ECT 250: Survey of e-commerce technology International, ethical, and legal issues.

ECT 250: Survey of e-commerce technology

International, ethical, and legal issues

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• 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

Outline

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• 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

International e-commerce

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• A first step in reaching international customersis to conduct business in their native language.

• Customers are more likely to buy products andservices 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.

Language issues

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• 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 asSpanish 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.

Common languages

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• 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

Multiple language sites

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There are several ways to ensure that customerswill 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, HyundaiThe links need to be clearly labeled. Country flags are not a good choice. (Why?)

Handling language displays

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• 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 andmaintenance 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.

Translation/localization

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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 theirgraves”.

• 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 wellin parts of Africa where food containers alwayscarry a picture of their contents.

Culture issues

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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 4and white represents death.

Labeling issues

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• Japanese customers prefer to pay using cash orcash transfer instead of credit cards.

• Softbank created a joint venture with 7-Eleven,Yahoo! Japan, and Tohan to sell books andCDs on the Web.– Order items on Internet– Pick them up and pay at 7-Eleven

• In this case, adding an intermediary helped gaincustomers.

Ways of doing business

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Some parts of the world have environments thatare 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 beseen as objectionable or threatening to the cultureor traditions of the country.

Internet access

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Some countries have strong cultural requirementsthat have found their way into the legal codes.• In France all advertisements for products must

be in French. A U.S. company that ships toFrance must provide pages in French.

• Quebec provincial law requires street signs,billboards, directories, and advertising createdby Quebec businesses to be in French.Web pages marketed at the U.S. in Englishonly are not allowed.

Culture and the law

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• In many countries, the telecommunication systemsare government-owned or heavily regulated.

• Regulations in some places have restricted thedevelopment to a point that Internet data packettraffic cannot be handled reliably.

• Local connection costs may be much higher thanin the U.S., resulting in different behavior byInternet users.

• The paperwork needed for international transactionscan be prohibitive. See Figure 11-2, page 347.

Infrastructure issues

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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. Defamation2. Privacy rights

Ethical issues

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A defamatory statement is one that is false and injuresthe reputation of another person or company.

A statement injuring the reputation of a product orservice is called product disparagement.

The line between justifiable criticism and defamationcan be hard to determine.

Defamation

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• Privacy issues remain unsettled and are hotlydebated in many forums.

• The FTC issued a report that concluded Websites were developing privacy practices withsufficient speed.

• Responses from privacy advocacy groups werein sharp disagreement.

• Privacy assumptions vary between cultures.

Privacy rights

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• 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.

Some principles

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Legal issues regarding e-commerce have only begunto be addressed.

Categories of issues:• Borders and jurisdiction• Jurisdiction on the Internet• Contracting and contract enforcement• Web site content

The legal environment

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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. Power2. Effects3. Legitimacy4. Notice

Borders and jurisdiction

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• 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 peoplewho are not located in or own assets in the areathat created those laws.

Power

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• Laws in the physical world are based on therelationship between physical proximity andthe effects of a person’s behavior.

• Actions have a stronger hold on things nearby.• Example: Trademark enforcement

Two restaurants with the same name, one inChicago and one in France.

Effects

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• The right to create laws and enforce laws derivesfrom the mandate of those who will be subjectto those laws.

• Some cultures allow their governments a highdegree of autonomy and authority.Example: China and Singapore

• Other cultures place severe restrictions on theauthority of the government.Example: Scandinavian countries

Legitimacy

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• Physical boundaries are an effective way to announce the ending of one legal or culturalsystem and the beginning of another.

• The perception that the laws and norms havechanged is needed to allow people to adjust.

• Borders provide this notice.

Notice

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• Determining who has jurisdiction can be difficult.Example: Mexican customer dealing with a firmfrom Sweden, hosted by a Canadian site, andmaintained by a programmer from India.

• A contract is an agreement between two or morelegal entities that provides for an exchange ofvalue (goods, services, money).

• A tort is an action taken by a legal entity thatcauses harm to another legal entity.

Jurisdiction on the Internet

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• If a person or organization wants to enforce theirrights under contracts or seek tort damages, theymust find courts that have sufficient jurisdiction.

