The eCommerce space has experienced continuous growth, becoming among the crowded startups in recent years. So to say, it accounts for three-quarter of retail growth with projections that global sales will surpass $29 trillion. However, eCommerce growth has come with its set of challenges. Like any other tech-based niche, eCommerce should adapt to the increasingly strict legal guidelines that can lead to product recalls, lawsuits, and closures.
Unlike physical startups that abide by employment laws, eCommerce entrepreneurs should watch out for legal infractions that come in several ways. Some key issues to consider to ensure legal compliance of your eCommerce startup include;
Taxes are probably one of the most common legal infractions affecting all types of businesses. Running an online business means that you can access a wide audience across multiple states, countries, and continents. Therefore, you should understand the specific tax expectations and standards for every country, especially your target market.
For instance, if your online store is demographically located in one of the U.S states, your prices should not include tax. However, if your target market is outside the U.S, your prices should include tax, as customers from other regions are accustomed to all-inclusive price tags.
Tax issues are also determined by what you are selling and your selling point. For instance, clothing attracts some tax in New York. Similarly, items in plastic bottles attract a recycling fee in the state of California. To cover such complicated tax issues, it is prudent to consult tax professionals. They can provide insights on specific taxation issues affecting your products.
You should avoid infringing potential customer’s privacy rights as you promote your online store. For instance, most eCommerce startups rely on email marketing, which is an effective digital marketing strategy. However, you should watch out to avoid CAN-SPAM act violations.
According to the regulations, all marketing messages should be clearly labeled for advertisements. The header and subject lines should also not be misleading statements to prospective customers. The message should contain a valid email address and a message giving the readers a chance to respond. To ascertain that you are contacting willing recipients, emails should have an option for unwilling recipients to unsubscribe.
Contractual Information and Liability
Legal issues surrounding contractual information are quite complicated. One of the eCommerce giants, Amazon, came under serious legal scrutiny for violating these practices in 2018. The store was found liable for selling a dog collar from a third-party vendor that led to permanent vision loss to a woman.
For eCommerce startups, the ruling emphasizes why you should clearly define your product’s liability and warranty, especially when dealing with products from third-party vendors. With the help of employment lawyers, customers can file legal claims in case of product defects that you don’t manufacture, which can cost your business heavily.
To avoid such;
- Indicate if you sell products from third-party vendors
- Explain the procedure for canceling or returning purchases from your store.
Data Privacy Laws
Ecommerce platforms contain a lot of sensitive customer information collected during customer registration, contact forms, and checkout processes. Federal and state laws require eCommerce sites to protect every customer’s data from data loss. For instance, eCommerce websites should notify visitors when gathering user information and seek consent before reusing such information.
That said, besides cookies policies, create a detailed data protection policy outlining how clients’ data is collected and stored to ensure that your store remains compliant. Provide the links to both policies on your store and an option for visitors who don’t want their information shared with third-parties.
Payment Gateways Fraud
Legal issues involving payment gateways and online security have significantly increased. Just like eCommerce business projections, a report estimates the growth of Card-Not-Present fraud by 14% annually. This is a serious issue for eCommerce stores that depend on on-site payments.
Apart from protecting your clients’ private data, you should tweak your websites’ inner workings to prevent such fraud. A key preventive measure that ensures the smooth running of your eCommerce store is installing the application performance management system. This software helps online sellers identify and fix possible vulnerabilities in their online systems.
If your eCommerce store is hacked, you are legally mandated to inform customers and the public. Most states require online businesses to openly report data breach cases, especially sites with sensitive personal information, within 45 days. Always be on the safe side of the law by reporting, especially if you suspect a breach in your systems.
The fact that your clients don’t come physically to your store doesn’t exempt your online store from the law. It is important to review and ensure that your eCommerce store meets all the required provisions to avoid legal suits. Consult an attorney to ensure that your eCommerce platform complies with all the applicable policies and regulations.
Pam Stone is a writer from Austin, TX and content editor for HKM. She is passionate about helping others navigate the complex legal landscape and better understand the justice system. In her spare time, Pam enjoys bowling and volunteering at her local adoption agency.