E-Commerce Sites’ Ethical, Legal, Regulatory Issues

Electronic commerce mainly consists of business-to-business (B2B) and business to consumer (B2C) types of transactions. One must understand the nature of these transactions to study the differences in ethical legal and regulatory issues in B2B and B2C sites. B2B (Business to Business) site is one that specifically caters one business to the needs of another business. This would include providing in-house service or maintenance software/networks for other businesses.

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Examples of B2B sites are Microsoft.com, Macromedia.com, etc. B2C (Business to Consumer) site is one that specifically caters to a group or target consumer in order to expose, sell or market goods or services to the public. Thus the main difference is that B2C transactions focus more on the individual consumer or group than B2B transactions (IBM, 2008). Examples of B2C sites are Amazon.com, ebay.com, Walmart.com, Borders.com, etc.

With the growth of e-commerce there are new ethical dilemmas and problems such as: sharing customer information on the internet, releasing the customer list for sales information; advertising the benefits of the system with ambiguous or lying statements; and using the internet or web technologies such as cookies or web bugs to collect customer’s movements on a Web site (Li and Du, 2004) and they are different in the cases of B2B and B2C environments.

Legal and Regulatory Issues

In terms of legal and regulatory challenges, controversies and issues in Ebusiness involve electronic copyright, cash policies, tariffs, privacy, digital offers and many more. As Ebusiness is still in the process of emergence there is the need for consistent rules and procedures. There are tax related issues in both types of transactions as all business needs to be properly accounted and regulated. Another issue concerns the buying and selling transactions being conducted via the Internet that often go beyond the national boundaries of one country. This emphasizes the role of Government and laws of other nations (Walsh, K. 2001).

However, both of these issues affect B2C transactions more as it involves buying and selling goods or services, sometimes across borders. Regulations and restrictions can restrict B2C transactions. An evident example is the fixed price regulation of books. Because of this regulation, book prices cannot be reduced even if costs are dramatically reduced by use of internet technology. On the contrary, the total cost becomes higher if bought through the internet because of additional delivery costs. In Japan, there is fixed price regulation of books and statistics show that the total amount of internet book sales in Japan is only about three percent of that of Amazon.com alone, which has no fixed price book regulation (Barfield et al, 2003).

B2B online transactions are largely managed through private contracts. Contracts act as legal statutes binding the players together, defining roles and responsibilities and providing for ready made dispute resolution method (Bidgoli, 2004). On the other hand, B2C online transactions are regulated by terms of sale, contracts and consumer law more generally. Disputes from B2B sites are mostly resolved through legal proceedings citing terms in the contract.

These proceedings could either be online dispute resolution methods using a cybercourt or normal legal proceedings in a court of law. Most disputes from B2C transactions are settled relatively painlessly under terms of sale or in some rare cases settled via consumer protection law or other legal mechanism. Cross border transactions are regulated through transnational agreements such as the General Agreement on Tariffs and Trade (GATT) (Bidgoli, 2004) in the case of B2C. Regulation of the internet began with the European Union taking the first steps to the creation of setting standards for industry conduct and consumer protection. The American Arbitration Association, headquartered in New York City, is the leading dispute resolution organization in the United States and has been in operation for more than seventy-five years as the world’s largest ADR provider. In May 2000, it launched an online dispute resolution program for B2B claims (Campbell et al, 2003).

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On the B2C market, consumer protection is very important. Legislation usually emphasizes the consumer’s protection, especially when food is sold. On B2B markets legislation generally treats both sides of the contracts equally (Barschel, 2007). Many legal experts believe that a model code should enhance freedom of contract not contain mandatory rules, not impose contractual terms or types, but resolve only the simplest of interpretation of the words used in directives and leave the parties with maximum room for inventiveness, ability, competence and economic power.

According to this idea, no regulations should be included for B2B transactions while some regulations of merely elementary protection should be included in business-to-consumer relationships. In the European Union, there has been no flexible approach. E-commerce contains regulations that influence the law of contract. Twigg-Flesner et al suggest that harmonization of contractual law should be applied for the most frequently used B2B contracts or contracts that would most affect consumers.

There are also differences in the context of problem on duties regarding warranty. Less reliability is placed on the statements of the seller in B2B activities than in B2C transactions. The assumption here is that with business as the client there is an expectation of a greater level of expertise than the consumer.

But as a whole, the World Wide Web is unregulated. Although there are regulatory rules and regulations in form of laws and acts like CAN-SPAM, gambling laws, Federal Telecommunications Act and the Computer Decency Act among others, still the Internet has been in a large part open to the free operation of the market.

Ethical Issues

Ethical perspective requires that all participants in a business transaction act with moral responsibility. When it comes to ethical issues the main difference can be seen on the level of attention given by the people to the two types of transactions: B2B and B2C. As the principal ethical contention in Ebusiness is trust, the focus on this value tends to give more weight on the B2C and the risk that it poses to traditional ways of doing business. So far critics like the writers have largely given least weight on the ethical issues that are instigated by enormous potential of the Internet in the B2B transactions.

Ethical issues on ebusiness tend to give emphasis on activities or transactions that are connected or related with the sensitivity of collected information that is in turn held and transferred by means of Internet mediated communication. Ethical issues include the matter of privacy regarding individuals’ information, the veracity of the given information, ownership of the information or intellectual property rights and the accessibility of the computer held information. These just manifest that emphasis is very much directed towards the individual consumer. These also imply a disregard on the valuable area of electronic commerce or the business-to-business.

To measure if e-commerce organization conducts its operations ethically, there is a standard known as the EBtrust mark. It is interesting to note that Best Buy, a major reseller of electronic goods for the B2C market has obtained the EBtrust from DNV (Ovreberg, 2002). In the B2B information control issues that are based on case privacy are less critical when it comes to the personal level. However, moral precepts are also relevant to the business to business. From time to time there are instances of ethical dilemmas in B2B sites as well. These cases may be related to: freedom of choice; transparency; facilitating fraud (ethical/illegal activities of others). (Harris, L. 2002).

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Staples.com is a B2B office supplies delivery provider which owns and operates its own fleet of trucks and also uses third party logistics providers They transact both through their stores and with their website.

Works Cited

Barfield, E. Claude; Heiduk, Gunter and Paul J. J. (2003). Internet, Economic Growth and Globalization. Springer Publications.

Barschel, Hauke (2007). B2B versus B2C Marketing – Major Differences along the Supply Chain of Fast Moving Consumer Goods (FMCG). GRIN Verlag Publishers.

Bidgoli, Hossein (2004). The Internet Encyclopedia. John Wiley and Sons.

Campbell; Campbell, Dennis and Woodley, Susan (2003). E-Commerce. Kluwer Law International.

Harris, L. (2002). The Ethics of E-Banking. Journal of Electronic Commerce Research, VOL. 3, Issue 2.

IBM (2008). How B2B differs from B2C. iSeries Information Center. Web.

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Li, Eldon and Du, C. Timon (2004). Advances in Electronic Business. Idea Group Inc (IGI).

Ovreberg, Anders (2002). Best-Buy.com signed EBTrust contract. Web.

Twigg-Flesner, Christian; Parry, Deborah and Howells, Geraint (2007). The Year Book of Consumer Law 2008. Ashgate Publishing Ltd.

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