Avoiding The Top 10 Legal Difficulties Facing Home-based e-Commerce Ventures

With the Internet being everywhere, it's no surprise that it penetrates every aspect of a home-based e-commerce venture, along with Internet law, which has developed in lock step with the Internet.

And as more people chagrined by the fickle economy turn to their own residential Internet connections as conduits for electronic business, these entrepreneurs find themselves exposed to legal difficulties previously reserved for large traditional businesses.

To succeed, this new generation ' and older commercial operations that have adapted to the Information Age ' must know about Internet law, as do counsel who advise them.

Following are the top 10 legal difficulties home-based e-entrepreneurs are likely to encounter, as well as an idea of how to eliminate or minimize each difficulty discussed. These legal difficulties include:

• New, and additional, legal liabilities imposed by the use of credit-card payments;
• Privacy-violation complaints;
• Legal requirements to accommodate disabled Internet users;
• Additional liability for selling to children;
• Increased exposure to lawsuits in a state other than where the business is located;
• Novel legal difficulties for failure to prevent e-viruses;
• Using e-mail to advertise; and
• e-Infringement.

Home-based e-commerce enterprises also face new legal liabilities for taxes and for use of technical protections of their e-assets.

Anxious? Don't be ' and clients shouldn't be, either, with proper counsel.

1. Credit-Card Law Favors e-Consumers

Owners of home-based e-commerce ventures need to know that most jurisdictions afford more protection to customers who use their credit card on the Internet than to customers who use their credit cards in person. This enhanced online protection increases legal risks that home e-ventures must endure vs. those a traditional home-based business must. These risks include increased legal liability for credit-card fraud, an increase in legal liability associated with customer satisfaction and an increased legal liability to comply with federal consumer-protection laws. While credit-card laws vary from state to state, it holds true that most states make vendors more liable for the prevention of credit-card fraud when the Internet is used than when the cardholder is present.

Using a credit card as part of an Internet transaction will afford consumers the same rights and protections as “cardholder not present” transactions. Cardholder-not-present transactions include such actions as mail-order and telephone credit-card payments. The same special laws that protect consumers who shop by phone or mail also apply to e-shopping, including the Fair Credit Billing Act.

Home-based e-commerce should use the Internet to give clients notice of refund and return policies before accepting an order. In the event of transaction discrepancies, home-based e-merchants may rely on e-mail exchanges with customers, or notices to customers of refund and return policies posted on Internet home pages.

2. Privacy Liability

Home-based e-commerce entrepreneurs are generally aware that Internet privacy laws are important because the Federal Trade Commission (FTC) and state attorneys general regularly investigate Internet privacy matters. Home-venture owners must keep in mind that it is the connection between their Internet privacy policies and their Internet privacy actions that should be the basis of their Internet privacy-liability concerns. No state or federal law exists upon which Internet privacy-violation claims can be universally based. Rather, Internet legal-privacy difficulties arise when a home-based e-commerce venture's privacy notices say one thing and the staff does something else.

Owners of home-based e-commerce venues also need to know that inaccurate privacy agreements are deceptive trade practices, and that Internet law requires consistent privacy notices and privacy-operating procedures.

Home-based e-commerce ventures, then, should create and enforce an employee Internet privacy policy. Information a business obtains from e-visitors is valuable, but to avoid being sued for a violation of state privacy laws or invasion of privacy, businesses should have a clearly posted Internet privacy policy. Such a policy should disclose exactly what a consumer's personal information will be used for, including whether the business resells or distributes the information. Once a business creates and posts its privacy policy, that policy should be internally monitored and enforced. The FTC has warned businesses that they risk prosecution for deceptive trade practices if they violate their own posted policy on privacy. Consumers might also sue businesses under state laws. For another layer of security, home-based e-commerce ventures should consider joining an organization that audits and polices online businesses' privacy policies.

3. Internet Sites Must Accommodate The Disabled

A consideration that might escape the home-office businessperson is that people with a variety of disabilities use the Internet, and that these consumers or business customers have as much a right to independent Internet access as to shopping-center access. The Internet is a public accommodation. Recently, America Online (AOL) settled a lawsuit with the National Federation of the Blind in which AOL agreed to make its Web site accessible to blind people.

People with limited or no vision use a device the size of a PC printer called a screen reader that converts Internet screens into Braille or reads the screen out loud, if the Internet screens are screen-reader enabled. Along the lines of protecting the rights of the disabled, The Americans With Disabilities Act (ADA) applies to the Internet. Blind people need to know that Web sites must make themselves screen-reader enabled. So, home-based e-commerce ventures must also design their Internet sites to be screen-readable enabled at a minimum, or they will face ADA legal difficulties.

