E-Commerce
INTRODUCTION
Information and Communication Technology (ICT) can contribute to economic growth. One of the most visible examples of the way in which ICT can improve the economy is E-commerce. However, it is not enough to know that this instrument is powerful. In order to utilize E-commerce to the best possible use, we need to understand every aspect of it. We must fully know how it works and how it should be used. To maximize its power, we must find creative ways to put this knowledge to practice and widely disseminate it. (199 7- 2006 ).
There are many issues concerning E–commerce. Such a powerful tool must be understood thoroughly in order to put it in the best possible use. One of the issues regarding e-commerce that gained global concern is security. To fully understand the issue, let us first discuss the history of the World Wide Web (Internet) and the development of e-commerce (2001).
WHAT IS INTERNET?
Before we explore the legal and commercial realities of e commerce, it is first necessary to consider the nature of the Internet. We must do this in order to be able to apply the law to it. Common misconceptions can arise merely from the description of the Internet. Use of `the’ implies that it is some constant `thing’, which has definable edges and a shape and even a legal presence. Actually, the Internet is a communications infrastructure, nothing more. It is made up of countless thousands of computers that are connected together by means of telecommunications systems. Not all these computers will be connected at any one time and hence it is impossible to define its size and presence. When one user’s computer is in communication with another user’s computer, the information that is sent and received by each will travel in different and unpredictable routes and will pass through many computers on its journey. All the computers and communications services providers that are not either the original sender or the final recipient of the information are intermediaries or `conduits’.
Internet connectivity is commonly established by using an Internet Service Provider (ISP). ISP’s are organisations that have a permanent presence on the Internet and provide a fixed line or dial-up service. Some ISP’s make a charge for this service, but many do not. However, most businesses will require a website, and hence web space on the ISP’s server, and this is normally a chargeable service. Businesses wishing to establish a web presence for the first time are advised to consult the trade press (business Internet magazines such as The Industry Standard) for information on ISP’s ( 2001).
ELECTRONIC COMMERCE
Before looking at the legal detail and common pitfalls of e-commerce, we will initially consider the nature of e-commerce — what exactly is it? We will also look at some terminology that is frequently used by e-commerce lawyers and business people. E-commerce (or electronic commerce) is the term used to denote a commercial (usually contractual) transaction that takes place between two or more people using the communications infrastructure known as the Internet. The first thing to note is that there is a range of e-commerce transactions, the following of which are examples: 1.the purchase by an individual of a book from a commercial website such as that run by Amazon.com 2.the ordering by Company A of office stationery from Company B’s website. 3.the exchange of e-mails between two persons whereby it is agreed that a certain service will be carried out by one party in exchange for a fee from the other.
We do not usually think of the latter type of transaction as falling within the category of e-commerce, but it is just as much an electronically formed contract as the other two examples: an exchange of e-mails can result in a legally binding contract. For example, if I send you an e-mail offering to sell you one dozen doughnuts, and you respond accepting my offer, this is just as much an e-commerce transaction as one taking place using the colorful pages and flash technology of the World Wide Web. Initially it will be important for an e-commerce business to identify whether its e-commerce transactions will be classified as B2B (business-to-business) or B2C (business-to-consumer).This is because the law applies in a different way to each. Of course, it may be that the e-commerce business anticipates engaging in both types of transaction. World Wide Web — that part of the Internet which uses the Hyper Text Transfer Protocol (HTTP) to display so-called web pages and to allow links between such pages anywhere on the Internet, ISP (Internet Service Provider) — a provider of Internet connectivity, ASP (Applications Service Provider) — an online provider of computer applications, such as software (2001).
THE LAW OF COMMERCE
The law does not currently recognise an e-commerce transaction as being inherently different from a non e-commerce transaction. However, due to the online nature of e-commerce, particular aspects of the law apply differently where a transaction takes place online. This section will briefly consider those aspects of the law that apply to both online and offline transactions. This will be followed by an introduction to those areas of the law that have particular application in the case of e-commerce (2001).
