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Law of E-Commerce Essay

August 25th, 2009 Leave a comment Go to comments

The intention of this essay is to examine the following statement: “The regulation of electronic commerce is not an issue for National or even European legislators. The issues are global and they must be regulated at that level. This can only be achieved by self regulation.”

In order to discuss the regulatory issues of e-commerce clearly, I would like to explain the nature of electronic commerce first. In my opinion, “electronic commerce” is used to refer to commercial transactions using the internet and other web enabled technologies, including WAP, other mobile telephony systems, and interactive digital television. E-commerce is a vibrant and rapidly expanding area of business, initially created in the US but increasingly extends to the whole world.

These new forms of business transactions provide enterprises, particularly SMEs (small and medium enterprise), the opportunity to do business with anyone, anywhere and at any time. Electronic transactions may be completed automatically and with no human intervention. On the other hand, it could also threat the trust between business and consumer if without human intervention.

Whether the interests of both sides of electronic transactions can be satisfied by the law? In fact, legislations always come later rather than technology develops. 1Lodder and Kaspersen (2002) claimed current legislation was drafted in a mainly paper-based society. These days, it is hard to identify a legal domain that does have some connection with e-commerce. The renown 2UNCTITRAL Model Law on e-commerce focuses on the shift from paper-based to electronic communication: “Nothing that an increasing number of transactions in international trade are carried out by means of electronic data interchange and other means of communication, commonly referred to as ‘electronic commerce’, which involve the use of alternatives to paper-based methods of communication and storage of information.”

As far as the involved parties of e-commerce are considered, 1there are businesses (B), consumers (C), and administrations/governments (A/G). Their relations can be identified as B2B, B2C, B2A/G, C2C, C2B, C2A/G, A/G2B and A/G2C, whereas B2B transactions represent the largest share, approximately 80% of total transactions. B2B is the fastest growing sector of e-commerce, therefore legislations have concentrated mainly on issues in this area. But the importance of B2C transactions, the aspect of e-commerce with which more people are familiar, should also be highly regarded. With B2B e-commerce, the parties are usually known to each other, so trust issues remain the same as those in the off-line business world. 3When businesses interact, trust operates as a two-way process. For example, the buyer needs to be confident that the seller will supply the right quality of goods at the right time. Equally, the seller needs to be confident that the buyer will honour his commitment to pay on time. In B2C e-commerce the seller collects payment at the point of sale, but the buyer needs to be confident that the right goods will show up at the right time.

Where businesses interact with consumers, e-commerce magnifies the existing off-line trust issues. So issues of consumer confidence and how best these might be addressed should be taken into account. Nevertheless, different parties or entities will keep considering their own interests as they do in off-line world while doing business. Consequently, a careful balance must be struck between the competing interests when deciding to regulate elements of e-commerce.

Technically, regulation, here I would use the phrase state-regulation, is 4action or behaviour that is required by governments – it is not voluntary, and the regulators are public authorities. But in broader, more practical terms, state-regulation is the formal rules or standards that dictate what is acceptable and required behaviour, putting limits on what is permissible.

Currently, existing regulations that e-commerce should consider are: 3Consumer Protection legislation – e.g. Trade Descriptions Act, Consumer Protection Act, including new Distance Selling regulations; Contract law; Advertising Codes of Practice; Data Protection Act; Company law; Tax and VAT requirements; Regulation of Investigatory Powers Act – e.g. Lawful Business Practice regulations; Electronic Communications Act; Employment Law; Sector specific regulation – e.g. the Financial Services and Marketing Act; Foreign laws – the implications of cross border trading, advertising laws; Planning laws; Health and Safety laws – e.g. Display Screen Equipment Regulations.

As I mentioned before, all these legislations were originally designed for the off-line world. Further, as far as interests of different parties are concerned, legislative issues like taxation, customer protection and jurisdiction are highly debated. Because of the global nature of e-commerce, a single state or national unions, even European Union, cannot solve the problem separately. This calls for some global answers. In addition, like any other field, e-commerce regulations should be based on the law and be controlled by governmental authorities. As a result, multinational regulatory bodies, such as European Union, Organisation for Economic Co-operation and Development (OECD), United Nations Commission on International Trade Law (UNCITRAL), are trying to harmonise these arguments which would occur.

