The contribution of Information and Communication Technology to Economic Growth
Information and Communication Technology (ICT) can contribute to economic growth. One of the most visible examples of the way in which ICT can improve the economy is E-commerce. However, it is not enough to know that this instrument is powerful. In order to utilize E-commerce to the best possible use, we need to understand every aspect of it. We must fully know how it works and how it should be used. To maximize its power, we must find creative ways to put this knowledge to practice and widely disseminate it. (Koki Annam – UN Secretary General).
There are many issues concerning E–commerce. Such a powerful tool must be understood thoroughly in order to put it in the best possible use. One of the issues regarding e-commerce that gained global concern is security. To fully understand the issue, let us first discuss the history of the World Wide Web (Internet) and the development of e-commerce.
WHAT IS INTERNET?
Before we explore the legal and commercial realities of e commerce, it is first necessary to consider the nature of the Internet. We must do this in order to be able to apply the law to it. Common misconceptions can arise merely from the description of the Internet. Use of `the’ implies that it is some constant `thing’, which has definable edges and a shape and even a legal presence. Actually, the Internet is a communications infrastructure, nothing more. It is made up of countless thousands of computers that are connected together by means of telecommunications systems. Not all these computers will be connected at any one time and hence it is impossible to define its size and presence. When one user’s computer is in communication with another user’s computer, the information that is sent and received by each will travel in different and unpredictable routes and will pass through many computers on its journey. All the computers and communications services providers that are not either the original sender or the final recipient of the information are intermediaries or `conduits’.
Internet connectivity is commonly established by using an Internet Service Provider (ISP). ISP’s are organisations that have a permanent presence on the Internet and provide a fixed line or dial-up service. Some ISP’s make a charge for this service, but many do not. However, most businesses will require a website, and hence web space on the ISP’s server, and this is normally a chargeable service. Businesses wishing to establish a web presence for the first time are advised to consult the trade press (business Internet magazines such as The Industry Standard) for information on ISP’s.
Before looking at the legal detail and common pitfalls of e-commerce, we will initially consider the nature of e-commerce — what exactly is it? We will also look at some terminology that is frequently used by e-commerce lawyers and business people. E-commerce (or electronic commerce) is the term used to denote a commercial (usually contractual) transaction that takes place between two or more people using the communications infrastructure known as the Internet. The first thing to note is that there is a range of e-commerce transactions, the following of which are examples: 1.the purchase by an individual of a book from a commercial website such as that run by Amazon. COM 2.the ordering by Company A of office stationery from Company B’s website. 3.the exchange of e-mails between two persons whereby it is agreed that a certain service will be carried out by one party in exchange for a fee from the other.
We do not usually think of the latter type of transaction as falling within the category of e-commerce, but it is just as much an electronically formed contract as the other two examples: an exchange of e-mails can result in a legally binding contract. For example, if I send you an e-mail offering to sell you one dozen doughnuts, and you respond accepting my offer, this is just as much an e-commerce transaction as one taking place using the colorful pages and flash technology of the World Wide Web. Initially it will be important for an e-commerce business to identify whether its e-commerce transactions will be classified as B2B (business-to-business) or B2C (business-to-consumer). This is because the law applies in a different way to each. Of course, it may be that the e-commerce business anticipates engaging in both types of transaction. World Wide Web — that part of the Internet which uses the Hyper Text Transfer Protocol (HTTP) to display so-called web pages and to allow links between such pages anywhere on the Internet, ISP (Internet Service Provider) — a provider of Internet connectivity, ASP (Applications Service Provider) — an online provider of computer applications, such as software. The subject of e-mails and the potential liabilities that can arise for employers from their inappropriate use is a subject in its own right and will not be considered in detail in this Report.
THE LAW OF COMMERCE
The law does not currently recognize an e-commerce transaction as being inherently different from a non e-commerce transaction. However, due to the online nature of e-commerce, particular aspects of the law apply differently where a transaction takes place online. This section will briefly consider those aspects of the law that apply to both online and offline transactions. This will be followed by an introduction to those areas of the law that have particular application in the case of e-commerce.
In the case of an existing business, wishing to move online, the legal infrastructure will already be in place. For start-ups, it is important to consider the way that trading is to be carried out. It may be that the business will be a partnership. Alternatively, it might be a registered limited company. E-commerce start-ups should usually be advised to use a company for trading purposes. The advantages are many, the two main ones being that it is easier to attract investment capital, and that the owners of the company (its shareholders) will benefit from limited liability.
Shares and responsibilities
This is an issue for start-ups. If a company is chosen as the appropriate trading vehicle then there will be a number of issues that must be agreed upon by the participants: What are the appropriate proportions for share ownership? Who are the directors going to be? Who will be Company Secretary? Will a shareholder agreement be needed? Appropriate legal advice should be sought on these issues.
Once again the normal considerations will apply to both offline and online transactions. The position is slightly complicated in an e-commerce transaction due to the greater likelihood that such a transaction will involve parties who are not located in the same country. Chapter eight considers two particular aspects of taxation that are relevant only to e-commerce.
