electronic commerce tenth edition chapter 7 the environment of electronic commerce: legal, ethical,...

Electronic CommerceTenth Edition

Chapter 7The Environment of Electronic

Commerce: Legal, Ethical, and Tax Issues

Electronic Commerce, Tenth Edition 22

Learning Objectives

In this chapter, you will learn:• How the legal environment affects electronic

commerce activities• What elements combine to form an online business

contract• How copyright, patent, and trademark laws govern

the use of intellectual property online• That the Internet has opened doors for online crime,

terrorism, and warfare

Learning Objectives (cont’d.)

• How ethics issues arise for companies conducting electronic commerce

• Ways to resolve conflicts between companies’ desire to collect and use their customers’ data and the privacy rights of those customers

• What taxes are levied on electronic commerce activities



The Legal Environment of Electronic Commerce

• All businesses:– Must comply with the same laws and regulations– Face the same set of penalties

• Web businesses face additional complicating factors– Web extends reach beyond traditional boundaries

• Subject to more laws more quickly than brick-and-mortar business

– More interactive and complex customer relationships• Due to increased communications speed and efficiency


The Legal Environment of Electronic Commerce (cont’d.)

• Online communications– Facilitate strategic alliances and supply web

relationships• Web creates network of customers

– Significant levels of interaction (with each other)• Implications of violating law or breaching ethical

standards– Web businesses face rapid, intense reactions from

customers and stakeholders


Borders and Jurisdiction

• Physical world of traditional commerce– Territorial borders clearly:

• Mark range of culture• Mark reach of applicable laws

• Physical travel across international borders– People made aware of transition through:

• Formal document examination• Language and currency change


• Geographic influences of area’s dominant culture– Limit acceptable ethical behavior and laws adopted

• Culture affects laws directly and indirectly– Through its effect on ethical standards

FIGURE 7-1 Culture helps determine laws and ethical standards

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Borders and Jurisdiction (cont’d.)

• Geographic boundaries on culture– Historically defined by lack of distant travel– Today people travel easily between countries

• Example: European Union citizen movement and use of common currency (the euro)

• Relationship between geographic and legal boundaries – Defined by four elements

• Power, effects, legitimacy, notice



• Power– Form of control over:

• Physical space• People and objects residing in physical space

– Defining characteristic of statehood– Effective laws require effective enforcement– Effective enforcement requires ability to:

• Exercise physical control over residents • Impose sanctions on violators


– Jurisdiction• Government’s ability to exert control over a person or

corporation– Physical world laws do not apply to people:

• Not located in or not owning assets in geographic area that created laws

– Asserted government power level• Limited by existing culture acceptance

– Ideally • Geographic boundaries, cultural groupings, legal

structures all coincide



• Effects– Physical world laws

• Grounded in relationship between physical proximity and effects (impact) of person’s behavior

– Diminish as geographic distance increases– Local culture’s acceptance or rejection of various

kinds of effects:• Determines characteristics of laws

– For online businesses:• Traditional measures, resulting laws do not work well• Example: online Nazi memorabilia sales




• Legitimacy– 1970 United Nations resolution

• Affirmed idea of governmental legitimacy– Legitimacy

• Idea that those subject to laws should have some role in formulating them

– Countries and governments• Operate with varying levels of authority and autonomy • Example: China and Singapore versus Scandinavian

countries



• Notice– Physical boundaries provide notice (when crossed)

• One rule set replaced by different rule set– Expression of such a change in rules– Constructive notice

• People informed of subjection to new laws and cultural norms: crossing international border

• Ignorance of law: not sustainable defense• Creates problems for online businesses: unknown

customers from another country accessing Web sites• Poor translation to online business


FIGURE 7-2 Physical geographic boundaries lead to legal boundaries

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Jurisdiction on the Internet

• Difficult– No geographic boundaries– Power, effects, legitimacy, and notice

• Do not translate well to e-commerce

• Governments enforcing Internet business conduct laws:– Must establish jurisdiction over conduct

• Contract– Promise between two or more legal entities

• Provides for exchange of value between them


Jurisdiction on the Internet (cont’d.)

