E-COMMERCE

Lecturer: Msc. Phan Tran Duc Lien

 Legal, Ethical and Societal
10
Impact of E-commerce
Learning objectives:
1. Describe the differences between legal and ethical issues in e-commerce;
2. Explain major legal issues in e-commerce;
3. Discuss the difficulties of protecting privacy in e-commerce;
4. Identify issues of intellectual property rights in e-commerce;
5. Discuss other legal issues in e-commerce; and
6. Explain e-commerce fraud and the impact to society.
LEGAL AND ETHICAL CONCEPT
▸ Marketing communications have dual purposes:
▹ Branding: develop and strengthen by informing consumers about the differentiating features of products and
services;
▹ Sales: used to promote sales directly by encouraging consumers to buy products.

▸ The distinction between branding and sales purposes of marketing communications:

▹ Branding communications:
▹ Rarely encourage consumers to buy now.
▹ Focus on extolling the differentiable benefits of consuming the product or service instead;
▹ Promotional sales communications: suggest consumers “buy now” and give offers to encourage immediate
purchase.
LEGAL ISSUES VERSUS ETHICAL ISSUES
1. Legal and Ethical concept
▸ Legal:
▹ Matters relating to laws.
▹ Laws: enacted by government and developed through case precedents.
▹ Laws: are strict legal rules governing the acts of all citizens.

▸ Ethics:
▹ Philosophy: thing considered to be right and wrong.
▹ Unethical is not necessarily illegal.
LEGAL ISSUES VERSUS ETHICAL ISSUES
1. Legal and Ethical concept
▸ Guidelines what behaviors are reasonable under circumstances :
▹ A website collects information from potential customers and the management then sells it to its advertisers.
Consequently, the customers receive numerous pieces of inappropriate and intrusive e-mail. Should junk e-
mail of this sort be allowed?
▹ A company allows its employees to use the web for limited personal use. Unknown to the employees, the
employer not only monitors the employees’ messages, but also examines the content. If during this monitoring
process the employer finds an objectionable content, should the company be allowed to fire the offending
employee?

 Unethical (or even illegal) or not it depends on the regulatory and value systems of the
 Unethical in one culture may be perfectly acceptable in another.
 Western countries higher concern for individuals and rights for privacy than do some Asian countries.
 Asian concern for society benefits than on the rights of individuals.
LEGAL ISSUES VERSUS ETHICAL ISSUES
▸ Privacy
▹ Internet users in many countries rate privacy as their first or second top concern.

▸ Intellectual Property Rights

▹ Easily violated on the Internet, resulting in billions of dollars of losses to the owners of the patent rights.

▸ Free Speech versus Censorship

▹ The control offensive, illegal and potentially harmful information on the Internet are controversial. This collides
with ones right to free speech.
PRIVACY
▸ The right to be left alone and to be free of unreasonable personal intrusions.
▸ Difficult to determine and enforce privacy regulations in certain situations:
▹ The right of privacy is not absolute. Privacy must be balanced against the needs of society;
▹ The public’s right to know is superior to the individual’s right of privacy.

