Legal and Ethical Issues in E-commerce

“Ecommerce, also known as

electronic commerce or internet
commerce, refers to the buying and
selling of goods or services using
the internet, and the transfer of
money and data to execute these
transactions. Ecommerce is often
used to refer to the sale of physical
products online, but it can also
describe any kind of commercial
transaction that is facilitated
through the internet.”

Legal and Ethical Issues:

It is an emerging concept that describes the process of buying and selling or exchanging of
products, services; and information via computer networks including the Internet.

At the early ages of its emergence, the Internet only became the platform to search information
and to communicate by each-others. But now, we can say that Internet has been commercialized
(thus the term e-commerce emerge). Nowadays, we can see almost all trading and business
activities including banking can be done online. This trend give a lot of advantages both to
consumers and business organizations. However, the bad side about e-commerce also cannot be
ignored. There are various legal issues associated with E-commerce businesses as well. And if
these issues are not taken care of in time, they can lead to serious problems for your business.
Some of the common legal and ethical issues an e-commerce business faces these days are:

1. Privacy Issues

When it comes to online businesses, privacy is the major issue that can create problems both for
the business and customers. Consumers share information with businesses online and they expect
the sellers to keep their information confidential. By just one minor mistake and leakage of
valuable information of a customer, you’ll not only lose your potential customer but your image
and reputation will become a question mark.
 2. Web Spoofing

Web spoofing is an electronic deception relates to the Internet. It occurs when the attacker sets
up a fake website which almost totally same with the original website in order to trap consumers
to give their credit card number or other personal information. For example is the attacker setup
a site called www.micros0ft.com using the number zero in place of the letter O, which many
users sometimes type by mistake. Users might find themselves in a situation that they do not
notice they are using a bogus web-site and give their credit card details or other information.

3. Domain name

The choice of domain name in the e–commerce is difficult process requiring assessment of many
factors. Except the considerations for association a domain with the name of a brand and the
meaning of the domain in the process of the website optimization, there are also legal aspects
whose neglecting or ignorance can have serious consequences in the future.

The chosen name must not be similar or like to the name of registered trademarks, especially of
well-known trademarks. Registering a domain that is close or similar to the name brand is
considered an offense known as "cybersquatting". In the Internet there are different databases,
where domains can be checked for a similarity with registered trademarks. On the website of the
World Intellectual Property Organization can be found a public database facilitating searching
into registered trademarks here

4. Trademark Security Problem

Not getting your trademark protected is one of the main legal issues in the field of e-commerce.
Since trademark is your company’s logo and symbol, the representation of your business all over
the web, it must be protected. If you don’t secure it, it won’t take long before you’ll realize your
trademark is being infringed upon. This is very common legal issue and can become a deadly
threat to your e-business.

5. Cyber-Squatting

Cyber-squatting is an activity which a person or firm register, purchase and uses the existing
domain name belong to the well-known organization for the purpose of infringing its trademarks.
This type of person or firm, called cyber-squatters usually infringed the trademarks to extort the
payment from original trademark’s owner. The extortion of payment occur when they offers the
prices far greater than they had purchased the organization’s domain name upon. Some cyber-
squatters put up derogatory remarks about the person or company which the domain is meant to
represent (eg: www.walmartsucks.com), in an effort to encourage the subject to re-buy their
domain from them.
 6. Copyright Protection Issue

While publishing content for your e-commerce website, using content of any other company can
be a severe legal problem. This might mark an end to your e-business. There are many sites
online which are royalty free and allow you to access their content and images. You may use
those sites for creating web content for your business site. With the hackers on loose and
cybercrime so common, trademark infringement of your business or by your business can be a
serious legal matter and may hinder your business’s progress. Even if you unintentionally used
copyrighted content, the other party can easily sue your business.