• Breach of contract– Occurs if either party does not comply with contract

terms• Other party can sue (failure to comply)

• Tort– Intentional (negligent) action taken by a legal entity

• Causing harm to another legal entity• Other than breach of contract

• Sufficient jurisdiction requires:– Subject-matter jurisdiction and personal jurisdiction



• Subject-matter jurisdiction– Court’s authority to decide particular dispute type– United States examples

• Federal courts: subject-matter jurisdiction over issues governed by federal laws

• State courts: subject-matter jurisdiction over issues governed by state laws

– Rules determining subject-matter jurisdiction• Clear and easy to apply (few disputes)

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• Personal jurisdiction– Determined by residence of parties– If defendant is a state resident where court located

• Straightforward determination– An out-of-state person or corporation can voluntarily

submit to a state court jurisdiction– Forum selection clause

• Statement included in a signed contract• Indicates contract enforced according to particular state

laws



FIGURE 7-3 A typical forum selection clause


– Long-arm statutes: state laws creating personal jurisdiction (details vary)• Create personal jurisdiction over nonresidents

committing tortious acts– Businesses conducting e-commerce over state and

international lines• Be aware of jurisdictional considerations

– Extent to which these laws apply: unclear• Procedural laws written prior to electronic commerce• Continue to evolve as electronic commerce disputes

arise




– Tortious acts • Represent exceptions to general rule determining

personal jurisdiction• Committed by selling product causing harm to buyer

– Negligent tort• Seller unintentionally provides a harmful product

– Intentional tort• Seller knowingly or recklessly causes injury to buyer

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– Most common business-related intentional torts• Defamation, misrepresentation, fraud, trade secret theft

– Long-arm statutes• Invoked more readily for tortious acts compared to

breach of contract




• Jurisdiction in international commerce– Governed by treaties between countries– U.S. determines personal jurisdiction for foreigners

• Same manner as in domestic long-arm statutes– Non-U.S. corporations and individuals

• Can be sued in U.S. courts• Foreign courts can enforce U.S. court system decisions

against U.S. corporations, individuals– Judicial comity

• Voluntarily enforce other countries’ laws out of sense of comity (friendly civility)



– Courts reluctant to serve as forums for international disputes• Not designed for diplomacy, cost-benefit evaluations• Prefer government executive branch to negotiate

international agreements, resolve international disputes– Examples: eBay and Google in China

• Some assert Chinese government involved in failures– Online resources

• Berkman Center for Internet & Society• UCLA Online Institute for Cyberspace Law and Policy

Conflict of Laws

• Business governed by various laws– Federal laws, state laws, local laws

• Conflict of laws– When laws address same issues in different ways

• Online businesses span many localities, states– Look to federal laws for guidance

• May lead to problems with state and local laws

• Example: direct wine sales industry• More information: Free the Grapes

– Web site of a wine industry trade association



Contracting and Contract Enforcement in Electronic Commerce

• Three essential contract elements– An offer, an acceptance, consideration

• Contract formed when one party accepts offer of another party

• Offer– Commitment with certain terms made to another party

• Can be revoked

• Acceptance– Expression of willingness to take offer including all

stated terms


Contracting and Contract Enforcement in Electronic Commerce (cont’d.)