1. Information Collection
▸ The Internet: large-scale databases, possible to eliminate or reduce crimes:
▹ Fraud;
▹ Government mismanagement;
▹ Tax evasion;
▹ Welfare embezzlements;
▹ Employment of illegal immigrants.
PRIVACY
1. Information Collection
▸ The Internet creates opportunities to collect private information :
▹ By reading an individual’s newsgroup postings;
▹ By looking up an individual’s name and identity in an Internet directory;
▹ By reading an individual’s e-mail;
▹ By conducting surveillance on employees;
▹ By wiretapping wire line and wireless communication lines and listening to employees;
▹ By asking an individual to complete a website registration; and
▹ By recording an individual’s actions on browser, usually by using cookies.
PRIVACY
1. Information Collection
▸ The two most common ways of gathering information on the Internet:
▹ Website Registration:
▹ Customers provide names, addresses, phone numbers, e-mail addresses, hobbies, likes or dislikes.
▹ Site use to improve customer service or business. Or, sell the information to another company, which
could use inappropriate or intrusive manner.
▹ Cookies:
▹ A small piece of data that is passed back and forth between a website and an end-user’s browser.
▹ Were designed to help with personalization.
▹ Allow websites to collect detailed user’s preferences, interests, and surfing patterns.
▹ The personal profiles created by cookies are more accurate.
▹ Netscape and Microsoft introduced cookies blocker:
▹ Deleting the Cookies
▹ Anti-cookie software: Pretty Good Privacy’s Cookie Cutter or Luckman’s Anonymous Cookie.
PRIVACY
2. Privacy Protection
Ethical Principles Description
Notice/ Awareness ‒ Sites must disclose information practices before collecting data:
• identification of collector, uses of data, other recipients of data, nature of collection, voluntary of required,
consequences of refusal, and steps taken to protect the confidentiality, integrity and quality of the data.
Choice/ Consent ‒ Consumers choose how their information will be used for secondary purposes other than supporting the
transaction, including internal use and transfer to third parties.
• Opt-in Model: affirmative by consumer to allow collection and use of information. Consumers be asked if they
approved of the collection and use of information. Otherwise, the default is not to approve the collection of
data.
• Opt-out Model: the default is to collect information unless the consumer takes an affirmative action to
prevent the collection of data by checking a box or by filling out a form.
Access/ Participation ‒ Consumers able to review and contest the accuracy and completeness of the data collected about them in a
timely and inexpensive manner.
Security ‒ Data collectors must take reasonable steps to assure that consumer’s information is accurate and secured from
unauthorized used.
Enforcement ‒ enforcement and remedy to deterrent or enforceability for privacy issues: self-regulation, legislation giving
consumers legal remedies for violations or through federal laws and regulations.
PRIVACY
2. Privacy Protection
▸ Commercial websites have poor privacy protection and very few sites provided end users with privacy protections:
▹ Details about the site’s information-gathering and dissemination policies;
▹ Choice over how their personal information is used;
▹ Control over their personal information;
▹ Verification and oversight of claims made by the site;
▹ Resource for resolving user complaints.
PRIVACY
3. Technological Solutions to Privacy Invasion
▸ Privacy-enhancing technologies for protecting user communications and files from illegitimate individuals or
organizations.
Technology Products Protection
Secure e-mail Ziplip.com; SafeMessage.com E-mail and document encryption

Anonymous remailers WWW Anonymous Remailer Send e-mail without trace

Anonymous surfing Anonymizer.com Surf without a trace

Cookie managers CookieCrusher Prevent client computer from accepting cookies

Disk/file erasing programmes FileWiper Completely erases hard drive and floppy files

Policy generators OECD Privacy Policy Generator Automates the development of an OECD privacy
compliance policy
Privacy Policy Reader P3P Software for automating the communication of
privacy policies to users
PRIVACY
3. Technological Solutions to Privacy Invasion
▸ Platform for Privacy Preferences Project (P3P) sponsored by the World Wide Web Consortium (W3C):
▹ Works through a user’s web browser.
▹ On the server side, P3P enables sites to translate their privacy policies into standardized machine-readable
XML .
▹ On the user client side, the browser automatically fetches a website’s privacy policy and informs the user.
INTELLECTUAL PROPERTY RIGHTS
▸ World Intellectual Property Organization (WIPO): “the creations of the mind such as inventions,
literary and artistic works, symbols, names, images and designs used in commerce.”
INTELLECTUAL PROPERTY RIGHTS
1. Copyright
▸ A copyright: an exclusive grant from the government confers on owner an essentially exclusive right to:
▹ Reproduce a work in whole or in part;
▹ Distribute, perform or display it to the public in any form or manner, including in the Internet.
▹ Does not protect ideas and only protects expression in a tangible medium (paper, cassette tape or handwritten
notes):
▹ Literary works (e.g., books and computer software);
▹ Musical works (e.g., compositions);
▹ Dramatic works (e.g., plays);
▹ Artistic works (e.g., drawings, paintings);
▹ Sound recordings, films, broadcasts, cable programs; and
▹ Websites’ images, photos, logos, texts, HTML, JavaScript and other materials.
INTELLECTUAL PROPERTY RIGHTS
1. Copyright
▸ Threat to intellectual property: illegally download music, videos, games, software and other digital products.
▸ International treaties protect global copyright: the Berne Union for the Protection of Literary and Artistic Property
(Berne Convention, 1886).
▸ Copyright infringement: unauthorized use of copyrighted material in a manner that violates the copyright owner’s
exclusive rights (right to reproduce or perform the copyrighted work).
▸ Copyright infringements can incur criminal liabilities:
▹ Commercial production of infringed works;
▹ Selling or dealing in infringed works;
▹ Possessing infringed works for trade or business;
▹ Manufacturing and selling technology for defeating copyright protection systems.
INTELLECTUAL PROPERTY RIGHTS
1. Copyright
▸ Design effective electronic copyright management systems:
▹ Preventing copyright violations by using cryptography:
▹ The conversion data into a scrambled code that can be deciphered and sent across a public or private
network.
▹ Tracking copyright violations.
▹ Digital watermarks:
▹ Identify the pirated works.
▹ Digimarc’s MarSpider used to locate the illegal copies and notify the rightful owner.
INTELLECTUAL PROPERTY RIGHTS
2. Trade Mark
▸ Trade marks are symbols (like logos and brand names)
▹ Composed of words, designs, letters, numbers, shapes, a combination of colors or other such identifiers.
▹ Registered in a country in order to be protected by the country’s law.
▹ Lasts forever.
▹ The owner of a registered trade mark has the exclusive rights to:
▹ Use the trade mark on goods and services for which the trade mark is registered; and
▹ Take legal action to prevent anyone else from using the trade mark without consent.
▹ The rapid growth and commercialization of the Internet provided malicious individuals and firms the to:
▹ Take advantage of Internet domains built upon famous trade marks; and
▹ Confuse consumers by lessening the value of famous or distinctive trade marks (including your name or a
movie star’s name).
INTELLECTUAL PROPERTY RIGHTS
2. Trade Mark
▸ American Congress passed the Anti-Cybersquatting Consumer Protection Act (ACPA):
▹ Creates civil liabilities for anyone who attempts in bad faith to profit from an existing famous.
▹ Does not establish criminal sanctions but forbids the following acts:
▹ Using “bad faith” domain names to extort money from the owners of the domain names (cybersquatting);
▹ Using the existing trade mark’s domain name to divert web traffic to the domain of infringing site (cyber
piracy) that could create :
▹ Harm the good-will represented by the trade mark;
▹ Create market confusion; and
▹ Tarnish or disparage the trade mark.
▹ Using of a domain name consists of the name of a living person, or a name confusingly similar to an
existing person’s name without the person’s consent, with the intent to profit by selling the domain name
to that person.
INTELLECTUAL PROPERTY RIGHTS
2. Trade Mark
▸ Trade mark abuse :
▹ Cybersquatting:
▹ Registering domain names in order to sell them later at a higher price.
▹ The Consumer Protection Act of 1999: aimed at cyber squatters.