The ADA may require Internet service providers and e-commerce sites to implement software that produces text-only Internet sites. Some sites will not need to be changed. For example, Amazon.com is accessible to visually impaired people because it has a text-only version of each Web page.

The ADA applies to a spectrum of disabilities, including color blindness, deafness, epilepsy, learning disabilities and paralysis. Adjusting access to the Internet to accommodate all these people will affect the way Internet content is prepared and presented. Multiple means of access may be required to accommodate a color-blind person's concern that color is used to communicate information, a deaf person's desire for captioned audio content and the elimination of flashing imagery to accommodate epileptics. While it's nearly impossible to be completely compliant with all ADA requirements, a combination of substantial compliance with a notice offering help to all who require additional assistance will bring substantial compliance, which is generally all that is necessary when the ADA is applied to e-commerce.

4. Selling To Children Is Strictly Limited

Home-based e-commerce venture owners and operators are prohibited from contacting children of a certain legally defined age more than one time. Strict laws were passed to prevent e-selling to children under the age of 13.

The Child On Line Privacy Protection Act (COPPA) generally forbids business e-selling to children unless the businesses have verifiable parental consent. So, the Internet sites of home-based e-commerce ventures' terms of use must include a prohibition against users under the age of 13.

5. Out-Of-State Lawsuits

Internet wrongs are actionable in local courts. Customers will be able to sue home-based e-commerce ventures in the customer's hometown courts, unless the venture's Internet site's terms of use include an agreement to limit suits. Constitutional notions of substantial justice and fair play govern Internet transactions. Thus, site terms of use should include an agreement to limit suits to the state in which the home-based e-commerce venture is physically present.

6. Legal Duty Not To Spread e-Viruses

The Computer Fraud and Abuse Act, and many similar state statutes, include an affirmative duty to refrain from sending Internet viruses and, it can be argued, require some preventive measures. Software that detects and stops e-viruses may be required to prevent being sued for negligence.

7. Spam is Lawful

The CAN-SPAM Act ' Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ' went into effect January 1, and has important implications for anyone engaged in sending unsolicited e-mails. Contrary to public opinion, the Act does not make spam unlawful; it attempts to regulate it.

Following three rules will enable home-based e-businesses to use spam to advertise their products. The rules are:

• Labeling. Unsolicited e-mails must be clearly identified as solicitation or advertisements for products and services.
• Opt-out option. Senders must provide easily accessible, legitimate means for recipients to opt-out of receiving future messages.
• Revelation of sender's addresses. Unsolicited e-mails must contain legitimate return e-mail addresses, as well as the sender's postal address.

8. e-Infringement Concerns

Any time someone acting on behalf of a home-based e-commerce venture uploads or downloads information to or from the Internet, a possible copyright violation can occur, although the doctrines of fair use and first sale are often applicable to ameliorate the negative legal implications of such transactions. But the simple (and low-cost) act of registering an e-commerce Internet business with the United States Copyright Office, and posting a notice of intended compliance with the Digital Millennium Copyright Act in the Internet site's terms-of-use agreement will provide the home-based e-mercantile entity immunity to copyright-infringement lawsuits.

9. Taxes On e-Transactions Are Due

Home-based e-commerce venture proprietors and operators must know how and where to apply Internet transaction taxes. Most Internet transactions should be treated like software transactions for e-tax law purposes. Generally speaking, these e-businesses must pay taxes if they have:

• People in a jurisdiction who can be arrested;
• Property in a jurisdiction that can be seized; and
• Stores in a jurisdiction that can be padlocked shut, and are the places where tax must be paid.

10. Law Favors Technical Rather Than Legal Protection at Times

Alex, my 10-year-old, had a disagreement with his mother. He went upstairs to his computer, and my 8-year-old, Emily, came down singing, “I am your password, I am your password.” My wife, a manager for a Fortune 30 firm, whose home office exists because of the Internet, thought nothing of it, until she found herself locked out of her computer. Alex had used the Internet to circumvent security and changed her password to Emily (hence Emily's pithy little coming-down-the-stairs song).

Pervasive home-office Internet use means that residence-based e-commerce ventures must know that if my son were seven years older, he'd be guilty of violating the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, and the Identity Theft Act. But home-based e-business operators take note: As a parent, I am not liable for his actions. Because of the parental-liability doctrine, home-based e-ventures are simply not liable for their children's bad acts on the Internet, unless they had actual notice of or aided the bad acts – or both. Because children can cause harm and can't pay for the harm they cause, technical rather than legal protections must be employed for your public Internet site.

