Practical Ecommerce

Five Legal Practices to Protect Your Online Business

The following is a list of five business practices that online business owners should follow to help protect their business from liability and minimize legal claims.

1. Maintain Clear and Accurate Communication with Customers

Clear communications will solve many customer complaint problems, but may also protect you from claims of false advertising and investigation by the U.S. Federal Trade Commission. Disclosing basic information is required by law, but must be done accurately. Therefore, you should monitor the information you are placing on your website to make sure it accurately depicts your business practices, prices, products, or whatever else you are describing to potential customers to entice them to buy your products or services. Clear communication includes “adequate” communication. Leaving out key details about what you are describing on your website is also considered misleading. The FTC provides guidelines on its website regarding advertising and marketing on the Internet and gives good examples of what types of statements might be misleading to customers. Find more information at the FTC’s website.

2. Maintain Information Security

There is probably no quicker way to lose customers than to allow their personal information to be unsecured. Laws and customers are placing more and more emphasis on personal security, and protection of their financial information is required. Accurate and adequate disclosure of security practices to consumers is a vital aspect of good on-line business practices. State and federal laws require protection of financial information and social security numbers. Also, several state laws require notification to consumers if there is a security breach that puts their personal information at risk for identity theft or other fraud. Constraint monitoring of your security practices is essential. Visit the FTC’s site for additional security and privacy requirements.

3. Special Protection for Children

There must be special protection afforded for child consumers, who are protected by state and federal laws. Your website must adopt certain procedures when dealing with these special consumers. If any information about children under 13 years old is collected by a website, the website must obtain parental permission before collecting such information. Under the Children’s Online Privacy Protection Act (COPPA), sites have to post privacy policies that give details about what kind of information they collect from children, and what they might do with it. If a site plans to share a child’s information with another company, the privacy policy must say what the other company will do with such information. Also, links to the policies should be in places where they’re easy to spot. Read more here about child protection requirements.

4. Comply with Industry Standards and Practices

Industry standards can be used to argue that a business should have acted in a certain way. Where terms and conditions or other contractual terms do not spell out how your business treats certain transactions differently, your business may be held to such industry standards. Therefore, you should be aware of what the industry standards are for your business and follow such standards where you do not give notice to the customer. Guidance for ecommerce standards can be found through resources such as the Better Business Bureau-Online Code of Online Business Practices and other online resources.

5. Insurance

Insurance is becoming increasingly available for online businesses. Ecommerce businesses should investigate what types of insurance are available and whether the cost of such insurance is worth the protection that such insurance might afford. It is important to carefully review provisions that cover the types of litigation defense covered under the insurance. Because of uncertainty in selling items across many jurisdictions, insurance may help reduce some of the risks of doing business online, and therefore, all online businesses should at least check into what insurance may be available for their business.

Jeff Jacobson, Jd, Llm

Jeff Jacobson, Jd, Llm

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