Jul 11, 2019 in Law

Legal Implications in E-Commerce

Introduction

Over three quarters of the countries in the world have access to the internet. According to a recent survey, there are over two billion internet users worldwide and still growing. Various innovations have been implemented as a result of the proliferation of the internet. E-commerce, for instance, has aided a great deal in business operations and boosted economic growth. With e-commerce, production, distribution, marketing and supply of goods and services has been enhanced.

It enables these practices to be accomplished through electronic means. APEC (Asia Pacific Economic Cooperation) defines e-commerce as a means of conducting business activities using electronic communications combined with information processing technologies. Similarly, UNESCAP (United Nations Economic and Social Commission for Asia and The Pacific) defines e-commerce as the process by which electronic methods and procedures are used to conduct business activities. The electronic technology revolution has enabled many people to use relatively little effort in getting their work done. Sometimes, people are not aware of the legal and ethical implications of these practices.

Traditionally, in general commerce, it was not very easy to start a business. Starting a business was mainly hampered by government prerequisites that involved tough rules and regulations. However, with electronic commerce, it is possible to start and conduct any type of business and in a simpler manner. This means that current legal frameworks and rules that govern e-commerce have become more lenient. Law enforcement mechanisms have transformed with the expansion of e-commerce. Consequently, a vast range of opportunities has been presented by e-commerce. Businesses can tap into these opportunities to improve their operations and processes. Nevertheless, there are several potential risks associated with e-commerce adoption.

For instance, security is a major concern in e-commerce. Customers must be assured of a secure environment for their transactions and business interactions through electronic media. A number of legal issues exist in the realm of electronic commerce that often go unaddressed. These include intellectual property issues, copyright, privacy and trust among a host of others. This paper seeks to address these concerns and the legal implications of their violation. A keen focus will be on authorities that seek to apply traditional laws in international links. These are particularly bound to face challenges given the global nature of the internet.

Electronic transaction and contract

E-commerce, just like any other conventional business form, requires involved parties to seal valid and legally binding online contracts. However, matters arise regarding the rationale under which these e-contracts are tailored, initiated, implemented and enforced particularly because most of the paperwork is replaced with electronic documents. Various aspects of electronic transactions and contracts with respect to e-commerce will therefore be discussed in this section.

Offer and acceptance

The IT Act 2000 defines the contractual aspects of the utilization of electronic records including attribution, acknowledgment, time and place of dispatch as well as receipt. For the formation of any contract, the Contract Act stipulates three major ingredients. These include offer, acceptance without modification and consideration of the contract. These core ingredients are also applicable in e-contracts. Nevertheless, a major concern arises regarding how to determine whether the offered party has accepted the offer. Moreover, the greater challenge is that the internet does not guarantee a direct communication line between the sender and recipient especially with e-mails as the dominant means of communication. Actually, an email message is usually broken into chunks of information which are assembled at the destination for delivery. Consequently, the issue of determining the exact time of acceptance of a contract arises and makes it difficult to uphold the rights of both parties. Fortunately, the IT Act provides methods of determining the exact time and location of email dispatch as well as receipt.

Clickwrap contracts

This addresses the issue of compliance to the terms of a contract by an involved party. In most cases, parties involved in online contracts fail to read these terms or are rather unable to negotiate these terms. For instance, a website may offer access to newsletters through a simple submission of an email address. Normally, a form is used for filling the required details and a single mouse click finalizes the subscription procedure. However, clicking “Subscribe” is prior to reading and accepting the terms and conditions stated the specified binding contract. As such, a user may fill his or her name and email address and proceed to subscribe without reading the Subscription contract. The question that arises is, does this amount to a contract with the user? This is referred to a “clickwrap contract” and is legally enforceable. However, it is of equal concern whether the terms and conditions of the contract are valid without the subscriber reading it and whether this can be regarded as acceptance.