Trading vehicle
In the case of an existing business, wishing to move online, the legal infrastructure will already be in place. For start-ups, it is important to consider the way that trading is to be carried out. It may be that the business will be a partnership. Alternatively, it might be a registered limited company. E-commerce start-ups should usually be advised to use a company for trading purposes. The advantages are many, the two main ones being that it is easier to attract investment capital, and that the owners of the company (its shareholders) will benefit from limited liability(2001).
Shares and responsibilities
This is an issue for start-ups. If a company is chosen as the appropriate trading vehicle then there will be a number of issues that must be agreed upon by the participants: What are the appropriate proportions for share ownership? Who are the directors going to be? Who will be Company Secretary? Will a shareholder agreement be needed? Appropriate legal advice should be sought on these issues(2001).
Taxation
Once again the normal considerations will apply to both offline and online transactions. The position is slightly complicated in an e-commerce transaction due to the greater likelihood that such a transaction will involve parties who are not located in the same country (2001).
Intellectual property rights
The subject of intellectual property is relevant to all businesses but may be particularly important to e-commerce as the business model may involve a greater use of intellectual property.
Terms and conditions of trade
Again, this is relevant to all businesses. The terms on which a business obtains its supplies, and upon which it trades with its customers, are of fundamental importance. Incorporation of a business’s terms into its contracts is not usually a problem with offline transactions but significant issues commonly arise with an e-commerce business — see Chapter four for further details. Choice of law and jurisdiction will be an issue in some contractual arrangements, both on and offline(2001).
THE LAW OF E-COMMERCE
Of greater significance are those areas of the law that apply specifically to e-commerce. This may be due to the fact that `old’ law applies in an unusual way to e-commerce due to the unpredictable (at the time that law was made) nature of the transaction. Alternatively, it may be due to the presence of ‘new law ‘, which, though it may not have been formulated to deal with e-commerce exclusively, clearly has it in contemplation as the main target of its intended regulation. The list that appears below contains those areas of law that are of particular (and in some cases exclusive) interest to e-commerce businesses:
Formation of contract
How does the law of offer and acceptance apply to an online transaction? In other words, how will a contract be formed in the virtual world? Will a web page that displays a product for sale be an offer or an invitation to treat? This issue has yet to be decided by the courts (2001).
Intellectual Property Rights
Much of the value in an idea for an e-commerce website can be tied up in the Intellectual Property Rights (IPR’s).It is essential, particularly when trying to attract seed money from venture capitalists, that these IPR’s are delineated and transferred to the trading vehicle. They may be owned by a number of different people and so IPR assignments will need to be executed at an early stage. In any event the value of IPR’s is notoriously underestimated by businessmen. Appropriate steps must be taken to protect this value and to take steps to safeguard any brand name and associated goodwill ( 2001).
Copyright
Copyright is of course comprised in IPR’s, but there are some specific considerations in relation to copyright that need to be looked at. We know that the law of copyright protects literary and artistic works and that these are the sorts of works that comprise a web page. So far so good. But what about links from one web page to another? Could they constitute breach of copyright? Of course in most instances, there would be no complaint because a link from one website to another would generate increased traffic and this surely is the objective of websites. But in one case a newspaper’s website contained a link to the news section of another newspaper’s website. It was held in an interim application to the court that this could constitute copyright infringement. The reason for the case was that the link bypassed the front (or home) page of the other website and so the users did not get to see the advertising messages on that home page — this technique is known as deep-linking. Sites that undertake deep-linking should be aware of the potential legal challenges that could arise (2001).
Domain names and cybersquatting
The fact that every website must have a unique Internet address means that many commercial enterprises will be disappointed in their desire for a specific domain name. This is the problem that is inherent in a first-come-first-served system of domain name registrations. Difficulties can arise when one business feels it should be entitled to use a domain name that has already been registered by someone else(2001).
Data protection
This area of the law governs what may and what may not be done with individuals’ personal information. In many cases much of the value in an e-commerce business is in its customer database, which may consist of a variety of information including name, address, e-mail address, date of birth, shopping habits, annual household income, etc. The law establishes a code of conduct (known as the Eight Data Protection Principles) for the processing of such data as well as a right for every individual to see a copy of such data if they request it( 2001).
