Ecommerce Chap 10

1© Prentice Hall, 2000

Chapter 10Public Policy:

From Legal Issues to Privacy

© Prentice Hall, 2000 2

Learning Objectives

List and describe the major legal issues related to electronic commerce

Understand the difficulties of protecting privacy and describe the measures taken by companies and individuals to protect it

Describe the intellectual property issues in EC and the measures provided for its protection

Describe some of the ethical issues in EC and the measures taken by organizations to improve ethics


Learning Objectives (cont.)

Understand the conflict between Internet indecency and free speech, and the attempts to resolve the conflict

Describe the issues involved in imposing sales tax on the Internet

Discuss the controls over exporting encryption software and the issues of government policies

Differentiate between contracts online and offline

Describe the measures available to protect buyers and sellers on the Internet


Legal and Ethical Issues: an Overview

PrivacyIntellectual Property

Difficult to protect since it is easy and inexpensive to copy and disseminate digitized information

Free Speech Internet provides the largest opportunity for free speech

Taxation Illegal to impose new sales taxes on Internet business at the

present time

Consumer Protection Many legal issues are related to electronic trade


Ethical Issues

What is considered to be right and wrong?

What is unethical is not necessarily illegal.

Whether these actions are considered unethical depends on the organization, country, and the specific circumstances surrounding the scenarios.


Ethical Issues (cont.)

Code of Ethics Many companies and professional

organizations develop their own codes of ethics

A collection of principles intended as a guide for its members

A guide for members of a company or an association


PrivacyCollection, storage,

and dissemination of information about individuals

AccuracyAuthenticity, fidelity, and

accuracy of information collected and processed

PropertyOwnership and value of

information and intellectual property

AccessibilityRight to access information

and payment of fees to access it

Organize IT Ethical Issues into a Framework


Protecting Privacy

Privacy The right to be left alone and the right to be

free of unreasonable personal intrusions

Information Privacy The “claim of individuals, groups, or

institutions to determine for themselves when, and to what extent, information about them is communicated to others”


Protecting Privacy (cont.)

Two rules The right of privacy is not absolute.

Privacy must be balanced against the needs of society.

The public’s right to know is superior to the individual’s right of privacy.


How is Private Information Collected?

Reading your newsgroups’ postings

Finding you in the Internet Directory Making your browser record information about you Recording what your browsers say about you

Reading your e-mail


Web-Site Self-Registration

Registration Questionnairestype in private information in order to receive a

password to participate in a lottery, to receive information, or to play a game

Uses of the Private Informationcollected for planning the businessmay be sold to a third partyused in an inappropriate manner


40% of all users have falsified information when registering online

66% of all U.S. and European respondents don’t register as they don’t know how the information is going to be used

63% don’t feel that registration is worthwhile considering the content of the sites

58% don’t trust the sites collecting this information from them

From the Eighth User Survey by GVU (1988)


Cookies

Piece of information that allows a Web site to record one’s comings and goingsWeb sites can ‘remember’ information about

users and respond to their preferences on a particular site, process is transparent to users

Web sites can maintain information on a particular user across HTTP connections


Reasons for using cookiesto personalize informationto improve online sales/servicesto simplify tracking of popular links or demographicsto keep sites fresh and relevant to the user’s intereststo enable subscribers to log in without having to enter a password every

visitto keep track of a customer’s search preferencespersonal profiles created are more accurate than self-registration

Solutions to cookiesusers can delete cookie files stored in their computeruse of anti-cookie software (e.g. Cookie Cutter and Anonymous Cookie)

CookCookies (cont.)


Privacy Protection

5 basic principlesNotice/Awareness— Customers must be given notice and be able to

make informed decisions.Choice/Consent— Customers must be made aware of their options

as to how their personal information may be used. Consent may be granted through ‘opt-Out’ clauses requiring steps.

Access/Participation— Consumers must be able to access their personal information and challenge the validity of the data.

Integrity/security— Consumers must be assured that the data is secure and accurate.

Enforcement/Redress— There must always exist a method of enforcement and remedy. The alternatives are government intervention, legislation for private remedies, or self-regulation.


