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Hands off of Net shopping

Internet shoppers have an unlikely friend fighting on their behalf: Uncle Sam. CNET News.com's Washington watcher, Declan McCullagh, describes the clash between states and the federal government over Net sales regulation.

WASHINGTON--Americans shopping on the Internet have an unlikely friend who is beginning to fight for lower prices on their behalf: Uncle Sam.

It's easy to beat up on the federal government, and many criticisms are justified. But occasionally, once every few decades or so, the federal government does something worthwhile. And striving toward cheaper products and more efficient online markets is entirely praiseworthy.

In this case, the federal government is fighting against tax-happy state legislators. The latter are becoming increasingly worried about their residents buying cheaper products over the Internet--and not paying state sales taxes or funneling purchases through local campaign-contributing businesses. Prohibitions vary, but products that can't be legally purchased online in some states include cars, fine wine, funeral caskets--and even contact lenses.

Such prohibitions are just nuts. Local businesses should not have the right to prohibit customers from shopping online for better deals. Protectionist state politicos shouldn't interfere with the natural evolution of the free market, which brings additional choices, lower prices and far more competition.

The people who deserve praise work at the Federal Trade Commission and the Department of Justice, two massive bureaucracies that somehow have recognized that politicians at the state level have gone too far. Both have criticized state barriers to electronic commerce in the past, and the FTC is convening a three-day workshop next week on the topic. (Disclaimer: I've been invited to testify.)

Local businesses should not have the right to prohibit customers from shopping online for better deals.

Rep. Cliff Stearns, R-Fla., chairman of a House subcommittee overseeing commerce and consumer protection, also has recognized the problem. Stearns has introduced a useful bill, stating that "no state or political subdivision thereof may enact" laws that unreasonably prohibit Internet purchases. All too often, such proposals unreasonably extend government's reach beyond what the Constitution permits--this bill is one of the few reasonable exercises of Congress' power to regulate interstate commerce.

Last week, Stearns convened a hearing that was designed to highlight some of the wackier antics by state legislatures and bureaucrats.

Tod Cohen, eBay's associate general counsel, said some states are so worried about competition from his employer that they might require people selling items on eBay to obtain state licenses as auctioneers. "Such licensing regimes could require every online seller to obtain state licenses--even in distant states--before he or she can sell goods on eBay," Cohen said.

"In addition, these licensing regimes can be remarkably burdensome," Cohen said. "To obtain an auctioneer license in North Carolina, you are required to pass an exam to prove your auctioneering 'aptitude.' But you cannot take the exam until you have completed a mandatory 80-hour course on auctioneering."

For now, eBay is relying on a self-policing approach. It has compiled a list of prohibited items, which include doozies like autographed items, batteries, event tickets and even "used clothing."

At the hearing Thursday, Rep. Edolphus Towns of New York was the only Democrat to show up. To his shame, Towns brought up the tired digital divide excuse, saying that because many people do not have "the opportunity" to shop online, Congress should do nothing.

"No rational basis"
One group that isn't waiting for Washington politicos to settle their differences is the doughty Institute for Justice (IJ), a merry band of Libertarian litigators in Washington D.C. IJ is a more liberty-friendly version of the venerable American Civil Liberties Union, which generally ignores economic liberties in favor of fighting for themes like a right to welfare.

IJ has sued to overturn two state restrictions on Internet shopping, one banning funeral casket sales and the other banning wine shipments.

The people who deserve praise work at the Federal Trade Commission and the Department of Justice--two massive bureaucracies that somehow have recognized that their counterparts at the state level have gone too far.

It turns out that advertising or shipping alcohol to New York state residents without going through a liquor wholesaler is a crime, thanks to those businesses' political clout and the impenitent bluenoses in the Albany legislature. A decision is expected from a federal judge in that case at any time.

In the second case, IJ is suing the Oklahoma State Board of Embalmers and Funeral Directors, saying the state's ban on casket shipments has "no rational basis." In doing so, IJ is trying to revive an old but vital legal doctrine that says governments need to show some reasonable cause for regulations aimed at businesses--politicians shouldn't be allowed to get away with whatever they want.

IJ filed a 16-page response to the state of Oklahoma on Friday, arguing against the state's motion to dismiss. It also attacks the licensing process that Oklahoma's in-state funeral homes have established for would-be casket sellers as a way to maintain funeral homes' government-created monopoly.

"Instead of explaining how the state?s avowed interest in protecting consumers is advanced by requiring casket retailers to become experts in embalming, restorative art, pathology, microbiology, chemistry, funeral arranging, and other irrelevant subjects, the defendants devote the bulk of their argument to the proposition that the state may, as a general matter, regulate the sale of caskets," the brief says. "Of course it may--but it must do so with a reasonably tailored statute that is rationally related to the ends it seeks to advance."

IJ said, "Defendants seem to believe there are no limits whatsoever on the government?s ability to require people to undergo costly, time-consuming, and expensive training that is only tangentially related to the occupation they wish to pursue."

Well put. Too bad the only politicians who are listening are the feds.