A Brief Description of E-commerce Law

After reading the below feel free to contact us to discuss your e-commerce legal needs.

Electronic commerce, or e-commerce as it is commonly known, is broadly defined as buying or selling goods and services by electronic means. It is the digital counterpart of commercial activities (selling goods and services, payment mechanisms, marketing and advertising, customer support) that occur regularly in the physical world. Organizations have utilized electronic systems to support or augment various business functions such as marketing, sales, distribution, financial transactions, and support services.

Every E-commerce Business Needs a Terms of Use Agreement and Privacy Policy

A company doing business online faces unique issues when it comes to enforceable online agreements relating to the sale of the company’s goods or services. The two primary online documents that every e-commerce company must have in place are a terms of use agreement and a privacy policy. The terms of use agreement defines the conditions of how web site users may access and use the company’s web site, and  the terms and conditions of the company’s e-commerce store sales. The privacy policy sets forth the company’s approach to protecting the e-commerce customer’s personal information in compliance with the applicable laws.

E-commerce Laws in the U.S.

Commercial transactions in the physical world are governed by trade treaties, national and international laws. Similarly, there are a number of international, federal and state laws that govern various aspects of e-commerce (identity, privacy, security, taxation and contract issues). But, the underlying technology powering e-commerce changes much more rapidly than the legal system. Consequently, e-commerce legislation is still new and developing in many states.

Electronic Signatures in Global and National Commerce Act

Contracts are at the heart of any business transaction. Legally speaking, any valid contract requires the signature of all involved parties. In e-commerce, commercial transactions are conducted with electronic systems. Buyers and sellers do not meet face to face. Is it possible to have valid contracts when they do not exist on paper?

The Electronic Signatures in Global and National Commerce Act (ESIGN) addresses the issue of digital signatures. It is a federal law that facilitates the use of digital signatures in e-commerce transactions. The very first section states that a signature or contract cannot be denied legal effect or validity solely because it is an electronic form. With the establishment of the ESIGN act, digital contracts and signatures became just as good as their paper counterparts.

The provision of digital signatures and electronic contracts ensures that businesses and customers can engage in e-commerce through binding agreements. Digital signatures prevent fraud and protect the authenticity, privacy, and integrity of transactions conducted online.

CAN-SPAM Act

Modern e-commerce would be impossible without email marketing. Businesses have the opportunity to send marketing messages to customers when they make a purchase or add their address to a marketing list. Unlike snail mail, organizations can send marketing emails to thousands of customers in a few seconds. This led to the proliferation of unsolicited commercial emails, commonly called spam.

The CAN-SPAM Act applies to all business email with commercial messages, including those sent from one business to another business. It allows customers to opt out of such emails, sets out compliance requirements, and imposes penalties for violations. Every business should comply with the following:

  • Clearly identify the email as containing an advertisement.
  • Do not mislead customers regarding the origin, subject, and content of the email.
  • Ensure the email contains a physical address located in the United States.
  • Allow customers to opt out at any time.
  • Complete opt-out requests promptly and without any fees or additional steps.

Clickwrap Agreements and Terms of Service

While there is no specific law governing e-commerce clickwrap agreements, there is a substantial precedent and case law to draw upon. Clickwrap agreements originated from software license agreements which were included in the box containing the CD/DVD. Clickwrap agreements have been found to be enforceable provided users clearly assent to the given terms and conditions. The courts have held that these agreements should be displayed prominently on the website. The terms should provide clear and simple language that is understood by the average person.

Any e-commerce site should have terms of service agreements for users. It should list all the conditions of use of the website. In a traditional store, customers have to follow certain rules of behavior like handling the products carefully or paying for purchases before leaving. Similarly, the terms of service for e-commerce websites set out conditions governing the use of personal data, user-created content, etc.

Protect Customer Personal Information: Privacy Policy and Data Protection

Privacy is perhaps the biggest issue facing e-commerce in 2018. Customers are now aware that every organization, website, and entity is capable of collecting personal information. Sometimes, information is required to complete transactions or otherwise help the user in some way. Quite often, companies collect the information through third-party software, advertising banners, and other ways that the customer is not aware of.

Unlike the European Union, which has a comprehensive privacy law, the United States has no such equivalent. Certain types of information (medical, financial, and educational data) is protected under specific laws while some states might have their own legislation. For instance, data pertaining to children under the age of 13 is protected under the Children’s Online Privacy Protection Act (COPPA). However, users have successfully litigated against companies under common law (breach of contract, fraud, unfair trade practices, and so on). There have been calls recently for comprehensive privacy regulation in the U.S. since self-regulation does not appear to be working. See here for more on privacy law.

Copyright Your Work: The Digital Millennium Copyright Act

One of the cornerstones of human innovation is the protection of intellectual property. Copyrights, patents and trademarks are some of the forms of intellectual property protections available to individuals and businesses.

Copyrights protect works of authorship such as movies, music, books, and even software. Their duration varies according to several factors. Copyright issues have taken center stage in e-commerce and other online activities. Electronic systems make it easier to duplicate and transmit proprietary information to millions of people at very little cost. It has made it difficult for authors to protect their content against theft, plagiarism, and misuse.

The Digital Millennium Copyright Act was created to deal with the specific challenges of regulating electronic content. The DMCA protects the rights of both copyright owners and consumers. It contains anti-circumvention provisions that prohibit the circumvention of access control by users. It provides safe harbor exemptions for service providers such as ISPs and search engines.

Both the anti-circumvention and safe harbor sections have come under scrutiny over the last 10 years. While the former was theoretically supposed to prevent piracy (duplicating and transmitting copyrighted content), it has not been successful so far. Rapid changes in technology have prompted many states to reevaluate existing laws and propose new ones. There is no doubt that future e-ommerce laws will be substantially different from the current framework. To stay up to date, seek assistance from Curry Law.

Feel free to contact us at Curry Law to discuss your e-commerce legal needs.