Legal and Privacy Issues

Outline
Privacy Other Legal Areas of Concern Online Fraud Internet Taxation Accounting Issues Online Advertising Marketing Branding

Legal Issues: Privacy on the Internet

Right to Privacy

Individual privacy vs. meeting consumer needs Financial Services Modernization Act of 1999 establishes a set of regulations concerning the mgmt of consumer info
July 1999 NAI represents 90% of Web advertisers Established to determine the proper protocols for managing a Web users personal info on the Internet
Deitel, et al., 2001

Network Advertising Initiative (NAI)

Legal Issues: Privacy on the Internet

Employer and Employee

Businesses monitoring employee activities on corporate and communications equipment Keystroke software is used to monitor productivity and the abuse of company equipment Issue of company time and company equipment vs. employees right of expression Notice of Electronic Monitoring Act proposed in 2000 requires employers to notify employees of telephone, email, and Internet surveillance
Deitel, et al., 2001; Oz, 2002

Legal Issues: Privacy on the Internet

Cookies

bits of info collected and stored by a Web browser when a person navigates the Web. aggregating data about customers by tracking their clickstream.

Online Profiling

Allen, et al., 2001

Legal Issues: Privacy on the Internet

Protecting the business

Privacy policy on the Web site Platform for Privacy Preferences (P3P) industry standard to allow Web users to gain more control over the personal info being collected on the Web and to make privacy policies easier to find and understand; determine if Web site privacy policies match users privacy needs
Allen, et al., 2001; Deitel, et al., 2001

Legal Issues: Privacy on the Internet

Consumer Privacy Act of 2000

Must give notice, obtain consent, etc., when collecting personally identifiable information Display seal on website when comply with the Principles for Fair Personal Information Practice

Online Privacy and Disclosure Act of 2000

Allen, et al., 2001

Legal Issues: Privacy on the Internet

Privacy of Consumer Financial Information Act (GLB Act)

U.S. financial institutions must provide its customers with a notice of its privacy policies and practices. It prohibits a financial institution from disclosing nonpublic personal info about a consumer to a nonaffiliated third party unless the institution satisfies various disclosures and opt-out requirements and the consumer has not elected to opt-out of the disclosure.
Oz, 2002

Legal Issues: Privacy on the Internet

Federal Trade Commission (FTC) established 5 Core Fair Info Practices

1. 2. 3.

4. 5.

Consumers should be aware that personal info will be collected Consumers should have a say in how this info will be used Consumers should have the ability to check the info collected to ensure that it is complete and accurate Info collected should be secure Web site should be responsible for seeing that these practices are followed

Deitel, et al., 2001

Legal Issues: Other Legal Areas of Concern

Defamation

Injuring anothers reputation, honor or good name through false written or oral communication Good Samaritan provision, Section 230 of the Telecommunications Act protects ISPs from defamation lawsuits

Deitel, et al., 2001

Legal Issues: Other Legal Areas of Concern

Children and the Internet

Younger Internet audiences are able to gain access to the same info as adults without the constraints that might be found in real space Communications Decency Act of 1996 (CDA) and Child Online Protection Act of 1998 (COPA) were designed to restrict pornography on the Internet, particularly in the interest of children Childrens Online Privacy Protection Act of 2000 (COPPA) prohibits Web sites from collecting personal info from children under the age of 13 without parental consent
Allen, et al., 2001; Deitel, et al., 2001; Oz, 2002

Legal Issues: Other Legal Areas of Concern

Intellectual property

Copyright protection given to the author of an original piece, including literary, dramatic, musical, artistic and certain other intellectual works, where the work has been published or not. To have a copyright, creators must only fix their creation in a tangible medium, such as paper or magnetic disk. Authors DO NOT have to add their names, dates, or copyright sign on the medium to have a copyright. Napster ? Digital Millennium Copyright Act of 1998 (DMCA) represents the rights of creative bodies to protect their work, as well as the rights of educators and resource providers to receive access to the work

Deitel, et al., 2001; Napier, et al., 2001; Oz, 2002

Legal Issues: Other Legal Areas of Concern

Trademark and domain name registration

Distinctive symbol, word or phrase used to identify a businesss products and distinguish them from other businesss products Parasite selects a domain name based on common typos made when entering a popular domain name Cybersquatting buys an assortment of domain names that are obvious representations of the brick-and-mortar companies Anticybersquatting Consumer Protection Act of 1999 (ACPA) protects traditional trademarking in cyberspace
Deitel, et al., 2001; Napier, et al., 2001; Oz, 2002

Domain Names
Domain Names that have sold for more than $1 million

Business.com Altavista.com Loans.com Wine.com Autos.com Express.com WallStreet.com

$7.5 million $3.3 million $3.0 million $3.0 million $2.2 million $2.0 million $1.0 million
Allen, et al., 2001

Legal Issues: Other Legal Areas of Concern

Spam

Unsolicited email Unsolicited Electronic Mail Act of 1999 protects against spam (must be able to get off of email list) Unsolicited Commercial Electronic Mail Act of 2001 protects individuals, families, and Internet service providers from unsolicited and unwanted electronic mail Mail Abuse Prevention System (MAPS) takes consumer complaints and places address on a list of offenders who are then blocked

Deitel, et al., 2001; Oz, 2002

Legal Issues: Other Legal Areas of Concern

Online contracts

Electronic Signatures in Global and National Commerce Act of 2000 (E-Sign bill) promotes online commerce by legitimizing online contractual agreements Click-Throughs must agree to before proceeding

