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March 13, 2002, 9:00 AM ET, Alert No. 387.
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House Crime Subcommittee Approves Internet Gambling Bill
3/11. The House Judiciary Committee's Subcommittee on Crime amended and approved HR 3215, the "Combating Illegal Gambling Reform and Modernization Act", by unanimous voice votes.
The bill was introduced on November 1, 2001. See, bill as introduced [PDF]. It is sponsored by Rep. Bob Goodlatte (R-VA), and 156 other Members of Congress, including Rep. Lamar Smith (R-TX), the Chairman of the Crime Subcommittee.
Expansion of the Wire Act. The bill would amend 18 U.S.C. §§ 1081 and 1084, which contain the definitions and prohibition, respectively, of the Wire Act. The Wire Act currently criminalizes the use of "wire communications facilities" in interstate commerce for gambling. The Wire Act does not ban gambling. This is a matter of state law. HR 3215 expands the prohibition to cover all communications between states or with other foreign countries. It maintains the principle that gambling is otherwise a matter of state law. Hence, under HR 3215, use of the Internet for gambling purposes would become illegal (if interstate or foreign).
The criminal prohibition of the Wire Act, 18 U.S.C. §§ 1084, currently provides that "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers ... shall be fined under this title or imprisoned not more than two years, or both." Since the current statute affects only wire communication facilities, and some Internet communications do not involve wires, it leaves open the possibility that some Internet gambling may not be illegal under the Wire Act.
HR 3215 provides that "whoever, being engaged in a gambling business, knowingly (1) for the transmission in interstate or foreign commerce ..." or between the U.S. and abroad "... of bets or wagers ... shall be fined under this title or imprisoned not more than five years, or both." Hence, it pertains to all communications, not just wire communications. Moreover, the maximum penalty for violation is increased from 2 to 5 years.
Also, HR 3215 would amend 18 U.S.C. § 1081, which currently defines ''wire communication facility'' as "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission." As amended, it would provide that "communications facility" means "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, satellite, microwave, or other like connection (whether fixed or mobile) between the points of origin and reception of such transmission."
Skill Versus Chance. On March 12, the Crime Subcommittee adopted an amendment in the nature of a substitute offered by Rep. Goodlatte. The substitute includes several significant changes to the bill as introduced. One of these changes involves the definitions in 18 U.S.C. § 1081. The substitute defines of "bets or wagers" as "the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game predominantly subject to chance, not skill, upon an agreement or understanding that the person or another person will receive something of greater value than the amount staked or risked in the event of a certain outcome". (Emphasis added.) The words "not skill" have been added to the language of the bill as introduced. (See, page 2, lines 16-23, of bill as introduced.)
Rep. Goodlatte stated at the mark up meeting that games based on skill, such as fantasy sports leagues, would thus not be covered by the Wire Act. Rep. Robert Scott (D-VA), the ranking Democrat on the Subcommittee, asked Rep. Goodlatte if poker would be covered by the Act. Rep. Goodlatte stated that while some poker players might think it a game of skill, it remains a game of chance, and would be covered by the Act.
Illegal Gambling Funding. HR 3215 also criminalizes "the transmission of a communication in interstate or foreign commerce ... which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers". Also, like HR 556, the Unlawful Internet Gambling Funding Prohibition Act, sponsored by Rep. James Leach (R-IA), HR 3215 would prohibit the use of credit, electronic funds transfers, and checks in connection with illegal gambling.
Rep. Goodlatte stated to reporters after the March 12 meeting that HR 556 puts the burden on financial services companies to monitor transactions, while HR 3215 puts the burden on law enforcement entities to prove that illegal gambling is taking place, and requires law enforcement entities to obtain a court order. Rep. Goodlatte added that he would not characterize the financial services industry as supporting his bill; however, he stated that it would prefer HR 3215 to HR 556.
Enforcement. In addition to criminal penalties, HR 3215 would allow federal, state, local, and tribal law enforcement agencies to obtain injunctions against violation of the act. It also provides that "any common carrier, subject to the jurisdiction of the Federal Communications Commission" may enjoined from providing service to entities in violation of the act, and gives such carriers immunity from suit for discontinuing such service.
