The timing of this hearing is important, as we see continued growth in the popularity of e-commerce and its importance in the American economy.  Last month, the U.S. Census Bureau reported that second-quarter online retail numbers showed a healthy 24% increase from the previous year -- and these data do not include sales from online travel, finance, and ticketing sectors.  

As e-commerce continues to develop and mature, we will continue to face new and difficult public policy challenges. We certainly must determine what kind of new consumer protections are needed for this digital economy. An example of this is the debate occurring in this Subcommittee over the issue of information privacy.      

We also must recognize that some consumer protections enacted long ago are not applicable for this new medium.  Many laws on the books were designed under different circumstances for vastly different purposes, and can now threaten the development of e-commerce, with minimal or no offsetting benefit to consumers.  

We should not forget that e-commerce produces fascinating new opportunities that will completely alter the way some businesses operate.  By improving communications, reducing costs and time to market, minimizing inventories, improving consumer information and knowledge -- just to name a few -- the use of the Internet to conduct business can have substantial benefits for businesses and consumers alike.   

Of course, in the process, e-commerce will also displace some of the existing companies and firms that have played a valuable role in our economic fabric for many years. One way it can threaten old business set-ups is by cutting out the middle man - disintermediation, as some call it-- by connecting consumers directly with the producers of goods and services, often across state lines.  

Now, in many cases there may be legitimate roles for middlemen in commerce. We examined some of these issues at a Subcommittee hearing on online travel services held a couple of months ago. But e-commerce can legitimately put those roles to the test, forcing them to prove their worth. And this is not a bad thing when it improves competition for certain goods and services. It can even enhance the middleman's role in some instances.   

The reaction of middlemen, faced with the e-commerce threat, can well be predicted: sit by and watch it happen, or fight. Our concern today involves one set of tools that businesses have to use against e-commerce - state laws and state legislatures. If current middlemen use their political connections, entrenched position in the market, and the guise of "consumer protection" to influence state governments and regulators to protect them, then that's a problem - particularly when it affects interstate commerce.   

And so I am interested to learn how state governments are reacting to the development of e-commerce - both negatively and positively.  States and State Attorneys General play a vital role protecting consumers.  But states, just like the Federal government, can be influenced by entrenched incumbents seeking to protect their market position though new laws or reinterpreted laws instead of through new services.   

States' reactions to a middleman's quest for intervention to protect their position can be a telling sign of whether e-commerce will develop as we all hope.  I expect our witnesses this morning will give us a good picture as to the reaction of states and "disintermediated" middlemen.   

Let me note that I understand there will be a detailed, three-day FTC workshop on this subject next month.  Chairman Muris should be thanked for pushing forward with such a thoughtful examination.  I am hopeful that this hearing will be a helpful starting point for that workshop and, in turn, that their work may assist us, should this Committee move to consider any remedies that may be necessary. 

 I thank the Chairman and look forward to the testimony of the witnesses.