Legal Obligations of Online Entrepreneurs/retailers in a Virtual World

Continued from last week

2. Intellectual property issues

The company’s website images, product descriptions, logos, videos, music, as well as its products, could be copied by other businesses or violate someone else’s intellectual property. The company should therefore take note of the following intellectual property issues:

a. Trademark protection

Owners of e-commerce platforms should ensure that the trademarks that represent their businesses online are protected. Failure to do so may lead to another platform eventually using a similar name and passing off their platform as that of the entrepreneur.

b. Copyright Protection

While publishing content for your e-commerce website, one should be careful not to use another company’s content without permission. Even if a platform unintentionally used copyrighted content, the holder of the copyright can still sue the business.

The owner of the e-commerce platform should therefore ensure that it uses only images and content that it has the rights to use or are in the public domain.

3. Terms of Sale

Terms and conditions of sale are necessary as they set out the legal basis on which the goods or services are supplied to the consumer and include important information (e.g. delivery, pricing, and payment terms).

These terms also enable ecommerce platforms protect themselves by limiting liability. Entrepreneurs should engage a lawyer that will ensure they avoid including any terms that would be considered ‘unfair’ under the applicable laws regulating consumer contracts.

4. Terms of Use of the platform

These terms apply to all users of the platform, rather than just customers, and set out the terms and conditions on which the user may use the business’ website/app. These terms should be as comprehensive as possible as they enable businesses limit their liability and assert intellectual property ownership over their website or app content.

5. Consumer Rights Information

Retailers have an obligation to provide information to consumers before the goods or services are purchased. Consumers must be informed of the identity and address of the retailer, the characteristics of the goods, the price or manner in which the price is calculated, and any applicable delivery charges. They should also be informed if they can cancel an order after it has been placed but before the goods have been delivered.

The business should equally ensure that its advertisements are not false or misleading as this could give rise to liability under consumer protection laws.

6. Tax

With a lot of attention being paid towards the digital economy in recent times, it becomes easier for tax authorities to track sales and services of business when they transition online. Companies will therefore need to seek advice from lawyers/tax practitioners on issues such as withholding tax, value added tax and company income tax which may apply to their business. Smaller businesses may also seek advice on how they can qualify for tax exemptions and other incentives.

7. Anti-money laundering (AML) issues

With cryptocurrency and other virtual assets now being used to make online purchases, ecommerce platforms can easily be vehicles for money laundering. It is therefore necessary for the business owners to be aware of AML issues or engage specialists to assist with compliance and put mechanisms in place to prevent such occurrences.

8. Managing fraud and securing electronic transactions

There has been a steady increase in payment fraud and other issues related to online security over the last few years. There are a range of security threats which include malware, phishing attacks, hacking and spam emails. Issues could also arise where a customer uses a stolen credit card to make an online purchase, or a hacker uses stolen credit data from other customers.

A recent report projects that card- not-present ( CNP) fraud will grow by 14% annually up to 2023, which is a significant figure for e-commerce platforms that accept onsite payments. Thus, while this may not be strictly legal solutions, owners of these platforms need to take steps to protect their platforms and prevent fraud.

To defend against different cyber threats, the business should ensure it updates its platform’s operating system regularly and use a strong Secure Sockets Layer (SSL).

It can also deploy an application performance management (APM) which is a software suite that helps retailers identify and fix vulnerabilities within their system and reduces the possibility of being hacked.

CONCLUSION

Running a successful e-commerce platform requires that the business remains compliant on several fronts. It is therefore advisable that the business consults a competent law firm when setting up its platform. The company should also conduct periodic checks on its compliance level. This may end up being crucial to the success of the business.