Thank you for checking out this article on e-commerce laws and regulations. eCommerce is growing rapidly and it’s important for marketers to be up-to-date on all the laws and regulations.
In this blog post, we’ll go over some of the key eCommerce laws and regulations that every marketer needs to know. Stay compliant and keep your business running smoothly by understanding these laws!
Do you own an e-commerce business?
Having a successful online store depends on knowing and understanding the laws and regulations that apply to your industry. This article provides in-depth knowledge of all the applicable rules, from sales tax to consumer protection laws. With this information, you can protect yourself and your customers from legal pitfalls.
Read through our article now to get informed about what’s involved when it comes to e-commerce law so you can avoid legal issues and keep everyone safe!
The legal landscape of e-commerce is constantly evolving
As the world continues to progress and our everyday interactions become increasingly virtual, there is a constant need to keep up with the legal landscape of e-commerce.
As more and more businesses take their manufacturing and sales online, it can be difficult to stay on top of data privacy regulations as they evolve.
Governments must look to balance consumer protection while promoting innovation in technology that allows e-commerce systems to operate securely.
This was highlighted recently in Europe after a major overhaul of data protection laws occurred, affecting how companies process personal data collected from consumers.
With this everchanging legal situation, staying informed is paramount for anyone marketing or selling goods and services through electronic means.
It is critical that industry leaders invest time in understanding the implications of new regulatory environments when navigating the complex digital marketplace.
E-commerce laws and regulations that all businesses should Know
With the rise of e-commerce, businesses need to be aware of their rights and responsibilities in terms of laws and regulations. E-commerce legislation extends across a range of categories, such as consumer protection and privacy, intellectual property, and tax compliance.
It is important to understand existing regulatory standards in the respective country when selling online and any related taxes which change depending on the location of purchase.
Companies should also ensure that they have Terms & Conditions clearly outlined so that customers can easily access them at checkout. In addition, digital security measures help to give buyers peace of mind when submitting financial information.
Laws You Need To Be Aware Of
Keeping up with laws and regulations around online activities is an important task for businesses that operate on the internet.
From preventing fraudulent activities to protecting the rights of children, governments have introduced several legislative acts over the years so that corporations can comply with digital privacy and data protection protocols.
The major ones include:
- The Federal Trade Commission Act, which works to protect consumers from deceptive practices
- The Children’s Online Privacy Protection Act, designed to secure the private information of kids under 13 and give parents more control over their online usage; and finally
Compliance with such regulations is a must for any company running its business in the digital space.
Federal Trade Commission Act
E-commerce businesses need to pay close attention to several aspects of the Federal Trade Commission Act.
This act requires businesses to be honest and truthful in their advertising, prohibits false and misleading statements, and bans any unfair or deceptive acts that could potentially benefit one party over another.
Additionally, e-commerce businesses must conspicuously disclose any important information related to a product or service that could influence a consumer’s decision.
Furthermore, the FTC enforces laws against unfair pricing practices like price fixing by competing companies or sellers.
To ensure compliance with the Federal Trade Commission Act and avoid costly penalties, it is essential for e-commerce businesses to understand these regulations before beginning operations.
The Children’s Online Privacy Protection Act
E-commerce businesses must be aware of The Children’s Online Privacy Protection Act, which was created to keep children safe from online predators and identity theft.
This act requires businesses to create websites that are compliant with the law, such as making sure any information collected is age-appropriate and secure, not collecting more information than necessary, and providing parents the ability to access their children’s data.
The CAN-SPAM Act
This law governs all commercial email communications and sets out specific requirements regarding marketing emails sent to potential customers.
Businesses must provide accurate sender information for their messages, offer an opt-out option if someone does not wish to receive further promotional materials, honor opt-out requests within 10 business days, monitor content to avoid being misleading or deceptive, use subject lines accurately describing the content of the message and avoid using other false or deceptive tactics.
Punishments For Non-Compliance
As the world accelerates into the digital realm, it is more important than ever for companies to comply with e-commerce laws.
If a business does not adhere to existing regulations, no matter the reasoning behind such failure, it risks incurring hefty fines or even jail time. Companies should take caution when entering a new market or launching an online venture and proactively study applicable rules and regulations.
