ECT 250: Survey of e-commerce technology International, ethical, and legal issues

2 International issues – Language – Culture – Infrastructure Ethical issues – Defamation – Privacy rights Legal issues – Borders and jurisdiction – Jurisdiction on the Internet – Taxation and e-commerce – Contracting – Web site content Outline

3 E-commerce is by its nature international. International companies must work to build trust with customers. Trust can be built by sharing a culture, that is, a combination of language and customs. The barriers to international e-commerce include: – Language – Culture – Infrastructure International e-commerce

4 A first step in reaching international customers is to conduct business in their native language. Customers are more likely to buy products and services from Web sites in their own language, even if they understand English. Estimates are that by the end of this year, 60% of Web use and 40% of e-commerce sales will involve at least one party outside the U.S. Language issues

5 Most common non-English languages for U.S. companies: Spanish, German, Japanese, French, Chinese. Second tier of languages: Italian, Korean, Russian, Portuguese, and Swedish. Many languages involve different dialects such as Spanish in Mexico vs. Spain vs. Argentina. Some dialect differences are in spoken inflection. Word meanings and spellings can vary between dialects. Example: Gray in U.S.; grey in U.K. Common languages

6 Not every page on a site will be translated into multiple languages. Pages that may be kept in multiple languages: – Home page – Marketing and branding pages – Product information pages Pages that may be kept in a single language: – Local news – Employment opportunities Multiple language sites

7 There are several ways to ensure that customers will see the language appropriate for them. Use the information about the default language of the browser to direct visitors to pages. Create different versions of the site and place links on the page directing visitors. Examples: Dell Computers, HyundaiDell ComputersHyundai The links need to be clearly labeled. Country flags are not a good choice. (Why?) Handling language displays

8 Hire a Web page translation service – Translate the pages – Maintain them for a fee ($0.25 – 0.50/word) Use software that automates the translation and maintenance of the pages. Example: Idiom TechnologiesIdiom Technologies Completely automated translation software. Can translate up to 40,000 words an hour. Human translators do words an hour. Translation/localization

9 Errors can stem from language and culture standards. Chevrolet Nova did not sell in Latin America. Pepsi’s campaign in China failed. “Come alive” became “Brings your ancestors back from their graves”. Complaints from Japanese customers to wine.com.wine.com Packaging is important part of a quality product. Baby food with a picture of a baby did not sell well in parts of Africa where food containers always carry a picture of their contents. Culture issues

10 Labeling issues are particularly troublesome: Inappropriate use of the image of a cow in India. Uncovered legs or arms in a Muslim country. A Web page divided into four parts or that uses the color white in Japan, where the number 4 and white represents death. Labeling issues

11 Japanese customers prefer to pay using cash or cash transfer instead of credit cards. Softbank created a joint venture with 7-Eleven, Yahoo! Japan, and Tohan to sell books and CDs on the Web. – Order items on Internet – Pick them up and pay at 7-Eleven In this case, adding an intermediary helped gain customers. Ways of doing business

12 Some parts of the world have environments that are inhospitable to e-commerce. Denial of access to citizens Restriction of citizens’ access Addition of taxes that place it out of reach The information provided on the Internet may be seen as objectionable or threatening to the culture or traditions of the country. Internet access

13 Some countries have strong cultural requirements that have found their way into the legal codes. In France all advertisements for products must be in French. A U.S. company that ships to France must provide pages in French. Quebec provincial law requires street signs, billboards, directories, and advertising created by Quebec businesses to be in French. Web pages marketed at the U.S. in English only are not allowed. Culture and the law

14 In many countries, the telecommunication systems are government-owned or heavily regulated. Regulations in some places have restricted the development to a point that Internet data packet traffic cannot be handled reliably. Local connection costs may be much higher than in the U.S., resulting in different behavior by Internet users. The paperwork needed for international transactions can be prohibitive. See Figure 11-2, page 347. Infrastructure issues

15 Not adhering to common ethical standards can result in a degradation of trust on the part of customers. Example: Amazon.com and publishers Two areas of concern: 1. Defamation 2. Privacy rights Ethical issues

16 A defamatory statement is one that is false and injures the reputation of another person or company. A statement injuring the reputation of a product or service is called product disparagement. The line between justifiable criticism and defamation can be hard to determine. Defamation

17 Privacy issues remain unsettled and are hotly debated in many forums. The FTC issued a report that concluded Web sites were developing privacy practices with sufficient speed. Responses from privacy advocacy groups were in sharp disagreement. Privacy assumptions vary between cultures. Privacy rights

18 Use the data collected to improve service. Do not share customer data with outsiders without the customer’s permission. Tell customers what data is being collected and what you are doing with it. Give customers the right to delete any of the data collected about them. Some principles

19 Legal issues regarding e-commerce have only begun to be addressed. Categories of issues: Borders and jurisdiction Jurisdiction on the Internet Contracting and contract enforcement Web site content The legal environment

20  Culture affects both laws and ethical standards.  Territorial borders in the physical world serve as notice that culture and laws may be changing.  The relationship between geographic boundaries and legal boundaries deals with four elements: 1.Power 2.Effects 3.Legitimacy 4.Notice Borders and jurisdiction

21 Some of the defining characteristics of a sovereign government are control over: – A physical space – Objects that reside in that space – People who reside in that space The ability of a government to exert control over a person or corporation is called jurisdiction. Laws in the physical world do not apply to people who are not located in or own assets in the area that created those laws. Power

22 Laws in the physical world are based on the relationship between physical proximity and the effects of a person’s behavior. Actions have a stronger hold on things nearby. Example: Trademark enforcement Two restaurants with the same name, one in Chicago and one in France. Effects

