Challenges Facing Consumer and Privacy Law - Essay Example

Name: Professor: Institution: Course: Date: 1.0 Introduction Internet has in the recent times become a powerful tool for trade. It is very important for states which are geographically remote from large overseas markets, this is because of its capacity to reduce the impact of distance and time by reducing the substantial overhead cost associated with distribution and transportation of goods and services as well as allowing any item can be displayed almost instantaneously in international market through e-commerce (Patterson, 2011). According to Shah & Nagree (2010), e-commerce is any type of commercial or business transaction that involves the transfer of information across the internet. It allows customers to electronically exchange services and goods with no obstacle of distance and time. E-commerce has expanded rapidly over the last few years and it’s expected to continue expanding at this rate. It has various advantages both to the businesses and customers such as faster selling\ buying procedures, better quality of services and low operation costs, buying\selling 24\7, more reach to consumers since there are no theoretical geographic limitations, and consumers can easily select products from different producers without moving around physically (Shah & Nagree, 2010). Despite the rapid use and expansion of e-commerce, privacy has become an increasing and an ongoing concern for technologist, providers, users as well as the policy makers. While it is difficult for a user to complete an e-commerce transaction without providing private information, it is another difficult issue for the technologist, providers and policy makers to protect that information from proliferation (Fitzgerald et al, 2011). If e-commerce users believe that their privacy is not protected, they are unwilling to give private information or even browse online. Fortunately, there policies as well as technologies that are in place to assist protect privacy at current and in future. Some of the companies that are proving services for standardized privacy protection technology and policy include TRUSTe, WebTrust and BBB online (Mayor et al, 2003). However, there is need to understand more about privacy issues so as to develop effective and usable mechanisms for those organizations and other privacy protection policies and technologies (Fitzgerald et al, 2011). Therefore, the characteristics of internet base e-commerce have brought up challenges (issues) that are giving rise to its failure to create trust that is there when transacting face-to-face. Customers and organizations may not be willing to make full use of the internet for e-commerce until they are assured of similar protection that is offered by the physical world. Some of the concerns that are emerging due to the use of the internet include; authentication, security, privacy, and consumer protection (Patterson, 2011) 1.1 Privacy in E-Commerce The term privacy can be defined as the right to be left alone or the right to be able to control one’s personal information. It can also be defined as a set of necessary conditions put in place to ensure protection and autonomy and dignity. Commerce on the other hand can be defined as an exchange of goods and services between two parties subject to negotiated terms and conditions which are favourable to both parties. Ecommerce as described is commerce conducted over an online system and available using the internet. The main purpose of e-commerce is to allow for trading in the online shops via internet between B2B (business-to-business), B2C (business-to-consumer) and C2C (consumer-to-consumer). The parties who are involved in this trade have to include their private information including the mailing information, and the credit number (Xiaoming, 2010). Privacy in E-commerce therefore means protecting the privacy of all the parties involves in conducting trade over the internet. Many people in the world are quickly embracing e-commerce as the art of trading change of traditional to electronic commerce. While conducting business over the internet, users are disclosing their personal information which is then being reproduced and getting to the hands of undesired people therefore increasing the issue of privacy. Almost every day, an issue about privacy violation is reported on the internet. According to several surveys that have been conducted in the past, it has been found that there is a rising level of privacy violation in e-commerce. Many websites have a lot of interest in profiling their users and therefore collect a considerable amount of personal data which may pose a liability risk (Craig &Mihajlo, 2011). 