Select Page

Electronic Commerce
Wayne State University Law School
Rothchild, John A.

Rothchild – Fall 2013 – Electronic Commerce
Class Notes:
U.S. has the most internet users, which is followed by China and will probably be surpassed by China.
International use of the internet may lead to translation issues.
Pricewaterhouse Coopers’ Report for Online Advertising Revenue.
The original WWW – Radio Article
Originally, the radio was used for sending messages across long distances or rough terrain.  Later it was used for broadcasting.
The internet was originally used for e-mail and now it is used for broadcasting.
In both cases, the use that developed was not the one intended.
RCA broadcasted so people would buy more radios.  This is similar to computers that came bundled with free software.
Voluntary support by users = free content
General tax revenues
Set tax or tube tax (this was like AOL when they charged by minutes)
Class 3 – Regulatory paradigms for electronic commerce
John Berry Barlow, A Declaration of the Independence of Cyberspace (1996)
“Cyberspace consists of transactions, relationships, and though itself, arrayed like a standing waive in the web of our communications.”
“Ours is a world that is both everywhere and nowhere, but it is not where bodies live.”
Spatial metaphors:
“I come from Cyberspace”
“You have no sovereignty where we gather.”
“I declare the global social space we are building to be naturally independent. . . .”
“Cyberspace does not lie within your borders.”
“our world, not yours.”
“there is no matter here”
“you are trying to ward off the virus of liberty by erecting guard posts at the frontiers of Cyberspace.”
He is trying to separate Cyberspace from the physical world.  In this way, it is easier to justify not be controlled by the usual regulations that govern the physical world.
Who built Cyberspace?
“Do not think that you can build [cyberspace] as though it were a public construction project.  You cannot.  It is an act of nature and it grows itself through our collective actions.”
He is claiming that cyberspace is created by individuals and therefore it should be governed by the individuals that create it (e.g., private agreements).  In other words, the government did not create the problem so therefore it should not be able to regulate it.
Why was the author so angry?  In 1996, Congress enacted a statute that regulated decency online.  This statute was overruled in ACLU v. Reno, but at the time the author was probably upset about this law.
Government regulation both bad and ineffective
“You have no moral right to rule us nor do you possess any methods of enforcement we have true reason to fear.”
Barlow’s argument is primarily a freedom of speech argument.
Regulation of speech:
Larger audience (access to minors – pornography, profanity, child predators, etc…; access to individuals with criminal motives: bombs, etc…)
More anonymity
Easier entry and lower cost
More personal/verbal acts – conduct
More safeguards to make sure the information gets to the appropriate audience
David R. Johnson & David Post, Law and Borders – The Rise of Law in Cyberspace
Government regulation both bad and futile:
“Global computer-based communications cut across territorial borders, creating a new realm of human activity and undermining the feasibility – and legitimacy – of laws based on geographic boundaries.”
Government regulation is infeasible.
“The volume of electronic communications crossing territorial boundaries is just too great in relation to the resources available to government authorities.” [5] This may be wrong.  It may be easier to decipher digital information than analog information like voice over telephone lines.
China is able to regulate well because users need to get online through one centralized pipe.
Notice problems (e.g., Am I in Canadian Cyberspace?)
Regulation of all by all.
“By asserting a right to regulate whatever its citizens may access on the Net, [state] authorities are laying the predicate for an argument that Singapore or Iraq or any other sovereign can regulate the activities of U.S. companies operating in Cyberspace from a location physically within the United States.  All such Web-based activity, in this view, must be subject simultaneously to the laws of territorial sovereigns.” [6] We consent to the power of the government by living in the country.  Why draw a line between internet activity and other activity?
This article represents the Libertarian view.
Jack L. Goldsmith, Against Cyberanarchy
Scope of legitimate regulation.
“[A] transaction can legitimately be regulated by the jurisdiction where the transaction occurs, the jurisdictions where significant effects of the transaction are felt, and the jurisdictions where the parties burdened by the regulation are from.” [8] This means that more than one jurisdiction may have stake to a claim.
Lack of notice as to what jurisdiction will lay stake to a claim is commonplace.
Scope of enforcement power.
A country can enforce a judgment:
In its own territory, if the defendant is located or has assets there
In another country, if it obtains personal jurisdiction and the other country recognizes the judgment and the defendant is located or has assets there
In its owner territory, if it can extradite the defendant [10] Impediments:
Other countries may not recognize jurisdiction (e.g., If Singapore says it has personal jurisdiction over me).
Criminal behavior must be criminal in both places.
Theoretically, it makes sense, but enforceability is limited.
John Rothchild, Protecting the Digital Consumer: The Limits of Cyberspace Utopianism
What you do online may be available everywhere, however, it may have different effects.  For example, only selling to location A; not location B.
Uncertainty of location.  800 numbers have the same problem as the internet.  In other words, online activity is not that different than other activities.
Tony Long, It’s Just the “internet” Now
The article discusses using a lowercase “i” for the internet
“I do all my research on the Interent”
“Don’t you just love the Web?”
“I’ll call you on the Telephone”
“I saw it on the Television”
Pluralist Approach of Online Conduct
Transnational Cyberspace Law
Enforceability (no transnational enforcement agency)
Transactional Intermediaries
Any entity that is an indispensable participant in online transactions can regulate conduct through contractual or technological restrictions.
Payment intermediaries (e.g., PayPal)
e.g., disallowing online gambling.  Many states prohibit gambling online and gambling is less convenient (e.g., send a money order).
Also have a

