Message to Congress: Unify e-commerce laws

By Stephen M. Ryan

For business-to-business and overnment-to-business electronic commerce to prosper, Congress must clean up the patchwork of overlapping and sometimes conflicting federal and state laws, regulations, agency interpretations and court decisions that govern Internet transactions.

Buyers and sellers need thoughtful government decisions to safeguard e-commerce, and they need them sooner, not later. This does not mean government should mandate one technology over another or compete with businesses offering e-commerce products.

Face it: Congress will have to adjudicate between state laws and regulations and a uniform federal law.

Medieval times

Digital signature legislation provides a perfect example of the important role Congress must play. In the Middle Ages, when few people could write, notaries evolved as a mechanism to authenticate whose X was on the page. We face a similar policy hurdle today. How should e-commerce users authenticate and use electronic signatures for the successful operation and growth of electronic commerce?

A digital or electronic signature is a method of signing an electronic message that identifies and authenticates a particular person as the source of the electronic message. About 40 states have laws regulating digital signatures; few of them match.

At least 50 bills have been introduced in the House and Senate to regulate digital signatures in some way at the national level.

What principles should guide decision-makers? First, federal law should pre-empt state laws and provide uniformity. Second, good laws ought to foster competition, reward innovation and give every new technology the chance to prove itself.

There are important caveats: In the legislative process, smaller, focused bills are often easier to understand, pass and administer than omnibus bills that try to cure all problems for all people.

The digital signature bills now under consideration range in complexity and in the extent of government involvement they envision. They vary according to specific industries. Pending bills cover medical records, Social Security records and securities transactions, for example. Some of the bills simply amend existing law to encourage the use of electronic transmission of records and signatures.

Security and authentication requirements can either be technology-neutral or technology-specific. Some of the electronic commerce bills propose extensive government involvement in setting standards and in approvals. Businesses using digital signature technology are concerned about slow government approval processes and laws that might mandate dated technologies. Some state bills already identify specific technologies, some of which are indeed obsolete.

Similarly, conflicting state laws are costly for customers, both private and government. The banking regulators recently warned banks about using digital signatures because some state jurisdictions do not authorize their use and because they are not explicitly authorized under state or federal law for certain transactions. Several of the bills introduced in Congress have federal pre-emption provisions, but state regulators are sure to fight to retain their jurisdiction.

It seems as if half the committees of Congress are jumping into the act'more, certainly than you might be used to seeing. Members of the Commerce and Judiciary committees of the House and Senate are literally competing to introduce legislation. Some bills are referred to both committees, and at least one has also had a third referral to the Judiciary Committee.

Other bills have been referred to the Senate Banking, Housing and Urban Affairs Committee, but there are jurisdictional claims by the House Commerce Committee because of the split in the jurisdiction over securities transactions in the House. Several bills that include personal data protection provisions and related privacy proposals have been referred to the House and Senate Banking committees, the House Commerce Committee and the House and Senate Judiciary committees.

Bills requiring federal agencies to set standards for their electronic transmissions with one another and with the public have been referred to or are being developed in the House and Senate by the Armed Services, Small Business, Science and other oversight committees.

Perhaps e-commerce demands a lighter touch, but it does need informed legislators to keep it on the right track.

Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan.
E-mail him at

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