Distance Selling Regulations
Towards the end of 2000, and in response to European Union legislation, the UK passed the Consumer Protection (Distance Selling) Regulations. These regulations require all UK businesses that enter contracts with consumers `at a distance’ (clearly this includes, but is not exclusive to, Internet transactions) to do two main things that they were not legally obliged to do before. The first is to provide certain specific information to the consumer and the second is to allow consumers a `cooling-off’ period of seven working days from receipt of goods to return the goods for a full refund (2001).
IT requirements
There will be a number of legal considerations which arise from the infrastructure and services which are required for an e-commerce business. Hence there may be purchase or rental of hardware and software, rental of server space if required and a website hosting and development agreement where the hosting is to be outsourced (2001).
Law and jurisdiction
One of the difficulties with an Internet transaction is that the buyer and seller may be in different parts of the world. The question then arises as to which legal system will govern the contract in the absence of any binding express provision. A related question but one which is more complex and somewhat political is which court system will have jurisdiction to hear any relevant litigation?
WORLDWIDE DEVELOPMENT OF E-COMMERCE
Arab Countries: Information and communication in general, is making its mark in the Arab World. Companies are slowly embracing the new technology to give them an advantage in the global economy. E commerce is becoming more widespread. Governments and companies expect benefits of participating in e-commerce. Enterprises are reviewing their strategies, incorporating e-commerce in their plans for the future. Arab enterprises are exposed to stiff global competition. Enterprises see advances in ICTs as opportunities for them to penetrate the globally and access remote markets. The future looks bright for businesses in the Arab countries but visibility and success in the international market require globally competitive technologies.
Asia-Pacific: E-commerce is seen as a big contributor in the economic growth all throughout the region. E-commerce is considered as a powerful tool in the global economic competition, enhancing productivity, promoting gender equality, increasing efficiency, raising the quality of goods and services. E-commerce also aids in the promotion of international trade and investment. It is considered as a key to economic and social development in the region. The countries are seeking to develop cooperation the region. They base national ICT and e-commerce strategies on the economic and social context of each country.
Europe: Perhaps The United Kingdom, France and other European countries are leading when it comes to E-commerce. Members of the European Union (EU) are making strategic developments in the field of electronic commerce. EU Member States have developed an electronic commerce action plan. France, Italy and Great Britain created concrete action plans that aim at fast action and success. The European Commission’s goal is to promote electronic commerce all throughout the region with all available means. The developments of electronic commerce in the region are being supported through structural and cohesion funds. The introduction of Euro aided in the development of e-commerce in Europe. V. Ellis writes, “Combined impact of the single currency and e-commerce in the region will result to a stronger and deeper single market”.
Latin America: E-commerce in Latin America is developing in a tremendous rate. It is expected to make up a big part of the Mexican and Brazilian economy because of its fast growth rate. E-commerce is growing the fastest in Brazil in areas such as online advertising and user numbers. However, the available market in Latin America is still small. Developments must be made to improve e-commerce in other Latin American countries. The economy of Latin American countries is expected to flourish once the developments in ICT are completed. Many companies are investing on infrastructures that will accelerate economic growth. In general, e commerce in America is showing a great potential and will remain exiting for the years to come.
Australia: (2005) reports that E-commerce offers potential benefits to Australians. E commerce in Australia is growing. Internet is being widely used as a business tool (p.20). E-commerce helps bridge the gap between Australia and major commerce centers in Asia, Europe and America (2002) Africa: Africa is far behinb when it comes to the adoption of e-commerce. The impact of e-commerce in the region is very minimal. The countries that are taking the lead on e-commerce are Egypt, Ethiopia, Morocco, Tunisia and South Africa. There is a need to build telecommunication infrstructure in order to promote growth in e-commerce. The lack of telecommunication policy and a regulatory authority in the region impede the flourish of e-commerce. Africa is widely seen by the International Community as corrupt, full of crimes and fraud-ridden. There have been efforts to unite the continent and promote cooperation among African nations and established a strong internal and external trade policy.
