ECT 250: Survey of e-commerce technology
International, ethical, and legal issues
• International issues
– Language
– Culture
– Infrastructure
• Ethical issues
– Defamation
– Privacy rights
• Legal issues
– Borders and jurisdiction
– Jurisdiction on the Internet
– Taxation and e-commerce
– Contracting
– Web site content
International e-commerce
• E-commerce is by its nature international.
• International companies must work to build trust
with customers.
• Trust can be built by sharing a culture, that is, a
combination of language and customs.
• The barriers to international e-commerce include:
– Language
– Culture
– Infrastructure
Language issues
• A first step in reaching international customers
is to conduct business in their native language.
• Customers are more likely to buy products and
services from Web sites in their own language,
even if they understand English.
• Estimates are that by the end of this year, 60%
of Web use and 40% of e-commerce sales will
involve at least one party outside the U.S.
Common languages
• Most common non-English languages for U.S.
companies: Spanish, German, Japanese, French,
• Second tier of languages: Italian, Korean, Russian,
Portuguese, and Swedish.
• Many languages involve different dialects such as
Spanish in Mexico vs. Spain vs. Argentina.
• Some dialect differences are in spoken inflection.
• Word meanings and spellings can vary between
Example: Gray in U.S.; grey in U.K.
Multiple language sites
• Not every page on a site will be translated into
multiple languages.
• Pages that may be kept in multiple languages:
– Home page
– Marketing and branding pages
– Product information pages
• Pages that may be kept in a single language:
– Local news
– Employment opportunities
Handling language displays
There are several ways to ensure that customers
will see the language appropriate for them.
• Use the information about the default language
of the browser to direct visitors to pages.
• Create different versions of the site and place
links on the page directing visitors.
Examples: Dell Computers, Hyundai
The links need to be clearly labeled.
Country flags are not a good choice. (Why?)
• Hire a Web page translation service
– Translate the pages
– Maintain them for a fee ($0.25 – 0.50/word)
• Use software that automates the translation and
maintenance of the pages.
Example: Idiom Technologies
• Completely automated translation software.
Can translate up to 40,000 words an hour.
Human translators do 400-600 words an hour.
Culture issues
Errors can stem from language and culture standards.
• Chevrolet Nova did not sell in Latin America.
• Pepsi’s campaign in China failed. “Come alive”
became “Brings your ancestors back from their
• Complaints from Japanese customers to
Packaging is important part of a quality product.
• Baby food with a picture of a baby did not sell well
in parts of Africa where food containers always
carry a picture of their contents.
Labeling issues
Labeling issues are particularly troublesome:
• Inappropriate use of the image of a cow in India.
• Uncovered legs or arms in a Muslim country.
• A Web page divided into four parts or that uses
the color white in Japan, where the number 4
and white represents death.
Ways of doing business
• Japanese customers prefer to pay using cash or
cash transfer instead of credit cards.
• Softbank created a joint venture with 7-Eleven,
Yahoo! Japan, and Tohan to sell books and
CDs on the Web.
– Order items on Internet
– Pick them up and pay at 7-Eleven
• In this case, adding an intermediary helped gain
Internet access
Some parts of the world have environments that
are inhospitable to e-commerce.
• Denial of access to citizens
• Restriction of citizens’ access
• Addition of taxes that place it out of reach
The information provided on the Internet may be
seen as objectionable or threatening to the culture
or traditions of the country.
Culture and the law
Some countries have strong cultural requirements
that have found their way into the legal codes.
• In France all advertisements for products must
be in French. A U.S. company that ships to
France must provide pages in French.
• Quebec provincial law requires street signs,
billboards, directories, and advertising created
by Quebec businesses to be in French.
Web pages marketed at the U.S. in English
only are not allowed.
Infrastructure issues
• In many countries, the telecommunication systems
are government-owned or heavily regulated.
• Regulations in some places have restricted the
development to a point that Internet data packet
traffic cannot be handled reliably.
• Local connection costs may be much higher than
in the U.S., resulting in different behavior by
Internet users.