1.2 Consumer privacy laws The consumer privacy regulation and laws are put in place to protect the users of e-commerce from losing privacy as a result of failure to take consumer privacy measures. These laws recognize that the damage done loss of privacy is not measurable and it cannot be undone and that commercial organizations have no interest at all in taking measures to ensure privacy of their customers and in the contrary, they are ready to share this information for commercial advantage. The consumer privacy bill of rights gives a guideline of protection of consumers and certainty for the companies (FTC, 2012). The consumer privacy Bill of Rights uses globally recognized Fair Information Practice Principles (FIPPs) and it provides for the following: Transparency: it states that clients have the right to easily understand information about security and privacy practices Individual Control: it states that clients have the right to exercise full control over their personal information that the company has collected from them Access and accuracy: clients have the right to access all information about in the correct and usable form Security: clients have the right have responsible and secure handling of their personal information Respect for context:-Clients have the right to expect that companies are going to collect, use and even disclose their personal information in ways consistent to how the consumer provide the data Accountability: the client has the right to have their personal information handled by companies which have put in place appropriate measures to assure their clients of their adherence to the consumer privacy Bills of Rights (FTC, 2012). 2.0 Core challenges facing the consumer privacy laws 2.1 Contracts In the heart of every e-commerce transaction is the need to have all parties involved to have a valid as well as a legally binding contract. However, the challenge here is how to conduct an electronic contract and have the parties enforce it as paper documents are replaced with electronic equivalents (Shah & Nagree, 2010). 2.1.1 Offer and Acceptance: The Information Technology Act, 2000 (IT Act) concerns itself with the contractual issues when using electronic records including acknowledgement, receipt, attribution, time and even the place of dispatch. For there to be a contract, there is need to have an offer, an acceptance and a consideration. In e-contract, there is a challenge in ensuring that his three main essentials of a contract. For instance, there is a difficulty in determining whether the offeree has accepted the offer. In addition, the internet communication has no direct line of communication between the receiver and the sender as in other means of communication. This therefore raises an issue in the exact time of acceptance of a contract which is a very crucial determinant of the rights of the parties. Further challenges arise on whether a person should be bound by the terms of a contract without even being able to negotiate it or read it. For example XYZ.com which offers newsletters when a user simply fills in their email address and clicks the subscribe button after agreeing to their terms and conditions. For example a Mr. B decides to fill the form by filling in their email address and then click the subscribe button without taking his time to go through the terms and conditions in the contract this would then amount to a contract with XYZ (Shah & Nagree, 2010). 2.1.2 Online Identity Transactions that occur over the internet occur between parties that have no pre existing relationship which then brings the challenge of identifying a person in respect to their mental capability, legitimacy and even their authority to enter into a contract (Shah & Nagree, 2010). 2.2 Security Security over the internet is of utmost importance when conducting e-commerce. It is required that companies that collect sensitive information from clients put up adequate measures to ensure that there is no unauthorized intrusion. Such companies face security challenges both externally as well as internally. Internally, companies may face security risks from their technical staff who may access this sensitive information from the database and use it for unauthorized reasons. Externally, the company may face security threat from hackers, Trojan horses and viruses. Internally, the company must ensure security against its technical staff and employees (Mayor, Thomas &Kiran, 2003). 2.3 Intellectual Property Rights One of the main considerations that companies involved in e-commerce should have in mind is the need to protect intellectual assets. There is need to acknowledge that the internet is boundless and is not regulated and hence, protecting intellectual property rights has become a great challenge in e-commerce. Where there are laws that have been put in place to protect the intellectual property rights in the physical world, the ability to safeguard these laws in e-commerce is not guaranteed (Fitzgerald, Beale & Lim, 2011). Some of the main challenges that arise in relation to protecting intellectual property rights are as described below 2.3.1 Determining the subject matter of protection: With rapid advancement of technology, new forms of intellectual property rights are emerging and the challenge for any business is determining how best they will protect their intellectual property. For instance, a software company like Microsoft Inc will have to keep in mind that in order to patent its software, it will have to use its physical objects as well to obtain its patent (Fitzgerald, Beale & Lim, 2011). 2.3.2 Ascertaining novelty/originality The intellectual property law requires that the work or invention to be patented has to be original or novel. However, the challenge comes where the work or invention in electronic form has been used on the internet which then hinders the originality claim. An e-commerce company has to devote a lot of effort while trying to satisfy the parameters set by the intellectual property law including proving the originality of the invention (Fitzgerald, Beale & Lim, 2011). 