Chairman Timothy J. Muris Opening Remarks
Good morning. On behalf of my fellow Commissioners, I'm pleased to welcome you here to the Federal Trade Commission's workshop on Possible Anticompetitive Efforts to Restrict Competition on the Internet. I'd like to extend a particular welcome to our regional offices who are watching by video conference.
When the Internet first began to grow, many thought that e-commerce would serve as an expansive free market, spawning creativity, innovation, and self-expression. The Internet was the wave of the future. It offered consumers new freedom and businesses new ways to deliver goods and services. Some of these predictions are, in fact, coming to pass. For example, retail e-commerce sales increased 24 percent in the second quarter of 2002, to $10.2 billion,(1) while retail sales generally increased only 2.5 percent.(2)
Despite these impressive gains, some observers have suggested that this perception of unfettered competition may be inaccurate. These observers contend that some businesses use government to prevent online competition from new entrants and to hamstring existing companies that want to sell online. In a number of instances and in a number of states, pre-existing regulatory regimes are being extended to the Internet. Through these regulatory regimes, many states now limit online competition for products ranging from cars to caskets to contact lenses and for professional services ranging from law to medicine to real estate. Protecting consumer or other sound public policy interests may drive many of these restrictions. But it bears examining whether particular regimes are pro-competitive and pro-consumer or whether they eliminate cost savings or convenience without sufficient benefits to justify the losses.
We have four principal goals for this workshop:
Let me talk about each goal in turn.
First, we want to enhance our understanding of these issues. I have long believed that the Commission can protect consumers in part by gathering information and studying competing perspectives. Toward this end, in August 2001, the FTC formed an Internet Task Force to evaluate regulations and business practices that could potentially impede e-commerce. The Task Force grew out of the agency's already-formed State Action Task Force, which had been analyzing the antitrust doctrine concerning state regulations generally, and out of the FTC's longstanding interest in e-commerce. Over the past year, the Internet Task Force has reviewed the relevant literature and has met with dozens of industry participants and observers, including e-retailers, trade associations, and leading scholars.
This workshop represents the next stage in the process. By bringing you together here, we hope to gain a comprehensive overview of possible barriers to greater e-commerce, while at the same time learning about specific issues in specific industries. I should reiterate that the FTC is very much in a learning mode. We do not know whether particular restrictions are or are not, on balance, pro-competitive and pro-consumer. Nor have we decided what, if anything, should be done about any possible restrictions that may harm consumers.
The workshop's second goal is to help educate policymakers about the effects of state regulation. We are delighted to have with us this morning Congressman Cliff Stearns, who chairs the House of Representatives' Subcommittee on Commerce, Trade, and Consumer Protection. Two weeks ago, his Subcommittee held a hearing on "State Impediments to E-commerce" that addressed many of these same issues. Chairman Stearns was kind enough to invite us to testify - I commend him for his leadership on these important issues of competition and e-commerce - and we're delighted to have him address us this morning. We're also delighted that Dr. Randall Kroszner, a member of the White House Council of Economic Advisers, will address the workshop later this morning. Through Chairman Stearns, Dr. Kroszner, and the many others here, we hope that this workshop will help policymakers design effective policies to further expand online commerce.
We also hope that the workshop will help educate state policymakers in particular about effective e-commerce policies and that the states will continue educating us about their views. Many of our industry-specific panels will include representatives of state governments. Our final panel on Thursday will include, among others, a state legislator, a state attorney general, and a former governor. The FTC is fortunate to have a terrific cooperative relationship with the states, and we very much look forward to this exchange of ideas and information with them.
I have long believed that federal agencies and the states should cooperate in advancing consumer welfare. Indeed, the Commission recently has been working closely with the states in promoting competition over the Internet. For example, in March 2002, the FTC filed a staff comment before the Connecticut Board of Examiners for Opticians, which is currently considering whether to require stand-alone sellers of replacement contacts to obtain Connecticut optician and optical establishment licenses. In preparing that comment, the FTC's staff worked hand-in-hand with the Connecticut Attorney General's Office to analyze the possible effects of the proposed rule on consumer health and welfare.
The third goal of this workshop is to help educate private entities about the types of business practices that may or may not be viewed as problematic. My comments so far have focused on efforts to use government to limit competition. We also have received reports of private parties employing potentially anticompetitive tactics. Some of the most obviously troublesome conduct involves horizontal refusals to deal. For example, in the late 1990s, a group of 25 Chrysler dealers in the Northwest threatened to refuse to sell certain Chrysler models and to limit warranty service, unless Chrysler limited its supply of cars to an Internet seller. In 1998, the FTC filed an administrative complaint against the dealers. The matter was settled by a consent order that prohibited the dealers' boycott.
We have also seen other reports - some published and some anecdotal - suggesting that other distributors may have applied pressure to discourage their suppliers from selling online directly to consumers. We intend to examine whether, and in what circumstances, this conduct may raise antitrust issues or may address legitimate concerns about free riding and channel conflict. We hope to develop a better understanding of the conduct and reasons for or against limiting retail sales over the Internet.
The final goal of the workshop is to learn of additional avenues to promote competition through e-commerce. As I've mentioned, we have already testified before Congress and filed staff comments in Connecticut regarding these issues. We also have filed three other comments involving Internet issues. In North Carolina and Rhode Island, the Commission filed joint comments with the Department of Justice commenting on proposals to require the physical presence of an attorney for all real estate closings and refinancings. More recently, in federal district court in Oklahoma, we filed an amicus brief explaining that the FTC's Funeral Rule protects consumers by promoting competition among providers of funeral goods, including online casket sales. Through this workshop, we hope to discover additional ways for the Commission and other policymakers to promote competition over the Internet.
I look forward to a productive, informative workshop.