While the Wall Street Journal has noted one disturbing aspect of Sen. Chris Dodd (D-CN)’s sprawling mortgage industry bailout bill (HR 3221) –the required fingerprinting of mortgage loan “originators”–Sen. Dodd and his Republican colleague Richard Shelby (R-AL) last week introduced an even more disturbing amendment (Subtitle B of S.AMDT.4983) that would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government,” as reported by FreedomWorks (and noted briefly by the WSJ).
Specifically, online payment systems such as eBay’s Paypal, Amazon, and Google Checkout (along with banks and credit card networks such as Visa, MasterCard and Discover) would be required to report,
(1) the name, address, and [Taxpayer Identification Number] of each participating payee to whom one or more payments in settlement of reportable transactions are made, and
(2) the gross amount of the reportable transactions with respect to each such participating payee.
This requirement would produce, starting in 2011, a detailed record of information about every “participating payee”–i.e., anyone receiving at least 200 online payments in a year worth at least $10,000 in total. This record would include entries for not only most online merchants but also the “long tail” of small sellers through sites like eBay who eke out more than $10,000 in revenue (not profit) as well as those who collect donations online, as many non-profits, blogs and other user-supported sites do. Such granular data collection becomes particularly troubling when one considers that, individual payees would be identified by social security number, as would sole proprietors of small businesses who use their own social security number instead of obtaining a separate Employer Identification Number. Continue reading →
Remember that old Saturday Night Live character, the Pathological Liar, played by Jon Lovitz? He’d deliver outrageous lies, like the recurring one that he was married to Morgan Fairchild. When he realized he’d thought of a particularly good lie, he’d exclaim “Yeahhh! That’s the ticket!”
Future references to tickets may only be idiomatic if a new paperless trend for concerts and sporting events takes off. Ticketmaster has introduced what it calls a “Paperless Ticket” and Veritix has a paperless ticketing technology called Flash Seats. The concept is the same – no more paper tickets.
But to me paperless tickets are not the ticket for consumer convenience.
Ticketmaster touts the convenience of paperless tickets: “Fans will no longer have to stand in line to pick up tickets at will-call”, it says, and the “entire process is quick, secure and simple.”
And, after all, it sounds appealingly convenient. It’s similar to ordering movie tickets from home on Fandango. But this is one advancement in technology that heads in the wrong direction.
First of all, check out this line from the Ticketmaster press release:
Fans who ordered tickets can simply present venue door staff their credit card, along with a valid photo ID, and they’ll be given a receipt and granted immediate access.
I added the italics for emphasis. So fans must present the credit card used in purchasing the tickets and a government-issued photo identification for admittance? Continue reading →
Today the Politico ran an article on online retail theft, an issue that NetChoice has been working on for a while now. In the article Retail Merchants want Feds to Crack Down Online, writer Lisa Lerer does a good job of laying out the position of traditional retailers:
The stores blame online auction sites — particularly those that allow sellers to offer items anonymously — for boosting the crimes from a few stolen razor blades to enough theft to supply a burgeoning industry. They want Congress to limit the types of items that can be sold online and to require the sites to investigate their sellers.
Retailers are also going to the states. There were bills in Maryland and Colorado, among others, that would prohibit a state’s residents and businesses from selling common consumer items such as cosmetics, non-prescription drugs, food products, and baby formula on any internet auction.
Here’s the reality: when retailers blame online marketplaces for organized retail crime, they don’t want you to know about the root causes of their theft problems. The National Retail Federation conducted its own study of the problem in 2005, and found that:
- Most retail theft occurs from a store’s own employees and retail vendors. Shoplifting accounted for less than one-third of all theft.
- Retailers have pursued fewer prosecutions, arrests, and invoked civil recovery laws less frequently in 2005 compared to previous years.
- Retail theft is not increasing. The rate has generally declined over the years, and is 12% lower than it was just 4 years earlier.
Continue reading →
In a new PFF essay, my colleague Barbara Esbin and I address a recent petition filed by the Rural Cellular Association (RCA) asking the FCC to prohibit exclusive arrangements between wireless handset producers and carriers. The RCA petition claims that large wireless companies have an unfair market advantage by giving their customers exclusive access to certain advanced smart phones, such as the Apple/AT&T iPhone—and that this anticompetitive practice is harmful to rural consumers served by RCA members.