2.3.3 Enforcing IPRs The internet user’s makes reproduction and dissemination of the already protected Intellectual Property and its virtual anonymous environment makes it very difficult to detect the infringer. It It is also very difficult to adjudicate as well as decide this cyber disputes. The company must also keep in mind that since the Intellectual Property Rights apply only within the territory, it becomes very difficult to decide whether the Intellectual property rights have been infringed if it is used over the internet which is boundless in nature. For instance is Company X which deals in software products has a trademark which was registered in Australia but another web portal in India uses the same trademark to market its product, it may then become difficult for X to sue the web portal in India for infringement. In addition, due to the differences in the two countries, what constitutes an infringement in Australia may not constitute an infringement in India (Fitzgerald, Beale & Lim, 2011). 2.4 Jurisdiction In accordance to the traditional internal law, a nation’s jurisdiction only applies to people within that country or to those transactions that occur within the country. However, when it comes to e-commerce transaction, if a company gets clients from another country as a result of using the website, it is required that such companies defend any litigation that may arise in that country. For this reason, any materials that the company place on their website should be reviewed to check its compliance with the laws of jurisdiction where a company wishes to promote, sell and market their products. The fact that parties to a transaction are in different jurisdiction pose a challenge as it may have implication in the enforcement and interpretation of a contract. For instance, company X in Australia, having its server in London sells its commodities in USA. In this situation, the client then receives some defective goods. The challenge to the client would be under which jurisdiction they will sue company X to claim damages (Shah & Nagree, 2010). 2.5 Privacy and Data protection It is very important for every e-commerce website to maintain the privacy of its users. However, lack of secure systems and use of innovative technologies has made it easy to obtain confidential and personal information about companies and individuals therefore there is urgent attention on privacy reforms (Patterson, 2011). Privacy is an essential precondition for business to customer (B2C) commerce; however, lack of adequate privacy regulation has continued to create trade barriers. Privacy concerns have been fuelled by ability of companies to use data integrated technologies like consumer profiling to offer a more fine grained approach to their market efforts (Fitzgerald et al, 2011). Therefore, the use of more advanced technology has lead to increase awareness of potential violations of the privacy law. According to Morgan, 56% of Australians are concerned about invasion of privacy as result of new information technology. In 2001, Microsoft users file complains in the United States about privacy issues with its windows XP operating system, some features of the operation system would store personal information such as credit card data and passwords and there users were not required to re-enter this information when accessing the websites (Patterson, 2011). Privacy challenges can arise in two ways, namely; Information relating to the trails left by internet transactions The content of information sent to a seller such information submitted when registering at an internet site or the content of an email One privacy challenge that relates directly to the nature of the internet is the manner in which information is transmitted across the internet. For instance, an email goes through hundreds of computers to reach its ultimate destination and therefore if effective encryption is not in place, there would be nothing to prevent the system operators of all the computers it has gone through to view the content to that email. Arguably, this can be seen as a security challenge rather than privacy challenge, privacy is broader than security as adequate security is a precondition for the effective protection of user personal data. The other related challenge arising due to the internet is the increasing size of information which is being collected and retained in relation to users and this information can now be cross referenced and accessed much more readily. The internet makes it possible for sites to gather process and store personal information about users, for instance, it very common for websites such as cookies and web bugs to gather information through the technological devices (Fitzgerald, 2011). These have brought about concerns on privacy protection. This is mostly notably in the context of the “EU data protection directive which restricts transfer of personal information from its member states to other states that do not have adequate privacy safeguards, the effect of this directive is that any state the exchanges personal information with any EU countries is required to comply with this strict set standards of privacy protection (Shah & Nagree, 2010). In conclusion so of the most important privacy concerns over the internet include; Sending spam e-mails Unreasonable check and scrutiny on an worker’s activity including their email correspondence dissemination of sensitive and confidential medical, financial and personal records of individuals and companies tracking activities of customers by using websites 2.6 Consumer protection The other issue that is brought by electronic transaction is customer protection. Challenges