International Legal and Ethics Issues 1 Objectives International
International, Legal, and Ethics Issues 1
Objectives • International E-commerce • Laws that govern E-commerce activities • Ethics issues that arise for companies conducting E-commerce • Conflicts between a company’s desire to collect and use data about their customers and the privacy rights of those customers • Taxes that are levied on E-commerce 2
International Nature of E-Commerce • Any business that engages in E-commerce instantly becomes an international business. • Customers’ inherent lack of trust in ‘strangers’ on the Web is logical and to be expected. • Businesses on the Web must find ways to overcome this well-founded tradition of distrusting strangers. Business trust is an important success factor in attracting customers. 3
International Nature of E-Commerce • Businesses engaging in electronic commerce must be aware of the differences in language and customs that make up the culture of any region in which they do business. • The barriers to international electronic commerce include language, culture, and infrastructure issues. 4
Language Issues • The only way to do business effectively in other cultures is to adapt to those cultures. • The first step to reach foreign customers is to provide local language versions of a Web site. – A Web server that can detect the default language setting of the browser and automatically redirect the browser to the set of Web pages created in that language. – Another approach is to include links to multiple language versions on the home page 5
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Culture Issues • The combination of language and customs is often called culture. • On the Web, designers must be very careful when choosing icons that represent common actions. • Even colors or Web page design elements can be troublesome. 7
Culture Issues • A site that strongly reflects a cultural design preference is the Bol. com, which is an online bookstore for several different countries. • Softbank has devised a way to introduce electronic commerce to a reluctant Japanese population. . 8
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Infrastructure Issues • Internet infrastructure includes the computers and software connected to the Internet and the communications networks over which message packets travel. • Regulations in some countries have inhibited the development of the telecommunications infrastructure or limited the expansion of that infrastructure. 10
Infrastructure Issues • Local connection costs through the existing telephone networks of many countries are very high. • This can have a profound effect on the behavior of electronic commerce participants. • In 1998, business and government leaders in several European countries began pushing for flat-rate telephone line Internet access charges. 11
Legal Environment of E-Commerce • Businesses that operate on the Web must comply with the same laws and regulations that govern the operations of all businesses. 12
Borders and Jurisdiction • Territorial borders in the physical world serve a useful purpose in traditional commerce. • In the physical world, geographic boundaries almost always coincide with legal and cultural boundaries. 13
Jurisdiction on the Internet • Jurisdiction is more difficult on the Internet because traditional geographic boundaries do not exist. • People or corporations that wish to enforce their rights based on either contract or tort law must file their claims in courts with jurisdiction to hear their case. 14
Subject-Matter Jurisdiction • Subject-matter jurisdiction is a court’s authority to decide a particular type of dispute. – In the U. S. , federal courts have subject-matter jurisdiction over issues governed by federal law. – State courts have subject-matter jurisdiction over issues governed by state laws. 15
Personal Jurisdiction • Personal jurisdiction is determined by the residence of the parties. • Businesses should be aware of jurisdictional considerations when conducting electronic commerce over state and international lines. 16
Jurisdiction in International Commerce • The exercise of jurisdiction across international borders is governed by treaties between the countries engaged in the dispute. • Jurisdictional issues are complex and change rapidly. 17
Contracting and Contract Enforcement in E-Commerce • Any contract includes three essential elements: an offer, an acceptance, and consideration. • The contract is formed when one party accepts the offer of another party. • Contracts are a key element of traditional business practice and they are equally important on the Internet; they can occur when parties exchange e-mail messages, engage in EDI, or fill out forms on Web pages. 18
Written Contracts on the Web • In general, contracts are valid even if they are not in writing or signed. • A signature is any symbol executed or adopted for the purpose of authenticating a writing. • It is reasonable to assume that a symbol or code included in an electronic file would constitute a signature. • The U. S. now has a law that explicitly makes digital signatures legally valid for contract purposes. 19
Warranties on the Web • Any contract for the sale of goods includes implied warranties. • Most firms conducting electronic commerce have little trouble fulfilling warranties. • Sellers can avoid some implied warranty liability by making a warranty disclaimer. • To be legally effective, the warranty disclaimer must be stated obviously and must be easy for a buyer to find on the Web site. 20