Failing to do so could be a costly mistake. Consulting an attorney or other legal professional can provide guidance on policies and prevent unknowingly violating any law.
By remaining aware of and compliant with these regulations businesses can avoid any penalties that may arise from failing to monitor e-commerce laws.
Should You Really Be Worried?
E-commerce laws can be daunting and overwhelming, but staying informed of those laws is essential to protecting businesses from non-compliance issues.
Although the rules differ by country, being knowledgeable about the requirements can help you stay on top of any potential e-commerce violations.
By implementing systems that help outline the necessary legal precautions and making sure to keep up with any changes or updates in this area, you’ll have greater peace of mind that operations remain compliant with applicable regulations.
Additionally, it’s important to educate employees regarding e-commerce compliance to ensure that everyone involved in your business is well aware of these rules.
As long as you remain vigilant in understanding and adhering to applicable e-commerce laws, your business will stand a better chance of steering clear of any potential legal pitfalls that come with digital trading.
Thank you for checking out this article on e-commerce laws and regulations. The e-commerce landscape is constantly changing, an often complex and confusing subject to navigate. To ensure your business is operating in compliance with all relevant laws and regulations, it is essential to stay up to date with developments as they occur.
All business owners need to be aware of the various e-commerce legislation and regulations that apply to their transactions, products, services, and advertising practices in order to protect both themselves and their consumers.
It is vital that businesses carry out regular reviews of their operations in order to ensure they are meeting the requirements set out by federal, state, and local laws.
It’s also important for e-commerce business owners to remember that even though the laws may differ from one country or region to another, there are still universal principles that must be upheld.
These include data privacy protection, consumer rights protection, anti-discrimination policies, intellectual property protection, and advertising standards.
Furthermore, businesses should always ensure that online payments are securely processed through safe payment gateways in order to protect customer credit card details from potential fraudsters.
By taking these steps, companies can provide a safe environment for their customers when shopping online.
Finally, it is important for all e-commerce firms to keep up with any changes in the legal framework governing them as well as any new industry best practices that arise from time to time.
Having a proactive approach toward understanding the legal implications of running an e-commerce business coupled with being aware of emerging trends will help businesses stay ahead of competitors while complying with all applicable regulations at the same time.
In conclusion, staying abreast of e-commerce laws and regulations allows businesses to create a level playing field while protecting consumers’ interests as well as ensuring fair competition between different players in the market.
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Privacy and security are paramount
Online business owners need to make sure they prioritize both security and customer privacy. Since most ecommerce businesses collect and retain sensitive consumer information, they are responsible for keeping it out of reach from cybercriminals. The government emphasizes information security because not only is it good for business, it also helps companies avoid legal problems.
- Personal contact information
- Social security numbers
- Account numbers
Depending on the amount and type of information an ecommerce business owner is collecting and who they’re gathering it from, companies may be subject to federal and state privacy laws.
Copyright and digital rights
- «Webcasters» pay licensing fees to record companies
- Devices used to illegally copy software cannot be manufactured, distributed or sold
- Service providers are expected to remove material that’s violated these rules upon notice
- Criminal penalties for evading anti-piracy measures built into commercially manufactured software
Ecommerce businesses may plan to start with a small operation that only sells regionally. However, as the business meets its goals and grows, it’s likely that customers may come from around the country — and even past its borders. If a company sells a popular or niche product, they’ll likely have to cater to a wider client base.
If an online business owner has to ship products overseas, he or she must first understand the taxes, customs laws, duties and even consumer protection issues that are involved with global commerce. Depending on the country and the shipping service provider, these characteristics could change. However, once the method of transportation and destination are finalized, ecommerce business owners can consult the shipper and see what they must to do comply with international regulations.
Online sales tax
Similar to how shipping regulations and guidelines are variable based on the final destination, sales tax on items sold also varies, as does state tax.
For instance, if an ecommerce business has any type of presence in the state — such as a store, warehouse or any other point along the supply chain — it must collect sales and state tax from its customers. If a business is selling its products and services to a customer in a state where the company has no tangible footprint, it is not required to collect the appropriate sales tax for that location.
