1. Chapter 7 The Environment of Electronic Commerce: International, Legal, Ethical, and Tax Issues

2. International Nature of Electronic Commerce  Any business that engages in electronic commerce instantly becomes an international business.  When companies use the Web to create a corporate image, or build a community, they are automatically operating in a global environment.  Businesses engaging in electronic commerce must be aware of the differences in language and customs that make up the culture of any region in which they do business.  The barriers to international electronic commerce include language, culture, and infrastructure issues.

3. Language Issues  The only way to do business effectively in other cultures is to adapt to those cultures.  The first step to reach foreign customers is to provide local language versions of its Web site - translating the Web site into another language or regional dialect.

4. Culture Issues  The combination of language and customs = culture.  Some errors stemming from subtle language and cultural standards are culture issues.  On the Web, designers must be very careful when choosing icons that represent common actions - even colors or Web page design elements can be troublesome – examples : Bokus.com. reflects a cultural design preference - Swedish Softbank devised a way to introduce electronic commerce to a reluctant Japanese population. Nike realized that it had to create special Web pages for foreign customers.

5. www.bokus.com/se

6. www.softbank.co.jp

7. www.nike.com/main.html

8. Infrastructure Issues  Internet infrastructure - computers and software connected to the Internet and the communications networks over which message packets travel.  Regulations in some countries have inhibited the development of the telecommunications infrastructure or limited the expansion of that infrastructure.  Local connection costs through the existing telephone networks of many countries are very high.  This can have a profound effect on the behavior of electronic commerce participants.

9. Infrastructure Issues (cont.)

10. The Legal Environment of Electronic Commerce  Businesses that operate on the Web must comply with the same laws and regulations that govern the operations of all businesses.  The Web extends a company’s reach beyond traditional boundaries, thus it faces many more laws than before.  Web businesses that violate laws can face rapid and intense reactions from many customers.

11. Borders and Jurisdiction  Territorial borders in the physical world serve a useful purpose in traditional commerce.  In the physical world, geographic boundaries almost always coincide with legal and cultural boundaries.  The relationship between geographical boundaries and legal boundaries can be discussed in terms of four elements: power, effects, legitimacy, and notice.

12. Jurisdiction on the Internet  Jurisdiction is more difficult on the Internet because traditional geographic boundaries do not exist  People or corporations that wish to enforce their rights based on either contract or tort law must file their claims in courts with jurisdiction to hear their case.

13. Subject-Matter Jurisdiction  Subject-matter jurisdiction is a court’s authority to decide a particular type of dispute.  Federal courts have subject-matter jurisdiction over issues governed by federal law.  State courts have subject-matter jurisdiction over issues governed by state laws.

14. Personal Jurisdiction  Personal jurisdiction is determined by the residence of the parties.  One way that people voluntarily submit to a jurisdiction is by signing a contract that includes a statement known as a forum selection clause.  Businesses should be aware of jurisdictional considerations when conducting electronic commerce over state and international lines.

15. Jurisdiction in International Commerce  The exercise of jurisdiction across international borders is governed by treaties between the countries engaged in the dispute.  The John Marshall Law School’s Center for Information Technology and Privacy Law Web site is a good source of cyberspace law.  http://www.jmls.edu/catalog.cfm?dest=dir &linkon=subsection&linkid=64

16. Online Resource for Cyberspace Law

17. Contract Enforcement in Electronic Commerce  Any contract includes three essential elements: an offer, an acceptance, and consideration.  The contract is formed when one party accepts the offer of another party.  Contracts - key element of traditional business practice - important on the Internet - occur when parties exchange e-mail messages, engage in EDI, or fill out forms on Web pages.

18. Written Contracts on the Web  In general, contracts are valid even if they are not in writing or signed.  A signature is any symbol executed or adopted for the purpose of authenticating a writing - reasonable to assume that a symbol or code included in an electronic file would constitute a signature.  A contract is formed when an offer is accepted for consideration.  Digital signatures, however, are an excellent way to establish identity in online transactions

19.  Warranties - Any contract for the sale of goods includes implied warranties - Sellers can avoid some implied warranty liability by making a warranty disclaimer - legally effective, the warranty disclaimer must be stated obviously and must be easy for a buyer to find on the Web site.  Terms of Service Agreement - Most Web sites have stated rules that visitors must follow, although few visitors are aware of these rules.  If you examine the home page of a Web site, you will often find a link to a page titled “Terms of Service”, “Conditions of Use”, “User Agreement” or something similar - contracts are often called terms of service (ToS) agreements.

20. Web Site Content  A number of other legal issues can arise regarding the Web page content of electronic commerce sites, including: trademark infringement - Web site designers must be very careful not to use any trademarked name, logo, or other identifying mark without permission. deceptive trade practices - trademark protection prevents another firm from using the same or a similar name, logo, or other identifying characteristic in a way that would cause confusion. regulation of advertising claims - any advertising claim that can mislead a substantial number of consumers in a material way is illegal under Malaysian law. defamation - a defamatory statement is a statement that is false and injures the reputation of another person or company - statement injures the reputation of a product = product disparagement

21. Copyright Infringement  Copyright infringement  A copyright is a right granted by a government to the author or creator of a literary or artistic work.  Creations that can be copyrighted include virtually all forms of artistic or intellectual expression: books, music, artworks, recordings (audio and video), architectural drawings, choreographic works, product packaging, and computer software.  Patent infringement  A patent is an exclusive right to make, use, and sell an invention that a government grants to the inventor.  To be patentable, an invention must be genuine, novel, useful, and not obvious given the current state of technology.

22. Ethical Issues  Laws in Malaysia  Companies using Web sites to conduct electronic commerce should adhere to the same ethical standards that other businesses follow. Advertising on the Web should include only true statements - ethical considerations are important in determining advertising policy on the Web. Defamation - a defamatory statement is a statement that is false and injures the reputation of another person or company Product disparagement – a statement that injures the reputation of a product Privacy rights Protection of personal data