The Environment of

1
Chapter 11

• The Environment of
• Electronic Commerce
• International, Legal, Ethical,
• and Tax Issues

Electronic Commerce
2
Objectives

• International electronic commerce
• Laws that govern electronic commerce activities
• Ethics issues that arise for companies engaged in
  electronic commerce

3
International Nature ofElectronic Commerce

• Language issues
• Think globally, act locally by establishing
  local language versions of the Web site
• By 2001, 60 of Web use and 40 of e-commerce
  sales will involve at least one party outside the
  United States
• The most used non-English languages for U.S.
  companies are Spanish, German, Japanese, French,
  and Chinese

4
Europages Home Page Figure 11-1
5
International Nature ofElectronic Commerce

• Culture issues
• Errors can stem from subtle language and cultural
  standards
• General Motors Nova
• Pepsis come alive campaign
• Baby food jars in Africa
• Cartoon cows in India
• White-coloured elements in Japan

6
International Nature ofElectronic Commerce

• Culture issues
• Unwillingness to allow citizens free access to
  the Internet
• Proxy servers that filter content
• Laws to prohibit publications that conflict with
  governmental or religious views, or must conform
  to the local language and customs

7
International Nature ofElectronic Commerce

• Infrastructure issues
• Variations and inadequacies of computers and
  software connected to the Internet
• Heavy government-regulated telecommunications
  limit support of Internet availability
• Inadequate bandwidth available for Internet data
  packets
• Complex flow of information for international
  transactions

8
A Typical International Trade Transaction Figure
11-2
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The Legal Environment ofElectronic Commerce

• Businesses operating on the Web face two
  complicating factors
• The Web extends a companys reach beyond
  traditional boundaries
• The speed and efficiency of communications on the
  Web

10
The Legal Environment ofElectronic Commerce

• Borders and jurisdiction
• Geographic boundaries on culture have
  historically been set by the distances involved
• The relationship between geographic and legal
  boundaries include

• power
• effects

• legitimacy
• notice

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Culture Determines Laws and Ethical
Standards Figure 11-3
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The Legal Environment ofElectronic Commerce

• Power
• Control over physical space
• The ability of a government to exert control over
  a person or corporation is called jurisdiction
• Level of power asserted by a government is
  limited to that which is accepted by the culture
  within its geographic boundaries
• Strife can erupt when geographic, cultural, and
  legal structures do not coincide

13
The Legal Environment ofElectronic Commerce

• Effects
• Personal or corporate actions have stronger
  effects on people and things that are nearby than
  on those that are far away
• Legitimacy
• The legitimate right to create and enforce laws
  derives from the mandate of those who will be
  subject to those laws
• Notice
• Physical boundaries, when crossed, provides
  notice that a set of rules have changed

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Jurisdiction on the Internet

• Governments that want to enforce laws regarding
  business conducted on the Internet must establish
  jurisdiction over that conduct
• A court has sufficient jurisdiction if it has
  both subject-matter and personal jurisdiction

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Jurisdiction on the Internet

• Subject-matter jurisdiction
• The courts authority to decide the type of
  dispute
• Rules of subject-matter jurisdiction are very
  clear and easy to apply
• Very few disputes arise over subject-matter
  jurisdiction

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Jurisdiction on the Internet

• Personal jurisdiction
• Determined by the residence of the parties
• A forum selection clause in a contract dictates
  that the contract will be enforced according to
  the laws of a particular state or government
• Tortious acts are an exception, such as cases of
  defamation, fraud, and theft of trade secrets

17
Jurisdiction on the Internet

• John Marshall Law Schools Center for Information
  Technology and Privacy Laws Web site includes
  links to current cases, law review articles, and
  other updated resources

18
John Marshall Law School Cyberspace Law
Site Figure 11-4
19
Contracting and Contract Enforcement in
Electronic Commerce

• A contract has two elements
• Offer declaration of willingness to buy or sell
  a product or service
• Sufficient details to be firm, precise, and
  unambiguous
• Can be revoked as long as no consideration has
  been accepted
• Acceptance expression of willingness to take an
  offer
• When one party makes an offer that is accepted, a
  contract is created

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Written Contracts on the Web

• In general, contracts are valid even if they are
  not in writing or signed
• Contracts for the sale of goods worth over 500
  and for actions to be performed that cannot be
  completed within one year must be created by a
  signed writing
• Writing does not require pen or paper

21
Written Contracts on the Web

• Writing exists on many tangible forms
• Tape recordings of spoken words
• Computer files on disks or tape
• Faxed copies of written documents
• Signatures are any symbol executed or adopted for
  the purpose of authenticating a writing
• Names on telegrams, telexes, faxes, letterhead
  are all considered signatures

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Written Contracts on the Web

• Warranties
• Any contract for the sale of goods includes
  implied warranties
• Product is fit for the purposes for which it is
  intended
• Explicit warranties can be created by the seller
  in general statements in advertising materials
• A warranty disclaimer, conspicuously stated,
  states that the seller will not honor some or all
  implied warranties

23
Written Contracts on the Web

• Digital IDs are often used to verify the identity
  of a person or corporation when entering into a
  contract
• Digital signatures and certificates can attest to
  the title and capacity of a person holding a
  particular public key

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Web Site Content

• Trademark infringement occurs when a Web site
  designer uses any trademarked name, logo, or
  other identifying mark without the express
  permission to do so
• Deceptive trade practices can lead to trademark
  dilution, a reduction of the distinctive quality
  of a trademark by alternative uses

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Advertising Regulation

• In the UK, advertising is regulated by the
  Advertising Standards Authority
• See \Consumers\new media tour

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FTC Policy Statements

• Bait advertising
• Consumer lending and leasing
• Endorsements and testimonials
• Energy consumption statements for home appliances
• Guarantees and warranties
• Prices

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Ethical Issues in Electronic Commerce

• Defamatory statements are statements that are
  false and injure the reputation of another person
  or company, are highly subjective and hard to
  distinguish from justifiable criticism
• Online statements about competitors should always
  be carefully reviewed for elements of defamation
  before published on the Web

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Privacy Rights and Obligations

• Rights to privacy can vary greatly from one
  country to another
• Principles for Web site administrators to adhere
  to include
• Use personal data to improve customer service
• Do not share customer data without permission
• Tell customers what data is collected and how it
  is to be used
• Give customers the right to delete any
  information collected about them

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Taxation and Electronic Commerce

• Online businesses are potentially subject to
  several types of taxes
• Income taxes
• Levied by national, state, and local governments
  on the net income generated
• Transaction taxes
• Includes sales taxes, use taxes, and customs
  duties
• Property taxes
• Levied by state and local governments on the
  personal property and real estate used by the
  business

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Summary

• International electronic commerce
• Laws that govern electronic commerce activities
• Ethics issues that arise for companies engaged in
  electronic commerce