▹ Cyber piracy:
▹ Same behavior as cybersquatting, but with the intent of diverting traffic from the legitimate site to an
infringing site.
INTELLECTUAL PROPERTY RIGHTS
3. Patent
▸ A document that grants the holder with the exclusive rights on an invention for a fixed number of years.
▸ Protect tangible technological inventions, especially in traditional industrial areas.
▸ Not designed to protect artistic or literary creativity.
▸ Confer monopoly rights to an idea or an invention (form of a physical device, method or process for making a
physical device).
▸ Valid for 20 years from the date of application.
▸ Be granted a patent: the invention is new, original, novel, non-obvious and not evident in prior art and practice.
▸ Patent protection extended to articles of manufacture (1842), plants (1930), surgical and medical procedure (1950)
and software (1981).
INTELLECTUAL PROPERTY RIGHTS
4. Fan and Hate Websites
▸ Fan sites: some people get advanced copies of new movies or TV programs and create sites that compete with the
formal sites of the movie or TV shows.

▸ Hate websites: directed against large corporations associated with cyberbashing.

▹ The sites contain only legitimate gripes not libelous, defaming or threatening are usually allowed to operate.
FREE SPEECH VERSUS CENSORSHIP
▸ Censorship: government’s attempt to control, in one way or another, material that is broadcasted.

▸ “How much access should children have to websites, newsgroups and chat rooms containing‘ ‘inappropriate” or
‘offensive’ materials and who should control this access?”
▹ The proponents of free speech contend: should be no government restrictions on Internet content and that
parents should be fully responsible for monitoring and controlling their children’s exploration of the web;
▹ The advocates of censorship: government legislation is required to protect children from offensive material.

▸ The advocates from the censorship: believe that the responsibility of the Internet service providers or ISP to control
the content of the data and information that flow across.

▸ The ISP: no easy way of monitoring the content or determining the age of the person viewing the content.
▹ The only way is to block the content from children and adults by controlling spam or the act of spamming.
FREE SPEECH VERSUS CENSORSHIP
▸ US legislation addressing the marketing practices in e-commerce is the Electronic Mailbox Protection Act:
▹ Sending spam to identify it as advertising: indicate the name of the sender prominently, and to include valid
routing information.
▹ Recipients have right to receive information and request the termination of future spam from the same sender
and to take civil action if necessary.
▹ The ISP are required to offer spam-blocking software.
OTHER LEGAL ISSUES
1. Electronic Contracts
▸ The Uniform Electronic Transactions Act of 1999:
▹ Extend existing provisions for contact law to cyberlaw
▹ Establishing uniform and definitions for electronic records, digital signatures and other forms of electronic
communications.

