FTC Told of State Barriers to E-Commerce

Computerworld - WASHINGTON -- State regulations are preventing e-commerce from reaching its potential and costing consumers billions of dollars, the U.S. Federal Trade Commission was told earlier this month at a workshop on the impact of state rules on Internet businesses.
There appeared to be little disagreement among e-commerce experts on the harmful impact of state rules that, for instance, can stymie Internet-based real estate brokers from offering services at lower commissions and automakers from offering discounted vehicles.
Robert Gertner, an economics and strategy professor at the University of Chicago, said that if e-commerce-based transactions could reduce the typical 6% real estate commission by 1% and lower the cost of a car by 2%, consumer savings would exceed $10 billion annually.
Restrictions on Internet sales "have limited the ability of e-commerce companies to provide consumers with the full potential of the Internet," said Gertner. "The justifications for these restrictions are typically weak."
The FTC, which is responsible for ensuring that competition isn't impeded, hasn't decided whether state restrictions are justified.
"The FTC is very much in a learning mode," said commission Chairman Timothy Muris. "We do not know whether particular restrictions are or are not, on balance, pro-competitive or pro-consumer. Nor have we decided what, if anything, should be done about any possible restrictions that may harm consumers."
But Rep. Cliff Stearns (R-Fla.), chairman of the House Subcommittee on Commerce, Trade and Consumer Protection, argued that state laws are being used to protect industries from Internet-based competition.
"There are many industries where state law and regulation are either unintentionally or intentionally impeding the growth of e-commerce," Stearns said.
State rules, as well as industry practices, that make it difficult for e-commerce firms vary widely. For instance, some states require financial services and real estate companies to maintain offices within the state in order to conduct business there. Some states are considering laws that would extend their auctions rules to online sellers and franchise laws that would limit direct sales by automakers.
But opponents of these state rules said the commerce clause of the U.S. Constitution prohibits these restrictions.
"I think we have to take seriously the notion of federal preemption," said Robert Atkinson, vice president of the Progressive Policy Institute., a liberal think tank in Washington. "Ensuring that we have robust, cross-border commerce is a role for the federal government to step into."

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