No Cop on the Beat:No Cop on the Beat:Underenforcement in E-Commerce Underenforcement in E-Commerce

and Cybercrimeand Cybercrime

Peter P. SwirePeter P. SwireOhio State University & Center for American Ohio State University & Center for American ProgressProgressSilicon FlatironsSilicon FlatironsFebruary 11, 2008 February 11, 2008

The PuzzleThe Puzzle

Policy for the next AdministrationPolicy for the next Administration Today grows from ongoing research about the Today grows from ongoing research about the

Internet and consumer protectionInternet and consumer protection Old paradigm of mostly local enforcement:Old paradigm of mostly local enforcement:

Local enforcement, county & state – a cop on Local enforcement, county & state – a cop on the beatthe beat

Information is localInformation is local Punishment & deterrent effects are localPunishment & deterrent effects are local Evidence is localEvidence is local

What Changes on the Internet?What Changes on the Internet?

Information problemInformation problem Commons problemCommons problem Forensic problemForensic problem Basic answer: non-local answers needed for Basic answer: non-local answers needed for

non-local problemsnon-local problems More federal – FTC (Cmmr. Leibowitz More federal – FTC (Cmmr. Leibowitz

yesterday)yesterday) More federated – networks of state AGsMore federated – networks of state AGs

The Information ProblemThe Information Problem

Physical world: a cop on the beatPhysical world: a cop on the beat A consumer complaint comes inA consumer complaint comes in

Honest Amy’s Used Cars & Shady Sam’s Honest Amy’s Used Cars & Shady Sam’s Used CarsUsed Cars

Local enforcers have insight/expertise from Local enforcers have insight/expertise from previous complaints & use discretionprevious complaints & use discretion

The Information ProblemThe Information Problem

For online commerce, a complaint comes in to the For online commerce, a complaint comes in to the county consumer protection officecounty consumer protection office

Web site typically far awayWeb site typically far away The county has a tiny fraction of all consumer The county has a tiny fraction of all consumer

problems with the siteproblems with the site The county has weak information for exercising The county has weak information for exercising

discretiondiscretion Likely result is underenforcementLikely result is underenforcement

““Underenforcement” means less enforcement Underenforcement” means less enforcement than we would expect/prefer if purely localthan we would expect/prefer if purely local

The Commons ProblemThe Commons Problem

No commons problem where bad action No commons problem where bad action and victim are localand victim are local Enforcers get credit for stopping local bad Enforcers get credit for stopping local bad

guysguys Local victims are protectedLocal victims are protected Deterrent effects are localDeterrent effects are local

The Commons ProblemThe Commons Problem

Online, enforcement incentives changeOnline, enforcement incentives change ““Why should I spend my scarce prosecutorial Why should I spend my scarce prosecutorial

resources when most of the protection goes to resources when most of the protection goes to victims outside of my jurisdiction?”victims outside of my jurisdiction?”

Deterrence – I’d rather prosecute where strong Deterrence – I’d rather prosecute where strong deterrence locallydeterrence locally

Public choice – I’d rather prosecute where Public choice – I’d rather prosecute where mostly local people are protectedmostly local people are protected

““Let someone else go after them” – a classic Let someone else go after them” – a classic commons problem -- underenforcementcommons problem -- underenforcement

Forensics ProblemForensics Problem

This problem has been recognized in the This problem has been recognized in the literatureliterature

It’s harder to enforce where the evidence is It’s harder to enforce where the evidence is outside of the localityoutside of the locality Harder to get cooperation from distant officialsHarder to get cooperation from distant officials Harder to trace where you don’t have Harder to trace where you don’t have

compulsory process or other sourcescompulsory process or other sources Result is underenforcementResult is underenforcement

Responses to UnderenforcementResponses to Underenforcement

Information problemInformation problem Information sharing: Consumer SentinelInformation sharing: Consumer Sentinel

Commons problemCommons problem Cross-border task forcesCross-border task forces Organize around subject matter – ID theft, Organize around subject matter – ID theft,

spam, etc.spam, etc. Forensic problemForensic problem

COE Cybercrime Convention for criminalCOE Cybercrime Convention for criminal US SAFE WEB Act for FTCUS SAFE WEB Act for FTC

Responses to the ProblemResponses to the Problem

More generally, recognize the need to match More generally, recognize the need to match solutions to the scale of the problemssolutions to the scale of the problems National (and international), so have national National (and international), so have national

solutionssolutions• FTC role for spam, spyware, and other FTC role for spam, spyware, and other

consumer protectionconsumer protection• FTC staffing still far below 1980 levelsFTC staffing still far below 1980 levels

Federated – NAAG and other efforts to match Federated – NAAG and other efforts to match geography with the problemsgeography with the problems

Some ObjectionsSome Objections

““The Internet hasn’t really changed anything”The Internet hasn’t really changed anything” ““Enforcement works better on the Internet”Enforcement works better on the Internet” ““We don’t really want to enforce the law”We don’t really want to enforce the law” ““States need to be laboratories of States need to be laboratories of

experimentation”experimentation” ““The Feds don’t do small potatoes”The Feds don’t do small potatoes”

ConclusionConclusion

The paper highlights the information and The paper highlights the information and commons problems that exist for local commons problems that exist for local enforcement and non-local fraud & crimeenforcement and non-local fraud & crime

Likely need to shift to federal or federated Likely need to shift to federal or federated enforcement enforcement

For whatever level of enforcement we want for For whatever level of enforcement we want for each type of law, the next Administration should each type of law, the next Administration should design strategies that address these problemsdesign strategies that address these problems