Online identity

Internet transactions are undertaken by parties who do not have any prior relationship beforehand. This raises concerns regarding the identity of an individual with respect to the capacity, authority and legitimacy of the person to enter the contract. However, digital signatures are used to determine the identity of parties entering a contract. The legal framework that governs digital signatures is defined by the IT Act. Nevertheless, these provisions vary from country to country.

Privacy and security

The most important assurance in e-commerce is security. Corporate organisations host sensitive information on their online sites. Therefore, adequate security measures have to be put in place to safeguard these websites and prevent possible malicious intrusion. Companies face prevailing threats both internally and externally. These threats include exploitation by hackers, infection by viruses and Trojans and a host of others. Internally, any company faces breach of security policies by members of staff which may compromise valuable corporate information. Therefore, a company must ensure stringent security measure using cutting-edge security tools. Cryptography, firewalling, authentication and authorization, virus scans and other security technologies are among the most commonly used security measures. For instance, access to website access can be restricted using login passwords or codes. Similarly, access to sensitive information may be restricted using firewalls which prevent various exploits originating from external sources.

Other than implementing efficient security tools, appropriate legal documentation is required for enhancing compliance to security policies. This entails having explicit security policies that bind all the members of staff working in an organization. Additionally, a company can be held liable for inadequate security measures on its information portals such as websites. Users have been reported to sue companies on account of their sensitive data being compromised through attacks. For instance, a hacker may attack a website and redirect the contents of its domain through another person’s web server, slowing down their traffic and costing them lots of time and money. Such a lawsuit was filed against Nike by a UK webhosting company.

Intellectual Property Rights

Companies that wish to commence on e-commerce should be ready to apply activities that help in ensuring the security of their intellectual properties and assets.  It is important therefore, to keep in mind that there are challenges that will come with the introduction of e-commerce, mostly because the internet is the main tool of operation, and is boundless as it is unregulated. Protection of intellectual property rights (IPRs) is governed by these challenges facing the e-businesses. It is notable that there are laws that govern the protection of intellectual property rights in the physical world. The law is known to exist universally. Unfortunately, the same is not true for protection of IPRs in e-commerce. The effects and significant issues that arise from the lack of surety of protection of IPRs in the virtual and e-commerce world are evaluated and analysed below.

Determining the subject matter of protection

The world is developing technologically by the day, and therefore, this means that with the evolution of new technology or the advancement of the pre-existing one, challenges in the IPRs continue to evolve. There is thus a challenge that continues to develop, in the manner of identifying how best intellectual rights of an organisation can be protected and made effective. An example can be offered in the form of a software developing company developing a strategy that would see it retain the patency of the software that they manufacture or design. There is no ease in doing this and therefore the software may have to be combined with physical objects in order for the company to obtain the patency. This is a big challenge for any organisation, especially if it is a young organisation that is trying to establish a market base.

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Ascertaining originality

In order to protect the intellectual properties, it is important, according to most intellectual protection laws that the work or mark to be protected have to be original. Unfortunately, there is a hindrance to claiming originality when the work is electronic, whether publication, invention or simply a mark.  It therefore follows that the e-commerce business must devote some of its attentions in satisfying some parameters that involve originality requirements. This includes ascertaining that there is no infringement on the part of the company to any third parties who could also be owners of similar IPRs.

Enforcing IPRs

There is no more difficult a task as adjudication and decision making concerning cyber disputes. This follows the fact that the internet has provided a platform for duplication or dissemination of works protected by IPR. Additionally, the internet also offers cover to the infringers in the form of anonymity as well as the fact that the infringing material may be in a particular location for quite a short time, making it quite hard for one to trace the infringer. The adjudication is further made difficult if the publication was done over the internet, because this makes it intrinsically boundless in nature, unlike in physical transaction where the intellectual property enjoys territorial protection. For instance, if a company has a trademark that is registered in Australia, and the company makes software, and another company with a web portal based in the US, it would be difficult for the Australian company to sue the American company even if the company uses the same trademark to market software not created by the Australian company. It should be noted that the IPRs laws are not harmonised and therefore what constitutes to infringement in the US may not be so in Australia, the converse is also true.

