. Yes we wouldn’t be as tuned into media ongoings. I’m sure many here will chime in to say how HN or similar has saved their life.
Don’t care, social media isn’t more important than the health of our children. And these companies have shown they don’t care and that profit is more important.
Thus, they needn’t exist.
But that won’t ever even be on the table. Because they don’t give a flying fuck about children. They want profits and control.
You're giving them way too much credit. MPs are not evil geniuses, they're highly motivated self absorbed politicians with no understanding of the internet, but the one thing they understand is that "protect the children" and "blame internet for bad stuff" is great for their career and ballot count. Trying to oppose this will get you a soundbite on the evening news with the headline "Tory MP defends online suicide porn". Good luck bouncing back from that.