Intellectual property rights
The subject of intellectual property is relevant to all businesses but may be particularly important to e-commerce as the business model may involve a greater use of intellectual property. For this and related reasons this Report will deal with a number of intellectual property issues in its various chapters.
Terms and conditions of trade
Again, this is relevant to all businesses. The terms on which a business obtains its supplies, and upon which it trades with its customers, are of fundamental importance. Incorporation of a business’s terms into its contracts is not usually a problem with offline transactions but significant issues commonly arise with an e-commerce business — see Chapter four for further details. Choice of law and jurisdiction will be an issue in some contractual arrangements, both on and offline.
THE LAW OF E-COMMERCE
Of greater significance are those areas of the law that apply specifically to e-commerce. This may be due to the fact that `old’ law applies in an unusual way to e-commerce due to the unpredictable (at the time that law was made) nature of the transaction. Alternatively, it may be due to the presence of ‘new law ‘, which, though it may not have been formulated to deal with e-commerce exclusively, clearly has it in contemplation as the main target of its intended regulation. The list that appears below contains those areas of law that are of particular (and in some cases exclusive) interest to e-commerce businesses:
Formation of contract
How does the law of offer and acceptance apply to an online transaction? In other words, how will a contract be formed in the virtual world? Will a web page that displays a product for sale be an offer or an invitation to treat? This issue has yet to be decided by the courts.
Intellectual Property Rights
Much of the value in an idea for an e-commerce website can be tied up in the Intellectual Property Rights (IPO’s).It is essential, particularly when trying to attract seed money from venture capitalists, that these IPO’s are delineated and transferred to the trading vehicle. They may be owned by a number of different people and so IR assignments will need to be executed at an early stage. In any event the value of IPO’s is notoriously underestimated by businessmen. Appropriate steps must be taken to protect this value and to take steps to safeguard any brand name and associated goodwill.
Copyright is of course comprised in IPO’s, but there are some specific considerations in relation to copyright that need to be looked at. We know that the law of copyright protects literary and artistic works and that these are the sorts of works that comprise a web page. So far so good. But what about links from one web page to another? Could they constitute breach of copyright? Of course in most instances, there would be no complaint because a link from one website to another would generate increased traffic and this surely is the objective of websites. But in one case a newspaper’s website contained a link to the news section of another newspaper’s website. It was held in an interim application to the court that this could constitute copyright infringement. The reason for the case was that the link bypassed the front (or home) page of the other website and so the users did not get to see the advertising messages on that home page — this technique is known as deep-linking. Sites that undertake deep-linking should be aware of the potential legal challenges that could arise.
Domain names and cyber squatting
The fact that every website must have a unique Internet address means that many commercial enterprises will be disappointed in their desire for a specific domain name. This is the problem that is inherent in a first-come-first-served system of domain name registrations. Difficulties can arise when one business feels it should be entitled to use a domain name that has already been registered by someone else.
This area of the law governs what may and what may not be done with individuals’ personal information. In many cases much of the value in an e-commerce business is in its customer database, which may consist of a variety of information including name, address, e-mail address, date of birth, shopping habits, annual household income, etc. The law establishes a code of conduct (known as the Eight Data Protection Principles) for the processing of such data as well as a right for every individual to see a copy of such data if they request it.
Distance Selling Regulations
Towards the end of 2000, and in response to European Union legislation, the UK passed the Consumer Protection (Distance Selling) Regulations. These regulations require all UK businesses that enter contracts with consumers `at a distance’ (clearly this includes, but is not exclusive to, Internet transactions) to do two main things that they were not legally obliged to do before. The first is to provide certain specific information to the consumer and the second is to allow consumers a `cooling-off’ period of seven working days from receipt of goods to return the goods for a full refund.
There will be a number of legal considerations which arise from the infrastructure and services which are required for an e-commerce business. Hence there may be purchase or rental of hardware and software, rental of server space if required and a website hosting and development agreement where the hosting is to be outsourced.
Law and jurisdiction
One of the difficulties with an Internet transaction is that the buyer and seller may be in different parts of the world. The question then arises as to which legal system will govern the contract in the absence of any binding express provision. A related question but one which is more complex and somewhat political is which court system will have jurisdiction to hear any relevant litigation?
WORLDWIDE DEVELOPMENT OF E-COMMERCE
Arab Countries: Information and communication in general, is making its mark in the Arab World. Companies are slowly embracing the new technology to give them an advantage in the global economy. E commerce is becoming more widespread. Governments and companies expect benefits of participating in e-commerce. Enterprises are reviewing their strategies, incorporating e-commerce in their plans for the future. Arab enterprises are exposed to stiff global competition. Enterprises see advances in Its as opportunities for them to penetrate the globally and access remote markets. The future looks bright for businesses in the Arab countries but visibility and success in the international market require globally competitive technologies.
Asia-Pacific: E-commerce is seen as a big contributor in the economic growth all throughout the region. E-commerce is considered as a powerful tool in the global economic competition, enhancing productivity, promoting gender equality, increasing efficiency, raising the quality of goods and services. E-commerce also aids in the promotion of international trade and investment. It is considered as a key to economic and social development in the region. The countries are seeking to develop cooperation the region. They base national ICT and e-commerce strategies on the economic and social context of each country.
