Summary of Testimony of Charlie Condon, Attorney General of South Carolina

Federal Trade Commission Workshop on
"Possible Anti competitive Efforts to Restrict Competition on the Internet"

October 10, 2002

Good Afternoon, I want to thank Ted Cruz and his staff here at the FTC for organizing this workshop and for focusing on this important subject. It is indeed refreshing to see a federal agency taking into account the views of the states when crafting policy.

Milton Freidman once said that "Most of the energy of political work is devoted to correcting the effects of mismanagement of government." I agree with that sentiment and I think that we can prevent unnecessary laws and regulation from being drafted in the first place through discussions such as this between state and federal officials.

The very fact that we are here discussing the role of government in regulating this technology that has developed over the past ten years and has become available to millions of Americans is amazing. The growth of the Internet, its availability to the masses, and its penetration into almost every facet of our culture is a testament to the greatness and power of free markets. The freedom to innovate is at the heart of the American entrepreneurial spirit. The idea that someone can invent a better mousetrap is really the essence of the American dream. We have seen this happen in the past twenty five years. Steve Jobs and Bill Gates literally invented the personal computer and the software to make it work in their garages and apartments. We have now seen the invention of computers that people can carry in their coat pockets. Who knows where we will go tomorrow. I believe that it is the first duty of the government to do no harm to this innovative culture that comes from freedom.

It is important for those of us in government to understand that while we have a role in protecting the rights and freedoms of citizens, that our role is limited. Markets over time tend to correct themselves efficiently and old ways of doing business give way to ones in a rapidly changing environment where technology is daily generating new products and new ideas. The role of government is not to manage the creation of new technology, but to guard against artificial outside influences limiting its availability to the public. Government should not be the overarching controller of the market, but a watchdog to ensure that the freedom to innovate continues to exist.

Along with my fellow Attorneys General, I often take action to ensure that illegal, anticompetitive practices such as price fixing are punished. When prices are artificially kept higher than the market dictates, consumers, and ultimately the economy suffers. This is the proper role for government to play in a free society. Any action beyond this role and the government becomes a force for the protection of the same artificial forces that it is our duty to keep away from free enterprise. No government at any level should allow itself to become the price fixer for any one actor in the economy.

I have seen an example of this type of unwise action in my state. Automobile dealers proposed that the sale of cars over the Internet by manufacturers should be illegal. In other words, the car makers are unable to sell cars directly to the public, cars may be bought only through car dealers in South Carolina.

It is my opinion that laws such as this are unconstitutional and unwise. It sets up the government as an actor in the market to keep prices artificially high for the consumer. Neither that state, nor the federal governments should be in the business of artificially controlling prices.

I don't believe that this is a reason for the federal government to begin micro managing state efforts to ensure fair competition. Overreaching from the federal level to the states would be an equally undesirable situation.

It is also important to recognize that it is a legitimate duty of government to protect consumers from fraudulent and illegal activity. Businesses that operate over the Internet should not be shielded or exempted from laws that non electronic businesses must follow.

I routinely get questions and complaints about online pharmacies, often based outside of the country, selling popular prescription medicine directly to consumers without a legitimate doctor's prescription. I have been advised of medicines such as Oxycontin, and steroids being sold from online pharmacies. I believe that this is an area where the federal government can assist states in ensuring that online pharmacies are legitimate and safe. Because these companies often operate outside of the Unites States, the cooperation of the federal government is essential in controlling these rogue pharmacies.

One issue that is always discussed in regard to the Internet is the application of sales taxes to sales over the Internet. I want to applaud federal officials from working with states to move with caution on imposition of taxes on the Internet. I believe that the collection of sales taxes over the Internet should be left up to the individual states to decide.

As I said earlier, government at all levels must not harm competition or be trapped in protecting one business over another. We should be cautious of rushing to do things that harm innovation or creativity. We should never forget that the American Dream and future economic growth depend on the willingness of Americans to innovate. We should never discourage the future Bill Gates from chasing his dream. Because ultimately, his dream is often ours as well.