Expanded FTC Powers Tops New iAWFUL List

NetChoice's periodic list of what the coalition of e-commerce businesses considers to be bad for the Internet includes the Wall Street Reform and Consumer Protection Act, which would streamline the Federal Trade Commission's rule-making procedures.

Legislation approved by the U.S. House aimed at greater regulation of the financial industry tops the latest edition of the iAWFUL (Internet Advocates' Watchlist for Ugly Laws) Top 10 by NetChoice, a coalition of trade groups that includes the IAC and the Electronic Retailing Association.

The Wall Street Reform and Consumer Protection Act includes a provision that would streamline the Federal Trade Commission's rule-making authority by eliminating some of notice and comment rules required since 1975. While the bill is principally aimed at financial institutions, NetChoice fears FTC Chairman Jon Leibowitz would use the new authority to gain approval for his proposal to require Websites to get opt-in permission to serve ads based on users' surfing habits.

"Our 2010 iAWFUL list includes legislation that has the potential to mortally wound already struggling online retailers," said Steve DelBianco, executive director of NetChoice, at a Feb. 18 teleconference. "In many cases, proposals intended to fix short-term problems risk gutting the long-term success of our economy's engine of growth."

DelBianco said NetChoice supports opt-in requirements before sites could collect consumers' sensitive personal information, but that an opt-in rule for sites to collect data to deliver relevant advertising would severely hurt companies offering free Web services.

"When it dries up that ad revenue, where else will these sites get the revenue to provide free information and free services to people online?" DelBianco said. "They're going to have to either start charging for it or stop providing it." DelBianco said only about 5 percent of users typically choose to opt in to new services.

The other nine pieces of legislation on the NetChoice list involve cash-strapped states seeking new ways to extract taxes from the Internet. For instance, Colorado, Illinois, Maryland, Vermont and Virginia are seeking to force out-of-state advertisers such as Amazon to become tax collectors because they use in-state Websites to publicize their products. 

"States are increasingly trying to expand Internet sales taxes by forcing online retailers to become tax collectors and by imposing new taxes on online services," said DelBianco. "Tax collectors' creativity knows no bounds when it comes to designing new schemes for extracting cash from large and small businesses."