Starting an eCommerce Business? Legal Issues to Watch.
eCommerce is the process of buying goods or services via the internet, and has become the most crowded business venture for start-up entrepreneurs. While the blueprint for starting an eCommerce website is seemingly straightforward, the industry’s takeover of more than three-quarters of retail growth has created demanding changes to legal regulations. In this post, we share with you some examples of legal concerns you may encounter launching your eCommerce company. We also hope to help you understand when you can manage alone, and when you should look for a good small business attorney.
Product recalls don’t just impact the reputation of manufacturers, the fault also lies on the retailer, and third-party sellers who use other platforms for product distribution should not take product liability lightly. In the 2020 lawsuit case of Bolger vs Amazon, a third-party seller, E-Life, sold a defective computer battery that exploded and burned the customer. Because Amazon had a major role in distributing the product, the company had to put pressure on sellers, requiring eCommerce sellers to purchase product liability insurance to minimize risk; this type of insurance is recommended by lawyers alike.
Third-party sellers must also be weary of IP infringement, as patent, copyright or trademark violations could result in expensive lawsuits. eCommerce resellers should confirm they have the rights for product stock photos or in their product descriptions. Here is a list of ways your eCommerce business could violate IP infringement.
Another liability can arise through data breaches, as personalized information is growing quickly, customers are at risk of hacks and identity theft. Amazon and Facebook have shown widespread scandals on misusing customer data, and eCommerce companies are recommended to limit their customer data to prevent cyber-hack scenarios. Securing your website, maintaing updated software, and encrypting information and data with secure socket layer (SSL) protection, all go a long way for business owners. It’s beyond the scope of this article, but you can find more on handling data breaches here.
Payment gateways are high in demand, but have limitations such as hosting capabilities, anti-fraud control or service fees, but most importantly, entrepreneurs should pick a getaway by their individual terms and conditions; features for transactions can include setting up shipping time frames, return policies, payment terms, etc. Most terms and conditions, however, are already procured through state regulation. For example, Florida has developed their own 2020 Florida Statutes that simply ensures customers have the right to return products sold online for a full refund within 7 days.
As the world of online selling is constantly changing, it is always good to be updated on the laws. Electronic payments through third-party vendors have created a new stream of chargebacks, an example is found through restaurants using food delivery services, and loss of orders and/or incorrect orders calls for chargebacks. The Electronic Transaction Association (ETA) underwriting guidelines help dispute refunds by exploring how banks and card processors manage payment. The chargeback process involves investigations from the transacting bank, beginning with the customer request for a refund, bank investigation within merchant accounts and a final dispute.
While transactions and liabilities create a lot of the problems for eCommerce businesses, there are some other smaller landmines to mind.
- Taxes: Depending on your state or country, taxation can vary on products and can be solved by contacting your applicable revenue agency or seeking counsel from a small business tax attorney.
- E-Contracts: Ensure all contracts are consented to by both parties.
- International Laws: international transactions, exchange control and distribution laws must be verified.
- Inventory: ensure that lease, deed, or zoning codes don’t prohibit you from running your business at home.
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