• Consideration– Agreed-upon exchange of something valuable

• Money, property, and future services

• Implied contract– Formed by two or more parties acting as if contract

exists• Even if no written and signed contract



• Creating contracts: offers and acceptances– Contract

• Exists for every kind of agreement or exchange between parties (no matter how simple)

• Example: consumer buying an item at the supermarket• Key element of traditional and Internet business

– Internet communication offers and acceptances• Occur by exchanging e-mail, engaging in EDI, and

filling out Web page forms• Can be combined with traditional methods

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• Creating contracts: offers and acceptances (cont’d.)– Consumer’s contract to buy goods

• Same basic elements: in-person and online– Resource

• Cornell Law School Web site– Contains Contracts Uniform Commercial Code (UCC)


FIGURE 7-4 Contracting process in an online sale


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• Click-wrap and Web-wrap contract acceptances– End-user license agreements (EULAs)

• Contract user must accept before installing software– Shrink-wrap acceptance

• Accepting a contract by removing plastic shrink wrap– Click-wrap acceptance

• Agree to site’s EULA or its terms and conditions by clicking a button on the Web site

– Web-wrap acceptance or browser-wrap acceptance• Accept by simply using the Web site


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• Creating written contracts on the Web– Contracts valid even if not in writing or signed

• May not be enforceable in certain categories– Statute of Frauds (state laws)

• Categories of contracts not enforceable unless terms put into writing and signed

• Applies to sale of goods worth more than $500• Requires that actions not completed within one year

must be created by a signed writing




• Creating written contracts on the Web (cont’d.)– Forming contracts using electronic commerce

• Pen or paper not required (fortunately)– Writing exists:

• When contract terms reduced to tangible form– Signature

• Any symbol executed or adopted for the purpose of authenticating a writing


• Creating written contracts on the Web (cont’d.)– Article 11 of the United Nations Convention on

Contracts for the International Sale of Goods (CISG)• Requires neither writing nor a signature to create a

legally binding acceptance– Information on CISG and related topics in

international commercial law • Pace Law School CISG Database Web site




• Implied warranties and warranty disclaimers on the Web– Implied warranty

• Promise to which the seller can be held even though the seller did not make an explicit statement of that promise

– Law establishes these basic elements of a transaction in any contract to sell goods or services

– Warranty disclaimer• Statement declaring that the seller will not honor some

or all implied warranties



• Implied warranties and warranty disclaimers on the Web (cont’d.)– Warranty disclaimer must be conspicuously made in

writing• Put in larger type, bold font, or contrasting color• State it obviously • Make it easy for buyer to find on Web site


FIGURE 7-5 A Web site warranty disclaimer


• Authority to form contracts– Contract formed when offer accepted for

consideration– Problems with acceptance

• Issued by imposter (forgery)• Improper authority to bind company to a contract

– Electronic commerce technology• Makes forged identities easy to create• Also provides means to avoid deception

– Establish identity in online transactions• Use digital signatures




• Authority to form contracts (cont’d.)– Authority to bind

• Authority to commit company to online contract• Example: employee accepts contract, company later

asserts employee not authorized– In physical world transactions:

• Check public information on file • Obtain copies of corporate certificates or resolutions

– In online transactions:• Physical world methods can be time consuming and

awkward



• Terms of service agreements– Site visitors must follow stated rules

• Most visitors not aware of rules– Terms of service (ToS) agreements

• Detailed rules and regulations• Limit Web site owner’s liability for what one might do

with site information– Site visitor held to terms of service by simply using

site


FIGURE 7-6 Yahoo! Terms of Service agreement

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Use and Protection of Intellectual Property in Online Business

• Intellectual property (general term) includes:– All products of the human mind

• Tangible or intangible– Protections afforded by copyrights and patents,

trademarks registration, service marks• Right of publicity

– Limited right to control others’ commercial use of an individual’s name, image, likeness, identifying aspect of identity

– Limited by U.S. First Amendment provisions


Use and Protection of Intellectual Property in Online Business (cont’d.)

• Online businesses must avoid:– Deceptive trade practices– False advertising claims– Defamation or product disparagement– Infringements of intellectual property rights

• By using unauthorized content

Copyright Issues

• Copyright– Right granted by government to the author (creator)

of literary or artistic work• Specific time length provided in copyright law

– Gives author (creator) sole and exclusive right to the work (print, publish, sell)

– Includes virtually all forms of artistic or intellectual expression



Copyright Issues (cont’d.)

