Table of Contents

LEGAL AND ETHICAL ISSUE ISSUES AND TRENDS IN E-COMMERCE.............................................................3

1.0 Introduction.....................................................................................................................................3

1.1 Overview of E-commerce.............................................................................................................3

1.2 Definition and Meaning of Terms................................................................................................4

2.0 Legal Issues......................................................................................................................................5

3.0 Ethical Issues....................................................................................................................................7

4.0 Trends in E-commerce.....................................................................................................................8

5.0 Conclusion.....................................................................................................................................10

BIBLIOGRAPHY...........................................................................................................................................11

LEGAL AND ETHICAL ISSUE ISSUES AND TRENDS IN E-COMMERCE

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1.0 Introduction

1.1 Overview of E-commerce

The 21st Century business environment is tremendously different from the scenario in preceding
years. A lot of technological advancement and innovations in the way business is done have
occurred, drastically changing the way business is transacted. “The Internet has changed the way
many firms do business throughout the world.” (Pahladsingh, 2006). Several other researchers
and authors agree with Pahladsingh’s sentiments. For example, in their article entitled
“Constraints Associated to E-Business Evolution”, Morais, Pires and Goncalves (2011) state that
technological advancement witnessed in the last few decades has created an environment
whereby organizations are compelled to actively seek for new ways reducing business costs, in
order to compete more effectively in the market, a move that requires focused, swift and more
flexible as well as more competitive strategies. This has led to implementation of radical changes
in the way companies do their business. All this has led to new economy, new tools and new
rules.

E-commerce offers the world opportunity for doing business in which organizations can reach
global markets without leaving home or office. According to Chitrangda (2014), the vastness of
Internet advertising offers a solid platform for e-commerce and the ability to create secure
business transactions by leveraging the technology that offers a lot of advantages to both
consumers and enterprises. In support of this, Franco and Regi (2016) argue that e-commerce
allows consumers to electronically exchange goods and services without barrier of time or
distance. The concept of Internet of Things by IBM Corporation, 2014 indicates that today
billions of devices, sensors and everyday simple objects can communicate with users and with
each other automatically, creating a situation where less and less of human intervention is
required. This is true with the introduction into the market of smart cars, smart phones and
mobile technology that serves as an interface allowing a person to operate practically any
electronic gadget using remote control.

However, with new technology applied in e-commerce, legal and ethical issues arise that pose
major challenges to implementation of e-commerce trends and emerging applications of the same

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(Massoud, 2002). The objective of this assignment is to discuss the legal and ethical issues
encountered in e-commerce practices.

1.2 Definition and Meaning of Terms

E-Commerce or E-Business
Electronic Commerce (E-commerce) is any method of carrying out an economic activity using
electronic connections such as Internet. According to Mohan (2015), electronic business (e-
business) is the act of conducting of business on the Internet, including buying and selling,
servicing customer and collaborating with business partners. It encompasses using Internet for
internal processes such as production, inventory management, product development, risk,
finance, knowledge as well as human resources management. It is a complex strategy whose
main objective is to reduce costs and improve in efficiency of business performance. Simply put,
e-commerce is any business transaction done either in a wireless environment or any transaction
with monetary value conducted using a mobile telecommunications network. (Mangat, 2015)

Legal Issues
Legal issues refer to any aspect of e-commerce practices that breaks the existing laws established
to protect and guide the same. This means doing something that is likely to cause harm of some
sort, an act that can be prosecuted in a court of law, as it contravenes the set rules and regulations
governing the use of electronic transactions and activities. (Massoud, 2002) argues that it is
difficult sometimes to draw a clear line between what is illegal or unethical, because sometimes
what is unethical may not necessary mean it is illegal.

Ethical Issues
Ethical issues are concerned with the principles of right and wrong as used by individuals to
guide behavior within Information and Communication Technology (ICT). These are moral
parameters that define terms of responsibility, accountability and integrity expected of
individuals involved in e-commerce or e-business practices, with the aim of protecting the end
users of this technology (Kamel, 2008)

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2.0 Legal Issues
Legal issues in e-commerce encompass issues surround the following: intellectual property,
privacy, internet fraud, free speech versus censorship.

Intellectual Property

The advent of information age has created new forms of assets that largely consist of ideas,
processes, trade symbols, computer software and goodwill, all of which can be termed as
intellectual property that must be protected. According to Kamel, (2008) most legal intellectual
property issues are concerned with misuse of patents, copyrights, trademarks etc. and their
protection. According to Reed (2003), intellectual property the one of the company’s most
important asset comprising of knowledge, its ideas and its identity that informs the company
image/brand in the market place. The threat of another entity infringing on the intellectual
property rights of organizations is greater, with the reliance on technology, as these intellectual
assets become exposed to internet users. The most vulnerable are trade secrets, trademarks,
copyrights and customer privacy. The challenges arise from the fact that different countries
enforce intellectual property laws differently, a fact that creates room for breach of the same in
certain countries, without necessarily breaking the law in those countries.

