MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
eCommerce and the Law
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law and management
 Why do managers need to be aware of
legal issues, surely this what we pay the
lawyers for?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law and Management
 Business needs to have good corporate
governance to survive. Business law sets down
the parameters for good corporate behaviour.
 Failure to comply is not only bad business but
may have severe legal consequences.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law and Management
 Be aware of the legal issues so you can make
sure compliance is embedded in your everyday
business practices.
 Then you may not need a lawyer which will
save you a lot of money
 Electronic Commerce challenges the existing
law. It is important for managers to be aware of
the law as it applies to EC and problem areas
that may require reform or undergo change.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Vicarious Liability
 The Principle of vicarious liability is that the
employer:
 Is liable to indemnifying a third party for damage or
loss suffered;
 As a result of a wrongful act committed by an
employee
 In the course of an employee’s employment .
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Vicarious Liability
 This liability extends also extends to claims by
other employees of the employer arising out of
the wrongful act of an employee.
 The wrongful act may be in:
 Tort (which includes negligence and
defamation); or
 Breach of a statutory duty under legislation
such as the Trade Practices Act.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Occupational Health and Safety
 The employer is also responsible for:
 maintaining a safe place of work pursuant to
occupational health and safety legislation; and
 Maintaining an workplace free of harassment
and discrimination pursuant to anti
discrimination and anti harassment legislation
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law and eCommerce
 What is law?
 What laws govern a person engaged in
eCommerce or an eCommerce transaction?
 What areas of law are affected by EC?
 Is the existing law good enough?
 How do societies regulate themselves?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law and Discontinuity
 Discontinuity is a change so encompassing that
it transforms the standards by which it is
measured.
 Discontinuity challenges and destroys the
assumptions which we hold true
 E-commerce is threatening to be the latest
example of discontinuity
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Challenge of E-commerce
EC challenges the commercial assumptions of:
 who and where the markets are;
 who competitors are; and
 how commercial organisations and relationships
are structured
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
The law and EC
 Faced with discontinuity the law (lawyers) and
other intermediaries must adapt.
 Each new application of eCommerce to the
market process requires an analysis of the legal
implications flowing from that application
including
 what the law governs the process and
 the rights of the players associated
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Peculiar features of cyberlaw
 No need for paper or
other physical
representation
 no clear geographic/
territorial or political
limitations or
delineations
 blurring of the
concept of time and
the linear order which
the law likes to
impose
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Law of the Horse
 A few years ago, at a conference on the "Law of
Cyberspace" held at the University of Chicago,
Judge Frank Easterbrook told the assembled
listeners, a room packed with "cyberlaw"
devotees (and worse), that there was no more a
"law of cyberspace" than there was a "Law of
the Horse";
 There is an important general point that comes
from thinking in particular about how law and
cyberspace connect.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
4 ways of regulating society
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Norms
Markets
Law
Architecture
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Jurisdiction
 One of the major issues
 Which country’s laws are to be applied to
address the respective rights and obligations of
the parties?
 What is the consequence of a country’s lack of
jurisdiction?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Jurisdiction
 The Internet transcends geographic borders ,
there are no laws or borders on the Internet.
There is no ‘Lex Internet’.
 Different countries have different
 Legal systems
 Criminal law
 consumer protection legislation
 etc
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Jurisdiction
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Which taxation laws apply?
Which criminal laws apply?
When is copyright breached?
What laws apply to contracts agreed upon over
the Internet.
 Are ‘clickwrap’ agreements enforceable?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Enforcement
 Even if you have the law on your side there is
the perpetual problem of enforcement.
 What good is a court order if you cannot enfoce
it against the other person
 Another pervasive problem in Electronic
Commerce
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Approaches to Jurisdiction
 France
 The Yahoo case
 Germany
 The Adelaide Institute
 USA approach
 Minimum contact with Territory
 Australia
 Gutnik’s case
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
General problem areas
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Application of paper based law to electronic transactions
Formation of contracts
Admissibility of evidence
Authentication integrity of electronic communication
Record retention and management
The need for regulation or let the market find its own
balance
 Should there be more self regulation and codes of
practice or unified International body of law
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Specific areas of concern
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Contract
Defamation
Security
Privacy
Criminal activity
Copyright
Trademark
Consumer protection
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Contract
 Formation of the contract
 Offer, acceptance , digital signatures
 Jurisdiction and proper law
 Incorporation of terms
 “clickwrap contracts”
 Consumer perspective
 TPA, Goods Act
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Security
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What is it.