7. Web tracking
E-businesses draw information on how visitors use a site through log files. Analysis of log file
means turning log data into application service or installing software that can pluck relevant
information from files in-house. Companies track individual’s movement through tracking
software and cookie analysis. Programs such as cookies raise a batch of privacy concerns. The
tracking history is stored on your PC’s hard disk, and any time you revisit a website, the
computer knows it. Many smart end users install programs such as Cookie cutters, Spam
Butcher, etc which can provide users some control over the cookies.
The battle between computer end users and web trackers is always going on with a range of
application programs. For example, software such as Privacy Guardian, My Privacy, can protect
user’s online privacy by erasing browser’s cache, surfing history and cookies. To detect and
remove spyware specially designed programs like Ad-Aware are present. A data miner
application, collects and combines Internet browsing history of users and sends it to servers. The
battle goes on!
8. Privacy Invasion

This issue is related to consumer. The privacy invasion occur when the personal details belong to
consumers are exposed to the unauthorized party. It may occur in THREE ways.

i. Electronic commerce businesses buy information about individuals such as their

personal details, shopping habits and web page visitation listings. This can be done
with or without the individual’s knowledge by using different computing
technologies. A large number of web sites, which require users to create a member
name, also ask for personal details. These details are then often sold on to companies
to aid in the marketing and selling of their products.
ii. The personal information of consumers being transmit may be intercepted by anyone
other than the person whom it is intended. Protecting the privacy of communication is
a great challenge, due to the very nature of the online medium, an open network of
digital telecommunications. It is technically and economically impossible to patch all
the holes through which unauthorized intruders may gain access.
 iii. Malicious programs delivered quietly via web pages could reveal credit card
numbers, usernames, and passwords that are frequently stored in special files called
cookies. Because the internet is stateless and cannot remember a response from one
web page view to another, cookies help solve the problem of remembering customer
order information or usernames or passwords. Online Piracy The online piracy can be
defined as unauthorized copyright of electronic intellectual property such as e-books,
music or videos. This unethical activity occurs when the Internet users use the
software and hardware technology in an illicit manner to transfer the electronic
intellectual property over the Internet. For example, some web-based applications
such as www.napster.com have enabled large scale exploitation of music samples and
audio formats. Software that is available for free of cost on the Internet allows the
transfer of music and videos without the authorization of rights holders. Moreover,
CD burners and portable MP3 players allow copyright violations to occur rather
easily.
9. Email Spamming

E-mail spamming, also known as unsolicited commercial e-mail (UCE) involves using e-
mail to send or broadcast unwanted advertisement or correspondence over the Internet. The
individual who spam their e-mail usually called spammer. Many spammers broadcast their e-
mail for the purpose of trying to get people’s financial information such as credit card or
account bank numbers in order to defraud them. The example of fraud using e-mail is
spammers will trap consumers to enter their personal information on fake website using e-
mail, forged to look like it is from authorized organization such as bank. The content of e-
mail often directs the consumers to the fake website in order to lure them to fill their personal
information such as credit card or bank account’s details. This technique is called phishing.

10. Privacy
Most Electronic Payment Systems knows the identity of the buyer. So it is necessary to protect
the identity of a buyer who uses Electronic Payment System.A privacy issue related to the
employees of company is tracking. Monitoring systems are installed in many companies to
monitor e-mail and other web activities in order to identify employees who extensively use
business hours for non-business activities. The e-commerce activities performed by a buyer can
be tracked by organizations. For example, reserving railway tickets for their personal journey
purpose can be tracked. Many employees don’t want to be under the monitoring system even
while at work.As far as brokers and some of the company employees are concerned, E-
Commerce puts them in danger zone and results in elimination from their jobs. The manner in
which employees are treated may raise ethical issues, such as how to handle displacement and
whether to offer retraining programs.
11. Return policy

The Law on the consumer protection which regulate the sales in e-commerce contains an
unambiguous provision for the right of every costumer to return the purchased goods within
seven days term after the delivery. The law does not require the presence of defects or
inconsistency in the good quality; neither any reason for return has to be mentioned. The
conditions upon which the right of return of goods purchased over the Internet cannot be
exercised by the user are explicitly listed in the law. In any other case the entrepreneur should
respect the legal right of the costumer and should accept back the purchased goods upon
existence of the conditions for returning.

The legal framework for e-commerce is increasingly becoming complex even in one single
jurisdiction. Things become more and more complicated when you are faced simultaneously
with hundreds of potentially applicable legislation because you are entering agreements with
customers located anywhere in the world. The Internet provides many new sales and marketing
opportunities and online business must adapt to this changing commercial environment.

