The Unique Legal Issues of the E-Commerce Sector and How to Navigate Them

Christopher Travis

It is no secret that e-commerce has emerged as a pivotal and often vital aspect of modern business. Given the vast reach and ease of use, millions of companies have already shifted their operations online, whether in whole or in part–and the trend is only predicted to grow from here. That being said, just as companies must adhere to applicable laws in the “brick-and-mortar” space, e-commerce comes with its own set of potential legal pitfalls. While it is both convenient and appealing to have a global reach, the laws regulating businesses tend to change according to geographic location, making it much easier to find oneself crosswise of certain regulations without even realizing it. Here are some of the most common legal concerns you might encounter within e-commerce and how to make sure your business stays protected while conducting transactions online.

Data Privacy

Protecting customer privacy is one of the highest priorities within the e-commerce sector–and the area where businesses are most likely to be non-compliant. Businesses collect, process, store, and sometimes sell, vast amounts of personal customer data gathered through methods like tracking cookies and online forms. The European Union and the State of California already have stringent requirements in place regarding how businesses are allowed to gather and handle customer information–the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA), respectively–and we can expect even more regulatory requirements in the days ahead. Non-compliance can result in hefty fines, not to mention reputational damage. Therefore, e-commerce businesses must have robust data privacy policies in place to ensure transparency in how they use customer data. And where applicable, users must be given the right to say how their information is used–or indeed, whether their information may be gathered at all.

Online Security

The rise in digital transactions also brings with it increased cybersecurity risks. E-commerce platforms are attractive targets for cybercriminals who are ever devising more creative ways to break into systems and steal data. Online security must therefore be a top priority for e-commerce platforms. Businesses need to implement comprehensive cybersecurity measures, such as secure sockets layer (SSL) encryption, two-factor authentication, and regular security audits, to protect against data breaches.

Payment Processing

Payment processing involves navigating a complex landscape of regulations. These include the Payment Card Industry Data Security Standard (PCI DSS), which sets the standard for businesses that accept, process, store or transmit credit card information. Compliance is mandatory, and failure to comply can lead to penalties and the loss of the ability to process credit card payments. 

Tax Collection

Another crucial legal issue for e-commerce businesses is taxation. Depending on country and state requirements, companies may be required to charge sales tax or value-added tax (VAT) on online transactions. Furthermore, if your business operates across multiple jurisdictions, you must ensure that you comply with applicable local laws governing taxes. Making sure you are compliant with all these rules can be a legal quagmire at best, and failure to collect and remit taxes correctly can lead to significant fines.

Intellectual Property

Protecting intellectual property rights in the digital space can be challenging. Businesses need to be mindful of copyright, trademark, and patent laws when selling products online. This includes ensuring they have the right to sell a product, using copyrighted material appropriately, and protecting their own intellectual property from infringement. Failing to respect the intellectual property of others can lead to costly legal action and reputational damage.

Consumer Protection

Consumer protection laws are designed to ensure fair trade competition and the free flow of truthful information in the marketplace. They cover areas such as false advertising, unfair business practices, and consumer rights. E-commerce businesses need to ensure they comply with these laws to avoid legal action and maintain trust with their customers.

Navigating E-Commerce Issues Successfully

If you think this list of potential legal issues is daunting, you are not alone. And what’s more, understanding the legalities of e-commerce is not a “one-and-done” objective because the world of e-commerce law is effectively a moving target, ever-changing. That’s why the best way to be proactive in protecting yourself and your business is with the help of experienced general counsel. At Travis Law, many of our clients work within the e-commerce sector at some level, and we go to great lengths to stay abreast of the complex, evolving network of regulations within this space. From drafting strong POS and privacy policies to keeping you compliant with data privacy regulations, we help you stay protected so you can focus on doing what you do best: providing excellent products and services to your customers, both in the digital marketplace and beyond. Contact us today to learn more about how we can help.

Recent Posts: