Should the Government Be an E-Commerce Cheerleader?

At the onset of the busiest shopping season of the year, e-commerce in the United Kingdom got a big boost from the British government in the form of a media blitz designed to get shoppers "clicking with confidence."

The campaign, built around the idea that it is safer to shop online than many people think, followed an in-depth study into why more UK residents were not buying online. The goal of the government's push was to allay fears about online security and data privacy.

It is too early to tell if the campaign will have the desired effect, but it is clear that the measures are extraordinary when compared to the arms-length approach the U.S. government has taken toward e-commerce.

Few analysts expect the U.S. government's laissez-faire attitude toward e-commerce to change anytime soon.

"I don't think anything is going to happen to allay consumer fears," Forrester Research analyst Christopher Kelley told the E-Commerce Times.

Lost Dollars

Those fears are costing the e-commerce industry a ton of money, according to some reports. A recent Forrester study found that this year alone, US$15 billion of potential e-commerce will be lost due to concerns about online privacy and security.

"Right now, the Federal Trade Commission believes that no legislation is good legislation, so they're likely to stay out of things," Kelley added. "That's too bad, because right now, the big problem is uncertainty. Anything that adds to that is going to keep more people from buying online."

Do Not Enter

Of course, to many in the e-commerce business, the government's decision to let the industry rise and fall on its own merits, without help or hindrance from the Feds, is just as it should be.

"Government can have a role, but that role should be as an observer and in some cases an incubator," Vince Sampson, a spokesperson for the technology lobbying group NetChoice, told the E-Commerce Times. "We don't have a problem with the government getting involved except when regulations are used by old-world companies to create barriers."

NetChoice formed earlier this year to lobby for limited government regulation of the tech sector. Backers include Orbitz, EBay (Nasdaq: EBAY) and other e-commerce companies.

At its launch, NetChoice said traditional retailers and suppliers were preventing e-commerce from breaking out, adding costs to consumers by building barriers.

Fighting Words

Sampson said that government and an open marketplace for e-commerce can co-exist, but admits the relationship is often a tense one.

He cites examples such as the dispute in the state of Texas in which regulators are claiming that legal decisions and opinions cannot be posted freely on the Web.

"Government shouldn't be absent for aggrieved parties," said Sampson. "But its presence is probably not needed in most cases."

Watchdog Role

And while Uncle Sam is unlikely to become a proactive cheerleader for buying online, in its role as watchdog, the government has been actively involved in shoring up confidence in e-commerce. The FTC has prosecuted online fraud, investigated porn sites accused of stealing credit-card information, and carefully vetted proposed mergers among online firms.

For example, the agency recently said it will investigate the merger of the two leading Internet audience measurement firms, NetRatings and Jupiter Media Metrix. The FTC has also gotten involved in privacy debates, such as the uproar created when Toysmart.com folded and attempted to sell its customer database.

At the same time, however, the agency has steered clear of regulating spam or unsolicted commercial e-mail.

Long Way To Go

Overall, the measures taken by the U.S. government are not likely to be enough by themselves to convince many skeptical or downright scared shoppers to give e-commerce a try, said Kelley.

Even when consumers are dealing with a trusted company, 60 percent worry about what will happen to their personal data should it fall into the hands of a third party.

"Consumers aren't sure what exactly they want in terms of regulation, but they want something," Kelley added. "They want to feel confident and so far, what they've seen out there hasn't allowed them to feel that way."