1. No Cop on the Beat: Underenforcement in E-Commerce and Cybercrime
Peter P. Swire
Ohio State University & Center for American Progress
Silicon Flatirons
February 11, 2008

2. The Puzzle Policy for the next Administration
Today grows from ongoing research about the Internet and consumer protection
Old paradigm of mostly local enforcement:
Local enforcement, county & state – a cop on the beat
Information is local
Punishment & deterrent effects are local
Evidence is local

3. What Changes on the Internet?
Information problem
Commons problem
Forensic problem
Basic answer: non-local answers needed for non-local problems
More federal – FTC (Cmmr. Leibowitz yesterday)
More federated – networks of state AGs

4. The Information Problem
Physical world: a cop on the beat
A consumer complaint comes in
Honest Amy’s Used Cars & Shady Sam’s Used Cars
Local enforcers have insight/expertise from previous complaints & use discretion

5. The Information Problem
For online commerce, a complaint comes in to the county consumer protection office
Web site typically far away
The county has a tiny fraction of all consumer problems with the site
The county has weak information for exercising discretion
Likely result is underenforcement
“Underenforcement” means less enforcement than we would expect/prefer if purely local

6. The Commons Problem
No commons problem where bad action and victim are local
Enforcers get credit for stopping local bad guys
Local victims are protected
Deterrent effects are local

7. The Commons Problem Online, enforcement incentives change
“Why should I spend my scarce prosecutorial resources when most of the protection goes to victims outside of my jurisdiction?”
Deterrence – I’d rather prosecute where strong deterrence locally
Public choice – I’d rather prosecute where mostly local people are protected
“Let someone else go after them” – a classic commons problem -- underenforcement

8. Forensics Problem This problem has been recognized in the literature
It’s harder to enforce where the evidence is outside of the locality
Harder to get cooperation from distant officials
Harder to trace where you don’t have compulsory process or other sources
Result is underenforcement

9. Responses to Underenforcement
Information problem
Information sharing: Consumer Sentinel
Commons problem
Cross-border task forces
Organize around subject matter – ID theft, spam, etc.
Forensic problem
COE Cybercrime Convention for criminal
US SAFE WEB Act for FTC

10. Responses to the Problem
More generally, recognize the need to match solutions to the scale of the problems
National (and international), so have national solutions
FTC role for spam, spyware, and other consumer protection
FTC staffing still far below 1980 levels
Federated – NAAG and other efforts to match geography with the problems

11. Some Objections “The Internet hasn’t really changed anything”
“Enforcement works better on the Internet”
“We don’t really want to enforce the law”
“States need to be laboratories of experimentation”
“The Feds don’t do small potatoes”

12. Conclusion
The paper highlights the information and commons problems that exist for local enforcement and non-local fraud & crime
Likely need to shift to federal or federated enforcement
For whatever level of enforcement we want for each type of law, the next Administration should design strategies that address these problems