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Legal, Ethical, and Social Impacts of EC

Electronic Commerce Prentice Hall © 2006 2

Learning Objectives

1. Describe the differences between legal and ethical issues in EC.

2. Understand the difficulties of protecting privacy in EC.

3. Discuss issues of intellectual property rights in EC.

4. Describe unsolicited ad problems and remedies.5. Understand the conflict between free speech

and censorship on the Internet.


Learning Objectives

6. Describe major legal issues in EC.7. Describe the types of fraud on the Internet and

how to protect against them.8. Describe representative societal issues in EC.9. Describe the role and impact of virtual

communities on EC.10. Describe the future of EC.


Legal Issues Versus Ethical Issues

ethicsThe branch of philosophy that deals with what is considered to be right and wrong



• The Major Ethical and Legal Issues Discussed in this Chapter

– Privacy– Intellectual property rights and online piracy– Unsolicited electronic ads and spamming– Free speech versus censorship– Consumer and merchant protection against fraud



• EC Ethical Issues– Non-Work-Related Use of the Internet

• Employees are tempted to use e-mail and the Web for non-work-related purposes

• In some companies, this use is tremendously out of proportion with its work-related use

• The utility of monitoring employee usage can be considered “one of the most controversial EC issues”



– Codes of Ethics: Useful guidelines for a corporate Web policy:• Issue written policy guidelines about employee use of the

Internet• Make it clear to employees that they cannot use

copyrighted trademarked material without permission• Post disclaimers concerning content, such as sample

code, that the company does not support• Post disclaimers of responsibility concerning content of

online forums and chat sessions



• Codes of Ethics: Useful guidelines for a corporate Web policy:

– Make sure that Web content and activity comply with the laws in other countries

– Make sure that Web content and activity comply with the laws in other countries

– Make sure that the company’s Web content policy is consistent with other company policies

– Appoint someone to monitor Internet legal and liability issues.– Have attorneys review Web content to make sure that there is

nothing unethical, or illegal, on the company’s Web site


Privacy

privacyThe right to be left alone and the right to be free of unreasonable personal intrusions

• Collecting Information about Individuals– Web Site Registration– Cookies– Spyware and Similar Methods– RFID’s Threat to Privacy– Privacy of Employees– Privacy of Patients


• Protection of Privacy– Notice/awareness– Choice/consent

opt-out clauseAgreement that requires computer users to take specific steps to prevent the collection of personal informationopt-in clauseAgreement that requires computer users to take specific steps to allow the collection of personal information


Privacy

• Protection of Privacy– Access/participation– Integrity/security– Enforcement/redress


Privacy

• Privacy Protection in Other Countries– In 1998, the European Union passed a privacy

directive (EU Data Protection Directive) reaffirming the principles of personal data protection in the Internet age

– The directive aims to regulate the activities of any person or company that controls the collection, storage, processing, or use of personal data on the Internet


Intellectual Property Rights

intellectual propertyCreations of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs, used in commerce



copyrightAn exclusive grant from the government that allows the owner to reproduce a work, in whole or in part, and to distribute, perform, or display it to the public in any form or manner, including over Internet

• Literary works• Musical works • Dramatic works • Artistic works • Sound recordings, films, broadcasts, cable programs



• Copyrights– Piracy of Software, Music, and Other Digitizable

Material– Copyright Protection Approaches

digital watermarksUnique identifiers embedded in digital content that make it possible to identify pirated works

– Digital Rights Management



trademarkA symbol used by businesses to identify their goods and services; government registration of the trademark confers exclusive legal right to its use

– Domain Name Disputes and ResolutionscybersquattingThe practice of registering domain names in order to sell them later at a higher price



patentA document that grants the holder exclusive rights to an invention for a fixed number of years

• Fan and Hate SitescyberbashingThe registration of a domain name that criticizes an organization or person


Unsolicited Electronic Ads: Problems and Solutions

• E-Mail Spammingunsolicited commercial e-mail (UCE)The use of e-mail to send unwanted ads or correspondence

– What Drives UCE?Many spammers are just trying to get people’s financial information



• E-Mail Spamming– Anti-spam Legislation

• Do-not-spam lists• Protecting employees



• Protecting against Pop-Up Ads– Pop-Up stoppers

• Concluding Remarks– The spam situation has not yet been resolved.

However, it seems that both e-mail spamming and pop-ups are not increasing, and they may even be declining


Free Speech Versus Censorship and Other Legal Issues

• On the Internet, censorship refers to government’s attempt to control, in one way or another, the material that is presented

• “Donham’s First Law of Censorship.” This semiserious precept states: “Most citizens are implacably opposed to censorship in any form—except censorship of whatever they personally happen to find offensive.”