• A court has sufficient jurisdiction in a matter if ithas both:– Subject matter jurisdiction– Personal jurisdiction.

Sufficient jurisdiction

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Subject-matter jurisdiction is a court’s authorityto 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.

Subject-matter jurisdiction

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• Personal jurisdiction is, in general, determined bythe residence of the parties in question.

• A court has jurisdiction if the defendant resides inthe state in which the court is located.

• An out-of-state person can submit to a court’sjurisdiction by signing a contract that includes astatement that the contract will be enforcedaccording to the laws of a particular state.

Personal jurisdiction

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• States can enact statutes that create personaljurisdiction over nonresidents conductingbusiness or committing tortious acts in thestate.

• In many cases, these laws are not clear withrespect to e-commerce.

• The more business conducted, the more likelya court will be to use a long-arm statute.

• Courts are also assert jurisdiction when a crimeor intentional tort has occurred.

Long-arm statutes

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• The exercise of jurisdiction across national bordersis governed by treaties between the countries.

• In general, personal jurisdiction for foreign firmsand persons is determined by U.S. courts in thesame way as long-arm statues.

• Jurisdictional issues are complex and changing.• Businesses should consult an attorney for advice.

International issues

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• A government acquires the power to tax a business when the business establishes a connection with the area controlled by thegovernment. This connection is callednexus.

• Nexus is similar to personal jurisdiction.• Determining nexus can be difficult when a

company conducts only a few activities ina state.

• Online companies may be subject to multipletax laws from day one.

Taxation and e-commerce

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A online business is potentially subject to severaltypes of taxes:• Income taxes: Levied by national, state, and

local governments on the net income generatedby business activities.

• Transaction taxes: Includes sales taxes, use taxes,and customs duties.

• Property taxes: Levied on the personal propertyand real estate used in the business.

Income and transaction taxes are most important.

Types of taxes

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• In the U.S., any increase in a company’s wealthis 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 alsopay federal income tax on income generated outsidethe U.S. (The law provides a tax credit for taxes paid to foreign countries).

Federal income taxes

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• Companies that do business in multiple localjurisdictions must apportion their income and file tax returns in each locality that leviesan income tax.

• The number of taxing authorities is over 30,000in the United States.

• Companies can accept orders and ship from onestate to many other states and avoid nexus byusing a contract carrier such as FedEx or UPSto deliver goods to customers.

State and local income taxes

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• Businesses that establish nexus with a state mustfile sales tax returns and remit the sales taxthey collect from their customers.

• If a business ships to customers in other states, itis not required to collect sales tax from thosecustomers unless the business has establishednexus with the customer’s state.

• There are 7500 U.S. sales tax jurisdictions andthe rules about which items are taxable differ.Example: In NY large marshmallows are taxablesince they are snacks but small ones are not sincethey are food.

Sales taxes

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• 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 tobe firm, precise, and unambiguous.

• An acceptance is the expression of willingness totake an offer, including all of its stated terms.

• When one party makes an offer that is accepted,a contract is created.

Contracting

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• A seller advertising on the Web is not making anoffer but inviting offers from potential buyers.

• When the buyer submits an order, the seller acceptsand a contract is made.

• Some examples of legally binding acceptances inthe physical world: – Mailing a check– Shipping goods– Shaking hands– Taking an item off a shelf– Opening a wrapped package

Contracting on the Web

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• In the U.S. written contracts must be used forgoods worth more than $500 and contractsrequiring actions that cannot be completedwith a year.

• Things that constitute a signature:– Faxes– Typed names– Printed names– Digital signatures

Written contracts

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• 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

Warranties

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Legal issues can arise relating to the Web pagecontent of an e-commerce site.

These include:• Trademark infringement• Deceptive trade practices• Regulation of advertising claims• Defamation

Web site content

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• Web designers must be careful not to use any trade-marked name, logo, or other identifying markwithout 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 themon a site can cause problems.

Trademark infringement

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• Web sites that include links to other sites must becareful not to imply a relationship with the company if there is none.

• A firm cannot use a similar name, logo, or otheridentifying characteristic that causes confusionin the customer’s mind.

• Trademark dilution is the reduction of the distinctivequality of a trademark by alternate uses.

Deceptive trade practices

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FTC seeks global e-commerce laws

Information