23 The right to create laws and enforce laws derives from the mandate of those who will be subject to those laws. Some cultures allow their governments a high degree of autonomy and authority. Example: China and Singapore Other cultures place severe restrictions on the authority of the government. Example: Scandinavian countries Legitimacy

24 Physical boundaries are an effective way to announce the ending of one legal or cultural system and the beginning of another. The perception that the laws and norms have changed is needed to allow people to adjust. Borders provide this notice. Notice

25 Determining who has jurisdiction can be difficult. Example: Mexican customer dealing with a firm from Sweden, hosted by a Canadian site, and maintained by a programmer from India. A contract is an agreement between two or more legal entities that provides for an exchange of value (goods, services, money). A tort is an action taken by a legal entity that causes harm to another legal entity. Jurisdiction on the Internet

26 If a person or organization wants to enforce their rights under contracts or seek tort damages, they must find courts that have sufficient jurisdiction. A court has sufficient jurisdiction in a matter if it has both: – Subject matter jurisdiction – Personal jurisdiction. Sufficient jurisdiction

27 Subject-matter jurisdiction is a court’s authority to decide the type of dispute. In the United States: Federal courts preside over federal law (Bankruptcy, copyright, patent, federal taxes) State courts deal with issues governed by states (Professional licensing, state taxes) The rules are easy to apply for subject-matter. Subject-matter jurisdiction

28 Personal jurisdiction is, in general, determined by the residence of the parties in question. A court has jurisdiction if the defendant resides in the state in which the court is located. An out-of-state person can submit to a court’s jurisdiction by signing a contract that includes a statement that the contract will be enforced according to the laws of a particular state. Personal jurisdiction

29 States can enact statutes that create personal jurisdiction over nonresidents conducting business or committing tortious acts in the state. In many cases, these laws are not clear with respect to e-commerce. The more business conducted, the more likely a court will be to use a long-arm statute. Courts are also assert jurisdiction when a crime or intentional tort has occurred. Long-arm statutes

30 The exercise of jurisdiction across national borders is governed by treaties between the countries. In general, personal jurisdiction for foreign firms and persons is determined by U.S. courts in the same way as long-arm statues. Jurisdictional issues are complex and changing. Businesses should consult an attorney for advice. International issues

31 A government acquires the power to tax a business when the business establishes a connection with the area controlled by the government. This connection is called nexus. Nexus is similar to personal jurisdiction. Determining nexus can be difficult when a company conducts only a few activities in a state. Online companies may be subject to multiple tax laws from day one. Taxation and e-commerce

32 A online business is potentially subject to several types of taxes: Income taxes: Levied by national, state, and local governments on the net income generated by business activities. Transaction taxes: Includes sales taxes, use taxes, and customs duties. Property taxes: Levied on the personal property and real estate used in the business. Income and transaction taxes are most important. Types of taxes

33 In the U.S., any increase in a company’s wealth is subject to federal taxation. Any company whose U.S.-based Web site generates income is subject to U.S. federal income tax. A Web site maintained by a U.S. company must also pay federal income tax on income generated outside the U.S. (The law provides a tax credit for taxes paid to foreign countries). Federal income taxes

34 Companies that do business in multiple local jurisdictions must apportion their income and file tax returns in each locality that levies an income tax. The number of taxing authorities is over 30,000 in the United States. Companies can accept orders and ship from one state to many other states and avoid nexus by using a contract carrier such as FedEx or UPS to deliver goods to customers. State and local income taxes

35 Businesses that establish nexus with a state must file sales tax returns and remit the sales tax they collect from their customers. If a business ships to customers in other states, it is not required to collect sales tax from those customers unless the business has established nexus with the customer’s state. There are 7500 U.S. sales tax jurisdictions and the rules about which items are taxable differ. Example: In NY large marshmallows are taxable since they are snacks but small ones are not since they are food. Sales taxes

36 Any contract includes an offer and an acceptance. An offer is a declaration of willingness to buy or sell a product or service with enough details to be firm, precise, and unambiguous. An acceptance is the expression of willingness to take an offer, including all of its stated terms. When one party makes an offer that is accepted, a contract is created. Contracting

37 A seller advertising on the Web is not making an offer but inviting offers from potential buyers. When the buyer submits an order, the seller accepts and a contract is made. Some examples of legally binding acceptances in the physical world: – Mailing a check – Shipping goods – Shaking hands – Taking an item off a shelf – Opening a wrapped package Contracting on the Web

38 In the U.S. written contracts must be used for goods worth more than $500 and contracts requiring actions that cannot be completed with a year. Things that constitute a signature: – Faxes – Typed names – Printed names – Digital signatures Written contracts

39 Any contract for sale includes implied warranties. Sellers can create explicit warranties. Statements in promotional material may create an implied warranty. Sellers can use a warranty disclaimer to avoid some implied warranties. It must be clearly displayed. Example: Lands’ End in GermanyLands’ End Warranties

40 Legal issues can arise relating to the Web page content of an e-commerce site. These include: Trademark infringement Deceptive trade practices Regulation of advertising claims Defamation Web site content

41 Web designers must be careful not to use any trade- marked name, logo, or other identifying mark without the written consent of the trademark owner. Example: A picture of a company (other than Pepsi) president holding a can of Pepsi. Manipulating trademarked images and placing them on a site can cause problems. Trademark infringement

42 Web sites that include links to other sites must be careful not to imply a relationship with the company if there is none. A firm cannot use a similar name, logo, or other identifying characteristic that causes confusion in the customer’s mind. Trademark dilution is the reduction of the distinctive quality of a trademark by alternate uses. Deceptive trade practices

43 FTC seeks global e-commerce laws Information