Case Study on IP rights

When a company pays a person to develop their website, who owns the copyright?
When a company’s website is developed by their employees, who are hired for that purpose, then
in most countries the company owns the copyright over the website, unless there is an agreement
to the contrary, at the time of engagement. The greatest concern is when a company decides to
outsource this service, and hires an outsider to design the website or web page for the
organization. Most organizations just assume they own the copyright of the website design,
simply because they paid for it. but in regard to IP rights, this is not the case. According to
Verbauwhede, (2002), unless there is a clear agreement on the same, at the time of contracting
the designer, the copyright ownership remains the property of the designer, not the company
contracting him to do the website design. So in case the company wants to modify or improve on
the design at a later date, they have to obtain the permission from the contracted designer, or pay

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him/her to do the work as a fresh contract. To avoid this, organizations are supposed to have the
designer transfer the copyright ownership to them, at the time the work is done the first time.

Privacy:
Online business transactions require both the consumer and the business to input private
information to allow for identification. Information such as names, addresses, bank details and
other personal information have been subject to identify theft. In some cases, fake websites have
been created to dupe unknowing customers or businesses. The laws and policies governing the
privacy protection need to be better articulated to ensure tighter measures are taken to protect
against intrusion, stealing and misuse of personal information given. “By violating the privacy
of customers, even inadvertently, companies put their reputations in jeopardy with severe
consequences for the bottom line” (Reed, 2003)

Free speech versus Censorship

With creation of social media such as Facebook, Twitter, WhatsApp and others, there is a thin
line between free speech and freedom of expression versus government censorship on what one
can or cannot say. Cyber bulling and defamation are the two most unpleasant experiences
suffered by individuals and businesses, as a result of their profile and personal information
appearing online. According to censorship tries to control material on the web especially for
protection of children or underage internet users through parental control, government control
and other mechanisms put in place by specific organizations to enforce decency among online
actors. Negative comments can destroy the reputation and goodwill of a business instantly, and
make it quite difficult to repair the damage.

Case Study on Protection of Free Speech

The case of Shopify which hosts websites describes a scenario where one company called
Breitbart, a controversial right-wing website. Most of the people who visit the websites hosted by
Shopify have demanded the removal of Breitbart’s website from those hosted by Shopify, but the
Shopify CEO says no to the pressure and explain that his company’s position is to support the
freed of expression, whether or not, they like what the person is saying. He continued to quote

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former US President, Baraka Obama, one of his famous quotes “I accept that people are going to
call me awful things every day, and I will always defend their right to do so.”— Barack Obama
In support of freedom of speech, Tobias Lutke, Shopify Chief Executive Officer (CEO) puts it
this way: “Commerce is a powerful, underestimated form of expression. We use it to cast a vote
with every product we buy. It’s a direct expression of democracy. This is why our mission at
Shopify is to protect that form of expression and make it better for everyone, not just those we
agree with.” (Lutke, 2017). Legal redress towards such is not always easy to obtain through the
court processes.

Consumer and merchant protection against fraud

Authenticating the identity of the source of information may not be so easy for individual
customers who are not particularly experts in computer and internet technology. Conmanship
through wrongful or misleading digital signatures, nonrepudiation and failure to authenticate
identify of signer can lead to defrauding customers or businesses. Again proving such claims in
courts of law may not be easy, because it may be difficulty to identify the person responsible.

3.0 Ethical Issues

Ethical issues encompass the following: web spoofing, cyber-squatting, privacy invasion, online
piracy and email spamming. Issues to do with who should access online data, who should own
the data as well as who is responsible for maintaining accuracy and security of such data will
always be ethical concerns that need answers.

Web spoofing

This is an electronic deception relating to the internet. It occurs when the attacker sets up a fake
websites which is almost the same with the original websites in order to lure consumers to give
credit card number or other personal information. This results in loss of business for the
company and loss of money to the customer because they pay without getting the products paid
for, and further, their credit identity can be stolen leading to further losses of whatever their
credit card is worth.

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Cyber-squatting

This is an activity in which a person or a firm registers purchases and uses the existing domain
name belonging to a well-known organization for the purpose of infringing its trademarks. Like
the case in web-spoofing, there is deception to the customer, and mimicking of the real company.