• Idea contained in an expression– Cannot be copyrighted

• Requirement– Idea must be separate from expression– Example: mathematical calculations

• Collection of facts– Can be copyrighted– Example: Yahoo! Web Directory



• U.S. law still allows registration (no longer required)• Work created after 1989

– Copyrighted automatically by virtue of copyright law• Most U.S. Web pages protected by automatic

copyright provision• Web client computer copy of HTML file

– Acceptable under fair use• Includes copying it for use in criticism, comment, news

reporting, teaching, scholarship, or research


FIGURE 7-7 U.S. law governing the fair-use exception


• Fair use specific factors– Nonprofit educational uses have better chance of

qualifying than commercial uses– Court may consider painting using different standards

than sound recording– Small sections qualify when entire work might not– Court may consider amount of damage caused to

value of copyrighted work• Fair-use Web site sources:

– University of Texas Copyright Crash Course– Stanford Copyright & Fair Use




• Copyright law difficult to apply– Due to elements such as fair use

• Vicarious copyright infringement– Entity capable of supervising infringing activity– Obtains a financial benefit from infringing activity

• Example: Napster– Failed to monitor its network – Profited indirectly from the infringement

• Music downloads, copying– Legality unclear in many cases


Patent Issues

• Patent– Exclusive right granted by government to an individual

• Make, use, sell invention– Invention must be:

• Genuine, novel, useful• Not obvious given current technology state

– 1980s: companies started obtaining software patents• Not useful for Web site software• Technology obsolete before patent protection secured


Patent Issues (cont’d.)

• Business process patent– Protects specific set of procedures for conducting a

particular business activity• Enforcing rights under business process patent

– Not yet clear– Examples:

• Amazon.com sued Barnes & Noble for process similar to 1-Click method

• MercExchange sued eBay over fixed price sales option


Trademark Issues

• Trademark– Distinctive mark, device, motto, implement company

affixes to goods it produces – Identification purposes

• Service mark – Similar to trademark, identifies services provided

• Both registered with governments (state, federal)• Trade name

– Name business uses to identify itself– Protected under common law


Trademark Issues (cont’d.)

• Common Law– Law established by history of court decisions

• Statutory law– Elected legislative bodies pass laws (statutes)

• Web site designers must not use:– Any trademarked name, logo, other identifying mark

• Without express trademark owner permission


Domain Names and Intellectual Property Issues

• Cybersquatting– Registering trademarked domain name– Hope owner will pay money to acquire URL

• Name changing (typosquatting)– Purposely registering misspelled variations of

well-known domain names• Registering a generic name

– Not cybersquatting• U.S. Anticybersquatting Consumer Protection Act

– Provides protection


Domain Names and Intellectual Property Issues (cont’d.)

• World Intellectual Property Organization (WIPO)– Uniform Domain Name Dispute Resolution Policy

(UDRP)• Handles trademark domain name disputes

– Example: Barry Diller versus cybersquatters owning URL barrydiller.com

– Example: Sting musician case– WIPO criticism: UDRP enforced unevenly


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FIGURE 7-8 WIPO Domain Name Dispute Resolution information page


Domain Names and Intellectual Property Issues (cont’d.)

• Name stealing– Unauthorized changes to domain name ownership

• Domain name ownership change– Information maintained by public domain registrar

changed in registrar’s database• Reflects new owner’s name and business address

• Occurs when safeguards not in place • Main purpose: harass site owner


Protecting Intellectual Property Online

• Digital watermark– Digital code or stream embedded undetectably in

digital image or audio file• Can be encrypted to protect contents

– Example: Verance• Provides digital audio watermarking systems

– Example: Digimarc• Provides watermark protection systems and software

• Copy control– Electronic mechanism limiting number of copies– Example: Blue Spike

Defamation

• Defamatory statement– False and injures reputation of another person or

company• Product disparagement

– When statement injures product or service reputation• Web sites must consider specific laws:

– Before making negative, evaluative statements• Designers must avoid potential defamation liability



Defamation (cont’d.)