As a consequence, I agree the comment that “the regulation of electronic commerce is not an issue for national or even European legislators. The issues are global and they must be regulated at that level.” Regulations at the state level would take more responsibility and usually with powerful enforcement bodies. The advantages of state-regulation are quite obvious, but so do their shortages. The lack of flexibility and timing may cause problems when entities are considering which law or legislation to apply. Furthermore, state-regulation would usually be resulted in over-regulation, which could create a too rigid environment thus stifling the flexibility of operation in e-commerce.

Basically, 5clear, consistent and predictable rules are prerequisites to securing trust in e-commerce. They ensure confidence for businesses to invest and consumers to engage in e-commerce. To adapt to rapid technological chances, regulatory framework must be flexible, which may require innovative regulatory approaches. And it cannot be achieved by government as effectively and efficiently as it requires. The legal framework for e-commerce must be simple, flexible and technology neutral. It must ensure competition while also generating trust and confidence. It must also take into account the global nature of e-commerce, which is “born global”. As a result, government encourages all policy makers to consider alternatives to state-regulation wherever possible. But, of course, all regulations should be based upon the law. From these opinions, industries should be involved in developing regulations, which I would use the phrase “self-regulation” to describe.

Self-regulation takes a variety of forms in which a key variable is the extent and nature of state involvement in steering the regime. Consumers may derive some benefits from such regimes where the cartel seeks to develop the reputation of its members.

Two main types of industry standard setting are often held up as models for business self-regulation. First, from a business perspective, the way to develop international standards is the way they have always been developed for technical advances or market promotion. For example, International Organisation for Standardisation (ISO), whose members are a mix of government and nongovernmental representatives for some forms of contemporary self-regulation activity, this technical model dominates industry thinking. Second model is based on social or political demands from outside the business community.

The European Commission has consistently backed self-regulation as a flexible, efficient and cost-effective alternative to regulation in many areas: achieving the same results, but without the delays of a time-consuming lawmaking process. However, certain conditions must be met: self-regulation must be in conformity with, and backed by law. It must be enforceable and verifiable.

Within e-commerce, self-regulatory bodies from different industries and backgrounds are ensuring confidence of both seller and buyer. For instance, VeriSign®, a leading certificate authority, involves in security and data protection of electronic transaction, RIAA’s (Recording Industry Association of America) enforcement in copyright and intellectual property protection is mainly in record area and particularly to MP3 files in the context of e-commerce. These self-regulations, as the complementarities of state-regulation, ensure the confidence of both buyer and seller in e-commerce.

On the other hand, flexibility usually comes with under-regulatory problems, which could be equally damaging to the development of e-commerce, resulting in the perception that e-commerce is an activity that contains an unacceptably high-risk element. This may prevent parties engaging in e-commerce due to a lack of confidence. Therefore, I disagree the comment that global level regulation of e-commerce only can be achieved by self-regulation.

Until recently, state-regulation and self-regulation were often seen as diametrically opposed. Neither of them can regulate e-commerce merely by itself. Where is the way to achieve a successful regulatory framework for e-commerce? Pressures from the digital economy have led to a more inclusive approach. And 5 “polarity has given way to integration.”

Here I would use the name of a 7″cooperative approach to governance” or just simply as “co-regulation” to identify the idea of this integration. Co-regulation implies taking self-regulation one step further. Rather than the mere coexistence of state-regulation and self-regulation, it implies the sharing of responsibilities through agreements between public and private partners.

The Department of Trade and Industry minister Michael Wills said this had now been resolved and the government had developed “a third way” of addressing the problem of government being too slow to regulate in the face of a rapidly changing environment. “Co-regulation is now our preferred approach. We set the broad objectives and task the private sector to design flexible solutions.” A joint forum on encryption would be set up with industry and civil servants rather than government mandating action, he said. “We have a world-class IT infrastructure, we are at the leading edge of developing the e-commerce market, we are well placed but we cannot be complacent,” he concluded.

9Some governments have a preference for state-regulation, others for self-regulation, and still others for co-regulation. But a simple “one size fits all” approach may not provide the best guidance for developing policy in the complex, fast-changing on-line realm. In matters of privacy and consumer protection, governments should seek to establish enforceable rules to safeguard users’ interests. This would promote the stability and predictability needed for commerce to flourish. But when it comes to the content of the information that flows across the Internet, governments should avoid legislation.

The regulatory issues of e-commerce and ideas are critical to the continued growth of the information economy and the protection of human’s basic rights. Any single module of regulation is inadequate to leading a successful regulatory framework. In a word, regulators should undertake a combination of different regulatory modules while regulating the world of e-commerce.

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