Technology &
Internet Law

Law & the Ecommerce Revolution

Ecommerce has been described as "mail order on steroids" and web access as "the new telephone". There is a real sense of excitement in the air over the opportunities on the Internet. "Ecommerce" is the use of the Internet for business purposes and there can be few for whom that explanation was really necessary given the vast amount of media coverage of the subject.

Statistics abound evidencing the lightning growth of ecommerce in the last year and forecasting it for the next three in what has been described as the ecommerce revolution. The Chairman of E-Connect 99, the ecommerce conference, Russ Nathan, went so far as to say that in five years if a business is not using the ecommerce opportunities it will probably not survive.

As use of the Internet (business-to-business and business-to-consumer) grows, so does the potential for dispute. The US experience has shown this to be the case and early indications here support that view - and it is hardly surprising given the wide range of legal issues that affect the Internet.

Unfortunately, in the same way that too many businesses fail to take preventive measures for "real world" trading, those operating in the virtual world of the Internet are burying their heads in the sand. Eversheds' research showed that over 80% of web sites in the UK were illegal to some extent. They focus on the "sexy" bits about medium and ignore the scary bits - the former outweigh the latter but can pose a serious threat to the virtual business and even to its real world dealings.

In their seminar at Internet World 99 HMV warned people to learn from their mistakes and look at the legal issues at an early stage. This article will focus on some of the key issues to consider when advertising or trading on the Internet but cannot be an exhaustive review of relevant legal matters.

Status and Basic Legal Information

It is considered good advice for people actively trading on the Internet to ensure the site contains the same information you have on your headed notepaper. So, if you are a sole trader or partnership, your name and those of all partners plus the real world trading address should appear. If you run a limited company, you should state the full company name and trading address, where it is registered (e.g. England), the company number and its registered office address (if it is the same as the trading address it must still make it clear that it is also the registered office).

If you are VAT registered, you should show the VAT number and where on-line sales are effected, you must generate a VAT invoice and where it is done on-line, make sure that people are advise to print off a copy and that you also keep a copy.

Copyright and Intellectual Property

These matters affect ecommerce more than most areas of law and cause most of the disputes - from domain name issues to illegal use of copyright or trade marked materials. Abuses of copyright etc are far more transparent on the Internet and so extra caution is needed. Always check domain names and product or service names to avoid infringing trade marks etc.. Do not link into someone else's site without their written consent and even then make sure it is clear to visitors that the material they can see belongs to the other site. Get warranties from your designers that any materials they produce for you are free from third party intellectual property rights and make sure you can use the materials for all purposes.

Terms & Conditions

When trading on the Internet you need to make sure you have effective terms and conditions and, sadly, it is not enough to post your usual ones - they are likely to need special provisions. Above all, you need to make sure that a customer is not able to by-pass your terms and preferably either scrolls down the terms or is at least referred to them and asked to accept them before being able to proceed.

Secure Access and Fraud

As yet banks are refusing to protect companies trading on the Net against fraudulent use of credit cards and electronic cash has not yet taken off. This means that a business loses out if it turns out that a card was used fraudulently. Systems are available to check for fraud and depending upon cost they have greater or lesser success. Otherwise the best way to deal with the matter is by insurance.

Disclaimers

For sites containing advice or opinions, you will need disclaimers and make sure they are clearly visible to all visitors. You need to warn people not to rely on the information as it is not intended to constitute advice. If you allow others to post information on your site, set out a whole series of terms for them doing so, including agreeing not to say anything defamatory, illegal, offensive, criminal or misleading nor to breach anyone's intellectual property rights. You should go on to get an indemnity from them for any losses arising from breach and reserve the right to remove or alter postings. If you link into other sites, specify that you accept no responsibility for the content of linked sites.

Policy for responding to defamatory statements

If you host other people's material, you run the risk of liability for defamatory statements they make. You can choose to edit it in which case you run the risk of liability for any defamatory remarks you miss as "editor" of the material. Alternatively, you can avoid liability for publishing or editing by turning a blind eye but you may still find yourself liable for failing to take reasonable steps to prevent the defamation (the recent Demoncase, for example). In any event you should take out insurance to cover this liability - premiums may be less if you adopt proper controls even though this means you are "editing" material.

Whatever you do, it is important to have a policy for dealing with alleged defamatory postings - for removing them pending any further investigations and to apologise promptly to the complainant. This may well diffuse the situation and may also reduce any damages which may be awarded if they sue.

VAT and Tax Matters

Although not quite so simple, the bottom line is that for most businesses on-line dealings are still taxable and VATable in the normal way. Indeed, proposed European legislation is likely to confirm that it is the working base (your office base) which is the relevant place of business, not "cyberspace".

E-mail and Internet use policy

For businesses employing people, it is essential to have policies for both e-mail and Internet use. Employers are liable for the acts of their employees during the course of their employment so the best way to prevent this is to specify what employees can and cannot do (e.g. requiring them to keep copies of all email, warning people that all email may be opened by the employer).

Privacy & Data Protection Issues

If you are taking personal details on-line (e.g. names and addresses), you must make sure that the information is kept reasonably secure - this will soon apply irrespective of whether the information is kept on computer. If you have not already done so, you must register under the Data Protection Act (£75 for a three-year registration for now) and ensure it covers Internet dealings. You can only use the information for purposes to which people have consented which can sometimes be implied.

If you post people's information on-line (e.g. a directory), you have to get their consent to doing so, having explained that the information will be available to people in countries that do not have adequate laws to protect the use of such data (e.g. Canada and the USA).

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NEED TO KNOW MORE?

For further information on ecommerce and business law and how they apply to you, contact Maitland Kalton.  Should you prefer to telephone, call us on +44 (0)207 278 1817.

Kaltons Solicitors, Suite 302, Spitfire Studios, 63-71 Collier Street, London, N1 9BE. Telephone +44 (0)20 7278 1817; Fax: +44 (0)207 278 1835.

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