In the piece, we debunk RCA’s arguments premised on a supposed lack of competition in wireless markets. RCA will likely now redouble these arguments by pointing to Verizon’s planned acquisition of Alltel (by far the smallest of the “Big 5” carriers), which was announced the day our piece was published. But even with four large carriers instead of five, the wireless market remains vibrantly competitive—especially as compared to 1992, when the FCC decided that even the two-carrier market was “extremely competitive,” and rejecting arguments that it ban exclusive handset arrangements. Continue reading →
E-commerce advertising, meet sales tax. Sales tax, meet e-commerce advertising. And they are talking amongst themselves–in a New York court.
Last week Overstock.com filed a lawsuit against New York to overturn the state’s recently implemented sales tax law. Overstock’s suit is in addition to a lawsuit filed by Amazon.com, with both companies saying that New York’s law is unconstitutional and should be overturned.
Overstock’s complaint highlights the disconnect that regulators have with how technology creates new ways to drive business and enhance revenues. Overstock has affiliates, which are websites that contain a link to Overstock.com in exchange for the possibility of earning a commission from purchases made by those visitors who access the Overstock website form the affiliate’s website. New York says these websites, if in New York, are soliciting business sufficient to create a legal nexus for sales tax purposes. Overstock says it’s just advertising.
Here’s where technology makes it interesting. Overstock says:
- It can’t determine whether affiliates are actual legal residents of NY
- It doesn’t control the affiliate websites, and can’t determine whether a specific ad is a direct or indirect solicitation for business.
- Websites aren’t location specific. Are New York websites even soliciting New York consumers?
Continue reading →
As Jim has mentioned, Google stands accused of violating a California law that requires a website operator to “conspicuously post” a link to its privacy policy on its “home page or first significant page after entering the Web site” with the word “Privacy” in a larger font than the rest of the page’s text.
Are we not fortunate to have state laws that make it possible for customers to actually find website privacy policies? With all the billions of documents floating out there in the dark and mysterious pipes and tubes of the so-called “Internet,” how on earth would any simple user ever find the Google privacy policy if Google were not required by law to include an obvious link to that policy on its homepage? Some modern-day da Vinci would have to invent a technology that could magically index every single webpage in existence and let users find—or “search,” to use a classic science-fiction term—for that particular webpage by typing the words “Google privacy policy” and clicking a button.
Until such fantastic Jules Verne-style technologies are developed in some distant century, it is obviouslyvital that each and every state government develop its own requirement as to how website operators—especially those that purport to offer fantastic-but-as-yet-clearly-impossible “search” services—must clutter their websites’ homepages with links to information that no user could ever possibly find on his or her own with today’s crude technology.
Of course, even if such “search engines” (to coin an unlikely phrase) actually existed, the burden on consumers of typing seventeen (17!) letters—plus two (2) spaces and perhaps even two (2) more quotation marks for a total of up to twenty-one (21!) agonizing-to-type characters—would have to be reduced dramatically through some additional innovation or Esperanto-like simplification of the English language before we could reasonably expect that average consumers might be able to find privacy policies on their own without the benefit of California’s enlightened net-paternalism. Continue reading →
As a result of New York’s new sales tax law, Overstock.com announced that it will bid adieu to its New York-based affiliates. 3,400 New York-based affiliate advertisers will no longer provide advertising for the company.
In a previous blog post, I talked about how the New York legislature in April passed a law designed to increase sales tax revenue from Internet sales. The law is referred to as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon and other Internet retailers to collect and remit taxes on all sales to NY residents.
I like Overstock’s reaction here. Instead of rolling over and complying, it’s thumbing its nose at New York’s law and the up to 9.5% sales tax collection burden as Amazon’s lawsuit proceeds in court.
Much of my draft paper, Private Prediction Markets and the Law, focuses on nuts-and-bolts fixes for the legal uncertainty that currently afflicts private prediction markets under U.S. law. I’ll say more about those in later posts to Agoraphilia and Midas Oracle. The paper also dicusses a more theoretical and general issue, though: The benefits of designing regulatory schemes to include exit options.
