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E-Commerce

JAFARI LAW GROUP, INC.

E-commerce or e-business is doing business on the Internet which, perhaps surprisingly, isn't all that different from doing business on a city street. Of course, instead of a physical work site, an e-business has a website. But the business itself typically consists of taking orders and accepting payment from customers, much like a mail order business. There are some laws and regulations that pertain specifically to the Internet. For example, there are Federal Trade Commission guidelines for online advertising called Dot Com Disclosures. The Digital Millennium Copyright Act protects against the unauthorized use of software, and the Electronic in Global and National Commerce Act establishes legal standards for electronic signatures and record keeping.

You've managed to design your own Web site, round up the necessary funds and slog through the various agreements you need to sell your wares over the Internet. You are officially a cyber seller, a net-setter, an e-trader. But before you start promoting your product, don't forget about your friends at the Federal Trade Commission, because they certainly haven't forgotten about you. In fact, the FTC recently published a guide for online advertising called Dot Com Disclosures.

There are a number of factors to consider with respect to disclosures: Whether a single disclosure is sufficient or whether the disclosure needs to be posted at various points throughout the site, whether anything on the site distracts attention from the disclosure,the location of the disclosure, including where it is in relation to the advertisement (generally, you should avoid requiring customers to click on a link to read the disclaimer). The prominence of the disclosure is also important. You also need to keep in mind that competing browsers may display Web page formats differently, so the effectiveness of a particular disclosure may vary depending on the browser.

  • E-Commerce Basics

    Follow some basic points and you will be fine: If your advertisement doesn't pass muster offline, don't bother posting it online. If there's something your customers ought to know, disclose it. Make your disclosure clear and conspicuous.

  • Rules of Conduct

    The rules of conduct are, of course, only fresh until the next technological development. But the FTC has tried to make its guide as general and widely-applicable as possible. Its authority for implementing the new guidelines is derived from Section five of the Federal Trade Commission Act, which prohibits "unfair or deceptive acts or practices." This prohibition covers: Advertising claims, marketing and promotional activities general sales methods.

  • Federal Trade Commission Act

    The act isnt limited by medium, either, so the commission ensures consumer protection online as well as in traditional print, television and other communication modes. In fact, the commission has taken a number of actions over the last six years to prevent online fraud and deception.

  • Ad Content

    The contents of your advertisement must comply with three basic principles: 1) an ad must be truthful; 2) an ad must not be misleading; and 3) if an ad is likely to mislead an average consumer and that misconception influences a customers decision to buy or use the product, it is considered deceptive, so change it.

    Furthermore, advertisers must be able to substantiate their claims. If you're going to run an ad, you must have support for the claims the ad conveys. For example, if your ad claims that tests show xyz.com is a better search engine than cde.com, you should have some test results to back that up. If there is more than one reasonable interpretation a consumer can make, the ad has to substantiate each interpretation.

  • Improper Advertising

    An ad cannot be unfair. It is unfair if, according to the FTC, it causes (or is likely to cause) serious consumer injury that could have been reasonably avoided, and is not justified by the potential benefit to consumers or competition. For example, you must disclose all hidden fees. It is also considered unfair if you don't admit that you paid individuals for endorsements.

  • Proper Advertising

    Make It Clear and Conspicuous. Much of the FTCs Dot Com Disclosures guide is devoted to a discussion of what constitutes a "clear and conspicuous" disclosure. The requirements depend on the nature of the advertisement. To determine if your ad complies, the FTC recommends adopting the perspective of a reasonable consumer and then asking yourself if the disclosure is presented in a way that you would both notice and understand.

The FTC links to a number of helpful examples on its website.Use size, color and graphics to help highlight the disclosure. There is no need for subtleties here; simply indicate that you are making a disclosure or disclaimer and list those details that the consumer needs to know. Two final notes: first, the FTC emphasizes that its rules and guides using the terms “written” or “writing” apply online as well as offline. Second, the FTC cautions that certain advertisements sent by e-mail may be considered “direct mail advertisements” and thus be subject to certain prohibitions under the direct mail solicitation rules. Ultimately, if you run an ad on your Web site that a reasonable consumer will understand and that will not deceive that consumer, you should be fine. If, however, you run an ad that is even slightly deceptive or somewhat confusing, and you fail to “clearly and conspicuously” disclose, you may have a problem. Hence, whether you are just gleaning over information for now, or if you are seriously considering setting up a virtual business, be sure to keep JLG in mind. We are equipped to guide you through organizing your business, developing a plan that will work with your interests, and help you think outside the box while complying with the law, and more importantly, taking advantage of the many options available in this relatively new field. Contact us as soon as you are ready to move forward.