Private Internet Governance

This article analyzes the effectiveness and limitations of the regulation of electronic commerce by private entities on the Net. In this sense, this work has a narrow focus. It is concerned about regulation of e-commerce and the improvement of regulatory regimes on the Net by attempting to increase the overall social welfare of both firms and consumers. My analysis relies on two detailed case studies of: (a) the regulation of online privacy rights by BBBOnline, and (b) the regulation of Internet domain names and addresses by the Internet Corporation for Assigned Names and Numbers (ICANN). In putting together these case studies, I have relied exclusively on publicly available information. I study the advantages and disadvantages of each regulatory regime and consider the problems faced by both types of institutions in efficiently managing a regulatory system. I then demonstrate how this system can be improved through governmental involvement. I claim that the failure of these third party institutions (TPIs) to create a regulatory framework for the Internet is proof of the need for a carefully defined government role. Based on the insights from the case studies, I then define this role for government as one that is intended to solve problems in the self-regulatory approach by setting minimum baseline standards for regulatory issues such as online privacy, preventing the capture of private regulators through meaningful oversight, increasing the participation of firms in private regulatory initiatives, and also serving as the enforcer of last resort.