United States: The United States of America is generally seen as the global leader in e-commerce. E-commerce is the fastest growing sector in the American market (2002). E-commerce is now an essential feature of every Ameriacan Business ( 2005). The tremendous growth of e-commerce in The United States is due to a higher presence of globalized establishments and high usage of technology. E-commerce benefits the economy, improving customer service and generating more sales and improving productivity ( 2002).
WORLWIDE REGULATIONS, SECURITY AND PROTECTION
United States: The United States of America is one of the leading e-commerce law and policy developer. There are many agencies and organizations in the country that play important roles in e-commerce protection and security. The leading enforcer of priavcy and consumer security is The Federal Trade Commission. The American Bar Association created policies regarding jurisdiction and privacy. The Federal Trade Commission (FTC) is in charge of the enforcement of the laws protecting the privacy of children online, fair trading practices and consumer credit information.There is no comprehensive privacy protection law for the private sector in the United States. In the year 1998, the Congress passed the Children’s Online Protection Act (COPPA) but it was only implemented in 2000. The law requires parental consent before the collection of data from children under thirteen. In 2003 the nation’s first spam regulation – the Fair Credit Reporting Act (FCRA). Also in 2003 the Controlling the Assault of Non-Solicited Pornography and Marketing Act was passed by the Congress. The Electronic Communications Privacy Act of 1986 and the Omnibus Safe Streets and Crime Control Act of 1986 governed the surveillance of wire, oral and electronic communications for criminal investigations. In the wake of the 9/11 attacks, an act has been passed that weakened the privacy protections in federal wiretapping statutes. The USA Patriot Act authorizes national application of wiretap order. A warrant can be issued by the court that could apply anywhere in the country. The Priavcy Protection against wiretapping was weakemned further when the Congress passed the Cyber Security Enahancement Act (CSEA) The law states that any computer involved in interstate commerce or communication is a protected computer, therefore granting law erforcers the power to install pen register and trap and trace devices without a court order.
Thailand: In April 2002, the Electronic Transactions Bill came in full effect. The law acknowledges the use of electronic documents as evidence in court. Also the E-commerce Act and the Credit Bureau Act have been enacted in 2002. To combat comruter crimes in Thailand, the Royal Thai Police established the Crime Suppression Center in 2003. Police Offecers were assigned to monitor computer crimes. A Cybersecurity Division was also established by The Thai National Intelligence Agency (NIA). The Official Information Commision (OIC) is in charge of implementing the Official Information Act. The act entitles every citizen to access public information.
Philippines: In the year 2000, the “Electronic Commerce Act” was passed. The said law recognizes the role of Informations and Communications Technology (ICT) and E-commerce in economic growth and nation-building. It seeks to facilitate domestic and international dealings, transactions and agreements through the use of ICT. The law promotes the creation of an information-friendly environment, identifying the role of the private sector in rendering services and investment contributions to develop and utilize to the fullest the benefits of The Information and Communication Technology in the country. The private sector is obliged ensure network security.
Spain: The Spanish constitution recognizes the right to privacy. The Spanish Data Protection of 1992 (LORTAD) was amended and succeeded by the Data Protection Act in 1999 in conjunction with the European Data Protection Directive. The Law of Information Society Services an Electronic Commerce (LSSI) was implemented in June 2002. The controversial law prohibits the distribution of spam and mandates retention for one year of Internet uses traffic data.
Germany: Among the members of the European Union, Germany has one of the strictest data protection laws. The information used in computer networks is protected by The Information and Communication Services Act of 1997. The Federal Data Protection Law has been revised in 2002. The law includes regulations on transmitting personal data abroad and sensitive data collection. A data protection officer must be appointed by companies if they collect, process, or use personal information. Another law that requires service providers to allow law enforcement to monitor data as well as voice lines is the G-10 law.
Canada: The Federal Access to information Act provides individuals with a right of access to information held by the federal public sector.