Protecting Your Privacy

Think before you give out personal information on a site

Track the use of your name and information Keep your newsgroups’ posts out of archives Use the Anonymizer when browsing Live without cookies Use anonymous remailers Use encryption Reroute your mail away form your office Ask your ISP or employer about a privacy policy


Legislation

The Consumer Internet Privacy Act

The Federal Internet Privacy Protection Act

The Communications Privacy and Consumer Empowerment Act

The Data Privacy Act


Personal Information in Databases Databases of banks and financial institutions; cable

TV; telephone ; employers; schools; insurance companies; and online vendors

ConcernsUnder what circumstances will personal data be released?Do you know where the records are?How are the data used?

Electronic Surveillance - Monitoring Computer Users

Tens of millions of computer users are monitored, many without their knowledge

Employees have very limited protection against employers’ surveillance


Privacy Policy Basics

Data Collection Data Accuracy Data Confidentiality Data should be collected on individuals only to accomplish a legitimate business objective. Data should be adequate, relevant, and not excessive in relation to the business objective. Individuals must give their consent before data pertaining to them can be gathered.

Sensitive data gathered on individuals should be verified before it is entered into the database. Data should be accurate and, where and when necessary, kept current. The file should be made available so the individual can ensure that the data are correct. If there is disagreement about the accuracy of the data, the individual’s version should be noted and included with any disclosure of the file.

Computer security procedures should be implemented to provide reasonable assurance against unauthorized disclosure of data. Third parties should not be given access to data without the individual’s knowledge or permission, except as required by law. Disclosures of data, other than the most routine, should be noted and maintained for as long as the data are maintained. Data should not be disclosed for reasons incompatible with the business objective for which they are collected.


Protecting Intellectual Property

Copyright A statutory grant that provides the creators of

intellectual property with ownership of it for 28 years

Trade Secret Intellectual work such as a business plan, which is a

company secret and is not based on public information

Patent A document that grants the holder exclusive rights on

an invention for 17 years


Copyright Protection Techniques

Digital watermarksembedding of invisible markscan be represented by bits in digital

contenthidden in the source data, becoming

inseparable from such data


Legal Perspectives

Electronic Theft (NET) Actimposed criminal liability for individuals who reproduce or

distribute copies of copyrighted works even if no commercial advantage or financial gain exists

Digital Copyright Clarification and Technology Education Actlimits the scope of digital copyright infringement by allowing

distance learning exemptions

Online Copyright Liability Limitation Actseeks to protect Internet access providers from liability for

direct and vicarious liability under specific circumstances where they have no control or knowledge of infringement


Legal Perspectives (cont.) Digital Millennium Copyright Act

reasserts copyright in cyberspacemakes illegal most attempts to defeat anti-copying technologyrequires the National Telecommunications and Information

Administration to review the effect the bill would have on the free flow of information and makes recommendations for any changes two years after it is signed into law

lets companies and common citizens circumvent anti-copying technology when necessary to make software or hardware compatible with other products, to conduct encryption research or to keep personal information from being spread via Internet “cookies” or other copy-protection tools

forbids excessive copying of databases, even when those databases contain information already in the public domain


International Aspects of Intellectual Property

The World Intellectual Property Organization more than 60 member countries to come up with an

international treaty part of the agreement is called the ‘database treaty’ its aim is to protect the investment of firms that

collect and arrange information


Domain Names

Two controversies Whether top-level domain names

(similar to com, org and gov) should be added

The use of trademark names by companies for domain names that belong to other companies


Domain Names (cont.)

Network Solutions Inc. Contracted by the government to assign domain

addresses

Trade Name Disputes Companies are using trade names of other

companies as their domain address to help attract traffic to their Web site

Increase Top Level Names Idea is that an adult only top-level name will be created

to prevent pornographic material getting into the hands of children


Defining Freedom of Speech

The Bill of Rights First Amendment to the Constitution of the U.S. of America reads

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”


The united nations Universal Declaration of Human Rights in 1948 addresses the right of freedom of expression

“Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive, and impart information and ideas through any media and regardless of frontiers.”

Defining Freedom of Speech (cont.)


The Debate about Free Speechon the Internet

Free speech debate “Most citizens are implacably opposed to censorship in

any form — except censorship of whatever they personally happen to find offensive.”