User agreements

Deitel, et al., 2001; Oz, 2002

Online Fraud
Losses from Online Fraud

Half said $1000 10,000 19% said over $100,000 60% said less than 1% 10% said more than 3%

Revenue Spent on Fraud Protection

Greatest Threat to Online Business

33% said difficulty in prosecuting Web-based fraud 22% said stolen credit cards Lack of security standards across the Web; growing use of credit card generators; and identity theft
Internet World, 2001

Internet Taxation
Use Tax

If vendor and consumer are located in the same state, then a sales tax can be imposed If vendor and consumer are not located in the same state, then the sale is subject to a use tax

Internet Tax Commission recommendation in April 2000 Streamlined Sales Tax Project designed to resolve Internet taxation issues suggests that taxation should occur in the state where a product is delivered and that the state should determine the percentage taxed The National Academy of Sciences National Research Center suggests a flat tax rate should be collected by the vendor and returned to the state in which the vendor resides

Deitel, et al., 2001; Napier, et al., 2001

Accounting Issues
Revenue Recognition

Net vs. Gross Barter counted as revenue but should be treated as fair value Coupons, Discounts, Loss Leaders putting sales at full price and deferring costs Fulfillment Costs are being classified as a marketing expense instead of cost of sales (which hides operational expenses amongst huge marketing costs)

Auctions are recognizing revenues immediately, but should be recognizing them over the period that the item is on the block

Briner, 2001; Kahn, 2000

Online Advertising
Nov. 1993 Oct. 1994 March 1995 July 1995 Oct. 1995 Jan. 1996 May 1996 Oct. 1996 Jan. 1997 GNN introduces advertising on the Internet HotWired site launches with ads from AT&T, Sprint, and others. Ragu is the first packaged-goods marketer to open a website Forrester Research reports online ad spending for 1995 will total $37 million Poppe Tyson spins off its web ad sales unit to form DoubleClick Microsoft pays $200,000 to sponsor Super Bowl website iVillage receives $800,000 in ad commitments CASIE introduces proposed web banner ad guidelines Hewlett-Packard introduces interactive Pong banner ad campaign Jupiter Communications predicts online advertising will total $7.7 billion by the year 2002

Aug. 1997

Schneider and Perry, 2001

Marketing
Internet marketing research

Internet allows for a relaxed and anonymous setting to hold focus-group discussions and distribute questionnaires Can learn about the demographics of Internet and WWW users in order to target marketing campaigns more effectively Can segment market into groups that have similar characteristics and interests
Deitel, et al., 2001

Marketing
E-mail Marketing

Inexpensive and effective way to target potential customers Opt-in email sent only to people who have expressed their consent to receiving commercial messages before the first message was sent to them
Can attract visitors to sites and influence purchasing Can be used to increase brand loyalty through reward programs Frequent-flyer miles, point-based rewards, discounts, sweepstakes, free trials, free shipping and coupons

Promotions

Deitel, et al., 2001; Oz, 2002

Marketing
E-business Advertising

Traditional channels such as TV, movies, newspapers and magazines Online advertising Banner advertising Webcasting using streaming media to broadcast an event over the Web Chat sessions, bulletin board on Web site, etc.
Deitel, et al., 2001; Napier, et al., 2001

Public relations

Marketing
B2B Marketing

Must consider companies distributors, resellers, retailers and partners when developing marketing strategies Requires marketing to all those involved in the purchasing decision Search-engine ranking is important to bringing new visitors to ones site

Search Engines

Deitel, et al., 2001

Branding
Key elements differentiation, relevance, and perceived value Emotional Branding

Hard to create on web Relies on helping users in exchange for them viewing an ad
Schneider and Perry, 2001

Rational Branding

Branding
Brand Leveraging

Extend dominant position by adding features useful to existing customers (Ex Amazon, Yahoo!)
One firms website includes information and link to another firms site that offers item for sale; commission to affiliate site for every click through Relies on existing customers to tell others about the products (Ex Blue Mountain Arts) Ex online bridal registries
Schneider and Perry, 2001; Oz, 2002

Affiliate Marketing

Viral Marketing

Brand Consolidation

11 Immutable Laws of Internet Branding

The law of 1. Either/Or 2. Interactivity 3. Common Name 4. Proper Name 5. Singularity 6. Advertising 7. Globalism 8. Time 9. Vanity 10. Divergence 11. Transformation
San Antonio Business Journal, 2001

References
Allen, C., Kania, D. and Yaeckel, B. (2001). One-to-One Web Marketing: Build a Relationship Marketing Strategy One Customer at a Time, 2nd edition, Johy Wiley & Sons, Inc.

Briner, R.F. (2001). Subtle Issues in Revenue Recognition, The CPA Journal, March (71:3), pp. 52-53.
Deitel, H.M., Deitel, P.J. and Steinbuhler, K. (2001). e-Business and eCommerce for Managers, Prentice Hall, Upper Saddle River, New Jersey. Internet World, 15 May (2001), p. 15.

References
Kahn, J. (2000). Presto Chango! Sales are Huge!, Fortune, 20 March (141:6), pp. 90+. Napier, H.A., Judd, P.J., Rivers, O.N. and Wagner, S.W. (2001). Creating a Winning E-Business, Course Technology, Thomson Learning, Inc. Oz, E. (2002). Foundations of e-Commerce, Pearson Education, Inc., Upper Saddle River, New Jersey. San Antonio Business Journal, (2001), Want Some Immutable Laws for the Fluid Internet World?, 13 April (15:12), p. 20. Schneider, G.P. and Perry, J.T. (2001). Electronic Commerce, 2nd edition, Course Technology.