hore gambling.
Class Notes:
How does the WTO enforce its decisions?  Enforcement is through trade sanctions such as tariffs on imports from Antiqua.  The problem is that the U.S. may not care about import tariffs from Antiqua. 
A violation of TRIPS may allow Antiqua to violate copyright laws, etc… This is another way to harm the U.S.
Approaches to controlling offensive foreign content:
Establish national filtering system
Requiring domestic ISPs to implement filtering
Making it illegal for its residents to receive the content
Establishing uniform global restrictions that all countries will enforce against content providers located within the jurisdiction
C.   Commerce Clause Limitations on State Power to Regulate Online Activities
American Libraries Association v. Pataki, 969 F.Supp. 160 (S.D.N.Y. 1997)
Facts: The plaintiffs represent a variety of individuals and organizations that use the internet to communicate, disseminate, and display information.  The sought a preliminary injunction against a New York criminal statute that outlawed sending any content over the internet that depicts nudity to a minor, regardless of who initiated the communication.
Ruling: The preliminary injunction is granted.  The New York law violates the Commerce Clause.
Major Point/Reasoning:
Only Congress is allowed to legislate in areas that affect interstate commerce.
Internet analogy: “I shot an arrow into the air; it fell to the earth I know not where.”
This represents the fact that it is extremely difficult to limit where internet communications are sent to.  For example, a message from NY to NY may pass through NJ.
The act concerns interstate commerce.  This is illustrated by the statement above.
New York has overreached by enacting a law that seeks to regulate conduct occurring outside its borders.
The burden the Act imposes on interstate commerce exceeds any local benefit.
Pike Test:
1)      Legitimacy of the state’s interest
2)      Weighs the burden of interstate commerce in light of the local benefit derived from the statute.
Protecting pedophilia is a legitimate state objective, but the local benefits are not overwhelming (e.g., enforcement, other means of protection, notice, etc…)
Dormant commerce clause is a two stage test:
Is there discrimination against other states?  If so, then law is void. If not, then go to 2.
Balance local benefits against the effects on interstate commerce
“The Internet . . . requires a cohesive national scheme of regulation so that users are reasonably able to determine their regulations.  Regulation on a local level, by contrast, will leave users lost in a welter of inconsistent laws, imposed by different states with different priorities.” [44]