State Regulation of Electronic Commerce

Abstract:     
There is a widespread belief that regulation of electronic commerce by individual states is unworkable because firms doing global business on the Internet easily can evade state regulation or, conversely, because firms are subject to excessive regulation due to states' overlapping jurisdiction. Instead, it is believed that electronic commerce is best regulated at the federal or even global level, and that any state regulation should be pursuant to uniform laws. This article challenges this conventional wisdom. It shows that regulation of electronic commerce by individual states has several advantages over federal or uniform state laws and that the problems of state regulation have been exaggerated. First, state regulation provides variety, evolution and competition that is especially well suited to the dynamic nature of electronic commerce. Second, courts can minimize jurisdictional overlaps by enforcing choice-of-law and choice-of-forum contracts. Third, markets alleviate concerns that enforcing contractual choice would lead to a "race-to-the-bottom" in state Internet regulation. Any remaining problems with state regulation should be analyzed in comparison with those that would result under federal or uniform state law.

Number of Pages in PDF File: 78

JEL Classification: K40, D18, K12, H11, D72

Accepted Paper Series