12. Rights of Intellectual Property

By creating an e-commerce website emerged a new object of intellectual property and all
copyrights and related rights with regard to their use in the website must be clearly stipulated in
the contract. The owner of the website should receive right to use the website without restriction
in time and scope, to make changes in it, the right to update and improve website without
limitations, depending of the changing business needs and conditions. Last but not least, the
contract must provide warranty by the contractor that with the creation of the website no
copyrights and other rights of the intellectual property of third parties are violated.

13. Security

Data protection is becoming increasingly important issue for the customers in the e-commerce.
Collection and the storage of personal data of the costumers should be made lawfully, with the
implementation of adequate measures and modern technical resources for protection of the
personal data of the costumers. The Law on Personal Data Protection requires the trader to be
registered as a data administrator into the register of Personal Data Protection Commission. The
law describes in details the obligations of the administrators of personal data. E-commerce
websites must have a policy for personal data protection that is available and posted in a
conspicuous place on the site. Published rules for the protection of personal data must be drafted
in compliance with the law. Security features such as authentication, non-repudiation and escrow
services can protect the sellers in e-commerce.
14. Incorporation Problem

If you are a company operated merely via a website, not being incorporated is a crucial problem.
Any purchase and selling activity related to your products will be considered illegal and you
can’t claim your right in case of any fraud and corruption. Without incorporation, your business
has no shelter.
Conclusion:

One needs to be careful while doing e-commerce activities. The need to educate the public about
the ethical and legal issues related to e-commerce is highly important from a buyer as well as
seller perspective.

The power of the Web to reach the world carries with it a variety of issues, Authorities seeking
to apply their laws in traditional ways or to expand legal control over international links, face
many challenges due to the global nature of the Internet.

EFFECTIVENESS OF E-COMMERCE:

Many banks and Telecom operators have introduced the concept of branchless banking, and
the number of branchless banking agents facilitating offline payments for online purchases. In
Pakistan, through the introduction of e-commerce in the banking sector, customers can now
gain access to their respective banks computer system and can control their daily financial
transactions and can also play their utility now a days. E-shopping or electronic shopping is
also becoming extremely popular in the country, you can choose a product from home and can
make payment after the product has been delivered at your doorstep. With accelerating
internet access and an overwhelming penetration of mobile phones around the globe, Asia is
becoming increasingly attractive to
e-commerce firms that are booming
on the international level. Amazon,
eBay and Expedia are the big guns
that are enjoying their success in
the international market, but they
are facing various challenges in
Asia due to diverse culture,
multiple languages and poor
infrastructure.

Although being a late entrant in this sector, Pakistan is showing a positive response in the e -
commerce business. E-commerce trends are expected to boom in the near future due to easy
internet access. Its growth is increasing due to drastically changing the way business is done.
It is estimated that in years almost $30 million is being spent on online purchases which
depicts a highly positive picture of the future and size of e-commerce market in Pakistan. It is
considered to be reaching over $600 million by 2017 due to unprecedented growth rates.
With the popularity of online marketing, the e-commerce business firms are facing a tough
competition among each other.

1-Benefits:

These e-commerce websites offer various packages at discounted rates to their customers
which benefits large number of people. E-commerce in Pakistan is taking an innovative step
as it is being applied to various sectors of the economy. Cash-On-Delivery (COD) payment
methods account for almost 95% of online purchases in the country. As we all know that
physical retail is run by branding and relationships. But online retail is also driving by traffic
that comes from search engines. For customers, it is not very so common to follow a link in
the search engine results and land up on an ecommerce website that they never heard of.
Presently, the e-commerce industry is operating on trust with zero regulations. And finally,
security of online transactions, high bandwidth rates and monopolistic role of the Pakistan
Telecommunication Company Limited (PTCL) are the issues hampering the growth of e-
commerce in Pakistan.

2- Decrease cost of inventory management:

With e-commerce business, the suppliers can decrease the cost of managing their inventory of
goods that they can automate the inventory management using web-based management
system. Indirectly, they can save their operational costs. The best thing is e-commerce
retailers can easily keep a constant eye on consumers’ buying habits and interests to tailors
their offer suit to consumers’ requirements. By satisfying their needs constantly, you can
improve your ongoing relationship with them and build long-lasting relationships.

3-Competence:

For effective business transactions, e-commerce is an efficient and competence method.

