Damming The Floodgates

I am a college professor. And beyond classes in marketing management in the business administration department, I also teach the ecommerce and web marketing aspects of the college's ebusiness web development certificate program. And this week, which marked the return to school, I taught the first section of the program -- called "ebusiness basics."

As a starting point, our class dealt with the repercussions of doing business online. The ebusiness must deal with a myriad of new issues and laws that were previously nonexistent in the brick-and-mortar business world. As some of my students jokingly said to me after class, "My gosh! This is not a web development course, it's law school." But really, it's no joke.

Indeed, doing business on the worldwide web can multiply sales. But it also multiplies the risks -- risks one should not ignore. It opens up a whole new series of issues. With the speed of electricity and today's global marketplace, the Internet literally changes the entire business landscape, often dramatically.

According to DEMC magazine (see http://www.demc.com/), the number of small businesses with web sites has grown from 900,000 in 1998 to 3.5 million. And according to NUA, credited by the government for it's empirical analysis of the global Internet demography, the online population has risen to 179 million worldwide in June of 1999 -- that's a whopping 20% in only 5 short months (see http://www.nua.ie/surveys/how_many_online/world.html).

In his book "Hyper Wars," Bruce Judson wrote that the Internet is the fastest growing new media to ever emerge, stating that it took only 6 months to reach 50 million people as opposed to 13 years for the television. (I recommend his book -- see Judson's site at http://www.growyourprofits.com/.)

Undoubtedly, the number of laws, issues and challenges grow proportionately with the Internet. I am certainly not a lawyer by any stretch and I vigorously encourage any business owner to seek the appropriate counsel of a competent professional. However, here are some of the most important areas to keep in mind when doing business online, just to name a few:

1) Competition

While a brick-and-mortar business may have to deal with the diversion a competitor next door creates, many tend to forget that, online, millions of competitors have now become neighbors. To simply conclude that competition online is just slightly higher than its offline counterpart is a naive presumption to say the least. Since the Internet is growing at breakneck speeds, competition will become virtually unfathomable, if it's not already.

2) Trademarks

Your business or product name is a registered trademark in your country. If your plans do not include expansion in the offline world, in large part you are pretty safe. But online however, you may be infringing on a similar registered trademark in another country in which you do business -- the result of which increases the threat of serious legal disputes let alone damages. While this area is still gray somewhat, a critical element remains: Domain names.

While cybersquatting has recently been outlawed (the act of registering famous trademarks as domain names with the hopes of reselling them to their rightful owners, often at exorbitant prices), there is also the issue of "piggy-backing." It is where one includes the names of competitors in its site's meta-tags in order to siphon traffic from search engines. That too is now considered as a serious offence resulting in serious penalties.

3) Copyright

One of the easiest things to do on the web is to copy and paste. A little text here, a clipart there. An email message here, an entire web page there. It's too easy in fact, which currently makes copyright infringement one of the web's biggest beasts. Why? Because most people erroneously assume that, if it's found on the web, it's in the public domain. Think again.

Since 1989, copyright is instantaneous and there is no longer a need for registration or a copyright notice. Therefore, all web sites (public or not), email messages and posts of any kind (e.g., newsgroups and forums) are instantly copyrighted by their authors the moment they are written (see http://www.templetons.com/brad/copymyths.html). Nevertheless, laws are now being implemented (such as the Digital Millennium Copyright Act of 1998), which are aimed at tracking and curbing plagiarists in the new electronic age.

3) Taxes and Duties

So you've created some fancy perfume. You've been selling it offline for a while and are doing quite well. You have the proper licenses to manufacture it in your own kitchen. But now you're going online: What happens if someone in London decides to buy your American-made perfume? Are there any special duties to pay? Are there any taxes, especially sales taxes to charge? What about labeling issues? Chemicals? Transportation? Regulations? To find out more, see http://www.cpateam.com/tax-internettrade.htm.

4) Liability

As a marketing consultant, a large part of my clientele consists of cosmetic surgeons. While medicine is a whole different dimension, on the web the intricacies are multiplied. For example, doctors are governed not only by business law but also by medical law. Some medical licensing boards regard the web as a solicitation of patients and, if a doctor who is licensed in one state happens to consult a patient from another (even from another country), the doctor may be considered as one practicing medicine without a license.

Of course it's never that clear-cut. And for the average business owner, it's not that complicated either -- but the risk exists nonetheless. According to DEMC, a business can be sued anywhere it transacts business. Writer Robert Serviss wrote that, "By setting up a web site, a company is (in a legal sense) transacting business wherever it is accessible, which is worldwide." He points out that a recent court case has set the precedent in that, in terms of liability, the jurisdiction is attached to the location of the user's personal computer.

5) Business Practices

In his free ebook at http://www.successdoctor.com/books/freebook.exe, Jim Daniels talks about the fact that, by and large, most online businesses fall into the category of direct marketing or, more precisely, mail order. And as such, the rules instituted according to the Mail Order Act of 1975 apply (to US online businesses) -- and there are many such rules.

For instance, this law states that products have to be delivered within 30 days of receipt of payment. When it comes to the web, nothing really changes. However, one must take into account that on the Internet a product can be sold and delivered to a global marketplace. For some countries, regular mail will certainly take more than 30 days to reach its destination. Therefore, proper notice must be given to the client of the estimated delivery time. There is also the issue of pricing practices and truthful advertising among others.

6) Cyberspace

Finally, an area of law that never existed before but is now growing rapidly is cyberspace law -- one over which many lawyers, governments and courts are currently debating as well as one being fine-tuned by them with each passing hour. It deals with all of the issues above and more, from copyright to ecommerce. More information can be found at http://www.cli.org/, http://www.findlaw.com/, http://www.cyberlawinformer.com/, http://www.lawbytes.com/ and http://www.lawpublish.com/.

In The Final Analysis

All of these laws might seem somewhat scary to some. In reality, it's not as complicated as one thinks. The rules are easy to follow in most cases or for most products. The point is not to shy you away from doing business online -- far from it. But this is intended to provide you with some food for thought; an understanding of the fact that, online, the rules of the game change.

Agreeably, being prepared, consulting with an attorney and ensuring that all bases are covered may cost a little more in the beginning. But keep in mind that it can certainly save you a lot of time, effort, money and heartache down the road. After all, as the adage goes, "If you want your place in the sun, you'll have to put up with a few blisters." Beware or be aware.

About the teacher:
Michel Fortin is an author, speaker and marketing consultant dedicated to turning businesses into powerful magnets. Visit http://www.successdoctor.com/index.htm. He is also the editor of the "Internet Marketing Chronicles" delivered weekly to 125,000 subscribers -- subscribe free at http://www.successdoctor.com/IMC/.