New Jersey Law Journal November 30, 2007

THE AMERICANIZATION OF E-COMMERCE LAW - AMERICAN LAW HAS BECOME THE PREEMINENT LEGAL FORCE WITH INTERNET COMMERCIAL TRANSACTIONS

By Jonathan Bick Bick is counsel to WolfBlock Brach Eichler of Roseland and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of 101 Things You Need To Know About Internet Law [Random House 2000].

Some compare the Internet to the lawless West of yore, and believe that no e-commerce law exists. They point to the fact that about two-thirds of all e-mail is unwanted 'spam,' unsolicited commercial e-mail, and that although Internet gambling is illegal in every state, millions of Americans gamble online, generating about $6 billion in revenues for the approximately 2,000 Internet gambling sites.

Others see the Internet as a set of mutually agreeable protocols, and suppose that e-commerce participants apply trade law akin to their medieval trade fair predecessors. They highlight the fact that peer-to-peer networks remains very high despite the efforts of copyright owners to shut them down and that anonymous e-mail is regularly used to make false marketing claims. However, due to the prepensely of Americans to engage in e-commerce and for American courts and governmental agencies to accept, resolve and publish e-commerce cases, it is fair to say e-commerce is dominated by American law.

American law's dominance with respect to commercial Internet transactions arises in part due to the fact that 35 percent of the world's Internet users are American and more than 80 percent of the world's e-commerce transactions involve at least one American party. The Department of Commerce estimates that total U.S. retail e-commerce sales for the second quarter of 2007, was $33.6 billion (see www.census.gov/mrts/www/ecomm.html).

This level of activity has resulted in more than 100 reported e-commerce lawsuits in 2007. In short, because the United States has the most traditional territorial sovereignty over the people, goods and facilities associated with e-commerce, its law is the most influential e-commerce regulator.

Another fact that allows the United States to impose its law on so much e-commerce is that the Internet relies on a master naming and numbering authority that provides the translation key for Internet addresses. The authority's servers are located in the United States, and the United States government has ultimate control over the master naming and number authority. United States courts can order involuntary changes in e-commerce domain names and thereby influence most e-commerce transactions.

Even when foreign courts use their laws to limit e-commerce, usually American court will be involved. Consider the Yahoo case involving French law. Yahoo was sued in France for violating French law by selling unlawful goods. A French court ordered Yahoo to 'take all necessary measures' to block visits by Internet users in France to Nazi auction sites available on Yahoo.com, or face the prospect of the seizure of Yahoo-owned assets in France. Yahoo did not change its policy and did not comply with the French court's ruling until an American court stepped in to enforce the order.

New Internet software also helped American courts impose American law on Internet transactions. In particular, Internet location software, known as Geo-ID services, sends tracing packets to Web site visitors with the content the visitor's request. While this tool was designed to allow advertisers to feature advertisements of local merchants, help credit card companies identify fraudulent online purchases and let Major League Baseball stream video online without breaching blackout commitments to local television stations, it also allowed plaintiffs and defendants to demonstrate American jurisdiction.

The fact that e-commerce users rely on the cooperation of intermediary computers operated by large American companies -- such as Internet service providers, search engines and credit card companies -- also yields a sufficient nexus to allow American courts to intervene. In the past, the United States enacted laws requiring search engines and credit card companies to block certain transactions to help enforce governmental prohibitions on particular e-commerce transactions.

While the number of Internet users in China passed 100 million in 2005, relatively few are e-commerce participants. The Chinese government has an International traffic firewall which dramatically diminishes e-commerce. Further, the software that makes the Internet possible was designed and is administered by the same American firms that were part of the Internet boom, such as Cisco and Yahoo, which suggests that when e-commerce is allow for the average Chinese citizen, American firms and, therefore, American law will be a factor.

Among the most significant sources of e-commerce activity is auctioneering, which is dominated by an American firm, eBay. Initially eBay relied on informal dispute resolution and laws which resembled those used to resolve disputes at medieval trade fairs. However, today eBay implements traditional forms of government law enforcement, particularly American law. Currently, eBay auctions result in traditional binding contracts and its full-time security staff of 800 work very closely with law enforcement to fight fraud and help the police investigate eBay-related crimes. If one of the participants is American, the standard eBay agreement will default to American law.

It should be noted that although American law may be the law initially applied to e-commerce transactions, another jurisdiction may supersede. The Wall Street Journal posted a story on its Web site in October 2000, suggesting that Australian billionaire Joseph Gutnick had engaged in dishonest activities. Gutnick read the story online from Australia and brought a libel suit in an Australian court against the Journal's parent corporation, Dow Jones & Company (Dow Jones). Dow Jones attempted to apply American law based on the fact that its servers were in the United States. The Australian court disagreed, ruling that the tort of defamation occurs where the person who downloads the material is located. Dow Jones settling the matter.

Traditional territorial governments continue to play a critical role in the development and management of e-commerce. If an entity has goods that may be seized, store fronts that may be pad-locked shut or people who may be arrested, then the jurisdiction where these things are located may assert that its laws apply. Such physical coercion by government is a feature of a traditional legal system. In other words, since so many e-commerce firms have an American presence, American law may be imposed.

While e-commerce law may be enforceable online, primarily through self-help devices, such as barring a user from an e-commerce site, these actions are uncommon. On the other hand, American regulatory techniques, such as barring credit card firms from accepting certain e-commerce transactions, are widely used. Thus, American administrative law, statutes and court decisions add to the Americanization of e-commerce law.

A decade ago, it was popular to think of e-commerce as an unregulated market place. Some of this perception is still reflected in the opinions of Internet users today. However, during the last decade, e-commerce has become more tied to our physical-world experience and American law has become the pre-eminent legal force.