Top 3 Legal Problems E-Commerce Businesses Face

In many ways, online transactions—also called electronic commerce or e-commerce—are replacing the traditional in-store buying and selling of years-past.  With the emergence of e-commerce, buyers can purchase goods essentially around-the-clock from the convenience of their home or office.  For a business, a functional e-commerce platform not only appeals to a new generation of consumers, but also presents the opportunity to reach a larger global market.  

In-fact, according to a recent report by tech giant BigCommmerce, e-commerce is growing 23% every year in the United States.  Although only half of American small businesses currently have a webpage, that number is increasingly rapidly.  It’s important to note, however, that having a functional online presence for your business doesn’t necessarily mean you escape the legal regulations associated with buying and selling goods.  

 

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Top Legal Problems Facing New E-Commerce Businesses

If done right, building an online presence for your enterprise will undoubtedly increase profits and productivity, but there are rules and regulations associated with e-commerce that must be understood.  Ignorance of these rules can lead to lengthy legal disputes, financial penalties, loss of intellectual property, or general customer dissatisfaction.  Here are a few of the top legal challenges for new e-commerce businesses:

1. Setting the Ground-Rules with your “Terms & Conditions”

Lastly, defining a “terms & conditions” agreement for your e-commerce business is also paramount.  Most people are accustomed to agreeing to a business’s terms and conditions without fully reading or understanding them.  Nonetheless, they are vitally important for a business owner in terms of resolving legal matters.  In a basic sense, the terms & conditions set the ground-rules for all of your online transactions.  At a minimum, these rules should establish the limits of liability, should their product fail.  They should also specify return policies, tax regulations, delivery terms, and other consumer-focused regulations.  Generally, a business’s terms & conditions are there to protect the company and establish a procedure in the event of a legal dispute.  It’s incredibly important they are well-defined and clearly stated in order to minimize legal disputes.

2. Protecting Intellectual Property

Protecting company copyrights and trademarks is another legal concern for today’s e-commerce businesses.  Some people have likened the internet to the “wild west” where laws and regulatory bodies are largely absent.  Although this isn’t entirely true, the openness of the web makes protecting your intellectual property in cyberspace a serious challenge.   For instance, if a small business owner decides to enter the digital realm of e-commerce, their name, logo, and content can be “stolen” by other web-users if they don’t have the appropriate copyrights and trademarks.  In reality, losing a logo or company-name can spell disaster for a business, especially a smaller business or a recent start-up.  Like privacy policies these laws can also vary by region, thus an attorney familiar with intellectual property law should be consulted.

3. Data Privacy Rules

Among the top concerns for new e-commerce businesses is the issue of handling sensitive consumer data.  Laws concerning consumer data in the U.S. are rather rudimentary, and can vary state-by-state.  However, data retention and information privacy is consistently among consumers’ top concerns, especially in recent months.  For this reason, it is crucial to have a well-written, comprehensive, and attorney-reviewed privacy policy.  

The privacy policy establishes the nature and discourse of personal information that is entered on your e-commerce platform.  For instance, when a user makes an online purchase, they are required to enter some rather sensitive information (such as their name, current address, credit card number, etc.).  But what happens with this information after the transaction is made?  This is exactly what the privacy policy should specify.   It is the business’s responsibility to ensure that sensitive information is secured, and that any data collection or retention is clearly communicated to the user and in compliance with federal and state laws.  Because these laws greatly depend on location and tend to change year-by-year, a legal professional should be consulted to draft a comprehensive policy—compliant with the current regional legislation—that will stand-up in court. 

 

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The Bottom Line

Many business owners are looking to transition into the world of e-commerce—and for good reason.  Not only do web-based transactions provide convenience and 24-hour service to consumers, they expand the market to the global-scale.  However, business owners that are interested in e-commerce must be aware of the accompanying legal challenges.  Namely, they should be cognizant of the many issues surrounding data security and consumer privacy, as well as protecting their brand and setting a solid foundation with their “terms & conditions” agreement.  A legal professional can help with this.

It’s important to note that today’s e-commerce regulations vary widely by country, and are generally still in the development-phase with in the United States.  For that reason, it’s advised that an experienced attorney is consulted before transitioning into the world of e-commerce.  An attorney-reviewed plan will likely increase profits and productivity, while avoiding some of the legal challenges that new e-commerce businesses tend to grapple with.

 

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