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EB/U4 Topic 5 Legal and Ethical Issues of E-Commerce

Legal and Ethical Issues of E-Commerce

In the Information Age, technology evolves fast and data travels even faster. It can be difficult for the law to keep up with new technologies and inventive ways to conduct e-business. Because of this, the law often lags behind, and lawmakers end up drafting laws to clean up Internet messes instead of preventing them. Take digital file sharing — dubbed piracy — for example, laws were not created to prevent digital piracy until millions of albums were stolen and the music industry was crippled. The lag in laws mean that e-business executives must rely on ethics as they move forward in e-commerce.

  • Client Privacy

Internet businesses have a legal obligation to protect the private information of their customers. E-commerce activity often involves collecting secure data such as names and phone numbers associated with email addresses. Many e-business activities also involve transactions, so customer banking or credit card information also ends up stored online. Legally, it is up to the e-business to store and protect or dispose of this sensitive data. The Children’s Online Privacy Protection Act, for example, protects the online privacy rights of children. Under this law, parents have control of what personal information their children can give to e-businesses.

  • Advertising Online

Several online marketing issues spring from the inherent anonymity of the Internet. It is often difficult to know the real identity of an e-business owner. A few online businesses take advantage of this in unethical or illegal ways. Some e-businesses track the online activity of their customers so that they can show advertisements based on the customer’s behavior. Behavioral advertising is not illegal, and it is not illegal to refrain from disclosing that an e-businesses tracks activity, although many people consider this nondisclosure unethical.

  • Copyright Infringements

Due to the Internet’s free flow of information, plagiarism and copyright infringement is a continual problem. The Digital Millennium Copyright Act addresses plagiarism and copyright infringement in the specific context of the Internet and e-business. Under this law, it is illegal to use online technology to copy and distribute legally copyrighted material, such as photography, articles or books, music or videos.

  • Net Neutrality

Net neutrality is the hotly debated idea that Internet users should have equal access to all websites. Most computers retrieve websites at the same speed, depending on the user’s Internet account settings or service, no matter if the site is a multibillion-dollar company or a neighbor’s blog. But some Internet providers have the capability to deliver different websites at different speeds. This is an issue because some websites could pay providers to deliver their content at faster speeds, while smaller business with less capital might not be able to afford the faster processing, and the Internet would lose its free-access-for-all feel. The Federal Communications Commission currently supports net neutrality and bans providers from participating in any program that offers extra pay for higher speed access to any websites.

  • Disintermediation and Reintermediation

 Intermediation is one of the most important and interesting e-commerce issue related to loss of jobs. The services provided by intermediaries are-

(i) Matching and providing information.

(ii) Value added services such as consulting.

The first type of service (matching and providing information) can be fully automated, and this service is likely to be in e-marketplaces and portals that provide free services. The value added service requires expertise and this can only be partially automated.  The phenomenon by which Intermediaries, who provide mainly matching and providing information services are eliminated is called Disintermediation.

The brokers who provide value added services or who manage electronic intermediation (also known as infomediation), are not only surviving but may actually prosper, this phenomenon is called Reintermediation.

The traditional sales channel will be negatively affected by disintermediation. The services required to support or complement e-commerce are provided by the web as new opportunities for reintermediation. The factors that should be considered here are the enormous number of participants, extensive information processing, delicate negotiations, etc. They need a computer mediator to be more predictable.

  • Legal Issues

Where are the headlines about consumers defrauding merchants? What about fraud e-commerce websites?  Internet fraud and its sophistication have grown even faster than the Internet itself. There is a chance of a crime over the internet when buyers and sellers do not know each other and cannot even see each other. During the first few years of e-commerce, the public witnessed many frauds committed over the internet. Let’s discuss the legal issues specific to e-commerce.

  • Fraud on the Internet

E-commerce fraud popped out with the rapid increase in popularity of websites. It is a hot issue for both cyber and click-and-mortar merchants. The swindlers are active mainly in the area of stocks. The small investors are lured by the promise of false profits by the stock promoters. Auctions are also conductive to fraud, by both sellers and buyers. The availability of e-mails and pop up ads has paved the way for financial criminals to have access to many people. Other areas of potential fraud include phantom business opportunities and bogus investments.

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