NCPA - National Center for Policy Analysis

A Rush to Gang Up on the Technology Industries

April 6, 2000

The environment that helped produce the high-tech boom -- low regulation, low taxes and minimal government intervention -- is being replaced by an environment of litigation, taxation and the use of government to thwart competitors. So warn some observers.

Even investors are becoming alarmed, as evidenced by plummeting prices on the Nasdaq Stock Market early this week. Not only did the value of shares in Microsoft take a dive after Monday's unfavorable court ruling, the shares of many competing companies plunged in tandem once shareholders recognized the increased threat of intervention in technology markets, analysts say.

In recent months:

  • The Justice Department, states' attorneys general and plaintiffs' lawyers -- the same players that tackled the makers of cigarettes and guns -- have been setting their sights on such firms as DoubleClick, which they accuse of privacy abuses.
  • The National Governors' Association has been pushing aggressively for taxation of Internet sales across state lines -- which would throttle the rapid growth of e-commerce and depress revenues of Internet companies.
  • Alarmed by the prospect of buyers going directly to manufacturers for purchases via the Internet, dealers, suppliers, agents and other middlemen are embracing political rather than competitive strategies -- with auto dealers in South Carolina, for example, pushing a bill prohibiting car makers from owning dealerships and banning Internet auto sales unless dealers are involved.
  • Companies are appealing to politicians to increase telecommunications regulations on the Internet -- an effort that threatens to hold up faster broadband technologies, which are already delayed by bottlenecks caused by local telephone companies.

Source: James K. Glassman (American Enterprise Institute), "Is Government Strangling the New Economy?" Wall Street Journal, April 6, 2000.


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