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
• Taxes that are levied on 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

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Europages Home Page Figure 11-1
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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-colored elements in Japan

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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

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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

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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

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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

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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

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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

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John Marshall Law School Cyberspace Law
Site Figure 11-4
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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

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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

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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 RegulationFigure 11-5

• In the U.S., advertising is primarily regulated
  by the Federal Trade Commission (FTC)

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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