Rep. Goodlatte stated the federal prosecutors would likely enforce the Wire Act against illegal Internet gambling operations because states which run lotteries, and anti gambling groups, will push them to enforce the law. He stated that HR 3215 is supported by an "unusual coalition"; state lotteries do not want competition from Internet gambling operations, while anti gambling groups are opposed to all gambling.
Internet Service Providers. The amendment in the nature of a substitute adopted on March 12 changes the bill as introduced on the matter of ISPs. The new language is as follows: "Relief granted under paragraph (1) against an interactive computer service (as defined in section 230(f) of the Communications Act of 1934) shall be limited to the removal of, or disabling of access to, an online site violating this section, or a hypertext link to an online site violating this section, that resides on a computer server that such service controls or operates; except this limitation shall not apply if the service is violating this section or is in active concert with a person who is violating this section and receives actual notice of the relief." Rep. Goodlatte stated at the mark up meeting that this is a "notice and take down" provision, which enables law enforcement authorities to obtain a court order compelling an ISP to take down a gambling web site.
State Lotteries. The amendment in the nature of a substitute adopted on March 12 also changes the bill as introduced on the subject of state lotteries. It includes a technical amendment which allows states to operate intrastate Internet lotteries with servers out of state. The new language is as follows: "Nothing in this section prohibits ... the interstate transmission of information relating to a State-specific lottery between a State or foreign country where such betting or wagering is permitted under Federal, State, tribal, or local law and an out-of-state data center for the purposes of assisting in the operation of such State-specific lottery."
Nine members of the Crime Subcommittee -- eight Republicans and one Democrat -- were present at the March 12 mark up. Rep. Goodlatte stated that no date has been set for a full committee mark up. However, he predicted that the committee would approve the bill. In the 106th Congress, the Judiciary Committee approved another Internet gambling bill sponsored by Rep. Goodlatte. The full House then considered it under a suspension of the rules, meaning that it could not be amended, and required a 2/3 majority for passage. It fell just short of a 2/3 majority. Rep. Goodlatte stated that he will seek a rule this time around.
House to Consider Class Action Reform Bill
3/12. The House is scheduled to debate and vote on HR 2341, the Class Action Fairness Act of 2001, on Wednesday, March 13. The House Judiciary Committee approved the bill on March 7 by a vote of 16 to 10. See, House Report No. 107-370. The bill is sponsored by Rep. Bob Goodlatte (R-VA), Rep. Rick Boucher (D-VA), and others.
On March 13, the House Rules Committee adopted a rule for consideration of HR 2341, the Class Action Fairness Act of 2001. It allows nine amendments to be offered. See, texts of allowable amendments [in PDF], by offeror: Issa, Nadler/ Delahunt/ Johnson, Waters, Keller, Lofgren/ Schiff, Conyers/ Lee/ Neal, Lee, Frank/ Berman/ Meehan, and Hart.
The bill, as reported by the Judiciary Committee, would add new sections to Title 28 of the U.S. Code pertaining to procedure governing interstate class actions brought pursuant to Rule 23 of the Federal Rules of Civil Procedure to ensure that the class members are treated fairly in settlements. For example, if a settlement provides that the class members would receive non cash benefits, the court must make "a written finding that, the settlement is fair, reasonable, and adequate for class members". This provision is designed to limit the ability of class action lawyers to negotiate settlements that provide the lawyers with attorneys fees in cash, while leaving the class members with no cash recovery.
The bill would also amend 28 U.S.C. § 1332, regarding diversity of citizenship. It would provide federal jurisdiction in certain class actions where "any member of a class of plaintiffs is a citizen of a State different from any defendant" and the aggregated claims exceed $2 Million. However, it would also provide an exception when "the substantial majority of the members of the proposed plaintiff class and the primary defendants are citizens of the State in which the action was originally filed". This provision is designed to limit the ability of class action lawyers to bring suits in distant forums that are particularly friendly to the class action bar.
NCTA's Sachs Addresses Regulatory Issues
3/12. Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA) gave a speech titled "The Broadband Decade" to the Cable Telecommunications Public Affairs Association Forum in Washington DC. He addressed the FCC's classification of broadband cable services, open access, digital rights management, privacy, and demand for broadband services.
