Group Releases List of 10 Worst Bills for E-commerce

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A handful of bills in state legislatures across the U.S. are creating the biggest legal threat to e-commerce in several years, trade group NetChoice said.

NetChoice released its first Internet Advocates' Watchlist for Ugly Laws (iAWFUL) Tuesday, with state legislation making up nine of the 12 bills on the list, and the remaining three bills in the U.S. Congress.

The combination of a struggling economy and the move of more activities online has created a major push to regulate the Internet, said Steve DelBianco, executive director of NetChoice. Legislative efforts to regulate the Internet are "more dangerous" now than at any time since the mid-1990s, when there were efforts to restrict Internet content, he said.

"We have seen for 10 years an increasingly diverse and aggressive effort by states, and to a lesser extent federal, to control, restrict and stifle innovation on the Internet, especially when it comes to finding ways to tax just about anything and everything we do online," DelBianco said.

Four bills on the iAWFUL list attempt to levy new taxes on Internet users. A bill in North Carolina, S.B. 99, would create a tax for event tickets resold specifically on the Internet. That's in conflict with a 2007 law passed by Congress prohibiting Internet-only taxes.

A second North Carolina bill, H.B. 558/S.B. 487, would tax the purchase of digital music, movies and other content. That bill would discourage Internet users from using the most environmentally friendly way of purchasing media, DelBianco said.

Neither of the sponsors of the two North Carolina bills was immediately available for comment.

A New York bill would tax online job-seeking and résumé services, even though services offered by traditional headhunters are not taxed in the state, NetChoice said. A Connecticut bill would expand sales tax collections by online retailers.

Topping the list is a New Jersey bill that would create new civil and fraud penalties on social-networking and other Web sites for failing to investigate and report to law enforcement complaints about sexually offensive and harassing comments posted on their pages. The law would apply to Web sites that allow users under age 18 to create profiles and have users in New Jersey.

The legislation, pushed by New Jersey Attorney General Anne Milgram, would open up social-networking sites to lawsuits for posts made by members, contrary to federal law, DelBianco said. Most large social-networking sites already offer users ways to report abusive behavior and investigate those complaints, he said.

The legislation could also stifle free speech by forcing social-networking sites to investigate complaints of innocuous comments, and Web sites would likely be forced to take down a wide range of comments, DelBianco said.

"Web sites, which will be faced now with adverse publicity and cost of expensive lawsuits, are going to have to lower the bar for what kind of harassing speech it takes to get kicked off the site," he said. "This is sort of like empowering any kid who doesn't like you to have you kicked off the playground."

Someone from Milgram's office wasn't immediately available for comment on the NetChoice list. Neither was bill co-sponsor Assemblyman Nelson Albano, a Democrat.

Since compiling the list two weeks ago, NetChoice has seen some positive changes to two bills on the list. A California bill that would have required social-networking sites to deploy technology to prevent users from downloading each others' photos has been amended, and now only requires that the sites notify users that their pictures can be downloaded by others.

A Texas bill that would have required cybersecurity standards similar to those used by the payment-card industry (PCI) on e-commerce vendors has died. But a Nevada bill requiring businesses to encrypt data using an encryption technology adopted by an established standards-setting body has become law, NetChoice said.

The Nevada bill fails to recognize that other encryption methods may be appropriate for businesses, DelBianco said. "Mandates like this are innovation killers," he added.

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