• Per se defamation– Statements so negative that injury assumed

• Important exception in U.S. law– Defamatory statements about public figures– Allows considerable leeway for:

• Satirical statements• Valid expressions of personal opinion

– Other countries do not offer same protections• Web site operators with international audiences need to

be careful

Deceptive Trade Practices

• Trademarked object manipulation– Constitutes infringement of trademark holder’s rights

• Personal Web pages – Cannot include unauthorized Web sites links– Risk implying nonexistent relationship

• Trademark protection prevents buyer confusion• Trademark dilution

– Reduction of distinctive trademark quality by alternative uses


Advertising Regulation

• Federal Trade Commission (FTC) (United States)– Regulates advertising, publishes regulations,

investigates false advertising claims• FTC Web site

– Includes links to advertising regulations



FIGURE 7-9 U.S. Federal Trade Commission Bureau of Consumer Protection Business Center page

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Advertising Regulation (cont’d.)

• Illegal under U.S. law– Advertising claim misleading substantial number of

consumers in a material way• FTC accepts referred investigations

– Better Business Bureau• FTC provides policy statements

– Useful for e-commerce Web site designers

Advertising Regulation (cont’d.)

• Policy statements cover specific areas– Bait advertising– Consumer lending and leasing– Endorsements and testimonials– Energy consumption statements for home appliances– Guarantees and warranties– Prices

• Other regulatory agencies– Food and Drug Administration (FDA); Bureau of

Alcohol, Tobacco, and Firearms (BATF); Department of Transportation (DOT)



Online Crime, Terrorism, and Warfare

• Internet– Opened up worldwide possibilities for people to

communicate– Opened doors for businesses to:

• Reach new markets• Create opportunities for economic growth

– Tool for some for perpetrating crimes, conducting terrorism, and waging war


Online Crime: Jurisdiction Issues

• Online versions of physical world crimes– Theft, stalking, pornography distribution, gambling

• New online crime– Commandeering computer to attack other computers

• Law enforcement obstacles– Jurisdiction issues

• Tricky to determine– Prosecuting across international boundaries

• Internet provides new life to old fraud scams– Advance fee fraud– Nigerian scam (419 scam)

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Online Crime: Jurisdiction Issues (cont’d.)

• Distribution of pornographic material– Jurisdiction issues– Subjective distinction between legal and illegal adult

material• Online gambling

– Sites located outside United States– State laws specifically outlaw Internet gambling– Jurisdiction not clear– Unlawful Internet Gambling Enforcement Act (UIGEA)

of 2006 provides clearer jurisdiction– Other countries’ laws challenged as discriminatory


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New Types of Crime Online

• Difficulty applying pre-Internet era laws– Example: online stalking– Few states have passed Internet laws

• Cyberbullying– Using technology to harass, humiliate, threaten, or

embarrass another– Laws lag behind technology

• Sexting– Sending sexually explicit messages or photos using a

mobile phone


New Types of Crime Online (cont’d.)

• Infiltrating computer systems with intent of stealing data, creating operational disruptions– Smaller companies: easier targets– Criminal extortion example:

• Myron Tereshchuk threatened MicroPatent with confidential client information disclosure

• National Retail Federation partnered with eBay and FBI– Combat cases of items stolen from physical stores

and then sold online


New Types of Crime Online (cont’d.)

• Internet can help law enforcement– Track perpetrators of crime

• Criminals brag on social networking sites• Criminals leave clues in online profiles



Online Warfare and Terrorism

• New age of terrorism and warfare– Carried out or coordinated through the Internet

• Web sites (considerable number)– Operated by hate groups and terrorist organizations– Contain detailed instructions for creating biological

weapons and other poisons– Contain discussion boards

• Help terrorist groups recruit new members online– Offer downloadable terrorist training films (thousands)

Online Warfare and Terrorism (cont’d.)