Authority to Form Contracts • A contract is formed when an offer is accepted for consideration. • Problems can arise in electronic commerce since the online nature of acceptance can make it relatively easy for identity forgers to pose as others. • Digital signatures, however, are an excellent way to establish identity in online transactions. 21
Terms of Service Agreements • Most Web sites have stated rules that visitors must follow, although few visitors are aware of these rules. • If you examine the home page of a Web site, you will often find a link to a page titled “Terms of Service”, “Conditions of Use”, “User Agreement” or something similar. • These contracts are often called terms of service (To. S) agreements. 22
Web Site Content • A number of other legal issues can arise regarding the Web page content of electronic commerce sites, including: • • trademark infringement deceptive trade practices regulation of advertising claims defamation 23
Copyright Infringement • A copyright is a right granted by a government to the author or creator of a literary or artistic work. • Creations that can be copyrighted include virtually all forms of artistic or intellectual expression: books, music, artworks, recordings (audio and video), architectural drawings, choreographic works, product packaging, and computer software. 24
Patent Infringement • A patent is an exclusive right to make, use, and sell an invention that a government grants to the inventor. • To be patentable, an invention must be genuine, novel, useful, and not obvious given the current state of technology. 25
Trademark Infringement • The owners of registered trademarks have often invested and developed their trademarks. • Web site designers must be very careful not to use any trademarked name, logo, or other identifying mark without permission. 26
Defamation • A defamatory statement is a statement that is false and that injures the reputation of another person or company. • If the statement injures the reputation of a product, it is called product disparagement. 27
Deceptive Trade Practices • If the Web page objects being manipulated are trademarked, these manipulations can violate the trademark holder’s right. • Trademark protection prevents another firm from using the same or a similar name, logo, or other identifying characteristic in a way that would cause confusion. 28
Advertising Regulation • In the U. S. , advertising is primarily regulated by the Federal Trade Commission. • Any advertising claim that can mislead a substantial number of consumers in a material way is illegal under U. S. law. • Other federal agencies have the power to regulate online advertising in the U. S. including FDA, BATF, and DOT. 29
Web-based Crime, Terrorism, and Warfare • The Internet has opened up many possibilities for people to communicate and get to know each other better. • The Internet has also opened doors for businesses to reach new markets and to create opportunities for economic growth. 30
Web-based Crime, Terrorism, and Warfare • Crimes on the Internet includes online versions of crimes, including theft, stalking, distribution of pornography, and gambling. • A considerable number of Web sites exist today that openly support or are operated by hate groups and terrorist organizations. 31
Ethical Issues • Companies using Web sites to conduct Ecommerce should adhere to the same ethical standards that other businesses follow. • In general, advertising on the Web should include only true statements - Ethical considerations are important in determining advertising policy on the Web. 32
Ethics and Web Business Policies • Often times legal practices on the Web can be perceived as unethical. • For example, e. Bay removed the sale of firearms from its site, even though it was legal, in an effort to present a better overall image to its customers. 33
Privacy Rights and Obligations • The issue of online privacy is continuing to evolve - The Electronic Communications Privacy Act of 1986 is the main law governing privacy on the Internet today. • A more recent law is the Children’s Online Privacy Protection Act of 1998. • Ethics issues are significant in the area of online privacy because laws have not kept pace with the growth of the Internet and the Web. 34
Communications with Children • A special set of privacy considerations arise when Web sites attract children. • Countries define “child” differently from others – there are many classes of “non-adults”. • The complicated nature of age-appropriateness confuses laws and ethics for Web sites that aim to interact with children, such as Disney. com. 35
Taxation and E-Commerce • Companies that do business on the Web are subject to the same taxes as any other company. • A Web site maintained by a company in the U. S. must pay federal income tax on income generated both inside and outside of the U. S. • Most states levy a sale tax on goods sold to consumers. A sales tax is subject to where the customer is located, the law of jurisdiction and tax rate, and the taxable status of the customer. 36
Income Taxes • The Internal Revenue Service is the U. S. government agency charged with administering the country’s tax laws. • A Web site maintained by a company in the U. S. must pay federal income tax on income generated outside of the U. S. 37
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