Legal_ Ethical_ and Social Impacts of Electronic Commerce

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					Prof. Rushen Chahal
Legal, Ethical, and Social Impacts of EC




2/7/2012
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.

2/7/2012
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.


2/7/2012
Legal Issues Versus Ethical Issues


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




2/7/2012
Legal Issues Versus Ethical Issues


•      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




2/7/2012
Legal Issues Versus Ethical Issues


•      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”




2/7/2012
Legal Issues Versus Ethical 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


2/7/2012
Legal Issues Versus Ethical Issues


•         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


2/7/2012
Privacy


       privacy
       The 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
2/7/2012
• Protection of Privacy
      – Notice/awareness
      – Choice/consent
        opt-out clause
        Agreement that requires computer users to take
        specific steps to prevent the collection of personal
        information
        opt-in clause
        Agreement that requires computer users to take
        specific steps to allow the collection of personal
        information
2/7/2012
Privacy


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




2/7/2012
Privacy


•      The USA Patriot Act
      –    E-mail and Internet searches
      –    Nationwide roving wiretaps
      –    Requirement that ISPs hand over more user
           information
      –    Expanded scope of surveillance based on new
           definitions of terrorism
      –    Government spying on suspected computer
           trespassers with no need for court order
      –    Wiretaps for suspected violations of the Computer
           Fraud and Abuse Act
2/7/2012
Privacy


•      The USA Patriot Act
      –    Dramatic increases in the scope and penalties of the
           Computer Fraud and Abuse Act
      –    General expansion of Foreign Intelligence
           Surveillance Act (FISA) authority
      –    Increased information sharing between domestic law
           enforcement and intelligence
      –    FISA detours around federal domestic surveillance
           limitations; domestic surveillance detours around
           FISA limitations

2/7/2012
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


2/7/2012
Intellectual Property Rights


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




2/7/2012
Intellectual Property Rights


       copyright
       An 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

2/7/2012
Intellectual Property Rights


•      Copyrights
      –    Piracy of Software, Music, and Other Digitizable
           Material
      –    Copyright Protection Approaches
              digital watermarks
              Unique identifiers embedded in digital content that
              make it possible to identify pirated works
      –    Digital Rights Management



2/7/2012
Intellectual Property Rights


       trademark
       A 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 Resolutions
           cybersquatting
           The practice of registering domain names in order
           to sell them later at a higher price

2/7/2012
Intellectual Property Rights


       patent
       A document that grants the holder exclusive
       rights to an invention for a fixed number of years
•      Fan and Hate Sites
           cyberbashing
           The registration of a domain name that criticizes an
           organization or person




2/7/2012
Unsolicited Electronic Ads:
Problems and Solutions

•      E-Mail Spamming
           unsolicited 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




2/7/2012
Unsolicited Electronic Ads:
Problems and Solutions

      –    Why It Is Difficult to Control Spamming
           •   Spammers send millions of e-mails, shifting Internet
               accounts to avoid detection
           •   Spammers use different methods to find their victims
      –    Solutions to Spamming
           •   Junk-mail filters
           •   Automatic junk-mail deleters
           •   Blocking certain URLs and e-mail addresses




2/7/2012
Exhibit 17.1 How Spam Blockers Work




2/7/2012
Unsolicited Electronic Ads:
Problems and Solutions

•      E-Mail Spamming
      –     Anti-spam Legislation
           • Do-not-spam lists
           • Protecting employees




2/7/2012
Unsolicited Electronic Ads:
Problems and Solutions

•      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




2/7/2012
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
2/7/2012
Free Speech Versus Censorship
and Other Legal Issues

      –    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 Contracts
                  Uniform Computer Information Transactions Act ( 2000), makes
                  clear that contracts can be formed even when a human is not
                  directly involved


2/7/2012
Free Speech Versus Censorship
and Other Legal Issues

•      Taxing Business on the Internet
           This 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




2/7/2012
Free Speech Versus Censorship
and Other Legal Issues

•      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



2/7/2012
Free Speech Versus Censorship
and Other Legal 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




2/7/2012
EC Fraud and
Consumer and Seller Protection

•      Fraud on the Internet
      –    Online Auction Fraud
      –    Internet Stock Fraud
      –    Other Financial Fraud




2/7/2012
EC Fraud and
Consumer and Seller Protection

•      Fraud on the Internet
      –    Identity Theft and Phishing

             identity theft
             A criminal act in which someone presents himself
             (herself) as another person and uses that person’s
             social security number, bank account numbers,
             and so on, to obtain loans, purchase items, make
             obligations, sell stocks, etc.


