Down by Law

Powerful industry lobbies are fighting tooth and nail to stop online competitors.
Magazine Contributor
2 min read

This story appears in the April 2002 issue of Entrepreneur. Subscribe »

Over the past two years, Old Economy companies ranging from wine wholesalers to contact lens manufacturers have used their lobbies to inhibit e-commerce. For example, last January, a federal law influenced by wine and spirits wholesalers curbed online wine sales. Similarly, some brick-and-mortar auctioneers have pushed for state laws inhibiting sales by eBay.

This protectionism has significant ramifications. The Progressive Policy Institute (PPI), a Washington, DC, think tank, estimates e-commerce barriers cost American consumers and businesses $15 billion annually. This wasted money often comes out of the pockets of entrepreneurs. Access Markets, a New York City research firm, estimates at least 5 million small companies currently conduct commerce on the Internet.

There are numerous examples of how blocking e-commerce harms entrepreneurs. Curbs on eBay hurt small businesses, because many smaller companies save by buying equipment there. Optometrists and contact lens manufacturers, who have used legal action to prevent the sale of contacts on the Web, have hurt small companies that sell contact lenses online. Jeremy Benson, president of Napa, California, wine marketing company Benson Marketing Group, says e-commerce is how most small vineyards survive, because most wholesalers and supermarkets only carry wines from a few large vineyards. Says Benson, "[Small vineyards would] have to sell three bottles to a wholesaler to make the same profit they do selling one bottle on the Web."

There is some cause for optimism. Lawsuits are challenging laws curbing e-commerce; for instance, Family Winemakers of California, an organization of small vineyards, is suing the state of Florida for prohibiting online wine sales to Florida citizens.

According to Robert D. Atkinson, director of the Technology & New Economy Project at the Progressive Policy Institute, "The current Congress seems more amenable to online commerce than I'd thought." For example, Congress recently extended the moratorium on sales taxes for goods bought online.

And progress eventually overcomes most deterrents. Look at the outcome of America's Horse and Mule Association's campaign to limit the use of trucks and cars in the 1920s.

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