Not every state has sales tax, including:
- New Hampshire
A majority of states also have tax exemptions on certain items, like food and clothing. While navigating each state’s sales tax can be challenging, ecommerce business owners need not worry. Ecommerce platforms that provide integrated shopping cart software can handle these transactions since they’re pre-programmed to calculate sales tax rates for the business owners.
E-Commerce law is more important than ever. As the Internet continues to grow, businesses are finding more success online than they would as a brick and mortar business. With this success comes legal responsibility as well as opportunities for others to sabotage your e-commerce business. This is why it is essential for online entrepreneurs involved in or seeking to be involved in the e-commerce industry to understand the legalities that surround it.
What is E-Commerce Law?
E-Commerce, also known as Electronic Commerce, is the online industry of buying and selling goods, products, or services via the Internet. E-Commerce law encompasses all the legalities associated with the e-commerce industry. Each type of e-commerce company is required to abide by certain laws and regulations just like any other business and can run into legal issues that require help from an experienced e-commerce lawyer. The laws that apply are numerous and can be complex.
What Types of Businesses are Considered E-Commerce Companies?
- Establishing a proper business entity to protect you from personal liability.
- Creating proper business agreements to protect your business interests with partners and affiliates.
- Drafting proper licensing agreements.
- Unfair competition issues
- Avoiding fake reviews.
- Counterfeit products and avoiding attacks on your re-sale business.
- Issues with FTC Compliance, including avoiding deceptive marketing practices.
- How to protect and control your intellectual property rights online.
- Protecting your personal and business brand online.
- How to address medical and health claims in marketing materials for FDA and DSHEA compliance.
- Payment processing issues, chargebacks, and holdbacks with processors and Amazon.
- Account suspensions
- Advertising practices
Why is it Important to be Represented by an Internet Law Attorney in Matters of E-Commerce Law?
What Services Does an Internet Law Attorney Provide?
- Advise on e-commerce business ventures
- Structure business entities for online retailers, and web-based businesses.
- Generate E-Commerce Terms and Conditions, Privacy Policies, Refund Policies, etc.
- Perform FDA, DSHEA, and FTC compliance reviews for e-commerce businesses
- Advocate on behalf of companies under FTC or Attorney General Investigation
- Help resolve account suspensions for Amazon Sellers.
- Assists with payment processing problems
- Resolve review and counterfeit issues
- Remove false and defamatory statements online and on social media websites
- Intellectual Property issues
- Fulfilled by Amazon (FBA) issues
What Does Unfair Competition Look Like for E-Commerce Companies?
Unfair competition is a broad legal term that encompasses multiple areas of law. The most important unfair competition torts that affect e-commerce platforms are defamation, product disparagement, Trade Libel, and Tortious Interference. While most states have unfair competition laws, Section 43(a) of the Lanham Act is the federal law that protects against misleading advertising or labeling.
How Does Internet Defamation Affect E-Commerce Companies?
Product Disparagement is another form of defamation and occurs when advertisers make a false or misleading product comparison or false statement of fact about a product that damages the company that produces the product. Internet attorneys can seek justice for companies fallen victim to product disparagement by suing under state product disparagement laws, state defamation laws as well as the federal Lanham Act that protects trademarks.
What is the Lanham Act?
The Lanham Act is the primary federal trademark law in the U.S. and covers registration, infringement, false advertising and dilution. Section 43(a) of the Lanham Act addresses claims for unregistered trademark infringement, which is often referred to as “common law trademark infringement”. The Lanham Act also provides remedies for false advertising or “commercial disparagement”, product disparagement, and trade libel. The Lanham Act also addresses a claim for false designation of origin, which can include “passing off” and “reverse passing off”. False endorsements are also addressed in the Lanham Act.
Over the years, the law has been amended to include trademark counterfeiting and cybersquatting. As with any well-worn federal statute, the Lanham Act is full of nuances and exceptions, but below you can find the basics:
A Mark Cannot be Registered as a Trademark Registration if it is
- Confusingly similar to another trademark
- Generic or merely descriptive of the goods or services it represents
- Scandalous or immoral.
- It is generally illegal to use the trademark of another for profit without authorization.
- It is illegal to import products that infringe or dilute a registered U.S. trademark.
- The owner of a trademark automatically has rights to any related domain names.