• Agencies devoting resources to monitoring terrorist activities online– U.S. Department of Homeland Security, Interpol– Historically: faced difficulty in coordinating activities

• Interpol motivations:– Update and expand computer network monitoring

skills– Coordinate global antiterrorism efforts

• Sustained terrorist effort could slow down major transaction-processing center processing


Ethical Issues

• Web electronic commerce sites:– Adhere to same ethical standards of other businesses

• Consequences all companies suffer– Damaged reputation, long-term loss of trust, and loss

of business• Web advertising or promotion

– Include true statements; omit misleading information– Ensure products supported by verifiable information


Ethics and Online Business Practices

• Ethical lapse rapidly passed among customers– Can seriously affect company’s reputation– Examples

• Amazon.com arrangements with publishers for book promotions

• eBay firearm sales • 2009 Apple Apps store software approval time

• Important ethical issues that organizations face– Limiting use of collected e-mail addresses; related

information– Lack of government regulation protecting site visitor


Privacy Rights and Obligations

• Online privacy: evolving– Hotly debated in various forums

• Electronic Communications Privacy Act of 1986– Main law governing privacy on the Internet today– Deals with leased telephone line interceptions

• Legislative proposals– None have survived constitutional challenges

• 1999 FTC report– Concluded no federal laws regarding privacy required– Created privacy advocacy group outrage


Privacy Rights and Obligations (cont’d.)

• Direct Marketing Association (DMA)– Established set of privacy standards– Member activity regulation: less than successful

• Ethics issues– Significant in online privacy area

• Laws not keeping pace with Internet, Web growth– Nature and degree of personal information recorded

• Threaten visitors privacy rights



• Ethics issues (cont’d.)– Companies may lose control of data collected– Companies may release confidential information

about individuals: • Without the individual’s permission

– Internet has changed traditional assumptions about privacy

– Worldwide cultural differences provide different electronic commerce privacy expectations• European Union adopted Directive on the Protection of

Personal Data



FIGURE 7-10 Example Web page showing opt-in choices

FIGURE 7-11 Example Web page showing opt-out choices



• Major United States privacy controversies– Opt-in versus opt-out

• No law limiting companies’ use of gathered information

• Opt-out approach– Assumes customer does not object to company’s use

of information• Unless customer specifically denies permission

• Opt-in approach– Company collecting information does not use it for

any other purpose• Unless customer specifically chooses to allow use



• Another opt-out approach – Page includes checked boxes

• Instructs visitor: “uncheck the boxes of the items you do not wish to receive”

• Opt-in approach more preferable– Gives customer privacy protection

• Unless customer specifically elects to give up rights


• Electronic commerce Web sites– Be conservative in customer data collection and use– Principles for handling customer data

• Use data collected for improved customer service• Do not share customer data with others outside your

company without customer’s permission• Tell customers what data you are collecting and what

you are doing with it• Give customers the right to have you delete any data

collected about them• Keep data secure


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Communications with Children

• Additional privacy considerations arise:– When Web sites attract children

• Children are less capable of evaluating information sharing and transaction risks– Concerns

• Children’s ability to read, evaluate privacy statements• Consent to providing personal information to sites

– MySpace• 2006: former federal prosecutor (site security officer)• Software looks for sex offenders


Communications with Children (cont’d.)

• Most countries– People under 18 or 21: not considered adults

• Specific laws for children’s privacy rights– Define a child as person below the age of 12 or 13

• 1998: Children’s Online Protection Act (COPA)– Unconstitutional: restricted lawful material access

• Children’s Online Privacy Protection Act of 1998– Successful: COPPA does not regulate content

• 2001: Children’s Internet Protection Act (CIPA)– Federally funded schools install filtering software


Communications with Children (cont’d.)

