Transcript ECT 250: Survey of e - commerce technology

ECT 250: Survey of e-commerce technology
International, ethical, and legal issues
Outline
• 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
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International e-commerce
• 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
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Language issues
• 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.
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Common languages
• 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.
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Multiple language sites
• 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
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Handling language displays
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, Hyundai
The links need to be clearly labeled.
Country flags are not a good choice. (Why?)
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Translation/localization
• 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 Technologies
• Completely automated translation software.
Can translate up to 40,000 words an hour.
Human translators do 400-600 words an hour.
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Culture issues
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.
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.
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Labeling issues
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.
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Ways of doing business
• 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.
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Internet access
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.
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Culture and the law
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.
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Infrastructure issues
• 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.
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Ethical issues
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
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Defamation
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.
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Privacy rights
• 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.
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Some principles
• 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.
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The legal environment
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
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Borders and jurisdiction
 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
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Power
• 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.
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Effects
• 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.
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Legitimacy
• 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
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Notice
• 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.
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Jurisdiction on the Internet
• 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.
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Sufficient jurisdiction
• 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.
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Subject-matter jurisdiction
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.
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Personal jurisdiction
• 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.
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Long-arm statutes
• 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.
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International issues
• 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.
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Taxation and e-commerce
• 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.
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Types of taxes
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.
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Federal income taxes
• 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).
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State and local income taxes
• 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.
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Sales taxes
• 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
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they are food.
Contracting
• 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.
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Contracting on the Web
• 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
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Written contracts
• 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
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Warranties
• 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 Germany
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Web site content
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
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Trademark infringement
• Web designers must be careful not to use any trademarked 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.
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Deceptive trade practices
• 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.
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Information
FTC seeks global e-commerce laws
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