With the Internet being everywhere, it's no surprise that it penetrates every aspect of a home-based e-commerce venture, along with Internet law, which has developed in lock step with the Internet.

And as more people chagrined by the fickle economy turn to their own residential Internet connections as conduits for electronic business, these entrepreneurs find themselves exposed to legal difficulties previously reserved for large traditional businesses.

To succeed, this new generation ' and older commercial operations that have adapted to the Information Age ' must know about Internet law, as do counsel who advise them.

Following are the top 10 legal difficulties home-based e-entrepreneurs are likely to encounter, as well as an idea of how to eliminate or minimize each difficulty discussed. These legal difficulties include:

• New, and additional, legal liabilities imposed by the use of credit-card payments;
• Privacy-violation complaints;
• Legal requirements to accommodate disabled Internet users;
• Additional liability for selling to children;
• Increased exposure to lawsuits in a state other than where the business is located;
• Novel legal difficulties for failure to prevent e-viruses;
• Using e-mail to advertise; and
• e-Infringement.

Home-based e-commerce enterprises also face new legal liabilities for taxes and for use of technical protections of their e-assets.

Anxious? Don't be ' and clients shouldn't be, either, with proper counsel.

1. Credit-Card Law Favors e-Consumers

Owners of home-based e-commerce ventures need to know that most jurisdictions afford more protection to customers who use their credit card on the Internet than to customers who use their credit cards in person. This enhanced online protection increases legal risks that home e-ventures must endure vs. those a traditional home-based business must. These risks include increased legal liability for credit-card fraud, an increase in legal liability associated with customer satisfaction and an increased legal liability to comply with federal consumer-protection laws. While credit-card laws vary from state to state, it holds true that most states make vendors more liable for the prevention of credit-card fraud when the Internet is used than when the cardholder is present.

Using a credit card as part of an Internet transaction will afford consumers the same rights and protections as “cardholder not present” transactions. Cardholder-not-present transactions include such actions as mail-order and telephone credit-card payments. The same special laws that protect consumers who shop by phone or mail also apply to e-shopping, including the Fair Credit Billing Act.

Home-based e-commerce should use the Internet to give clients notice of refund and return policies before accepting an order. In the event of transaction discrepancies, home-based e-merchants may rely on e-mail exchanges with customers, or notices to customers of refund and return policies posted on Internet home pages.

2. Privacy Liability

Home-based e-commerce entrepreneurs are generally aware that Internet privacy laws are important because the Federal Trade Commission (FTC) and state attorneys general regularly investigate Internet privacy matters. Home-venture owners must keep in mind that it is the connection between their Internet privacy policies and their Internet privacy actions that should be the basis of their Internet privacy-liability concerns. No state or federal law exists upon which Internet privacy-violation claims can be universally based. Rather, Internet legal-privacy difficulties arise when a home-based e-commerce venture's privacy notices say one thing and the staff does something else.

Owners of home-based e-commerce venues also need to know that inaccurate privacy agreements are deceptive trade practices, and that Internet law requires consistent privacy notices and privacy-operating procedures.

Home-based e-commerce ventures, then, should create and enforce an employee Internet privacy policy. Information a business obtains from e-visitors is valuable, but to avoid being sued for a violation of state privacy laws or invasion of privacy, businesses should have a clearly posted Internet privacy policy. Such a policy should disclose exactly what a consumer's personal information will be used for, including whether the business resells or distributes the information. Once a business creates and posts its privacy policy, that policy should be internally monitored and enforced. The FTC has warned businesses that they risk prosecution for deceptive trade practices if they violate their own posted policy on privacy. Consumers might also sue businesses under state laws. For another layer of security, home-based e-commerce ventures should consider joining an organization that audits and polices online businesses' privacy policies.

3. Internet Sites Must Accommodate The Disabled

A consideration that might escape the home-office businessperson is that people with a variety of disabilities use the Internet, and that these consumers or business customers have as much a right to independent Internet access as to shopping-center access. The Internet is a public accommodation. Recently, America Online (AOL) settled a lawsuit with the National Federation of the Blind in which AOL agreed to make its Web site accessible to blind people.

People with limited or no vision use a device the size of a PC printer called a screen reader that converts Internet screens into Braille or reads the screen out loud, if the Internet screens are screen-reader enabled. Along the lines of protecting the rights of the disabled, The Americans With Disabilities Act (ADA) applies to the Internet. Blind people need to know that Web sites must make themselves screen-reader enabled. So, home-based e-commerce ventures must also design their Internet sites to be screen-readable enabled at a minimum, or they will face ADA legal difficulties.

