Eight Important Online Retail (and Marketing) Policy Issues

A few weeks ago at the Darden School of Business Online Marketing Update, Scott Silverman, Executive Director of Shop.org, shared his thoughts on some of the major issues facing online retailers today. (Apologies for the lag in getting the slides online.) Among the issues discussed, Scott covered internet security, privacy, net neutrality and the issue of retailers collecting sales tax from interstate purchases. Here’s the presentation (pdf): Eight Important Online Retail (and Marketing) Policy Issues Thanks for sharing the great info, Scott. ______________________________________________________ Presentation as Text: (The pdf presentation is easier to read.) Eight Important Online Retail (and Marketing) Policy Issues Online Marketing Update @ Darden Scott Silverman Executive Director, Shop.org – NRF’s Digital Division

US eCommerce sales, 2007 to 2012 Online retail will be resilient in the face of tough economy 17% growth in 2008 Tale of two shoppers High-income shoppers still drawn to online shopping for convenience and selection Those affected by the economy drawn to online shopping to save money Security Consumers are concerned that their credit card or identity can easily be stolen online The Payment Card Industry Security Standard (PCI) was first designed to secure Internet credit card transactions. TJX recently entered into a 20 year consent decree with the FTC citing security deficiencies as a result of non-compliance with PCI. DSW and BJ’s entered into similar agreements following their breaches. Congress is considering several data security bills, including proposals that would allow the FTC to set security standards like those required for banks for the retail industry. 40 states have passed breach notification laws. Privacy Consumers are concerned that their private information may be easily shared or exploited online FTC recently issued proposed “self-regulatory” principles for “behavioral advertising,” which Shop.org has submitted comments. Our top concerns where: No distinction between first- and third-party advertising Focus on the collection of data rather than the use No demonstration of the consumer harm that the principles are attempting to protect against State for Federal Issue? Dormant Commerce Clause Interchange Mastercard and Visa control 80% of payments card market $40 billion in credit card “interchange” fees collected each year and rising. Online retailers pay the highest “card not present” credit card fees – as much as 4 percent – due to fraud risk But, online retailers bear the financial burden of fraud. If a product purchased with a stolen or fraudulent credit card leaves a warehouse the real cardholder is not responsible for the charge and the retailer bears the loss. Credit Card Fair Fee Act introduced March 6, 2008 by House Judiciary Committee Chairman John Conyers, D-Mich. A hearing and mark-up is expected by mid-May. Sustainability Consumers would like to receive fewer catalogs due to the impact on the environment Most online retailers also use catalogs and direct mail Some states have proposed “do-not-mail” legislation Net Neutrality Should those who control the “pipes” of the Internet have the ability to control the content flowing through them? Cable and phone companies and the FCC don’t believe that any new laws or regulations are required Publishers and First Amendment advocates say no, and have supported legislation to keep the pipes “neutral” Sales Tax Online-only retailers and catalogers prefer not to collect sales tax from interstate purchases Maintain the 1992 Quill vs. North Dakota decision Store-based retailers prefer a level playing field and promote uniformity among state sales tax regimes Congress is considering HR 3396, the “Sales Tax Fairness and Simplification Act” which would give states the power to directly collect sales tax on Internet transactions as part of the Streamline Sales Tax Project Earlier this month, New York passed a state budget that requires online retailers to start collecting NY state sales tax if their “partners” operate in the state of NY Partners = affiliate marketers Patent Trolls Companies (usually law firms) acquire broad and vaguely defined business process patents they do not intend to use themselves and sue online retailers for patent infringement Example: Computer-Based System for Ordering Goods and Services Via the Internet Most defendants settle to avoid legal fees involved with going to trial House has passed a patent-reform bill in September 2007, but a counterpart bill is stalled in the Senate after being approved by the Judiciary committee in July 2007 Internet Tax In Nov 2007, President Bush signed the "Internet Tax Freedom Act Amendment Acts of 2007" Moratorium on Internet usage tax extended through 2014.

Presentation as pdf: Eight Important Online Retail (and Marketing) Policy Issues

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