Privacy invasion

This occurs when the personal details belonging to a consumer are exposed to unauthorized
party. For any online transaction to be carried out, the both the customer and the seller give out
personal details such as identification card number, bank details, both physical and postal
address, as well as email address. When the privacy is infringed on by unauthorized person,
serious damage can be done, such as identity theft or some sort of conmanship. Physical harm
like robbery can also be possible, because of possibility of locating where the individual lives.

Online piracy

This is unauthorized copyrighting of electronic intellectual property such as eBooks, music or

videos. This unethical activity occurs when internet users use the software and hardware
technology in an illicit manner to transfer the electronic content over the internet without paying
for it. YouTube for example, Project Free TV, Cyro.se, Putlocker, iTunes etc. are some of the
channels through which internet users can access free movies and music.

Email spamming

This is also known as unsolicited commercial email. It involves using email to send or broadcast
unwanted advertisement or correspondence over the internet. This can be quite disrupting to the
email owner because of large number of emails coming through, some of which are potentially
loaded with destructive viruses that can affect the PC and cause a lot of damage to useful files.

4.0 Trends in E-commerce

Online business will keep rising making it very competitive in 2017 and coming years. As
competition builds up, explosion in high-tech online marketing tools will be witnessed,
according to Brinker, (2016). mind blowing technology on video uploads, prodcams and pop-up

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ads are already being seen and the ability to overlay links on videos and other online marketing
tools promises exciting times ahead. Some of the trends and emerging issues in e-commerce and
online business include: digital payment types, the rise of fast delivery, e-commerce
personalization, loyalty schemes, mobile commerce and introduction of chatbots and Internet of
Things. The concept of Cloud is also a useful trend.

Digital Payment Types

More and more customers are now using digital payment through phones, cards and digital
watches to complete business transactions. Some examples include: phones, credit and debit
cards, digital watches, Apple pay, Amazon pay, paypal, Mpesa etc.

Rise of Fast Delivery

Customers are now able to click and collect, which is a fast online purchase that enables a
customer to get his/her purchases delivered the same day.

E-commerce personalization

Personalization instead of on-fit all services are now available to customers. Retailers are able to
tailor make the products and services for a specific customer, by collecting behavioral data from
websites visited by the customer and developing personalized products or services based on
customer preference.

Loyalty Schemes

Retailers now capture information about their customers as they shop and use this information to
offer higher personalized promotions and rewards to customers who seem to be loyal to their
brand.

M-commerce (Mobile Commerce)

More and more businesses are developing applications that can work with majority of mobile
phones and using these as a form of shopping window on which they present their products to
the potential customers.

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Internet of Things (TOT)

The internet of things is a concept that allows for personal details to be captured and integrated
across the board, to enable an individual transaction with minimal or no human intervention at
all. For example, where it is being used in US by Walmart Stores and Amazon Stores, the
customers just walks into the store and whatever item they pick is directly and automatically
charged and added to their shopping cart. At the end of the shopping, the total automatically adds
up and is deducted or payed from their back accounts, without them having to produce any card,
or sign for any authorization. This means, there is no need to queue at the till in order to pay a
supermarket or vendor cashier.

5.0 Conclusion
While e-commerce has brought a lot of benefits to both customers and marketers, the challenges
that come with it in terms of legal and ethical issues cannot be ignored. Both the customers and
organizations conducting e-business must be aware of the fit falls and must be prepared to pay of
the prize of securing themselves from harmful activities. On the other hand, the emerging trends
promise an exciting time for internet users as they sample from the wide variety of upcoming
innovations and technological advancement.

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BIBLIOGRAPHY
Mangat, H. (2015). Legal and ethical issues in e-commerce. International Journal of Business
Management

Massoud, S.L., (2002). Ethical and legal issues in e-commerce. Prairie View A&M university.
Proceedings of the Midwest business economics association.

Reed, R. (2003). Besieged: Confronting intellectual property threats. Risk management

magazine July 2003 Issue

Sopitkamon, M. (2006). E-commerce: Challenges and issues. BizIT.

Special Interest Group PCI Security, (2017). Best practices for security e-commerce. PCI data
security council. Information supplement.

Niranjanamurthy, M., Chahar, D. (2013). The study of e-commerce security issues and solutions.
International Journal of advanced research in computer and communication engineering.
2 (7)

Verbauwhede, L. (2002). IP ownership: Avoiding disputes.

http://www.wipo.int/sme/en/document/wipo_magazine/11_2002.pdf.

http://knowing-itech.blogspot.co.ke/2011/09/ethical-issues-in-e-commerce.html?m=1

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