Why is it an issue for managers?
Is it a legal issue?
Encryption
Keys
Security over transactions
Security over web sites
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
What security is available?
 3 common methods include:
 Encryption
 Digital Signatures
 Firewalls
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Encryption
 Hot issue
 Gives security but conflicts with needs of
national security.
 Should the government be allowed to access
private communications.
 Is it essential for business?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Internet transaction systems
 There are about 65 current systems available for
making simple transactions.
 Range from the sophisticated digital coin system
to variations on the credit card and cheques
based systems called cheques in the net.
 Credit cards seem to have won the day
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Internet transaction systems
 Secure Socket Layer (SSL) relies on
digital certificates
 Has beaten proprietary systems developed by
banks, Visa etc.
 Stored value cards (Smart cards)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Smart card
 Need for consumer protection
 Code of conduct for smart card and stored value
cards
 What are the legal problems?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Consumer Issues
 Competitive pricing of payment services to
ensure equal access to all consumers
 Consumer protection from fraud
 Right to choice of institutions and payment
methods
 Transaction privacy, safe record keeping and
proof of payment
 Managing information privacy
 Risk management.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Privacy
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Data collection
Data protection
Surveillance
Encryption
Customer profiles developed from eg: smart
cards (one of the selling points for banks)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Crime
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Hacking
Pornography
Stalking
Illegal firearm sales
Fraud
Sexual harassment and discrimination
Use of computer evidence
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Unauthorised Use
 Disruption Terrorism/ Violation
 Virus : A program that modifies other computer
programs ensuring the infected program
replicates the virus.
 Worms: A stand alone program that replicates
itself. uses a computer network to duplicate
itself, and doesn’t need help from a human
hand.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Logic bombs
 Tells a computer to execute a set of instructions
at a certain time under certain specified
conditions.
 An attacker can reach thousands of computers
at once. Or shut down a banks security system
at a given time - say 3 PM on a Friday night.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Trojan Horses
 Is a program which performs some apparently
useful function
 But also contains a hidden code that is
malicious.
 For example will permit outside access at a
given time.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Denial of Service
 (DOS) - attacks and overwhelms websites and
stops them from communicating with other
computers.
 One computer becomes the master (operated
by a hacker) and other computers the slaves or
zombies, giving illegal access to information,
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Identity Theft
 When one’s identity is wrongfully used by
another
 use of another’s credit card
 Pose as another to ruin a reputation or other
example forged letters
 How do you establish identity in an electronic
world
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Defamation
 Name calling in cyberspace E-mail issue
 Publication of information likely to harm the
reputation of another
 Site of the defamation (jurisdiction)
 mailing lists, newsgroups
 Liability of service providers
 Gutnik’s Case
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Taxation
 Electronic payment systems have evasion
potential (cash economy?)
 Jurisdiction rules doubtful
 Need to administer domestic tax laws
internationally
 Encryption presents difficulties
 Taxpayer identity uncertain
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Taxation
 How is the tax department going to approach the
problem?
 Most jurisdictions have ignored the problem so
far because
 Too difficult
 Not enough trade to warrant attention
 Need to encourage eCommerce to gain a
national competitive advantage
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Intellectual Property
 Framing & linking
 Your goodwill and image can be used as
another's advertising (Seattle Sidewalk link to
ticket master)
 Metatags
 Attaching another name to your HTML eg:
Playboy
 Copyright
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Web sites
 Trade Marks
 Barbie Doll and McDonalds chase defendants
all over the globe
 Domain names
 How do you protect you name
 What is its status
 How does it interact with other forms of IP
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Copyright
 Generally the use of the works of others without
consent or appropriate acknowledgment
 Look at the problems Napster experienced