Europe: Perhaps The United Kingdom, France and other European countries are leading when it comes to E-commerce. Members of the European Union (EU) are making strategic developments in the field of electronic commerce. EU Member States have developed an electronic commerce action plan. France, Italy and Great Britain created concrete action plans that aim at fast action and success. The European Commission’s goal is to promote electronic commerce all throughout the region with all available means. The developments of electronic commerce in the region are being supported through structural and cohesion funds. The introduction of Euro aided in the development of e-commerce in Europe. V. Ellis writes, “Combined impact of the single currency and e-commerce in the region will result to a stronger and deeper single market”.
Latin America: E-commerce in Latin America is developing in a tremendous rate. It is expected to make up a big part of the Mexican and Brazilian economy because of its fast growth rate. E-commerce is growing the fastest in Brazil in areas such as online advertising and user numbers. However, the available market in Latin America is still small. Developments must be made to improve e-commerce in other Latin American countries. The economy of Latin American countries is expected to flourish once the developments in ICT are completed. Many companies are investing on infrastructures that will accelerate economic growth. In general, e commerce in America is showing a great potential and will remain exiting for the years to come.
Australia: Jingo GAO (2005) reports that E-commerce offers potential benefits to Australians. E commerce in Australia is growing. Internet is being widely used as a business tool (p.20). E-commerce helps bridge the gap between Australia and major commerce centers in Asia, Europe and America (Dont and Harper (2002) Africa: Africa is far behind when it comes to the adoption of e-commerce. The impact of e-commerce in the region is very minimal. The countries that are taking the lead on e-commerce are Egypt, Ethiopia, Morocco, Tunisia and South Africa. There is a need to build telecommunication infrastructure in order to promote growth in e-commerce. The lack of telecommunication policy and a regulatory authority in the region impede the flourish of e-commerce. Africa is widely seen by the International Community as corrupt, full of crimes and fraud-ridden. There have been efforts to unite the continent and promote cooperation among African nations and established a strong internal and external trade policy.
United States: The United States of America is generally seen as the global leader in e-commerce. E-commerce is the fastest growing sector in the American market (Kraemer et al, 2002). E-commerce is now an essential feature of every American Business (Sheriff 2005, p19). The tremendous growth of e-commerce in The United States is due to a higher presence of globalize establishments and high usage of technology. E-commerce benefits the economy, improving customer service and generating more sales and improving productivity (Kraemer et al, 2002).
WORLDWIDE REGULATIONS, SECURITY AND PROTECTION
E-commerce is growing in a very fast rate all over the world. Many companies are going global and aiming to join the international competition. But there are issues that must be considered. There are problems that must be faced. Such a powerful tool as e-commerce needs regulation in order to ensure protection and security. Many organizations seek solve problems regarding e-commerce. There are different organizations that attend to different issues. These organizations are contributing in the development of global e-commerce law at the international level. Some of these organizations are listed below:
Organization for Economic Co-operation and Development (OECD) leads in developing policies that will ensure e-commerce consumer protection and privacy. A program which focused in building trust for users and consumers was created by the organization’s members in 1998. The organization came up with guidelines to ensure the protection of consumers. It also promotes the use of technologies that will enhance privacy. The World Intellectual Property Organization (WIPE) is an organization that protects original works. A Digital Agenda” was created to deal with the intellectual property system in the internet. The organization evaluates the intellectual property law and make provisions for its application in the internet. It aids in the creation of online systems that will effectively deal with online disputes. The European Union (EU) has been actively shaping the e-commerce law in Europe and around the globe. The Union implemented directives such as Directive 95/46/EC which focuses in the protection of individuals with regard to personal data process. Another international body that has involvement in e-commerce is The Council of Europe. The council is responsible for the cyber crime treaty in 2001. The treaty aims to stop online criminal activity such as fraud and hacking. Consumers International has called on governments to establish policies that will protect the e-commerce consumers. The organization plays an important role in making e-commerce protection policies.
United States: The United States of America is one of the leading e-commerce law and policy developer. There are many agencies and organizations in the country that play important roles in e-commerce protection and security. The leading enforcer of privacy and consumer security is The Federal Trade Commission. The American Bar Association created policies regarding jurisdiction and privacy.
Philippines: In the year 2000, the “Electronic Commerce Act” was passed. The said law recognizes the role of Information’s and Communications Technology (ICT) and E-commerce in economic growth and nation-building. It seeks to facilitate domestic and international dealings, transactions and agreements through the use of ICT. The law promotes the creation of an information-friendly environment, identifying the role of the private sector in rendering services and investment contributions to develop and utilize to the fullest the benefits of The Information and Communication Technology in the country. The private sector is obliged ensure network security.
United Kingdom: An act was introduced in The United Kingdom in 1998. The Data Protection Act aims to ensure privacy and data protection of the citizens. The Electronic-commerce Directive is being implemented in the United kingdom to ensure consumer protection. The consumers are entitled to fair service and clear information about the company and how to complete a transaction.