Chapter 11

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

4. Europages Home Page Figure 11-1

5. International Nature ofElectronic Commerce • Culture issues • Errors can stem from subtle language and cultural standards • General Motor’s Nova • Pepsi’s “come alive” campaign • Baby food jars in Africa • Cartoon cows in India • White-colored elements in Japan

6. 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

7. 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

8. A Typical International Trade Transaction Figure 11-2

9. The Legal Environment ofElectronic Commerce • Businesses operating on the Web face two complicating factors • The Web extends a company’s reach beyond traditional boundaries • The speed and efficiency of communications on the Web

10. Borders and jurisdiction Geographic boundaries on culture have historically been set by the distances involved The relationship between geographic and legal boundaries include The Legal Environment ofElectronic Commerce • power • effects • legitimacy • notice

11. Culture Determines Laws and Ethical Standards Figure 11-3

12. 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 The Legal Environment ofElectronic Commerce

13. 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 The Legal Environment ofElectronic Commerce

14. 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

15. Jurisdiction on the Internet • Subject-matter jurisdiction • The court’s 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

16. 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

17. Jurisdiction on the Internet • John Marshall Law School’s Center for Information Technology and Privacy Law’s Web site includes links to current cases, law review articles, and other updated resources

18. John Marshall Law School Cyberspace Law Site Figure 11-4

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. Advertising RegulationFigure 11-5 • In the U.S., advertising is primarily regulated by the Federal Trade Commission (FTC)

26. FTC Policy Statements • Bait advertising • Consumer lending and leasing • Endorsements and testimonials • Energy consumption statements for home appliances • Guarantees and warranties • Prices

27. 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

28. 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

29. 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