What the boundaries are, and how they should be enforced

Governments protective of their role in society, parents

concerned about exposing their children to inappropriate Web

pages and chat rooms, and federal agencies attempting to

deal with illegal actions

Citizen action groups desiring to protect every ounce of their

freedom to speak, individuals concerned about their right to

information on the Internet, and organizations seeking to empower

the citizens of the earth


The Debate about Free Speechon the Internet (cont.)

Provisions in law for 2 cases that limit free speechobscene materialcompelling government interest

“Indecency” “any comment, request, suggestion, proposal, image, or other communication that, in context, depicts or describes, in terms patently offensive as measured by contemporary

community standards, sexual or excretory activities or organs”


Protecting Children

3 approaches (regarding the protection of children from inappropriate material on the Internet) No information should be held back and parents

should be responsible for monitoring their own children

The government is the only one who can truly protect children from this material

To hold the Internet providers responsible for all the material and information they provide


Protecting Children (cont.)

Parents Governing Their Own Children

Government Protecting the Children

Responsibility for the Internet Providers

Forcing Internet Providers to be Accountable


Legal Perspectives in the USA

Child Online Protection Act

Internet Tax Freedom Act

Family Friendly Internet Access Act

Internet Protection Act

Internet School Filtering Act


Controlling Spamming

What is spamming, why is it bad?

Spamming “the practice of indiscriminate distribution of messages (for

example junk mail) without permission of the receiver and without consideration for the messages’ appropriateness”

Spamming’s negative impacts Spam comprised 30% of all mail sent on America Online

slowing the Internet in general shutting ISPs down completely now less than 10%


Legislation, Legal

The Electronic Mailbox Protection Act

The Unsolicited Commercial Electronic Mail Act

The Netizens Protection Act

The Telephone Consumer Protection Act

Controlling Spamming (cont.)


Controlling Spamming (cont.)

How to cut spamming

Tell users not to validate their addresses by answering spam requests for replies if they want to be taken off mailing lists

Disable the relay feature on SMTP (mail) servers so mail cannot be bounced off the server

Delete spam and forget it— it’s a fact of life and not worth wasting time over

Use software packages, e.g. www.getlost.com and www.junkbusters.com


Taxation PoliciesThe Taxation Exemption Debate

Internet Tax Freedom Act (8 Oct,98)promotes electronic commerce through tax incentives by

barring any new state or local sales taxes on Internet transactions during the next three years

Applying existing law to new mediums of exchange is far more difficult than ever imagined. The global nature of business today

suggests that cyberspace be considered a distinct tax zone unto

itself with unique rules and considerations befitting the stature

of the environment.

Electronic commerce industries

The Internet businesses must pay its fair share of the bill for the nation’s social and physical infrastructure. They feel

that the Internet industries are not pulling their own weight. These companies are screaming that the same situation exists in the mail order business and that there are sufficient parallels to warrant similar

legal considerations.

Non-electronic commerce industries


Taxation Policies (cont.)Proposed Taxation Solutions in the USA

The Internal Revenue Service might “come to the rescue” with a single and

simplified national sales tax.

This will reduce 30,000 different tax codes to ‘no

more than 50”.

Net sales would be taxed at the same rate as mail order or

Main Street transactions.

While states could set their one rate, each sale could be

taxed only once.38


Encryption Policy

The 128-BIT Encryption Debate Export 128-bit encryption is 3.09X10 to the 26th

power times more difficult to decipher than the preceding legally exportable technology.

For the past 20 years there was a limitation

on exported encryption devices of 56 bit codes

Recent legislation allows 128 bit in

specific circumstances thus paving the way for

the Compaq permit

Secure e-commerce Government’s legal requirements


Encryption Policy (cont.)

Data Encryption Standard (DES) A published federal encryption standard created to

protect unclassified computer data and communications Law Enforcement’s Plea

Cryptographers would follow an audit trail to ensure that keys haven’t been released improperly, however, law enforcement does not trust that process

First Amendment RightTechnology can encrypt so thoroughly, that every computer on

earth, working in tandem, would take trillions of years to decode the encryption

Business ViewEFF (Electronic Frontier Foundation) believes that

software, networked communications and cryptography industries are suffering


Other Legal Issues What are the rules of electronic contracting, and whose jurisdiction

prevails when buyers, brokers, and sellers are in different states and/or countries?

