By Samuel Greengard
The efforts to regulate electronic commerce come not only from Capitol Hill, but also from state officials and the courts, who are slowly defining which commercial activities can and cannot be conducted online.
"Having no restrictions is unrealistic, but adding layers of laws and bureaucracy won't solve the problem," argues Brian O'Shaughnessy, director of public policy at the Internet Service Association, a Baltimore-based consortium of 350 companies doing business online.
Congress, for the most part, is giving industry first crack at regulating itself. But when self-regulation fails, politicians reacting to outcries from constituents step in.
Take, for instance, the attempts to curtail unsolicited E-mail, or spam. A measure introduced by Sen. Robert Torricelli (D-N.J.) puts the onus on World Wide Web users to notify senders that they want to be removed from mailing lists. "I have long been concerned about excessive-indeed any-government regulation of the Internet," he says. But a competing measure, the Netizens Protection Act, sponsored by Rep. Chris Smith (R-N.J.), stipulates that consumers would have to sign up to receive unsolicited commercial E-mail. "No one ... should be forced to pay for unsolicited advertisements," Smith says.
Another contentious area of regulating E-commerce is online gambling. But why should IS managers whose enterprises have nothing to do with gambling care?
New York cyber-lawyer Mark Fowler answers that other types of regulated commerce can face similar controls. So, the path government takes to regulate gambling may provide a road map of how it might regulate other types of online commerce.
Courts in Minnesota and Missouri have backed efforts by prosecutors to charge out-of-state operators of gambling Web sites with violation of state antigambling statutes. However, in a trademark-infringement case, a federal appeals court ruled that simply putting a site on the Web does not subject someone to being sued anywhere, adding that in order for a company to be sued in a given state, it must have a physical presence there.Eventually, the Supreme Court must resolve this matter.
The big legal problem faced by businesses conducting E-commerce may not be laws aimed exclusively at online business but rather their own unfamiliarity with laws in states where they are not physically located. "There's a whole slew of people who for a lack of knowledge may not be compliant with local rules and regulations," observes Steve Katz, a New York tax lawyer who dabbles in online issues. It's not just small retailers, he adds, but also larger manufacturers who might be selling directly to consumers for the first time.
One bill receiving strong support in the Internet community, as well as bipartisan backing in Congress, is the Internet Tax Freedom Act. It would bar state and local governments from applying new taxes to Internet activities and ban utilitylike taxes that would treat data as a commodity. "Even if a state has enacted an online tax law, collection and enforcement are often haphazard," notes sponsor Sen. Ron Wyden (D-Ore.). "This system rewards ignorance and punishes the Boy Scout businesses that play by the rules."
Only a few state and local officials have opposed the act, claiming that it could cause budgetary problems and infringe on states' sovereignty.
The next few years are likely to lay the foundation for the future of Internet regulation. "If we self-regulate now," says Tom Patterson, VP of Cyberguard Corp., a Fort Lauderdale, Fla., Internet security and E-commerce firm, "we can avoid excessive government controls later." Copyright (c) 1997 CMP Media Inc.
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