Protection against unfair competition

Marketing over the internet entails that the companies using this route in their marketing utilise technical features that are available on the internet. Some of these technical features that are used in the marketing through the internet include interaction and the multimedia application support. Unfortunately, the same creates a way by which different companies competing for the same market share will introduce unfair competition. Several results could be got from this kind of unfair competition in the form of interactive marketing practices, spamming and immersive marketing.

Preventing unauthorised hyper linking and Meta tagging

Hyper linking and Meta tagging are also growing to be a concern for the judiciary in many parts of the globe. The argument is that Meta tagging may constitute to the infringement of trademark while hyper linking may add up to infringement of copyright. The crux of the matter is that some companies will offer a link to the website of the other company and by so doing gain competitive advantage over the owner company, as a result, the company practices unfair competition and information distribution.

Jurisdiction

 Laying of jurisdiction in a suit involving the protection of intellectual property rights will involve not only the corporate structure but also decisions have to take into consideration the jurisdiction that the corporate structure should be situated.  This determines the liability that may arise against a website or another internet related tool. Traditional rules governing private international law dictates that the jurisdiction of a nation can only extend to individuals that are within the country and the transactions that take place within the borders of the country. Apparently, emergence of  e-commerce transactions has made it that if a business enjoys clientele in a certain location or state, resulting from utilization of its website, then the company can as well defend any litigation that may arise in that country, regardless of the fact that the company may not have a physical base in that country.

However, the fact that the contracts entered through the internet can be found in different locations is a factor that is capable of raising contention on the issue so that interpretation and implementation of jurisdiction is hard, even using the jurisprudence that is available from prior situations may not be binding. This problem comes like a double sided sword because both the company and the client are confronted by the problem. For instance, a company may be based in the Arab emirates but have servers in the Americas, when a client makes a purchase, it becomes hard to decide which part of the company to sue, American or Arabic. On the same issue, companies find that they are faced with different foreign laws they were not aware of in the first place. In the United States, there have been several suites where an organisation is found not to have complied with the laws of one state while the same is applicable in another state.

Liability

It is important for all website owners to understand that the websites are boundless and therefore there is high chance that the website could be liable to violation of laws of about any nation. This should warn the owners to ensure that their sites are original and are not linked in any way to any other sites and therefore reduce any potential. It is important to understand that the owners of the websites should know that the main areas that make sites prone liability are hyper linking and Meta tagging, although there are other ways that the same can happen. All this add up to invasion of privacy, fraud and infringement of copyright, all which are protected by IPR laws.

Contractual Liability:

It is important that the organisation should take the first step towards protecting themselves against some of the liabilities that may come as a result of interactability in the internet. Websites should have a terms and conditions page that clearly shows the regulations that should be required, time and method of acceptance. In so doing, the company is protected by the contract.

Statutory liability

Based on the mode of business entity compliance with the established legal clauses is of paramount importance in within a state or country from the perspective its jurisdiction. However, disparities on the formulated provisions in relation to statutory and allowed internet operations are evident. From this perspective an established website should not only meet the demands under the laws of a nation but also provisions anchored on the legal framework of a country or states the site will be extensively visited. In this case it is apparent that legal framework plays a pivotal role in influencing the capacity of a website becomes a remarkable site for the targeted individuals. In addition, the notion that provisions vary in various country highlights that operational of website cannot be controlled solely by a particular legal framework recognized internationally. For instance a corporation based in Australia deploying comparative mode of advertisement in WWW sites either in Germany or France can be prosecuted on the grounds of infringing the established legal framework in both countries.