- It is illegal to falsely or misleadingly describe a product or its origins in order to cause marketplace confusion.
Is it Possible to Remove Negative Reviews from the Internet?
A review cannot be removed just because it is negative unless the author chooses to remove it themselves. A negative but truthful review is not defamation. If the review is false and damages the reputation of your company or product, it is possible to sue for defamation or trade libel. The Federal Trade Commission has a zero-tolerance policy on fake reviews. The FTC considers fake reviews a clear case of unfair and deceptive marketing.
How Do I Know if a Review is Fake?
You might not always be able to tell if a review is posted by an actual customer or someone seeking to damage your company. However, you may be able to identify them by some of these red flags:
- The reviewer has no other review listed
- The reviewer does not describe the product or service with specific details
- The review is vague
- The review is over the top and has a wide use of superlatives
- The review emphasis first-person pronouns like “I” and “We”
- The review provides a link to another product as a “superior alternative”
Who is Writing Fake Reviews About My Business?
- Paid reviewers
- Content Writers
- “Brushers” that place fake orders to inflate sales
The Federal Trade Commission has outlined what is acceptable and unacceptable marketing behavior within their guide known as “.com disclosures”. One of the primary goals of the FTC is to protect consumers from deceptive marketing. If your business is not compliant with the regulations regarding proper digital disclosures, your business could be investigated by the FTC, receive hefty fines, and/or be prosecuted in court. FTC regulations require advertising to be truthful and therefore not misleading. Claims made in advertisements must be substantiated or “backed-up” by evidence.
Are There Regulations for Marketing on Social Media?
Yes, the same regulations that apply to online advertising also apply to social media. Nowadays, it is common practice to advertise through a social media influencer. It is important for the business and the influencer to always disclose when a post, whether it be a photo, video, or story, is paid for or sponsored by a business with hashtags like #ad, #paidpromotion, #paidpartnership, etc. This is also included in the FTC’s dot com disclosures.
How Do I Protect the Interests of My E-Commerce Company?
There are many ways that an e-commerce lawyer can help you protect your e-commerce company. Creating a clear outline of your company’s terms and conditions can help your business stay protected when selling online. Standard Terms and Conditions for e-commerce businesses consist of:
- Liability Limitations: In order to keep your legal costs at a minimum in case you were to be sued by a customer, it’s important to have a limited liability clause to limit any claims that may arise. Some claims to liability like causing death or personal injury cannot be contracted away from but other claims like damage can be.
- Return Policy: Specifying what happens with returns and who pays for returns is important to include in your terms and conditions as returns are a common occurrence with an online business.
- Jurisdiction/ Choice of Law: This establishes the laws that the contract of sale will be interpreted by. This is important especially for an ecommerce business because if you were to sell around the world, you need to establish what legal jurisdiction your company abides by.
- Delivery Terms: This will protect your company from responsibility for delivery issues. Having a clear outline in place that customers are required to accept upon order can help solve support issues or refund requests.
Shipping and Delivery Policy
Make sure to have a clear shipping and delivery policy that defines when customers can expect to receive their products and how their packages are going to be delivered by including timeframe information as well as shipping costs.
It is important for your company to have a reasonable refund policy as it is an essential part of building trust with customers and could even be a deciding factor for someone purchasing your product. It is best to be generous with your refund policy and handle refund requests promptly so you can show customers that you care.
What are the Benefits of Hiring an Internet Law Attorney?
- The e-commerce legal world is still new and relatively uncharted. Internet law changes as the Internet grows and having an experienced e-commerce attorney on your side that can evolve with your business is important.
- There are many online resources available for drafting terms and conditions for your e-commerce company but in order to ensure your company receives the maximum amount of protection it is essential that you seek counsel from an experienced e-commerce attorney.
Testimonials from RM Warner Law Clients
“Superb attorney, highly recommend Raees Mohamed! Truly a top e-commerce lawyer that has guided me through complicated Internet law issues, and for a very reasonable fee I might add.” -Google Review
“We were involved in a complicated online defamation case in which a someone pretended to be female students and filed made-up sexual harassment charges against both of my partner and myself–all in an attempt to steal an academic job. Raees and his team at RM Warner helped us wade through the complex world of anonymous online identities and defamatory attacks, eventually enabling us to put a stop to the attacks, clear our name, reveal who had been behind it all, and make sure that person faced real consequences for what he did to us. We are forever indebted to Raees and the RM Warner team.” – Google Review
Ready to Speak with an E-Commerce Attorney?
