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State Impediments to E-Commerce: Consumer Protection or Veiled Protectionism?
Subcommittee on Commerce, Trade, and Consumer Protection
Prepared Statement of The Honorable Cliff Stearns Good morning. I am pleased to welcome you all, especially
our witnesses, to the Commerce, Trade and Consumer Protection subcommittee
hearing examining State impediments to e-commerce. This hearing is one of a
number of hearings that the subcommittee has held on e-commerce this Congress.
The others hearings have included examinations of (1) cyber-security (2)
cyber-fraud and crime (3) impediments to digital trade (4) electronic
communications networks (5) supplier-owned online travel sites; and (6) online
information privacy. I think it important that the subcommittee and the full
committee, as Congressional custodians of the commerce clause, be vigilant of
and encourage interstate commerce in general and nascent forms of interstate
commerce, such as e-commerce in particular. As times change, economic and political priorities change.
Now and again, history is witness to new and innovative technologies that demand
and bring about fundamental change in the way commerce takes place. Those
fundamental economic changes then in turn require and indeed bring about needed
legal and regulatory change. The Internet and the commerce that transpires on
the Internet are such technologies and innovations respectively. Today, the
value of online commercial activity at the business-to-business level is in
excess of one trillion dollars worldwide. While, consumer transactions taking
place online are maintaining double-digit growth rates year after year. It is essential that the growth of e-commerce is
not stymied by laws and/or regulations that were enacted or promulgated at a
time when e-commerce was at best a figment of a few technologist's
imagination. Many of those state laws and regulations did and may still have
important consumer protection objectives as part of their rationale. I think it
imperative that every state carefully examines its laws and regulations that
were intended to advance consumer protections but now hinder e-commerce, albeit
unintentionally. I am confident that states would find alternative legal and
regulatory approaches that would not impede e-commerce and at the same advance
state consumer protection interests. We will hear this morning that that
is exactly what Illinois did when it examined and ultimately revised its auction
licensing rule, so that the rule could be more responsive to a new business
model, not really an auction house, called e-Bay. However, there seems to be a
trend where new state laws are enacted and old ones are reinterpreted with the
distinct objective of protecting parochial local commercial interests from
out-of-state online competitors. It is neither new nor unusual for local
commercial interests to appeal to their local governmental authorities for
relief from new competitors made possible by technology or innovation. Some of the greatest efficiencies accruing to the economy
and the individual consumer from the Internet and e-commerce has been in a
dramatic reduction in the need for and cost of distribution. As such, many
traditional industries in the business of being intermediaries or middleman are
faced with significant competition from online providers of such distribution
services. The hearing today focuses on three
industries: (1) contact lens (2) wine and (3) auction houses. The current
intermediaries in the first two industries, optometrists and wine
distributors/retailers, face potentially significant direct competition from
online providers of the same distribution services. While, auctioneers face a
serious competitive challenge in e-Bay, not an auction house in the traditional
sense, but a "cybermall" of sorts that allows sellers and buyers, from
around the world, come together and trade over 10 million listings for goods and
services on a given day. In the context of their respective industries,
today's witnesses will highlight some of the anticompetitive effects on their
online businesses from state laws and regulations, some with clear protectionist
intent, while most serve as a barrier to e-commerce, because they are relics of
a by-gone era. There are many other industries where state law and regulation, either
unintentionally or intentionally, is impeding the growth of e-commerce. Some of
those other industries are subject of a forthcoming workshop at the FTC. The
Commission has scheduled a three-day workshop on the issue before us this
morning starting October 8th. The Commission hopes, among other things, to
better understand the particular state laws and regulations that impede
e-commerce by having panels of experts addressing certain specific industries,
including: retailing, automobiles, cyber-charter schools, real estate /
mortgages, health care / pharmaceuticals / telemedicine, wine sales, auctions,
contact lenses, and funerals (caskets). Upon completion of the Commission
inquiry, including its review of all the pertinent filings made with the
Commission, the subcommittee hopes to have the FTC testify as to their findings
in a subsequent hearing in the 108th Congress. I look forward to hearing the witnesses testimony.
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