• The paperwork needed for international transactions
can be prohibitive. See Figure 11-2, page 347.
Ethical issues
Not adhering to common ethical standards can
result in a degradation of trust on the part of
Example: and publishers
Two areas of concern:
1. Defamation
2. Privacy rights
A defamatory statement is one that is false and injures
the reputation of another person or company.
A statement injuring the reputation of a product or
service is called product disparagement.
The line between justifiable criticism and defamation
can be hard to determine.
Privacy rights
• Privacy issues remain unsettled and are hotly
debated in many forums.
• The FTC issued a report that concluded Web
sites were developing privacy practices with
sufficient speed.
• Responses from privacy advocacy groups were
in sharp disagreement.
• Privacy assumptions vary between cultures.
Some principles
• Use the data collected to improve service.
• Do not share customer data with outsiders
without the customer’s permission.
• Tell customers what data is being collected
and what you are doing with it.
• Give customers the right to delete any of the
data collected about them.
The legal environment
Legal issues regarding e-commerce have only begun
to be addressed.
Categories of issues:
• Borders and jurisdiction
• Jurisdiction on the Internet
• Contracting and contract enforcement
• Web site content
Borders and jurisdiction
 Culture affects both laws and ethical standards.
 Territorial borders in the physical world serve as
notice that culture and laws may be changing.
 The relationship between geographic boundaries
and legal boundaries deals with four elements:
1. Power
2. Effects
3. Legitimacy
4. Notice
• Some of the defining characteristics of a sovereign
government are control over:
– A physical space
– Objects that reside in that space
– People who reside in that space
• The ability of a government to exert control over a
person or corporation is called jurisdiction.
• Laws in the physical world do not apply to people
who are not located in or own assets in the area
that created those laws.
• Laws in the physical world are based on the
relationship between physical proximity and
the effects of a person’s behavior.
• Actions have a stronger hold on things nearby.
• Example: Trademark enforcement
Two restaurants with the same name, one in
Chicago and one in France.
• The right to create laws and enforce laws derives
from the mandate of those who will be subject
to those laws.
• Some cultures allow their governments a high
degree of autonomy and authority.
Example: China and Singapore
• Other cultures place severe restrictions on the
authority of the government.
Example: Scandinavian countries
• Physical boundaries are an effective way to
announce the ending of one legal or cultural
system and the beginning of another.
• The perception that the laws and norms have
changed is needed to allow people to adjust.
• Borders provide this notice.
Jurisdiction on the Internet
• Determining who has jurisdiction can be difficult.
Example: Mexican customer dealing with a firm
from Sweden, hosted by a Canadian site, and
maintained by a programmer from India.
• A contract is an agreement between two or more
legal entities that provides for an exchange of
value (goods, services, money).
• A tort is an action taken by a legal entity that
causes harm to another legal entity.
Sufficient jurisdiction
• If a person or organization wants to enforce their
rights under contracts or seek tort damages, they
must find courts that have sufficient jurisdiction.
• A court has sufficient jurisdiction in a matter if it
has both:
– Subject matter jurisdiction
– Personal jurisdiction.
Subject-matter jurisdiction
Subject-matter jurisdiction is a court’s authority
to decide the type of dispute.
In the United States:
• Federal courts preside over federal law
(Bankruptcy, copyright, patent, federal taxes)
• State courts deal with issues governed by states
(Professional licensing, state taxes)
The rules are easy to apply for subject-matter.
Personal jurisdiction
• Personal jurisdiction is, in general, determined by
the residence of the parties in question.
• A court has jurisdiction if the defendant resides in
the state in which the court is located.
• An out-of-state person can submit to a court’s
jurisdiction by signing a contract that includes a
statement that the contract will be enforced
according to the laws of a particular state.
Long-arm statutes
• States can enact statutes that create personal
jurisdiction over nonresidents conducting
business or committing tortious acts in the
• In many cases, these laws are not clear with
respect to e-commerce.
• The more business conducted, the more likely
a court will be to use a long-arm statute.
