Economic Report of the President

it difficult for law enforcement agencies to track down sources of fraudulentspam and spyware (which collects information from the victim’s computer).Such activity is growing quickly and posing significant costs to victims andcompanies. The President signed into law the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act), whichestablishes a framework of administrative, civil, and criminal tools to helpAmerica’s consumers, businesses, and families combat unsolicited commercial e-mail. The problems associated with spam cannot be solved by Federal legislationalone, but will require market responses in the development and adoption ofnew technologies. The Federal government has also stepped up the pursuit ofpurveyors of fraudulent spam and spyware. For example, in a joint law enforcementinitiative, the FTC and the Department of Justice (DOJ) have broughtactions to shut down operations that hijacked logos from online businesses tocon hundreds of consumers into providing credit card and bank accountnumbers. December 2004 saw the formation of a new public-private consortiumthat includes financial services firms, Internet service providers, ITvendors, and law enforcement to fight Internet-based fraud.Copyright InfringementCopyrights encourage the development of goods such as books, songs, andvideos that are much costlier to produce initially than to replicate. Digitaltechnologies and the Internet have made possible high-quality reproductionof music and video at nearly zero cost, and facilitated extensive unauthorizeduse through mechanisms such as file-sharing networks. Industry is exploringtechnological remedies to combat theft, but the Federal government is alsoplaying a role. The Attorney General has made enforcement of intellectualproperty laws a high priority of the DOJ. The DOJ has expanded itsComputer Crime and Intellectual Property Section and created the CyberDivision of the Federal Bureau of Investigation. In 2004, the DOJ launchedOperation Digital Gridlock, the first Federal enforcement action ever takenagainst criminal copyright theft on peer-to-peer networks (that allow groups ofcomputer users with the same networking program to interconnect anddirectly access files from one another’s hard drives).Competition Versus Economic RegulationAn overly high price or low quality by a supplier opens the door to profitopportunities for the supplier’s rivals. Rivals can expand their sales by undercuttingprice or offering superior quality or service. In this way, competitiondrives suppliers to provide customers the greatest possible value consistentwith covering costs. Pursuit of profit opportunities also draws firms to enter142 | Economic Report of the President