How can gambling be controlled on the Internet? Gambling is legal in Nevada and other states. How can the winner’s tax be collected?

When are electronic documents admissible evidence in the courts of law? What do you do if they are not?

Time and place can carry different dates for the buyers and sellers when they are across the ocean.

Is a digital signature legal? The use of multiple networks and trading partners makes the

documentation of responsibility difficult. How is such a problem overcome?


Electronic Contracts

Uniform Electronic Transactions Act Provides the means to effectuate transactions

accomplished through an electronic medium

Uniform Commercial Code (UCC) Provides a government code that supports

existing and future electronic technologies in the exchange of goods or of services related to exchange of goods


Electronic Contracts (cont.)

Shrink-wrap agreements (or box top licenses) The user is bound to the license by opening the package This has been a point of contention for some time The court felt that more information would provide more

benefit to the consumer given the limited space available on the exterior of the package

Click-wrap contracts The software vendor offers to sell or license the use of the

software according to the terms accompanying the software The buyer agrees to be bound by the terms based on certain

conduct


Fraud on the Internet

Internet Stocks Fraud SEC brought charges against 44 companies and individuals who illegally

promoted stocks on computer bulletin boards, online newsletters and investment Web sites

Other Financial Fraud Selling bogus investments, phantom business opportunities, and other

fraud schemes

Other Fraud in EC Customers may

receive poor quality products and servicesnot get products in timebe asked to pay for things they assume will be paid for by sellers


Federal Trade Commission (FTC) Consumer Alerts

Business opportunitiesBulk mail solicitors Investment opportunitiesWork-at-home schemesHealth and diet schemes Effortless incomeGuaranteed loans or credit,

on easy terms

Free goodsChain lettersCable descrambler kitsCredit repair Vacation prize

promotions

The “Dirty Dozen”


Buyer Protection

Tips for safe electronic shopping Look for reliable brand names at sites. Search any unfamiliar site for address and phone

and fax number. Call up and quiz a person about the sellers.

Check the seller with the local Chamber of Commerce, Better Business Bureau, or TRUSTe as described later.

Investigate how secure the seller’s site is and how well it is organized.


Examine the money-back guarantees, warranties, and service agreements.

Compare prices to those in regular stores; too-low prices may be too good to be true.

Ask friends what they know. Find testimonials and endorsements.

Find out what you can do in case of a dispute. Consult the National Fraud Information Center. Check www.consumerworld.org Do not forget the you have shopper’s rights.

Buyer Protection


Third Party Service

Public organizations and private companies attempt to protect consumers TRUSTe’s “Trustmark”

non-profit groupto build user’s trust and confidence in the Internet by

promoting the polices of disclosure and informed consent

BBB (Better Business Bureau)private non-profit organizations supported largely by

membershipto provide reports on business firms that are helpful to

consumers before making a purchase


Authentication

If authentication can be solved ….. students will be able to take exams online fraud of recipients of government entitlements and other

payments will be reduced to a bare minimum buyers will be assured who the sellers are and sellers will

know who the buyers are with a very high degree of confidence

arrangements will be made so that only authorized people in companies can place purchasing orders

interviews for employment, possible marriage, and other matching applications will be accurate

trust in your partners and in EC in general will increase significantly


Biometrics Controls

Photo of faceFingerprintsHand geometryBlood vessel pattern in the retina of a

person’s eyeVoiceSignatureKeystroke dynamics

Cathy .


Seller Protection

Sellers must be protected against: Use of their names by others Use of their unique words and phrases, names, and slogans

and their web addresses Dealing with customers that deny that they placed an order Several other potential legal issues are related to sellers’

protection Customers downloading copyrighted software and/or

knowledge and selling it to others Not being properly paid for products and services provided


Managerial Issues

Multinational corporations face different cultures in the different countries in which they are doing business

Issues of privacy, ethics, and so on may seem to be tangential to running a business, but ignoring them may hinder the operation of many organizations

The impact of electronic commerce and the Internet can be so strong that the entire manner in which companies do business will be changed, with significant impacts on procedures, people, organizational structure, management, and business processes

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