-Caveat Lector- from: http://www.zolatimes.com/V3.3/pageone.html <A HREF="http://www.zolatimes.com/V3.3/pageone.html">Laissez Faire City Times - Volume 3 Issue 3</A> The Laissez Faire City Times January 18, 1999 - Volume 3, Issue 3 Editor & Chief: Emile Zola ----- Is It Time to Sell Onions on the Internet? by Brad Lips Amid the various traditions of December � hanging stockings, spinning dradels, and disposing of unwanted fruitcakes � something new occurred during the holiday season of 1998: Internet commerce came of age. Boston Consulting Group reports that online sales from Thanksgiving to Christmas more than tripled from prior-year levels. America Online said its 15 million accounts alone were responsible for $1.2 billion in Internet holiday sales. Such numbers may well pique the interest of Washington's policy-makers, who are always attentive to new sources of revenue or new opportunities to expand their regulatory scope. So it is worth investigating how life is evolving out on the digital frontier and whether government bureaucrats will be able to justify any change to the present "hands off" policy. To date, the most successful Internet retailers are operating on business models that are fairly similar to traditional mail order companies, but with more informative presentations, faster feedback and delivery, and often steeper discounts. There are, however, other booming services, which could never have developed outside of cyberspace and this is where things get interesting. A company called eBay, for instance, conducts online auctions by matching sellers with potential buyers who bid on collectibles � from rare coins to Beanie Babies � over a period of days. To a first-time user, the potential for fraud may seem high, given the relative anonymity of participants in these transactions. One can imagine regulators will want to safeguard the public by establishing standards of conduct, requiring licenses for online trading, or using any of their regular tricks to bring conformity to an evolving marketplace. But users of eBay would find this kind of regulatory red tape irrelevant. They create order in this trading universe on their own, by shaming users who fail to deliver goods satisfactorily and by praising those who exceed expectations. A buyer on eBay called Sorny says of his transaction with seller Diamon: "Item well packaged and arrived in good time. Good to do business with." Other sellers were tarred with criticisms, such as "Product not as described. Junk. Over 30 days in shipping. Beware!" These comments are complimented by a "feedback score" which quantifies the number of happy vs. unhappy customers of a particular buyer, so new users can gauge whether or not they want to do business with a particular individual. The feedback mechanisms of eBay show how markets can be self-regulating. This is particularly true on the Internet where the costs of collecting and distributing information are essentially nil. Not only are government agencies unnecessary to these processes, they could have the unintended effect of undermining the existing rules with which current users voluntarily comply. Stepping outside of cyberspace and into the arena of premium produce, we find a real-world example of how a regulatory body that is supposed to serve consumers can wind up operating to their detriment. Onions grown in Vidalia, Georgia, are known for their unusual sweetness, which scientists attribute to the area's low-sulfur soil and mild winters. In 1988, in order to protect the Vidalia name from abuse by imposters, Georgia's State Legislature mandated that only onions grown within a 20-county region could legally represent themselves as Vidalia onions. One problem: some onion farms within these boundaries have higher sulfur levels than others and produce onions that are rather unspectacular. As a result, consumers have no guarantee that a purchase of Vidalia onions would be blessed with Vidalia sweetness. An entrepreneur named David Burrell sought to remedy this situation. He developed a system to measure the sulfur content of an onion and use Global Positioning Satellite technology to predict the sulfur content of the rest of a crop. Burrell could therefore separate the good from the merely ordinary and put a label on it: "Certified Extra Sweet by Vidalia Labs Inc." Once it became apparent that supermarkets would pay a premium for Burrell-approved onions, farmers who peddle not-so-sweet onions became alarmed and turned to the government to intervene. A legal suit followed and a state judge issued a order to stop Burrell from testing onions for the remainder of the harvest season. The Wall Street Journal has reported that Georgia's agricultural commissioner Tommy Irvin promised to stop Burrell from testing onions ever again. His explanation � "A sweet Vidalia onion is a sweet Vidalia onion. We don't need a test to tell us what we already know for a fact." � is a quintessential example of paternal government. Irvin suggests that the government knows best when it comes to what onion you should eat. This tale of two businesses � one regulated by self-policing participants, the other subject to the meddling of bureaucrats � illustrates how free markets tend to produce innovative solutions and how government agencies often stifle change. Individual consumers have better things to do than lobby agriculture regulators, so such an agency winds up hijacked by the very special interests they are supposed to monitor. If it had no such authority, consumers could discern for themselves whether David Burrell's advice on onions is worth a premium price. Maybe it is time to take the onion business onto the Internet, where consenting adults can still engage in capitalist acts without the government looking over their shoulders. ------------------------------------------------------------------------ Brad Lips is President of Free-Thinking Consultants, an independent management and communications consultancy based in Washington, DC. -30- from The Laissez Faire City Times, Vol 3, No 3, Jan. 18, 1999 ----- Published by Laissez Faire City Netcasting Group, Inc. Copyright 1998 - Trademark Registered with LFC Public Registrar All Rights Reserved Disclaimer The Laissez Faire City Times is a private newspaper. Although it is published by a corporation domiciled within the sovereign domain of Laissez Faire City, it is not an "official organ" of the city or its founding trust. 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