Setting-up cost is extremely low as compare to expanding your business with more brick and
mortar locations. Very few licenses and permits are required to start-up an online business
than physical store. You can save your lots of money by using fewer employees to perform
operations like billing customers, managing inventory and more.

4-Selling products worldwide:

If you are running a physical store, it will be limited by the geographical area that you can
service, but with an e-Commerce website, you can sell your products and services across the
world. The entire world is your playground, where you can sell your complete range of
products without any geographical limits. Moreover, the remaining limitation of geography
has dissolved by ecommerce that is also known as mobile commerce.

5-Standard of living:

E-commerce face tremendous challenges,

these are providing scope for innovation
thus driving the market forward. Electronic
commerce or e-commerce is actually the
business done through the Internet in the
present era of modernization and
technology. The rapidly growing usage of
Internet is shifting the world towards the e-
commerce net. Phenomenal advancement
in Information and Communication Technology (ICT) has not only brought a revolution in the
lifestyles of the people but also in the business and marketing strategies of the people. Today,
a company creates, maintains and optimizes business relations with consumers and other
businesses using tools and practices involving Internet technologies. This is precisely e-
commerce, which is an information technology trend developing fast in the business world. It
includes selling, buying,

6-Growth barriers:

Pakistan has a low literacy rate, and hence many do not know how to use Internet, yet.
Secondly, there is still a majority of people who lack access to technology. There is a low
percentage of entire population having access to the Internet. The Internet penetration in
Pakistan is quite low in comparison to the West. There is about 28 percent of the population
having access and using the Internet in the country. Thirdly, the local businessmen still
believe in traditional mode of doing business and show a lack of trust in e-commerce. There is
a lack of trust because there is absence of any laws or rules. Merely the trust element poses
threat to industry in long run. There is also a dire need to remove the misconception of e -
commerce in business circles in Pakistan. Fourthly, there is lack of proper infrastructure like
telephone line and frequent power breakdown in cities and towns across the country. Fifthly,
absence of any e-commerce policy framework has been a big hurdle because of what many
companies have held their plans to start e-business in Pakistan.

Rising and contacting buyers with credit card

or digital cash, by transfer of data between
different companies using Internet through
online facility. Presently, the e-commerce
industries operating on trust with zero
regulations. And finally, security of online
transactions, high bandwidth rates and
monopolistic role of the Pakistan
Telecommunication Company Limited (PTCL)
are the issues hampering the growth of e-
commerce in Pakistan. Now, you don’t have to invest your money in the physical store,
insurance or infrastructure as all you need is a wonderful idea, unique products and well -
designed website to reach your precious customers to sell your products and services. We can
say that this makes an e-commerce a lot more economical and reasonable.

7- Scope of e-commerce:

Pakistan’s much-awaited entry into 3G and LTE services in 2014 has increased internet
accessibility and will also most likely propel the growth of online purchases. Statistics from
the Pakistan Telecommunication Authority (PTA) reveal that the total number of third-
generation (3G) mobile subscriptions have risen up to 10.3 million in 2015.

Even though e-commerce is an emerging market in our country, it is likely to face various
challenges. Although many of these challenges are providing scope for innovation, thus
driving the market forward. Pakistani market is fragmented with poor logistic i nfrastructure.
Issue of mistrust prevails among the customers regarding the security and privacy of their
personal information like credit cards, phone numbers and home addresses etc. Also, people
lack confidence with the newly emerging companies in the online market which needs to be
taken into account by the government authorities. There is a lot of scope of e-commerce in
Pakistan, but there is dire need to increase computer literacy and internet penetration in our
country. Despite of all the issues, research findings have shown that due to time, money and
other resource savings, online stores are becoming most favored options for shopping among
customers. Pakistan has the capability to move efficiently into the era of electronic trade and
it can make good use of this opportunity with better planning and execution and we can reach
the true e-commerce potential and can compete with other big players of the region.
 E-COMMERCE

ASSIGNMENT

“LEGAL AND ETHICAL ISSUES IN E-COMMERCE AND

EFFECTIVENESS OF E-COMMERCE”

Submitted To:

MISS KHANSA ATIF

Submitted By:

MUNIZA USMAN (61651031)

TAYYABA SHEHBAAZ (61651050)
MEMOONA SHAHID (61651029)

Bba 6th semester

Lahore College for Women University, Lahore