Readers of this publication seem to come from two very distinct and very different backgrounds. One group consists of veterans of the adult video and/or print industry who have gone hi-tech; the other group is comprised of veterans of the computer industry who have either tip-toed or plunged into the Adult Internet World.
Those of you in the former group understand all too well something which those in the latter group may not: The most irritating villain when it comes to adult entertainment can be local government - states, counties, townships, municipalities, villages, and so on. And the smaller the unit of government, the more inept but domineering it is likely to be. But whatever local government you might be dealing with, two things are clear. First, local politicians invariably think that it is their station in life to protect their constituency from sex. Second, all such local governmental entities have the ability to put you in jail. This often proves to be a very dangerous combination.
Local adult businesses normally have found themselves endlessly tussling with the hierarchy of local government - typically city, county and state. On the other hand, historically, mail-order distributors, for whatever reason, have rarely found themselves confronted by local prosecutors; the typical fear in that realm always has been federal prosecution for interstate transportation or mailing of obscene material. If you remember Operation Post Porn, you come from the ranks of adult video people who have crossed into the world of ones and zeros.
Local politicians, of course, will do whatever it takes - on any front - to get themselves reelected. This was recently demonstrated in California where the City of Santa Monica enacted an ordinance forbidding banks from charging additional ATM fees for non-customers. As you might expect, the result exemplified the myopia and stupidity of local politicians. The banks reacted as any sane business person would expect, by saying that they had been in the business of selling a service to non-customers (i.e., cash from ATMs), that the customers always had been free to use other ATMs if the fees were too high and, most significantly, that the banks were not about to go to the trouble and expense of supplying free services to non-customers, so they pulled the plug. As a result, people who live in Santa Monica found themselves bereft of a convenience, all because the idiots in City Council thought they knew best just exactly what was good for their constituency. Now, it might occur to you that banking generally is regulated by state and federal governments, not by cities and towns. Indeed, as this column went to press a judge had decided just that, issuing a temporary restraining order against enforcement of the law, apparently on the grounds that cities were preempted from entering the field of banking legislation.
Now, the Internet - boy, is that ever a plumb for a politician! With all of the publicity and controversy about sex on the Internet, sponsoring a law against that kind of thing is certain to result in one "photo op" after another. After all, the goal here is getting reelected, not doing the right thing. This is the perfect opportunity for a media feeding frenzy.
However, federal courts are beginning to embrace the concept that states have no business regulating the Internet. In particular, two recent decisions have approved of the principle that the Internet is inherently a phenomenon of interstate commerce that can be regulated only by the Federal Government.
Until recently, the only decision lending meaningful support to this concept was American Libraries Association v. Pataki, 969 F.Supp. 160 (S.D.N.Y. 1997). There, the court granted a preliminary injunction against a New York statute prohibiting use of a computer to disseminate harmful materials to minors. Noting that states' regulatory reach under the Commerce Clause of the United States Constitution is related to geography but that "geography... is a virtually meaningless construct on the Internet," the court found that "the menace of inconsistent state regulation invites analysis under the Commerce Clause... because that clause represented the framers' reaction to overreaching by the individual states that might jeopardize the growth of the nation - and in particular, the national infrastructure of communications and trade - as a whole."
Importantly, the court observed, "the Internet is wholly insensitive to geographic distinctions. In almost every case, users of the Internet neither know nor care about the physical location of the Internet resources they access." Finding that the "nature of the Internet makes it impossible to restrict the effects of the New York Act to conduct occurring within New York," that the state was free to use its obscenity and child pornography laws to protect children and, very significantly, that the Internet, like rail and highway traffic, requires a cohesive national scheme of regulation so that users can evaluate their legal obligations, the court found that the statute ran afoul of the Commerce Clause of the Federal Constitution. However this was only one court, albeit the very prestigious Southern District of New York in Manhattan, and only a preliminary injunction rather than a final judgment.
Of late, however, there are signs that courts indeed may go further in the direction of frustrating local regulation of the Internet. Last summer, in Cyberspace Communications., Inc. v. Engler, 55 F.Supp.2d 737 (E.D. Mich. 1999), the court faced a Michigan statute, much akin to the one in New York, which was the subject of a preliminary injunction two years earlier and likewise granted a preliminary injunction against enforcement of the statute, one reason for which was the same Commerce Clause argument embraced in the New York case.
Most recently and most importantly, the United States Court of Appeals for the Tenth Circuit affirmed a preliminary injunction against a New Mexico statute, again prohibiting dissemination by computer of materials harmful to minors. This higher court, although primarily disapproving the statute on the same grounds as was the federal counterpart in Reno v. A.C.L.U., also embraced the conclusions of the two cases above, concluding a likely violation of the Commerce Clause.
But sex isn't the only component of the Internet issue which is mesmerizing local and state governments. The big feeding frenzy will come to fruition over the issue of taxes. As we all know, most products can be sold over the Internet with substantially less overhead than at a storefront or shopping mall. Witness Amazon.com. And as retail commerce dwindles at storefronts and shopping malls, so too does local tax revenue - sales tax, gross receipts tax, or whatever. Local governments have been miffed enough about not being able to tax mail-order sales. The growth of the Internet has them spinning.
Just like everyplace else, in local government, money is power. It will be interesting to watch various governmental factions square off to divide the spoils of the inevitable taxes which will be levied on Internet services. Presently, the Internet Tax Freedom Act generally provides that "[n]o State or political subdivision thereof shall impose any of the following taxes during the period beginning on October 1, 1998, and ending 3 years after the date of the enactment of this Act," enumerating various taxes including, importantly, Internet access and discriminatory taxes on electronic commerce. So, come October 1, 2001, watch local governments scramble for their money!
It is important to every aspect of the Internet that it be free from local regulation, particularly that which is serviced by the readers of this publication. Keep an eye on this as local politicians scramble for a chunk of the money which the Internet is sure to generate and the publicity which they think they can get for promoting morality over the 'Net.
(Clyde DeWitt is a partner in the Los Angeles, California law firm of Weston, Garrou & DeWitt. He can be reached through AVN Online's offices, at his office at 12121 Wilshire Boulevard, Suite 900 Los Angeles, CA 90025 or over the Internet at [email protected]. Readers are considered a valuable source of court decisions, legal gossip and information from around the country, all of which is received with interest. Books, pro and con, are encouraged to be submitted for review, but they will not be returned. This column does not constitute legal advice but, rather, serves to inform readers of legal news, developments in cases and editorial comment about legal developments and trends. Readers who believe anything reported in this column might impact them should contact their personal attorneys.)