• Disney Online– Offers three registration choices (adult, teen, kids)– Refuses to enroll child under age 13 without parent’s

consent– Meets COPPA law requirements

• Sanrio– Requires birth date before allowing access– Encourages notification of COPPA site violations



FIGURE 7-12 Sanrio’s approach to COPPA compliance

Taxation and Electronic Commerce

• Web businesses must comply with multiple tax laws • Several types of taxes

– Income taxes: levied on net income– Transaction taxes (transfer taxes): levied on

products or services company sells or uses• Sales taxes, use taxes, excise taxes

– Property taxes: levied on personal property, real estate

• Greatest concern: income and sales taxes



Nexus

• Connection between tax-paying entity and government– Similar concept: personal jurisdiction

• Activities creating nexus (United States)– Determined by state law; vary from state to state

• Determining nexus:– Difficult if company conducts few activities in the state

• National nexus issues– Business conducted in more than one country

• Establish nexus with a country• Liable for filing tax returns in that country


U.S. Income Taxes

• Internal Revenue Service (IRS)– Charged with administering tax laws

• Basic principle– Any verifiable increase in company wealth:

• Subject to federal taxation• Pay U.S. federal income tax if:

– U.S.-based Web site generating income– Web site maintained by U.S. company

• Credit given for taxes paid to foreign countries – Reduces double taxation of foreign earnings


U.S. Income Taxes (cont’d.)

• States levy income tax on business earnings– Must file tax returns in all states– Apportion earnings in accordance with each state

• Others with power to levy income taxes– Cities, counties, other political subdivisions

• Must apportion income, file tax returns in each locality

• Companies selling through Web site– Do not establish nexus everywhere goods delivered

to customers (in general)• Avoid nexus by using a contract carrier


U.S. State Sales Taxes

• Transaction tax on goods sold to consumers• Businesses establishing nexus with a state

– Must file sales tax returns and remit sales tax collected from customers

• Business not required to collect taxes from out-of-state customers– Unless nexus established

• Use tax– Tax levied by a state on property used in that state

• Not purchased in that state


U.S. State Sales Taxes (cont’d.)

• Large companies– Use complex sales tax management software

• Purchasers exempt from sales tax– Charitable organizations, businesses buying items for

resale• Sales tax collection problem

– Confusing; no new laws• Amazon laws require online retailers to collect taxes• Streamlined Sales and Use Tax Agreement

(SSUTA): Simplifies state sales taxes


Import Tariffs

• Countries regulate import and export of goods– Goods imported: only if tariff paid

• Tariff (customs duty, duty)– Tax levied on products as they enter country

• Many reasons for imposing tariffs– Beyond scope of this book

• Goods ordered online: subject to tariffs – When crossing international borders

• Products delivered online: subject to tariffs– Example: downloaded software


European Union Value Added Taxes

• European Union (EU)– Transfer taxes generate revenues– Value Added Tax (VAT): most common

• 2003: VAT applied to sales of digital goods– EU-based companies

• Must collect VAT on digital good sales– Non-EU companies

• Must register with EU tax authorities, levy, collect, remit VAT if sales include digital goods delivered into EU

Summary

• Concept of jurisdiction on Internet: still unclear• Contracts are part of doing business on the Web• Web businesses must avoid:

– Deceptive trade practices– False advertising claims– Defamation or product disparagement– Intellectual property rights infringement

• Law enforcement agencies face difficulty combating online crimes, terrorist acts, conduct of war


Summary (cont’d.)

• Online privacy– Collection and use of consumer information– Opt-in and opt-out methods used– Special rules for communicating with children

• Ethics issues can shape Web business policies• Various forms of taxation apply to e-commerce

– National, international, state and local


electronic commerce tenth edition chapter 7 the environment of electronic commerce: legal, ethical,...

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