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Controversial Net Sales Spur Legislative Battle
Policymakers are encountering the proliferation of e-commerce issues such as online gambling, direct shipment sales of alcohol and fire arms, and consumers who are frustrated by the growing onslaught of online junk mail. In turn, both federal and state lawmakers are working to address the issues, creating a turf battle between the groups and highlighting the difficulties of solving these new economy challenges.
Online Gambling Is A Risky Business
Federal lawmakers have struggled over how to craft Internet gambling for three congressional sessions. The number of online gamblers worldwide is expected to triple by 2004, according to market researcher River City Group. Pegged at producing nearly $10 billion in revenue by 2004, online gambling has industry groups and state lawmakers eager to embrace the possibility of huge profits and tax revenues.
While Rep. Bob Goodlatte, R-Va., and Sen. John Kyl, R-Ariz., are working on crafting bills dealing with banning online gambling, Rep. Jim Leach, R-Iowa, has introduced a measure to ban the use of credit cards and electronic financial services to participate in online gaming.
Some major companies, such as American Express, already prohibit the use of credit cards for online gaming transactions.
The fight for a federal ban on Internet gaming could face new hurdles this year as states make their move. Last week, the Judiciary Committee of Nevada's assembly addressed a bill, AB 296, to authorize the state's gaming commission to regulate online gaming, if it so chooses. The bill's chief co-sponsor, Assembly member Merle Berman cited the change in international rules regarding the treatment of Internet gaming and the potential lose of tax revenue as key factors in considering the issues.
"The most substantive shift in the [legislative] landscape is that you are seeing some states looking to tackle the same goals [as the federal government] ... through a regulatory process rather than through a prohibition, " said Sue Schneider, a co-founder of the Interactive Gaming Council.
Nevada is not alone. Two New Jersey lawmakers introduced a similar measure that would let the state's gaming commission regulate online gambling operated by established Atlantic City casinos.
But the case for a federal ban on gambling received a boost last week when Australia's Office for Information Economy released a draft report that found it would be technically possible to ban online gambling.
Enforcing a total ban on online gambling would be difficult, experts say, because so much of e-gambling occurs off shore.
Internet service providers (ISPs) are concerned over the liabilities of filtering access to gambling sites. Barbara Dooley, president of the Commercial Internet Exchange (CIX), said that ISPs will suffer if they are expected to police the content that runs through their wires.
Several states are moving to outlaw online gambling on a state level, inducing California and Oregon, where lawmakers have introduced bills on the matter within the last month. A California bill, AB 1229, targets gamblers and Web site operations, while two measures in Oregon, HB 2823 in the House and SB 755 take an approach similar to that of Leach, to ban online payments. Oregon's Senate passed SB 775 on Friday.
Online Alcohol Sales Brew New Challenges
Efforts to promote the online distribution of alcohol saw a major setback in the passage of legislation in the 106th Congress.
It has been several months since the passage of the "21st Amendment Enforcement Act," sponsored by Sen. Orrin Hatch, R-Utah, handed a major victory to alcohol distributors by enforcing direct shipment laws for the sale of alcohol via the Internet. But legal challenges to the legitimacy of direct shipment laws are working their way through various state and federal courts.
Under the Hatch bill, which was signed into law in November, states have jurisdiction to sue wineries in federal court for violations of direct shipment laws. "Any winery that ships this way faces huge liabilities," said Clint Bolick, a vice president at the Washington, D.C.-based Institute for Justice. Bolick serves as the lead counsel in Swedenberg vs. Kelly, a New York case in which vintner Juanita Swedenburg, David Lucas and consumers sued New York state's liquor authority in an attempt to overturn the prohibition on the direct shipment of wine to buyers.
Bolick also is a plaintiff in a similar, ongoing Virginia case. It is one of seven cases nationwide. Indiana consumers who filed a case are awaiting a decision from the U.S. Supreme Court.
While one Hill source said that the issue is "dead" in light of the passage of the Hatch legislation, any outcome in the courts could change the landscape of the issue.
Meanwhile, industry groups continue to press their case. The Coalition for Free Trade tracks the legal challenges to the direct shipment laws, while a consumer group called Free The Grapes promotes state legislation.
States across the country have been tackling the issues with mixed success. The Georgia legislature defeated a bill, S.B. 208, the Electronic Commerce Home Delivery Act, that would have allowed home delivery of beer and wine. Other states such as Connecticut, Indiana, Massachusetts and Mississippi are considering legislation to allow for direct sale of wine to consumers within the state. Meanwhile, Wyoming Gov. Jim Geringer, R, signed legislation, HB 132, enabling limited direct shipments of wine to residents, beginning July 1.
Lack Of Data Affects Online Gun Sale Debate
The 107th Congress may have another opportunity to tackle the issue of selling guns over the Internet.
Two measures introduced in the 106th Congress saw little progress. Sen. Charles Schumer, D-N.Y., had introduced S. 637, or the Internet Gun Trafficking Act, and Rep. Bobby Rush, D-Ill., has introduced a companion measure in the House, H.R. 1245, which would have banned the online sale of guns. Similarly, Patsy Mink, D-Hawaii, tried to push H.R. 1702, but the issue saw very little action.
One "reason why the issue is not mature is because there is very little data," explained a Democratic congressional staffer. "No one has really comprehensively looked at how big of a problem it is."
While a Schumer spokesman indicated that the congressman likely will reintroduce the measure and Mink last month reintroduced her bill, numbered H.R. 726 in the 107th Congress, Hill sources said the issue still is not a top priority.
Putting Spam In The Can Proves Difficult
Efforts to crack down on unsolicited e-mail are moving forward as the House Committee on Energy and Commerce approved a major anti-spam measure last month. Co-sponsors of the Unsolicited Commercial Email Act, Reps. Heather Wilson, R-N.M., and Gene Green, D-Texas, offered a substitute bill, H.R. 718, to allay concerns raised in an earlier subcommittee markup of the legislation.
While the bill enables spam victims to seek damages in lawsuits against spammers, changes to the bill prohibit class action lawsuits and prevent state attorneys general from collecting damages when prosecuting consumer cases against spammers.
S. 630 in the Senate, sponsored by Sens. Conrad Burns, R-Mont., and Ron Wyden, D-Ore., would offer similar protections and provisions, but it reins in legal enforcement mechanisms.
Industry groups such as direct marketing and financial services companies are wary of provisions where they say vague language could create legal loopholes, and leave businesses liable for legitimate communications that could be misconstrued as spam.
Reps. John Dingell, D-Mich., and Ed Markey, D-Mass., last week asked the Securities and Exchange Commission to provide a report on the e-mail and spam practices of financial services companies to determine if "such practices are consistent with the purposes of " the Wilson-Green measure.
But major financial companies such as Visa, Bank of America and Charles Schwab, and major industry associations like the American Insurance Association could turn the tide of the debate this year, persuading House members to vote down a measure should it arrive on the floor. Likewise, the groups could fuel opposition in the Senate once the Burns-Wyden bill is taken up, congressional sources said.
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