• Children’s Online Protection Act (COPA) exemplifies the protective approach



– Other Legal Issues– Electronic Contracts

• A legally binding contract requires a few basic elements: an offer, acceptance, and consideration

• These requirements are difficult to establish when the human element in the processing of the transaction is removed and the contracting is performed electronically

• Intelligent Agents and ContractsUniform Computer Information Transactions Act ( 2000), makes clear that contracts can be formed even when a human is not directly involved



• Taxing Business on the InternetThis issue is extremely important because it is related to global EC, as well as to fairness in competition when EC competes with off-line marketing channels, which requires the collection of taxes



• The Tax-Exemption Debate– The Internet Tax Freedom Act 1(998) sought to

promote e-commerce through tax incentives, by barring any new state or local sales taxes on Internet transactions until October 2001

– The U.S. Congress extended the tax moratorium until 2006, giving it time to digest the contents of the report and hash out contentious tax issues



• The Tax-Exemption Debate– Proposed Taxation in the United States

• The National Governors’ Association, the National League of Cities, and the U.S. Conference of Mayors fought the Tax Free Bill for the Internet

• The U.S. Congress blocked state and local governments from taxing connections that link consumers to the Internet, at least until November 2007


Societal Issues

digital divideThe gap between those who have and those who do not have the ability to access electronic technology in general, and the Internet and EC in particular

• Other Societal Issues– Education– Public safety, criminal justice, and homeland security– Health aspects


Virtual (Internet) Communities

virtual (Internet) communityA group of people with similar interests who interact with one another using the Internet

• Characteristics of CommunitiesOne possibility is to classify members as traders, players, just friends, enthusiasts, or friends in need



1. Search communities2. Trading communities3. Education

communities4. Scheduled events

communities5. Subscriber-based

communities

6. Community consulting firms

7. E-mail-based communities

8. Advocacy communities9. CRM communities10.Mergers and

acquisitions activities

Commercial Aspects of Communities



• Types of Virtual Communities– Transaction– Purpose or interest– Relations or practice– Fantasy

• Financial Viability of Communities: Revenue model of communities can be based on:

– Sponsorship– Membership fees– Sales commissions– Advertising – Combination of these


Exhibit 17.5 Value Creation in Electronic Communities



1. Increase traffic and participation in the community

2. Focus on the needs of the members; use facilitators and coordinators

3. Encourage free sharing of opinions and information—no controls

4. Obtain financial sponsorship. This factor is a must. Significant investment is required

5. Consider the cultural environment

6. Provide several tools and activities for member use; communities are not just discussion groups

7. Involve community members in activities and recruiting

8. Guide discussions, provoke controversy, and raise sticky issues. This keeps interest high

Eight critical factors for community success:



Key Strategies for Successful Online Communities1. Handle member data sensitively2. Maintain stability of the Web site with respect to the

consistency of content, services, and types of information offered

3. Provide fast reaction time of the Web site4. Offer up-to-date content5. Offer continuous community control with regard to

member satisfaction6. Establish codes of behavior (netiquette/guidelines) to

contain conflict potential


The Future of EC

• Nontechnological Success Factors– Internet Usage– Opportunities for Buying– M-Commerce– Purchasing Incentives– Increased Security and Trust– Efficient Information Handling– Innovative Organizations– Virtual Communities


The Future of EC

• Nontechnological Success Factors– Payment Systems– B2B EC– B2B Exchanges– Auctions– Going Global– E-Government– Intra-business EC– E-Learning– EC Legislation


The Future of EC

• EC Technology Trends– Clients– Embedded Clients– Wireless Communications and M-Commerce– Pervasive Computing– Wearable Devices– RFID– Servers and Operating Systems– Networks


The Future of EC

• EC Technology Trends– EC Software and Services– Search Engines– Peer-to-Peer Technology– Integration– Web Services– Software Agents– Interactive TV– Tomorrow’s Internet


The Future of EC

• EC Technology Trendsutility computingComputing resources that flow like electricity on demand from virtual utilities around the globe—always on and highly available, secure, efficiently metered, priced on a pay-as-you-use basis, dynamically scaled, self-healing, and easy to manage

– Grid Computing coordinates the use of a large number of servers and storage, acting as one computer


The Future of EC

• Integrating the Marketplace with Marketspace– Probably the most noticeable integration of the two

concepts is in the click-and-mortar organization– A major problem with the click-and-mortar approach is

how the two outlets can cooperate in planning, advertising, logistics, resource allocation, and so on and how the strategic plans of the marketspace and marketplace can be aligned

– The impact of EC on our lives will be as much as, and possibly more profound than, that of the Industrial Revolution