RM Warner Law is well-versed in e-commerce and advertising law as well as the Amazon Marketplace laws and regulations. We know exactly how to help Internet entrepreneurs, startups and e-commerce businesses thrive so get in touch today.
Selling your products and services online is an increasingly lucrative way to run your business. And with e-commerce platforms like Jumpseller, it has never been easier to get started. Before you do, though, there are some things you need to know.
As the world of e-commerce grows, so too do the rules, regulations, and taxes around selling online.
To give you a headstart, we’ve outlined a few of the key laws you need to know, regarding some of the major trading countries across the globe.
The United States has an exhaustive list of e-commerce regulations at both state and federal levels. Some states have tighter regulations than others, so it pays to check their local laws.
With that said, the federal government has imposed several blanket regulations on online sellers. For example, you will need to register your online business to make it a distinct legal entity.
Federal privacy law
The Federal Trade Commission Act (FTC Act) enforces privacy laws to protect consumers from “deceptive trade practices”.
- Maintain reasonable data security measures.
- Do not mislead consumers with inaccurate privacy policies.
- Do not engage in false advertising.
As well as federal laws, US Attorneys General oversee state data privacy laws that monitor the collection, storage and safeguarding of their resident’s data.
There is no national sales tax rate. The state-decided sales tax rates range from 2.9% in Colorado to 7.25% in California.
Sales tax is a percentage rate tacked on to the original price. There are five states where sales tax is not required for internet-based businesses, including Alaska, Delaware, Montana, Oregon and New Hampshire.
The USA imposes federal income tax at a rate that varies depending on your entity.
The highest corporate tax rate is 21%, and the lowest rate is 13.3%, which is typically used for sole proprietorship entities.
China has tightened its online trading regulations in the past two years to clear up several issues in the online marketplace and protect the rights of consumers.
To sell online in China on an established platform or your own website, you need to:
- Register as a market entity.
- Maintain accurate transaction records.
- Sell goods that comply with China’s personal safety standards.
- Pay taxes.
- Display your business licence and inform the public 30 days before closing your business.
- Protect consumer information and IP address.
- Provide comprehensive and accurate descriptions of products.
- Clearly define the company’s refund policy.
State Administration for Market Regulation (SAMR)
In a recent bid to rein in China’s loose online marketplace, SAMR is cracking down on illegal pricing activities.
This prevents online sellers, including e-commerce giants such as Alibaba, from setting different prices based on consumers’ purchasing trends and ensures platforms set the same price for the same offering.
Violating this regulation will result in the suspension of operations and a fine of 0.1% to 0.5% of the annual sales.
Value Added Tax (VAT)
China has three VAT rates: 6%, 9% and 13%, depending on the type of goods or services sold.
For goods sold online, 13% is the VAT rate tacked on to the product’s original sale price.
Individual Income Tax
Business income comes under China’s Individual Income Tax (IIT) rate. The rate is a percentage of total annual earnings, ranging from 3% to 45%.
The amount of IIT you pay depends on your annual income, i.e. the more you earn, the more tax you pay.
Australia enforces several regulations with legal implications for online sellers who fail to comply. The Australian Consumer Law (ACL) under federal law prioritizes consumer privacy and protection and prevents harmful business practices.
Australian Consumer Law (ACL)
The ACL regulates all businesses that deal with consumers, maintaining a high level of business conduct. Online businesses are obligated to ensure products sold are:
- Suitable for sale.
- Fit for purpose.
- Free of defects.
- Match the online product description.
Consumer data protection
Online businesses must have processes in place to protect all consumer data, including personal information and credit card details.
Displaying legal documents on websites
Terms and Conditions: Addresses what you are selling, how it is paid for, how it is delivered and any disclaimers about what your business is not liable for.
When online selling becomes a business
Selling online in Australia may not meet business criteria.
If you’re selling online sporadically on established trading platforms, this is considered a hobby.
If you intend to make a profit, set up a ‘shop’ on a trading platform, apply product mark-ups or make regular sales, you are operating an online business.