• Courts are also assert jurisdiction when a crime
or intentional tort has occurred.
International issues
• The exercise of jurisdiction across national borders
is governed by treaties between the countries.
• In general, personal jurisdiction for foreign firms
and persons is determined by U.S. courts in the
same way as long-arm statues.
• Jurisdictional issues are complex and changing.
• Businesses should consult an attorney for advice.
Taxation and e-commerce
• A government acquires the power to tax a
business when the business establishes a
connection with the area controlled by the
government. This connection is called
• Nexus is similar to personal jurisdiction.
• Determining nexus can be difficult when a
company conducts only a few activities in
a state.
• Online companies may be subject to multiple
tax laws from day one.
Types of taxes
A online business is potentially subject to several
types of taxes:
• Income taxes: Levied by national, state, and
local governments on the net income generated
by business activities.
• Transaction taxes: Includes sales taxes, use taxes,
and customs duties.
• Property taxes: Levied on the personal property
and real estate used in the business.
Income and transaction taxes are most important.
Federal income taxes
• In the U.S., any increase in a company’s wealth
is subject to federal taxation.
• Any company whose U.S.-based Web site generates
income is subject to U.S. federal income tax.
• A Web site maintained by a U.S. company must also
pay federal income tax on income generated outside
the U.S. (The law provides a tax credit for taxes
paid to foreign countries).
State and local income taxes
• Companies that do business in multiple local
jurisdictions must apportion their income
and file tax returns in each locality that levies
an income tax.
• The number of taxing authorities is over 30,000
in the United States.
• Companies can accept orders and ship from one
state to many other states and avoid nexus by
using a contract carrier such as FedEx or UPS
to deliver goods to customers.
Sales taxes
• Businesses that establish nexus with a state must
file sales tax returns and remit the sales tax
they collect from their customers.
• If a business ships to customers in other states, it
is not required to collect sales tax from those
customers unless the business has established
nexus with the customer’s state.
• There are 7500 U.S. sales tax jurisdictions and
the rules about which items are taxable differ.
Example: In NY large marshmallows are taxable
since they are snacks but small ones are not since
they are food.
• Any contract includes an offer and an acceptance.
• An offer is a declaration of willingness to buy or
sell a product or service with enough details to
be firm, precise, and unambiguous.
• An acceptance is the expression of willingness to
take an offer, including all of its stated terms.
• When one party makes an offer that is accepted,
a contract is created.
Contracting on the Web
• A seller advertising on the Web is not making an
offer but inviting offers from potential buyers.
• When the buyer submits an order, the seller accepts
and a contract is made.
• Some examples of legally binding acceptances in
the physical world:
– Mailing a check
– Shipping goods
– Shaking hands
– Taking an item off a shelf
– Opening a wrapped package
Written contracts
• In the U.S. written contracts must be used for
goods worth more than $500 and contracts
requiring actions that cannot be completed
with a year.
• Things that constitute a signature:
– Faxes
– Typed names
– Printed names
– Digital signatures
• Any contract for sale includes implied warranties.
• Sellers can create explicit warranties.
• Statements in promotional material may create an
implied warranty.
• Sellers can use a warranty disclaimer to avoid some
implied warranties. It must be clearly displayed.
• Example: Lands’ End in Germany
Web site content
Legal issues can arise relating to the Web page
content of an e-commerce site.
These include:
• Trademark infringement
• Deceptive trade practices
• Regulation of advertising claims
• Defamation
Trademark infringement
• Web designers must be careful not to use any trademarked name, logo, or other identifying mark
without the written consent of the trademark owner.
• Example: A picture of a company (other than Pepsi)
president holding a can of Pepsi.
• Manipulating trademarked images and placing them
on a site can cause problems.
Deceptive trade practices
• Web sites that include links to other sites must be
careful not to imply a relationship with the
company if there is none.
• A firm cannot use a similar name, logo, or other
identifying characteristic that causes confusion
in the customer’s mind.
• Trademark dilution is the reduction of the distinctive
quality of a trademark by alternate uses.
FTC seeks global e-commerce laws