India: The Information and Technology Act was passed in May 2000. The law provides comprehensive regulations on electronic commerce. A Cyber Crime Investigation Cell was established by the Central Bureau of Investigation to investigate offences under the IT Act.
United Kingdom: An act was introduced in The United Kingdom in 1998. The Data Protection Act aims to ensure privacy and data protection of the citizens. The Electronic-commerce Directive is being implemented in the United Kingdom to ensure consumer protection. The consumers are entitled to fair service and clear information about the company and how to complete a transaction.
Singapore: The National Internet Advisory Board released the “E-Commerce Code for the Protection of Personal Information and Communications of Consumers of Internet Commerce” in 1998. Providers are encouraged to ensure the confidentiality and protection of personal information users. The Media Development Authority (MDA) regulates the media content – including internet, radio and television.
Netherlands: A revised and expanded version of the Data Registration Act of 1998 was made in 2002. The Personal Data Protection Act regulates the disclosure of personal data to countries outside of the European Union. A law on e-commerce that implements the EU E-commerce Directive has been passed by the Parliament. In 2004, spam has been outlawed in The Netherlands.
Romania: The Law NO. 676/2001 was enacted by the Parliament in November 2001. The Law is about the Processing of Personal Data and Protection of Privacy in the Telecommunications Sector. Another law – Law No. 667/2001 for the Protection of Persons concerning the Processing of Personal Data and the Free circulation of such Data was enacted was also enacted in the same year. Laws regarding “spam” or unsolicited commercila e-mails was enacted in 2002.
France: Personal information held by government agencies and private sectors are protected by The Data Protection Act of 1978. In 2004, France’s Data Protection Act was revised. The “Commission nationale de l’informatique et des libertés” (CNIL) is an independent agency that is in charge of the implementation of the Data Protection Act. The Internal Safety Law has authorized the law enforcement authorities an immediate access to the computer data of telecommunications companies, including the Internet service providers.
Japan: A guideline has been issued by the Japanese Internet Service Providers to protect the privacy of online users. The said guideline was made in response to the Internet Responsibility law of 2001. Four bills that seek to uphold personal information protection in Japan were passed in 2003. The bills are as follows: The Act Concerning the Protection of Personal Information, The Information Disclosure and Personal Information Protection Council Establishment Act, The act concerning the Protection of Personal Data and The act concerning the Preparation of Related laws for the enforcement of the Act concerning the Protection of Personal Information. In 2002, two new anti-spam laws were implemented.
South Korea: Acts that protect Personal Information in the private sector includes: Protection of Communications Secrets Act, Telecommunications Business Act, Medical Service Act and the Real Name Financial Trade and Secrecy Act. Data protection system similar to that of the United States and Japan has been adopted by South Korea.
South Africa: In 2002, the Electronic Communications and Transactions Act was implemented. The said act aims to create legal certainty and promote trust and confidence in Electronic Transactions.
Sri Lanka: The rapid growth of the Information Technology in Sri Lanka has affected the legal system. There is a need to create laws that will effectively regulate new technologies. An act that aims to combat computer crimes in Sri Lanka has been approved by the Cabinet in 2003 – The Computer Crime Bill. Another bill that is still waiting for the Cabinet’s approval is the Electronic Transaction Bill. The said act is based on the UNCITRAL Model Law on e-Commerce of 1996.
China: Regulations aimed at controlling Internet Usage was introduced in the year 2000 by the Ministry of Information Industry. Controversial topics inside online chat rooms are monitored by service providers. Online activists are continuously being cracked down by the government. China has adopted the principle “guarded openness “in its legislations. The government preserves the benefits of the new information technology while at the same time guarding anti-government activities.
Conclusion:
Electronic Commerce has dramatically changed the global economy. It is a powerful tool to improve the economic standing of a nation. E-commerce is spreading the fastest among developing countries. E-commerce provides opportunities for small business to reach a wider market and compete in the global economy. However, there are issues that must be considered and dealt with, like security and protection. Various international organizations are trying to solve the problems. Efforts have been made by countries all around the world to ensure the safety and protection of users.
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