2/7/2012
EC Fraud and
Consumer and Seller Protection

•      Consumer Protection
      –  Third-Party Assurance Services
        • TRUSTe’s “Trustmark”
        • Better Business Bureau
        • WHICHonline
        • Web Trust Seal and Others
        • Online Privacy Alliance
        • Evaluation by Consumers
      – Authentication and Biometric Controls

2/7/2012
EC Fraud and
Consumer and Seller Protection

•      Seller Protection
      –    Customers who deny that they placed an order
      –    Customers who download copyrighted software
           and/or knowledge and sell it to others
      –    Customers who give false payment (credit card or bad
           checks) information in payment for products and
           services provided
      –    Use of their name by others
      –    Use of their unique words and phrases, names, and
           slogans and their Web addresses by others
2/7/2012
EC Fraud and
Consumer and Seller Protection

•      What can Sellers Do?
      –    Use intelligent software to identify possibly
           questionable customers
      –    Identify warning signals for possibly fraudulent
           transactions
      –    Ask customers whose billing address is different from
           the shipping address to call their bank and have the
           alternate address added to their bank account



2/7/2012
Societal Issues


       digital divide
       The 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
2/7/2012
Virtual (Internet) Communities


       virtual (Internet) community
       A group of people with similar interests who
       interact with one another using the Internet
•      Characteristics of Communities
           One possibility is to classify members as traders,
           players, just friends, enthusiasts, or friends in need




2/7/2012
Virtual (Internet) Communities

  Commercial Aspects of Communities

1. Search communities    6. Community consulting
2. Trading communities      firms
3. Education             7. E-mail-based
   communities              communities
4. Scheduled events      8. Advocacy communities
   communities           9. CRM communities
5. Subscriber-based      10.Mergers and
   communities              acquisitions activities
2/7/2012
Virtual (Internet) 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

2/7/2012
Exhibit 17.5 Value Creation in
             Electronic Communities




2/7/2012
Virtual (Internet) Communities
  Eight critical factors for community success:

   1.      Increase traffic and             5. Consider the cultural
           participation in the community      environment
                                            6. Provide several tools and
   2.      Focus on the needs of the           activities for member use;
           members; use facilitators and       communities are not just
           coordinators                        discussion groups
   3.      Encourage free sharing of        7. Involve community members in
           opinions and information—no         activities and recruiting
           controls                         8. Guide discussions, provoke
   4.      Obtain financial sponsorship.       controversy, and raise sticky
           This factor is a must.              issues. This keeps interest high
           Significant investment is
           required

2/7/2012
Virtual (Internet) Communities


Key Strategies for Successful Online Communities
1.     Handle member data sensitively
2.     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 site
4.     Offer up-to-date content
5.     Offer continuous community control with regard to
       member satisfaction
6.     Establish codes of behavior (netiquette/guidelines) to
       contain conflict potential
2/7/2012
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

2/7/2012
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

2/7/2012
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

2/7/2012
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

2/7/2012
The Future of EC


•      EC Technology Trends
         utility computing
           Computing 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

2/7/2012
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

2/7/2012
Managerial Issues

1. What sorts of legal and ethical issues should be
   of major concern to an EC enterprise?
2. What are the most critical ethical issues?
3. Should we obtain patents?
4. What impacts on business is EC expected to
   make?
5. Do we have a community?


2/7/2012
Summary

1.     Differences between legal and ethical issues.
2.     Protecting privacy in EC.
3.     Intellectual property rights in EC.
4.     Unsolicited ads and spamming.
5.     Conflict between free speech and censorship.




2/7/2012
Summary

6. Legal issues.
7. Protecting buyers and sellers online.
8. Societal issues and EC.
9. The role of virtual communities.
10. The future of EC.




2/7/2012