The Commodity Futures Trading Commission recently issued a request for comments about whether and how it should regulate prediction markets. In earlier papers, I explained why the CFTC cannot rightly claim jurisdiction over many types of prediction markets. I recap that view in my most recent paper, but add some suggestions about how the CFTC might properly regulate some types of prediction markets. In brief, I suggest that the CFTC build exit options into any regulations it writes for prediction markets, allowing those who run such markets the same sort of freedom of choice that U.S. consumers already enjoy, thanks to internet access to overseas markets like Intrade, with regard to using prediction markets. Here’s an excerpt from the paper:
Those practical limits on the CFTC’s power should encourage it to write any new regulations so as to allow qualifying prediction markets to operate legally, and fairly freely, under U.S. law. . . . Ideally, the CFTC would offer prediction markets something like these three tiers, each divided from the next with clear boundaries.- Designated Contract Markets. Regulations designed for designated contract markets, such as the HedgeStreet Exchange, would apply to retail prediction markets that offer trading in binary option contracts and significant hedging functions.
- Exempt Markets. Regulations for “exempt” markets, which impose only limited anti-fraud and manipulation rules, would apply to prediction markets that:
- offer trading in binary option contracts;
- thanks to market capitalization limits or other CFTC-defined safe harbor provisions do not primarily support significant hedging functions; and
- offer retail trading on a for-profit basis.
- No Action Markets. A general “no action” classification, similar to the one now enjoyed by the Iowa Electronic Markets, would apply to any market that duly notifies traders of its legal status and that is either:
- a public prediction market run by a tax-exempt organization offering trading in binary option contracts but not offering significant hedging functions;
- a private prediction market offering trading in binary option contracts, but not significant hedging functions, only to members of a particular firm; or
- any prediction market that offers only spot trading in conditional negotiable notes.
Notably, regulation under either of the first two regimes would definitely afford a prediction market the benefit of the CFTC’s power to preempt state laws. It remains rather less clear whether the third and lightest regulatory regime would offer the same protection, though the cover afforded by its two “no action” letters has allowed the Iowa Electronic Markets to fend off state regulators. Markets that by default qualify for the third regulatory tier described above thus might want to opt into the second tier, so as to win a guarantee against state anti-gambling laws and the like. So long as they satisfy the first two conditions for such an “exempt market” status, public prediction markets run by non-profit organizations or private prediction markets that offer trading only to members of a particular firm should have that right. Why offer this sort of domestic exit option? Because it would, like the exit option already open to U.S. residents who opt to trade on overseas prediction markets, have the salutatory effect of curbing the CFTC’s regulatory zeal.
The footnotes omitted from the above text includes this observation: “Because they fall outside the CFTC’s jurisdiction, markets offering only spot trading in conditional negotiable notes could not opt into the second regulatory tier.”
Please feel free to download the draft paper and offer me your coments.
[Crossposted at Agoraphilia, Technology Liberation Front, and Midas Oracle.]
Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com. New York says it’s soliciting business. The distinction means all the difference in the world for sales taxes, for Amazon, and possibly even print media, television and radio.
Amazon.com sued New York State earlier this month, challenging a newly enacted law that has serious implications for online advertisements. In April, the New York legislature passed a law designed to increase sales tax revenue from Internet sales. The law is known as the “Amazon tax” because of the way it broadens the sales tax law to apply to Amazon’s Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon (and other Internet retailers) to collect and remit taxes on all sales to NY residents.
A little bit of history helps put this law into context. The Supreme Court has held that a state can only impose sales or use tax-collection obligations on an out-of-state retailer if the retailers has a “substantial nexus” with the state (the Quill decision). Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state’s consumers via sales representatives located in the state. However, it can’t be just any sales rep, according to another Supreme Court case — in-state representatives must be “significantly associated with the taxpayer’s ability to establish and maintain a market in the state” (Tyler Pipe). Continue reading →
Don’t take your eye off the ball, people. The FTC’s assessment of $2.9 million against ValueClick does not mean that CAN-SPAM is working. The Inbox at Privacilla.org has about 25,000 spam messages in it – because Rackspace’s hosted email product has such ineffectual anti-spam technology. Oh, and because CAN-SPAM, which was supposed to “can” spam – meaning “end it” – didn’t.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.