▸ Uniform Commercial Code (UCC),:

▹ Providing a government code that supports existing and future electronic technologies in the exchange of
goods or services.
OTHER LEGAL ISSUES
1. Electronic Contracts
▸ Electronic-related contracts:
▹ Shrink-wrap agreements (box-top licenses): appear in or on a package that contains software.
▹ User is bound to the license by opening the package, even though the user has not yet used the product
or even read the agreement.
▹ Click-wrap Contracts:
▹ The software vendor offers to sell or license the use of the software according to the terms
accompanying the software.
▹ The buyer agrees to be bound by the terms based on certain conduct.

▸ In fall 2000, the Electronic Signatures in Global and National Commerce Act was approved.
OTHER LEGAL ISSUES
2. Electronic Agents
▸ Article 2B of the Uniform Computer Information Transactions Act passed in October 2000.
▸ Contracts can be formed even when no human involvement is present: the interaction of electronic agents results in
operations that confirm the existence of a contract or indicate an agreement.
▹ The interaction between an individual and an electronic agent.
▹ The interaction between two electronic agents.
OTHER LEGAL ISSUES
3. Electronic Gambling
▸ Online casinos:
▹ Inherent dangers of physical gambling houses, with the
▹ Added risk of accessibility by minors or individuals of diminished capacity who may financially harm
themselves
▸ Example: World Sports Exchange (wsex.com)
▸ The Internet Gambling Prohibition Act of 1999:
▹ Online wagering illegal except for minimal amounts.
▹ Make the ISP liable for illegal currency movements and report transactions requiring documentation.
▸ The Australian Internet Industry Association (AIIA), the Communication Ministry: totally ban on interactive gambling
in Australia through the use of Internet filtering technology.
E-COMMERCE FRAUD AND SOCIETAL ISSUES
1. Internet Fraud
▸ Online Auction Fraud
▹ Internet auction fraud accounts for 87% of all incidents of online crime, according to eMarketer.

▸ Internet Stock Fraud

▹ Stock promoters spread false positive rumors about the prospects of the companies they touted.

▸ Other Financial Fraud

▹ The sale of bogus investments, phantom business opportunities and other schemes.

▸ Other Fraud in E-commerce

▹ Customers may receive poor-quality products and services, may not get products in time.
E-COMMERCE FRAUD AND SOCIETAL ISSUES
2. Consumer Protection
▸ Tips for safe electronic shopping :
▹ Make sure enter the real website of well-known companies by going directly to the site;
▹ Unfamiliar site, search for an address and telephone and fax numbers. Call and quiz a person about the seller;
▹ Check out the seller with the local chamber of commerce, (ex: Better Business Bureau (bbbonline.org);
▹ Investigate how secure the seller’s site is and how well it is organized;
▹ Examine the authenticity of money-back guarantees, warranties and service agreements before making a
purchase;
▹ Compare prices online to those in regular stores as low prices may be too good to be true;
▹ Ask friends what they know. Find testimonials and endorsements;
▹ Find out what remedy is available in case of a dispute;
▹ Consult the National Fraud Information Centre;
▹ Check the resources available at consumerworld.org.
E-COMMERCE FRAUD AND SOCIETAL ISSUES
3. Societal Issues
▸ The digital divide: gap between those who have and those who do not have access to computers and the Internet.
▸ Three aspects generally derived a positive impact from e-commerce:
▹ Education:
▹ Virtual universities;
▹ Companies can use the Internet to retrain employees much more easily;
▹ Home-bound individuals can get degrees from good institutions, and many vocational professions can be
learned from home.
E-COMMERCE FRAUD AND SOCIETAL ISSUES
3. Societal Issues
▹ Public Safety and Criminal Justice:
▹ Technologies that will help to deter, prevent or detect early criminal activities of various types.
▹ E-commerce tools can help increase safety at home and in public :
▹ The e-911 system;
▹ Collaborative commerce (collaboration among national and international law enforcement units);
▹ E-procurement (of unique equipment to fight crime);
▹ E-government efforts at coordinating preventive measures during disasters;
▹ Information sharing;
▹ Expediting legal work and cases;
▹ Intelligent homes, office, public buildings;
▹ E-training of law enforcement officers.
E-COMMERCE FRAUD AND SOCIETAL ISSUES
3. Societal Issues
▹ Health Aspects:
▹ E-commerce technologies: collaborative commerce can help to improve health care
▹ By using the Internet, the approval process of new drugs has been shortened, saving lives and
reducing suffering;
▹ Pervasive computing helps in the delivery of health care;
▹ Intelligent systems facilitate medical diagnoses;
▹ Health-care advice can be provided from a distance; and
▹ Intelligent hospitals, doctors and other health-care facilities have been offering improved services
by using some of the tools of e-commerce.
▹ Teleconsultation links between healthcare facilities: application of Telehealth under the seven flagships of
the Multimedia Super Corridor (MSC) .
THANK YOU!
Any questions?