arise due to the ephemeral nature of Internet trading, lack of adequate information about suppliers, lack of access to customer complaints and dispute resolution mechanisms as well as failure to comply with advertising and product safety requirement (www.white house, 2012). Just like the US, Australia has introduced consumer protection laws covering issues such as deception and fraud, cooling off and disclosure. However, the challenge lies in ensuring that these laws are enforced. Offering services and goods across board over the internet brings up customer protection issues (Patterson, 2011). Moreover, the internet provides a platform for misleading and false activities such as deceptive advertising. Internet has brought about massive potential for frauds; examples include scams that have been identified by the Australian Competition and consumer Commission such as misleading claims concerning business opportunity, pyramid selling schemes, and false lotteries and pries (Patterson, 2011). 2.7 Authentication Even though the internet eliminates the need for physical contact, it does not do away with the fact that any transaction or contract would have to be authenticated (Shah & Nagree, 2010), In the past, there have evolved different authentication technologies to ensure identity of parties entering into online transactions but there are some issues that need to be considered by organizations; 2.7.1 Digital Signatures to be used as authentication tools According to the IT Act, “digital signatures should be used for the purpose of authenticating an electronic contract and must follow PKI (Public key infrastructure). Therefore, the acts limits other technology for authentication purposed, e.g. if an organization uses some other forms of authentication technology, it said that there has been no authentication (Shah & Nagree, 2010). 2.7.2 Evolving inter-operable technology standards Different states use different authentication standards and at times specifying a clear technology. However, since businesses and customer has embraced electronic transactions, these different standards should be inter-operable so as to facilitate state to state transactions (Shah & Nagree, 2010). To achieve this, there is need for a high degree of co-operation among technology providers and states. For instance, an e-commerce firm which uses KPI authentication technology for online transactions with US clients, the same company may use a different authentication technology while entering into an online contract with another client from another state. This means that the contract with foreign clients may not be recognized in the US as they did not use KPI authentication technology (Shah & Nagree, 2010). However, such contracts may be enforceable in the foreign jurisdiction depending upon the laws of the foreign country. Conclusion From there above analysis, e-commerce has brought with it a lot of advantages especially in business as it has made it possible to do business beyond the regional borders. However, due to its boundless nature, it has been very difficult for clients to retain their privacy as their personal information is being reproduced and disseminated without their permission. To enhance privacy, the consumer privacy law was put in place but it has faced a lot of numerous legal challenges as analyzed above. Therefore, the rapid expansion of e-commerce has left legal system struggling to keep up it. Some of laws which are struggling include privacy and consumer protection laws. Challenges that have emerged include privacy and data protection, consumer protection, authentication, security, contracts, intellectual property as well as jurisdiction. Therefore, there is need for adequate legal documentation which will go a long way in protecting electronic commerce. As someone had said, “through the Internet is a goldmine, without adequate legal protection it could become a landmine” References Shah A & Nagree (2010) Legal and tax counseling worldwide, legal issues in ecommerce, Mumbai: India Fitzgerald, Beale & Lim (2011), Internet and E-commerce Law Technology Law and Policy, Thomson Law book Patterson D (2011), Info economy Issues E-commerce law, The white house (2012) Consumer data privacy in a networked world: a framework for Protecting privacy and promoting innovation in the global digital economy, Washington: USA Fitzgerald B, (2007) Internet and E-commerce Law: Technology, Law and Policy, Law Book Co of Australasia: Australia Awad, N. F. and Krishnan, M. S., “The Personalization Privacy Paradox: An Empirical Evaluation of Information Transparency and the Willingness to be Profiled Online for Personalization”, MIS Quarterly, (30:1), 2006, pp. 13-28 Cassidy, C. M., & Chae, B., “Consumer Information Use and Misuse in Electronic Business: An Alternative to Privacy Regulation”, Information Systems Management, Summer 2006, pp. 75-87 Curran, C. M., & Richards, J. I., “Misplaced Marketing. Public Privacy and Politics”, Journal of Consumer Marketing, (21:1), 2004, pp. 7-9 Mayor.S.D, Thomas C R & Kiran J (2003) E-commerce policies and customer privacy.Information management and computer security (11/1) Craig. E. W & Mihajlo Z (2011) A personalized approach to web privacy: awareness, attitudes and actions. Information management and computer security, (19/1) Xiaoming L (2010) privacy in e-commerce: A general perspective. University of Windsor: Canada. FTC (2012) Protecting consumer Privacy in an era of rapid change Read More