E-commerce special report: Know your laws

Summary:Part III: Numerous e-commerce laws have been enacted over the past years, and there are more to come. Here we explain which are the most important laws that any e-commerce operation must be aware of

Any company engaging in e-commerce needs to be aware of the myriad laws now in place. If you are engaging in e-commerce then you have obligations under everything from the Data Protection Act and the Electronic Commerce Regulations, through to the latest rules on cookies and spam, the VAT directive, defamation laws and just what the best solution is when you get the price wrong on your Web site. Pricing errors
Getting the price wrong on articles sold on e-commerce sites can be expensive: Just ask Argos, Kodak or Amazon: all have recently made the mistake of pricing articles wrongly on their Web sites, and all suffered a significant amount of bad publicity because of it. In January 2002, Kodak succumbed to public pressure and bad publicity, and offered to honour a £100 digital camera offer that it mistakenly posted on its site (the DX3700 camera normally cost £329 at the time). And in the wake of the most recent incident, when Amazon.co.uk priced a £300 iPaq PDA at £7.32, lawyers said disgruntled customers may have a case despite Amazon's claims to the contrary. When Amazon first became aware of the problem, in March 2003, it first closed the site for a short time, and then contacted customers to say the sales were cancelled, as the small print on the site states that Amazon has not entered into any contract until it sends an email saying it has shipped the products. However, law firm Beale and Company then advised shoppers to take their case to court because, it said, contract law may work in their favour. Beale and Company is not alone in this opinion. Nigel Miller, a partner at City law firm Fox Williams, points out that the small print on the Amazon site says: "No contract will subsist between you and Amazon.co.uk for the sale by it to you of any product unless and until Amazon.co.uk accepts your order by email confirming that it has dispatched your product". However, said Miller, "This may not be binding on the customer if it is not sufficiently visible or if it is unfair." Amazon's case would also be undermined by its confirmation email -- the one it said did not constitute a contract -- which includes advice on how "To cancel this contract..." Michael Archer, a partner at Beale and Company, said: "It could be argued that Amazon is stating that this is acceptance of the consumer's offer, and it would be surprising if a court were to decide that no contract existed at this point." Despite this, Miller believes that consumers would be likely to lose a long drawn-out fight, if it went to court. "If Amazon loses on [the wording of its conditions], it can argue 'mistake'. This is a most complex area of law and the cases are somewhat confusing but I suspect Amazon would win on this point in the end." Even so, Miller suggests that Amazon.co.uk may actually be better off honouring the sales at the lower price than it would be fighting individual claims and suffering the associated negative press: "You can argue about the legal position but the commercial reality is that a consumer Web site will want to maintain its customer goodwill and it will not be cost efficient for it to fight multiple claims." Now, new rules have been drawn up by the Department of Trade and Industry to help Web traders avoid costly breaches of consumer protection rules. The Code of Practice for Traders on Price Indications gives practical guidance on complying with the Consumer Protection Act 1987 (CPA). The update covers the Internet and other distance selling methods. Although the Code is not legally binding, e-tailers would be well-advised to adhere to its benchmarks, since the penalty for giving a misleading price indication (including an out of date Web page) can be a fine of up to £5,000. The revised version of the Code is expected to be finalised before the end of the year. E-tailers should keep pricing information under constant review, ensure that out of date pages can no longer be accessed, and implement an "early warning system" to draw attention to unusual site traffic. The worst thing an e-tailer could do is to follow Kodak's example. The big mistake that this company made was in the wording it used to confirm sales to users. Companies selling products over the Internet should use wording to the effect that when somebody is clicking on a product and going through the shopping cart system, that they are making an offer to the buyer that if accepted by the vendor will form a contract. "The legal consensus was that Kodak had formed a contract with the customers at the point when the confirmed acceptance of the customer's order, unless the company said something to the contrary," said Struan Robertson, a solicitor with law firm Masons. In fact, the confirmation email that Kodak sent out to customers appeared to do exactly the reverse, and actually referred to itself as a contract of sale. "If that is the case, then it sounds as if a contract had been formed and Kodak would not have had a leg to stand on," said Robertson. "I'd have been very surprised if Kodak managed to convince the court there was no contract." Kodak's blunder echoes a mistake made by Argos in 1999 when it offered television sets online for £3.

Topics: Tech Industry

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