Though it is still early in the information technology revolution, e-commerce is transforming the way people shop.
Although consumers and companies in most sectors enjoy the choice and lower prices e-commerce efficiencies allow, some business and professional interests are fighting the transformation. To protect their markets and profits, auctioneers, car dealers, wine distributors, travel agents, real estate agents, optometrists, funeral directors, and even the U.S. Postal Service are fighting e-commerce competitors in courts and legislatures. For example:
The National Association of Realtors is fighting efforts to provide useful access to home listings online, which would allow efficient and cost-saving direct negotiations between buyer and seller. Under New York law, homebuyers can save time and effort in finding a home by using the Internet to search listings, but they cannot save any money over regular commissions by buying directly from the seller. Similarly, sellers hoping to avoid commissions by advertising their houses on the Internet are forbidden by law from doing so in California unless they have a real estate license. However, in 2004, a California district court ruled that the advertising restriction was unconstitutional.
In these and other cases, the entrenched players fearful of e-commerce competition justify e-commerce restrictions on the grounds that online sales compromise consumer protections. In fact, in all cases, state laws can be designed to protect both consumers and competition. For example, wine producers have reached agreements with some states and all major courier companies to ensure that the age of the recipient is verified upon delivery and that appropriate taxes are remitted for Internet wine sales. Companies that sell contact lenses over the Internet must receive a valid prescription from the prescribing doctor. In addition, the Federal Trade Commission protects e-commerce consumers by providing a website as an easy-access portal for making complaints against domestic and foreign e-commerce companies. Given the market's competitive pressures and the government's enforcement mechanisms, online sales clearly need not compromise consumer protections.
As most restrictions on e-commerce are matters of state law, state and local legislators will play a pivotal role in reforming the system to allow for more efficiency and consumer choice. Legislators in California, for instance, recently asserted the right of consumers to buy their contact lenses from whomever they choose so long as they present a valid prescription. In 2003, Virginia passed a model piece of legislation permitting producers and retailers to ship wine and beer directly to consumers if they verify age, remit taxes, and pay a $50 annual license fee. But, for each of these pro-consumer laws, several pro-entrenched interest, anti-consumer counterparts have been proposed and many passed.
In evaluating any legislation that would impact e-commerce, legislators should consider:
1. Implications for consumer choice;
2. Effects on new and innovative channels of commerce; and
3. Whether means other than limiting e-commerce could ensure the same consumer protections intended by proposed restrictions.
Careful consideration of these factors will help legislators determine whether e-commerce restrictions are necessary infringements on choice in the public's interest, or merely protection for entrenched players threatened by e-commerce competition. Legislators considering these factors will do much to facilitate the natural growth of e-commerce and deliver the new choices and lower prices that consumers deserve.
Virginia Chapter 1030, 2003
leg1.state.va.us/cgi-bin/legp504.exe?031+ful+CHAP1030
The Contact Lens Rule, Federal Trade Commission
www.ftc.gov/os/2004/06/040629contactlensrulefrn.pdf
Robert D. Atkinson, "The Revenge of the Disintermediated: How the Middleman is Fighting E-Commerce and Hurting Consumers," Progressive Policy Institute, January 2001
www.ppionline.org/ppi_ci.cfm?knlgAreaID=107
&subsecid=123&contentid=2941
Robert D. Atkinson and Thomas G. Wilhelm, "The Best States for E-Commerce," Progressive Policy Institute, March 2002
www.ppionline.org/ppi_ci.cfm?contentid=250162
&knlgAreaID=140&subsecid=900055
Robert D. Atkinson, "State Impediments to E-Commerce: Consumer Protection or Veiled Protectionism?," Testimony before the House Committee on Energy and Commerce, Subcommittee on Commerce, Trade and Consumer Protection, September 26, 2002
www.ppionline.org/ppi_ci.cfm?contentid=250910
&knlgAreaID=140&subsecid=900055
Shane Ham and Robert D. Atkinson, "Modernizing Home Buying: How IT Can Empower Individuals, Slash Costs, and Transform the Real Estate Industry," Progressive Policy Institute, March 2003
www.ppionline.org/ppi_ci.cfm?contentid=251396
&knlgAreaID=140&subsecid=900055
Brian Newkirk and Robert Atkinson, "Buying Wine Online: Rethinking the 21st Amendment in the 21st Century," Progressive Policy Institute, February 2003
www.ppionline.org/ppi_ci.cfm?contentid=251266
&knlgAreaID=140&subsecid=900055
"Public Workshop: Possible Anticompetitive Efforts to Restrict Competition on the Internet," Federal Trade Commission, October 8-10, 2002
www.ftc.gov/opp/ecommerce/
anticompetitive/index.htm
"Massachusetts, New Jersey, Maryland, Washington and California Top State Rankings in Transitioning to New Economy, Says ITIF-Kauffman Foundation Report"
http://www.itif.org/index.php?id=33
Paul Weinstein
Progressive Policy Institute
600 Pennsylvania Ave. SE, Suite 400
Washington, DC 20003
(202) 547-0001
(202) 544-5014 (fax)
pweinstein@ppionline.org
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