Regulatory Classification of Broadband Cable. Sachs stated that "Later this week, the FCC is expected to determine the appropriate regulatory classification for cable modem service. This sounds like an arcane issue but it's one that has been the subject of lengthy debate and litigation, and it has enormous implications for American consumers who benefit by our deployment of broadband services."
On March 8, the Federal Communications Commission (FCC) announced that the agenda for its Thursday, March 14, meeting includes consideration of a Declaratory Ruling and Notice of Proposed Rulemaking (NPRM) addressing the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. This is GN Docket No. 00-185.
Sachs continued that "We hope the Commission adopts a course that allows our industry to continue to roll out rapidly high speed Internet services in the most cost effective manner. And should the FCC determine that cable modem service is an ``information service´´, then we hope that the Commission will make clear what this means and also make clear that such services are inter-state in nature and not subject to a myriad of conflicting state and local regulations. The Internet is global in reach and a clear national policy statement concerning the regulatory status of cable modem service will provide much needed guidance to the courts, local governments, and the capital markets."
Open Access. Sachs stated that "The government’s ``hand's off´´ policy has been a vital spur to the remarkable pace of cable's broadband development. And industry leaders like AOL Time Warner and Comcast have begun to offer consumers a choice of ISP's, establishing models for other MSO's. As a result of a deregulatory environment, cable's broadband infrastructure and services have evolved rapidly. Had government imposed common carrier type regulation as some of the Bell companies advocated, cable modem service would still be in the starting blocks."
He added that "The ``hands off´´ the Internet policy stands in contrast to the close regulatory scrutiny to which cable’s services were subjected not so long ago. Compare the capital investment by this industry from 1992 to 1996 -- in the wake of regulation imposed by the Cable Act of 1992 -- to the capital investment made since 1996 -- following the de-regulation fostered by the Telecommunications Act that same year -- and, consider the related consumer benefits."
More News
3/12. The Department of Justice (DOJ) announced that it "approved the National Consumer Telecommunications Data Exchange's (NCTDE) proposal to expand its credit data exchange service to include other utility industries. The approval allows NCTDE, currently providing credit histories to telecommunications carriers, to open its membership to the electric power, gas and water industries." See, DOJ release.
3/12. President Bush gave a speech at a fund raiser in Washington DC in which he advocated passage of trade promotion authority legislation. He stated that "we passed a good trade bill out of the House of Representatives. It's a bill that has got confidence in the productivity of American farmers and American workers. It says that if you're confident, you open up markets. If you're confident, you encourage trade as opposed to protectionism. And thanks to the Speaker's leadership, we got trade promotion authority out of the House of Representatives."
3/5. Sen. Charles Schumer (D-NY) and Sen. John Edwards (D-NC) introduced S 1989, the National Cyber Security Defense Team Authorization Act.
3/12. PayPal announced that it has received an advisory opinion from the Federal Deposit Insurance Corporation (FDIC). See, PayPal release.
3/12. The Federal Trade Commission (FTC) announced that it will hold its two day public workshop on issues relating to the security of consumers' computers and the personal information stored in them or in company databases on May 20 and 21. See, notice to be published in the Federal Register. The FTC had previously announced that this event would be held on May 16 and 17. See, notice in Federal Register, March 6, 2002, Vol. 67, No. 44, at Pages 10213 - 10215.
Wednesday, March 13
The House will meet at 10:00 AM for legislative business. The House may take up HR 2341, the Class Action Fairness Act of 2001.
7:30 AM. FTC Commissioner Orson Swindle will speak at the Baltimore Academies Business Professionals Breakfast on "consumer protection and competition issues". Location: Pikesville Hilton, 1726 Reistertown Road, Pikesville, MD.
10:00 AM. The House Financial Services Committee will hold a hearing on HR 3763, the "Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002". Location: Room 2128, Rayburn Building.
10:30 AM. The Senate Appropriations Subcommittee's Subcommittee on the Legislative Branch will hold hearings on the proposed budget estimates for FY 2003 for the Library of Congress (LOC) and the Congressional Research Service. The Copyright Office is a part of the LOC. Location: Room 124, Dirksen Building.
10:30 AM. The Senate Appropriations Subcommittee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing on the administration's proposed budget estimates for FY 2003 for the Department of Commerce. Location: Room 116, Dirksen Building.
Thursday, March 14
The House will meet at 10:00 AM for legislative business.