In this case, you will need to apply for an Australia Business Number (ABN) and register as a business.
Goods and Services Tax (GST)
GST applies to businesses with an annual turnover of over $75,000. GST is a rate of 10% that is tacked on to the original sales price of a product.
This tax is then reported and paid to the Australian Taxation Office (ATO) monthly, quarterly or annually, depending on your annual business income.
Business Income Tax
All businesses must file an annual business income tax return even if they don’t owe tax for that year.
The federal tax rate of 30% of accessible income applies to larger businesses and 25% for small to medium businesses.
Most Australian businesses use a Pay As You Go (PAYG) system and pay tax in quarterly instalments to avoid a large annual tax bill.
New Zealand’s online selling regulations are outlined in the Consumer Guarantees Act and the Fair Trading Act.
These laws are closely regulated to protect consumer information and prevent online businesses from misleading their customers.
Fair Trading Act
The Fair Trading Act applies to online businesses selling within New Zealand and online businesses abroad that sell to New Zealanders.
Under the Fair Trading Act, online businesses are obligated to:
- Disclose to customers that you’re in trade.
- Represent goods accurately and have a reasonable basis for all claims.
- Ensure consumers are aware of their rights.
- Engage in fair, accurate advertising.
- Comply with product safety standards.
Consumer Guarantees Act
The Consumer Guarantees Act protects consumers from being misled by online sellers.
Under the Consumer Guarantees Act, online businesses are obligated to:
- Sell goods of reasonable quality.
- Sell goods fit for purpose.
- Ensure goods arrive in good condition.
- Ensure goods match their online product description.
- Offer repair or refund options for manufacturer faults.
Online businesses may be liable for leaks of personal and payment information.
New Zealand GST is a flat rate of 15% applied to the original sale price of goods and services.
The extra 15% is charged to the consumer and then paid by the business to the Inland Revenue Department (IRD) every month.
Contractors, sole traders, or self-employed New Zealanders — such as those who run their own online stores — pay provisional tax on their income.
Provisional tax is a method of paying tax in instalments in advance which, in many cases, requires a forecast of earnings.
As inaccurate forecasting can lead to significant penalties on underpaid tax, IRD-approved intermediaries offer progressive tax pooling systems to simplify provisional tax.
Many of those who are eligible to take advantage of tax pooling are still unaware it is an option, so it’s worth checking to see whether you qualify.
There are several rules and regulations to be aware of before becoming an online trader in the United Kingdom.
Online businesses are closely monitored to protect the consumer and ensure fair trading practices are adhered to. Online sellers are subject to the same laws as bricks and mortar retailers.
Consumer Rights Act
All online businesses must adhere to the regulations outlined in the Consumer Rights Act.
These regulations give consumers the legal right to:
- Repair or replace a faulty product.
- A reasonable delivery timeframe.
- Fair terms and conditions.
- Goods of satisfactory quality, fit for purpose and accurately described by the seller.
Distance Selling Regulations
Consumers are protected by Distance Selling Regulations when not in the presence of the seller at the time of transaction.
Under these regulations, online businesses are obligated to:
- Give consumers the right to cancel a sale within seven working days.
- Provide clear product details and delivery information.
- Provide email confirmation of order.
- Deliver the product within 30 days of order.
Most goods and services in the United Kingdom incur a standard rate of 20% VAT tax.
If you are VAT-registered, you must file a VAT return to Her Majesty’s Revenue and Customs (HMRC) quarterly even if you have no VAT to pay.
In the wake of COVID-19, online shopping has skyrocketed, contributing to the collapse of bricks and mortar retailers.
The UK government introduced a 2% digital sales tax in April 2020 in an attempt to help reduce store closures.
Be aware that the UK government is now considering a 2% sales tax on top of the digital sales tax.
This levy has not yet been introduced, but it’s looking more and more likely as retailers struggle to come back from the pandemic’s economic impact.
Look into your local laws and regulations
Online selling can be extremely profitable, especially in today’s climate.
However, it’s important to know your local laws and regulations before setting up an online business to ensure you’re a compliant and reputable company.
As we’ve learned, consumer rights are a priority across the globe, so putting your customers first throughout your business journey is key to your success.