1. International, Legal, Ethical,
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 of Electronic 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 of Electronic 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 of Electronic 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 of Electronic 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 of Electronic 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. The Legal Environment of Electronic 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

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

12. The Legal Environment of Electronic 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

13. The Legal Environment of Electronic 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

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 Regulation Figure 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