Advertising

3 Legal Issues Online Retailers Must Be Aware of

3 Legal Issues Online Retailers Must Be Aware of
Advertising

Many experts believed that the eCommerce industry would peak in 2011. However, it has been growing faster than anyone would have predicted. The industry reportedly grew 14.6% in 2015. It grew another 16% year-over-year in the third quarter of 2016.

Rapid industry growth creates new opportunities for online retailers. However, it has also attracted more scrutiny from regulators. Governments around the world have imposed new laws for a variety of reasons, including:

  • Protecting consumers from unscrupulous merchants
  • Limiting the competitive edge that online retailers have over their brick-and-mortar counterparts
  • Combatting fraud
  • Fighting money laundering
  • Limiting access to potentially harmful products

Here are some legal issues online retailers must be aware of.

1. Online Sales Taxes

When Amazon first began selling products online, it didn’t have to pay sales tax. The law stipulated that only brick-and-mortar businesses needed to pay it.

Advertising

Sales tax laws are now applied to online stores as well. Unfortunately, they vary from state to state and country to country. If you have a physical presence in a state, you may need to pay sales taxes regardless of where your customers are located.

In California, you may also be required to pay sales taxes if you have a representative in the state, even if your main office is based elsewhere. Some states will also require you to charge a sales tax if you sell to customers in their jurisdiction, even if your business is technically based elsewhere.

“Navigating sales taxes is challenging for all businesses,” says Ryan Kh, business development consultant and founder of Catalyst for Business.

“I encourage my clients to review sales data and see which states they receive the bulk of their sales. They may want to establish a physical presence in one of those jurisdictions to avoid the pains of double taxation online retailers often face. Of course, it depends on whether those states have a reasonable tax rate.”

2. Minimum Advertised Price

If you are selling products from another company, they may impose restrictions on advertising. One of the most common restrictions is the minimum advertised price policy many suppliers have.

If you enter into an agreement with a manufacturer, you must follow this policy carefully. According to an infographic by TradeVitality, there are a number of reasons MAP policies are enacted, including preventing merchants from engaging in price wars, which can put pressure on the manufacturer to lower their wholesale price.

It’s important to read the agreement with each supplier carefully. Never advertise a price below what they will allow.

3. Dealing with Fraudulent Payments

Fraudulent payments are a serious concern for online merchants. Unlike brick-and-mortar businesses, online retailers must usually accept liability for any fraudulent payments.

Advertising

Why is the liability different for e-commerce companies? The law states that if a brick-and-mortar retailer uses a CHIP Reader, then it is not their responsibility to determine whether or not fraud took place. It’s up to the bank to monitor the account for fraudulent activity if the retailer took all reasonable precautions.

When an online retailer accepts payment, the transaction is classified as “card not present.” Since the retailer isn’t able to confirm the identity of the buyer, they usually assume the liability. If it is a fraudulent purchase, they will have to pay restitution to the cardholder.

However, this law is not absolute. It is usually based on the assumption that online retailers offer less security than the customers bank. If you can show that you have exceeded expectations with your online security, you may be able to shift the liability back to the bank.

“The liability shift protects the entity who offers the greater level of security by holding the other entity with less secure systems responsible for fraud,” said Carolyn Balfany, a safety expert with MasterCard.

However, it’s difficult to meet this burden, unless the customer has a lax bank that overlooked red flags of fraudulent activity.

“The one thing that merchants are going to have to struggle with, as long as we have cards that are chip and signature, we will see a shift to online fraud,” Mallory Duncan, senior vice president and general counsel at the National Retail Federation, told Yahoo Finance. “Merchants will have to put more roadblocks in the way of transactions in an effort to keep down the fraud occurring online.”

Conclusion

eCommerce companies are being more tightly regulated these days. They must be aware of all laws and take all reasonable precautions to abide by them.

Featured photo credit: Pexels / Negative Space via pexels.com

Advertising

More by this author

Annie Qureshi

Entrepreneur

6 Startup Costs You Should Never Cut 5 Tips for Marketers to Build an Instagram Audience 6 Apps for a Better YouTube Experience 5 Business Ideas for New Entrepreneurs in 2017 photo editing 3 Photo Editing Tools to Bring You into the Social Media Limelight

Trending in Technology

1 Can Technology have Biases Like Humans? 2 15 Great Macbook Accessories To Improve Productivity 3 7 Best Outdoor Security Cameras For Better Home Security 4 10 Best VPNs to Browse the Internet More Securely 5 10 Best Monitors for Your PC Under $100

Read Next

Advertising
Advertising

Last Updated on December 18, 2020

Can Technology have Biases Like Humans?

Can Technology have Biases Like Humans?
Advertising

Technology has taken a vantage leap in providing solutions for man. Before now, technology used to appear complex and would require a great deal of expertise to handle solutions available. Today, we have technology applicable in the simplest human activities as smart products with intelligent algorithms powering them as they make error-free judgments and provide intelligent and analytic solutions.

Does technology have all the answers?

This article from Credit Suisse, tells us that technology does not have all the answers because it has been found to exhibit “similar biases,” as humans. No one can discredit the impact of technology, but it is not totally free of human input and this is the reason we experience these biases in many areas we have technology holding foot.

Advertising

Creating technological solutions transparently

This article suggests that the process of creating technological solutions be made transparent and subject to contribution from many people who would end up as users of the product – male, female, young, old, learned, unlearned and all other preferences as we have them. It also underscores the importance of having women on product development teams. This approach is not sure to eliminate all forms of bias, but it is a good way to start in order to appraise the full benefits of technology.

Advertising

Technology as the connecting tool

Technology so far has been a major connecting tool amongst us humans. It is used and appreciated by all regardless of race, language and sex. In order to keep it less subjective to these arguments about human biases. I believe we should gather opinions on products and solutions before making them available to the public. This could be done by gathering input from intended target users and receiving feedback across the stages of production.

Advertising

“Recognizing the problem is a start…success will depend on inclusive technologies that meet this vast untapped market.” This cannot be more apt especially at a time when we look up to technology for solutions. We should not muzzle our progress with technology by battling algorithm bias. The first way to avoid this battle is by reading this article here.

Advertising

Advertising

Read Next