Advertisement

Notably a considerable mode of advertisements globally is geared towards promoting the sales of either products or services. Initially provisions from legal perspective were established to control sales of commodities were vested on the notion that customers should be protected from deceiving mode of advertisements as well as from prejudices during product sales in the society.  Similar laws are enacted to bound internet connectivity in various parts of the world. In addition, the legal frame work plays a significant role in influencing operations like advertisement as well as marketing of products through the internet. It should be noted that websites are prone to liability that culminates to various adverse effects to the both the internet users and targeted customers.

For instance website advertisement can be give false information regarding the nature of the product magnitude commodities as well as particular location where the products were obtained. In addition, through the internet the scope of service that is facilitated by the said organization can be inaccurate thus causing intense damage to the customers. In order to protect the consumer from such kind of damage laws are established that control internet advertisement in particular area of jurisdiction. However, compliance to the established provisions to control enterprise advertisement is a function of both the kind of business entity and website characteristics.  

Due to the increasing cases of internet deceiving in the globe various nations established provisions that controlled advertisement over the internet. However, these limitations raise varying reactions in the society especially on foreign based organizations in such countries. The fact that a foreign can fail to identify the scope of legality of advertisement raised controversy on the ground that liability is based on comprehensive comprehension of the established provisions regarding internet advertisement. According to previous scenario regarding violation of the established legal frame work limiting internet advertisement, law courts have identified website from different nations guilty of infringing law established to control internet advertisement under their areas of jurisdiction.

Content Regulation

Internet has been identified as a fast and affordable method of sharing as well as spending of information globally. The notion that information can be shared as well as distributed without restriction raises controversy in the society. Due to the fact that social norms plays a significant role in establishing restriction in spreading of information in the society, sharing of information via internet is based on the aspect of social phenomena. However in the current era of technological development in the globe restriction in distribution of internet content faces challenges due to varying restriction on control. In this case particular factors should be considered by corporations in E-commerce industries during content display and publishing.

Nations have developed different perceptions regarding the issue of display as well as displaying of information in the internet. The scope of restriction is based on diverse factors regarding social aspects, standards in business entities based on cultural perceptions in the society. In addition, matters of country’s interests in the global markets greatly influence formulation of content regulation laws in respective parts of the globe. Due to variation in scope of restriction on internet content among countries corporate faces challenges in displaying their content to diverse audience.  For instance a country cans restriction particular content that is allowed in another nation. From this perspective, corporate should withdraw display in information in order to avoid infringing of interests and cultural values of another country.

Electronic Payment Issues

The electronic mode of transaction that entails cyber cash as well as e-cash can be used is continuously replacing the normal mode of transactions globally. Development in this mode of transactions is being deployed in acquiring of both capital and current assets globally. Though the need to regulate internet financial operations is evident identification components involved in these mechanisms is of paramount importance.

Secure Credit Transaction

This involves a type of e-commerce site designed to permit online credit payment. However, this mode of payment calls for comprehensive security mechanisms in order promote confidentiality on information of a client during transaction. Notably, in case confidentiality is not upheld and information of the client is assessed in the internet the website is held responsible for the damages caused.

Recognition of digital currencies

According to analysts in order for this modes transaction to become effective mode of financial transaction legal frame work should be restructures to facilitate transaction based on internet connectivity. In addition, the scope at which the digital currencies are effective medium of exchange needs to be evaluated in depth.   

Determining the relevant jurisdiction

This calls for an appropriate law or provision to govern transaction in form of digital currencies. However, evaluation on this based can raise controversy due to the fact that a particular country can allow transactions from this perspective while another can be against digital mode of transactions.

Risk of Regulatory Change

Notably, regulations in electronic mode of transaction can culminate to swift changes in technological development in payment. On this ground provisions should be formulated in order to be free from any form contradiction from both avenues. The Act under Reserve Bank of India (RBI) is geared towards restructuring the IT based mode of transactions in the globe aims at establishing an apt platform to integrate diverse transactions with digital currencies.   

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