9:00 AM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold a hearing titled "Patent Law and Non Profit Research Collaboration." Location: Room 2141, Rayburn Building.
9:30 AM. The FCC will hold a meeting. See, agenda. Location: FCC, 445 12th Street, SW, Room TW-C05.
10:00 AM. The Senate Judiciary Committee will hold a hearing titled "Competition, Innovation, and Public Policy in the Digital Age: Is the Marketplace Working to Protect Digital Creative Works?" The witnesses will be Richard Parsons (AOL TW), Craig Barrett (Intel), Jonathan Taplin (Intertainer), Joe Kraus, and Justin Hughes (UCLA Law School). Location: Room 226, Dirksen Building.
10:00 AM - 12:00 NOON. The House Science Committee's Subcommittee on Environment, Technology, and Standards will hold a hearing titled "Technology Administration: Review and Reauthorization". Location: Room 2318, Rayburn Building.
11:00 AM. FTC Chairman Timothy Muris will speak at the 6th Annual Georgetown University Law Center (GULC) Corporate Counsel Institute. Location: GULC, 600 New Jersey Avenue, NW.
12:00 PM. The FCBA will host a luncheon. The speaker will be Craig McCaw, Ch/CEO of Teledesic. A reception will begin at 12:00 NOON, followed by lunch at 12:30 PM. RSVP to Wendy Parish at wendy@fcba.org by 12:00 NOON on Tuesday, March 12. Location: Capital Hilton Hotel, 16th and K Streets, NW.
2:00 PM. The Senate Judiciary Committee will hold a business meeting. Location: Room 106, Dirksen Building.
Friday, March 15
The House will not be in session.
9:00 AM. The AFL-CIO's Department for Professional Employees will host a panel of speakers who will advocate retention of the FCC's newspaper and broadcast cross ownership rules. FCC Commission Michael Copps will speak. See, AFL-CIO notice. For more information, contact Leandra Kennedy at lkennedy @aflcio.org or 202 638-0320. Location: National Press Club, Holeman Lounge, 529 14th St. NW, 13th Floor.
9:30 - 11:00 AM. The Progressive Policy Institute (PPI) will host a panel discussion on the impact of new homeland security efforts on privacy issues. The panelists will be Robert Atkinson (PPI), Shane Ham (PPI), and Jim Dempsey (Center for Democracy and Technology). RSVP to 202 547-0001. Location: PPI, 600 Pennsylvania Avenue, SE, Suite 400.
11:00 AM. FTC Chairman Timothy Muris will give the keynote address at the Consumer Federation of America's Assembly. Location: Washington Plaza Hotel, 10 Thomas Circle, NW.
Deadline to submit comments to the FCC on the World Radiocommunication Conference Advisory Committee's (WRC-03 Advisory Committee) recommendations of February 6, 2002, regarding the 2003 World Radiocommunication Conference (WRC-03). See, notice [PDF].
Monday, March 18
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Costa de Oro TV v. FCC, No. 01-1153. Judges Ginsburg, Henderson and Tatel will preside. Location: 333 Constitution Ave. NW.
12:00 NOON. Deadline to submit requests to USTR to testify orally at its April 1 hearing negotiation of a U.S. Singapore Free Trade Agreement. See, notice in the Federal Register.
Deadline to submit comments to the FCC in response to its notice of proposed rulemaking (NPRM) regarding its unbundling analysis under § 251 of the Communications Act and the identification of specific unbundling requirements for incumbent local exchange carriers (ILECs). The FCC adopted this NPRM at its December 12 meeting. This is CC Docket No. 01-338. See, notice in the Federal Register. Note: SBC submitted a request for extension of deadline [PDF] on March 11.
Tuesday, March 19
9:30 AM - 4:30 PM. The Federal Trade Commission (FTC) and the Department of Justice Antitrust Division will continue their joint hearings titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy." From 9:30 AM until 12:00 NOON, there will be presentations on "Business Perspectives on Patents". From 1:30 until 4:30 PM, there will be presentations on "Business Perspectives on Patents: Biotech and Pharmaceuticals. See, agenda. Location: Room 432, FTC, 600 Pennsylvania Ave., NW.
10:00 AM. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing on the proposed budget estimates for FY 2003 for the FTC, and other agencies. Location: Room 138, Dirksen Building.
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