The ADA may require Internet service providers and e-commerce sites to implement software that produces text-only Internet sites. Some sites will not need to be changed. For example, Amazon.com is accessible to visually impaired people because it has a text-only version of each Web page.

The ADA applies to a spectrum of disabilities, including color blindness, deafness, epilepsy, learning disabilities and paralysis. Adjusting access to the Internet to accommodate all these people will affect the way Internet content is prepared and presented. Multiple means of access may be required to accommodate a color-blind person's concern that color is used to communicate information, a deaf person's desire for captioned audio content and the elimination of flashing imagery to accommodate epileptics. While it's nearly impossible to be completely compliant with all ADA requirements, a combination of substantial compliance with a notice offering help to all who require additional assistance will bring substantial compliance, which is generally all that is necessary when the ADA is applied to e-commerce.

4. Selling To Children Is Strictly Limited

Home-based e-commerce venture owners and operators are prohibited from contacting children of a certain legally defined age more than one time. Strict laws were passed to prevent e-selling to children under the age of 13.

The Child On Line Privacy Protection Act (COPPA) generally forbids business e-selling to children unless the businesses have verifiable parental consent. So, the Internet sites of home-based e-commerce ventures' terms of use must include a prohibition against users under the age of 13.

5. Out-Of-State Lawsuits

Internet wrongs are actionable in local courts. Customers will be able to sue home-based e-commerce ventures in the customer's hometown courts, unless the venture's Internet site's terms of use include an agreement to limit suits. Constitutional notions of substantial justice and fair play govern Internet transactions. Thus, site terms of use should include an agreement to limit suits to the state in which the home-based e-commerce venture is physically present.

6. Legal Duty Not To Spread e-Viruses

The Computer Fraud and Abuse Act, and many similar state statutes, include an affirmative duty to refrain from sending Internet viruses and, it can be argued, require some preventive measures. Software that detects and stops e-viruses may be required to prevent being sued for negligence.

7. Spam is Lawful

The CAN-SPAM Act ' Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 ' went into effect January 1, and has important implications for anyone engaged in sending unsolicited e-mails. Contrary to public opinion, the Act does not make spam unlawful; it attempts to regulate it.

Following three rules will enable home-based e-businesses to use spam to advertise their products. The rules are:

• Labeling. Unsolicited e-mails must be clearly identified as solicitation or advertisements for products and services.
• Opt-out option. Senders must provide easily accessible, legitimate means for recipients to opt-out of receiving future messages.
• Revelation of sender's addresses. Unsolicited e-mails must contain legitimate return e-mail addresses, as well as the sender's postal address.

8. e-Infringement Concerns

Any time someone acting on behalf of a home-based e-commerce venture uploads or downloads information to or from the Internet, a possible copyright violation can occur, although the doctrines of fair use and first sale are often applicable to ameliorate the negative legal implications of such transactions. But the simple (and low-cost) act of registering an e-commerce Internet business with the United States Copyright Office, and posting a notice of intended compliance with the Digital Millennium Copyright Act in the Internet site's terms-of-use agreement will provide the home-based e-mercantile entity immunity to copyright-infringement lawsuits.

9. Taxes On e-Transactions Are Due

Home-based e-commerce venture proprietors and operators must know how and where to apply Internet transaction taxes. Most Internet transactions should be treated like software transactions for e-tax law purposes. Generally speaking, these e-businesses must pay taxes if they have:

• People in a jurisdiction who can be arrested;
• Property in a jurisdiction that can be seized; and
• Stores in a jurisdiction that can be padlocked shut, and are the places where tax must be paid.

10. Law Favors Technical Rather Than Legal Protection at Times

Alex, my 10-year-old, had a disagreement with his mother. He went upstairs to his computer, and my 8-year-old, Emily, came down singing, “I am your password, I am your password.” My wife, a manager for a Fortune 30 firm, whose home office exists because of the Internet, thought nothing of it, until she found herself locked out of her computer. Alex had used the Internet to circumvent security and changed her password to Emily (hence Emily's pithy little coming-down-the-stairs song).

Pervasive home-office Internet use means that residence-based e-commerce ventures must know that if my son were seven years older, he'd be guilty of violating the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, and the Identity Theft Act. But home-based e-business operators take note: As a parent, I am not liable for his actions. Because of the parental-liability doctrine, home-based e-ventures are simply not liable for their children's bad acts on the Internet, unless they had actual notice of or aided the bad acts – or both. Because children can cause harm and can't pay for the harm they cause, technical rather than legal protections must be employed for your public Internet site.