E-commerce regulations offer lawyers opportunity to help and advise entrepreneurs, business owners

By Mike Scott

Legal News

Increased e-commerce activity, especially by retailers with little or no experience in the electronic frontier, could be a boon for area lawyers with expertise in the field.

The legal advice can be particularly valuable for businesses operating e-commerce websites that handle credit card information and other consumer data, said Andrew Goldberg, a partner and expert in business law and technology for the Kemp Klein Law Firm in Troy.

"You need to be clear on the items and conditions that are set forth on your website and in your (product) listings," Goldberg said. "It is critical that the terms of the contract and conditions of the sale are clearly outlined and defined."

There are certain contractual requirements of businesses that engage in e-commerce activity, both in federal and state statues, said John Carter, managing partner of John T. Carter & Affiliates in Troy. Some of the statutes are related to advertising requirements and what needs to be a part of an online contract.

"There are many canned contracts out there that may or may not be in compliance with federal statues," Carter said. "In many cases just adhering to these cookie cutter contracts won't help (e-tailers) to accomplish their goals. You just can't download and slap on template contracts and (expect) that is enough."

The contract helps to define the relationship that an e-commerce website has with its consumers, Carter said. If the contracts are not properly created, it could result on a breach of contract lawsuit or one related to misrepresentation. Under the Michigan Consumer Protection Act, consumers have protection against many unfair business practices. However, the act only applies to "the conduct of a business providing goods, property or service primarily for personal, family or household purposes."

The Michigan Court of Appeals has ruled that the protections of the act do not apply to transactions intended primarily for business or commercial purposes. Not adhering to provisions in the act, can actually place an e-commerce business in jeopardy from a lawsuit standpoint. One way to avoid this is to be clear in what is being sold and when consumers can expect delivery, Goldberg said.

"If you're an (entrepreneur), you want to have specific answers to (frequently asked questions) and set up a help desk to provide for customer support," Goldberg said.

Occasionally e-tailers will look to business lawyers with an expertise in online selling for advice on operational responsibilities, but often the engagement of a lawyer is because of a need to better understand legal requirements and ramifications, he said. However, lawyers also can point their clients in the right direction to address or avoid certain trends.

One of those is how to handle a social media process, both from the standpoint of reacting to customer comments and pushing out social media from a business perspective as part of a marketing effort, Goldberg said.

"I have seen more instances lately where consumers will slam (an e-tailer) on a Facebook page or Twitter feed and it can cause some serious damage in terms of revenue, sales, and reputation," Goldberg said. "It is important for such a business to dedicate a person who is monitoring social media and is also getting your intended message out there."

The marketing effort also can include blogging, online advertising, and pay per click (PPC) advertising, Goldberg said. The inbound and outbound linkage policies also should be streamlined.

Michigan was an early leader in consumer protection, establishing the nation's first statewide Consumer Protection Division in the Attorney General's office in 1962. This act prohibits a variety of specific misrepresentations in commerce and advertising, regulates the return of down payments and conditions of signing agreements and service contracts, and requires sellers of business opportunities to file notice with the Attorney General.

However, there are other threats as well. If a contract is deemed invalid by courts, or another type of law is broken, consumers can walk away from any contracts they have signed, or purchases made at the website.

Transactions over the Internet also must adhere to interstate commerce laws, both website related and phone related, Goldberg said. But perhaps one of the most important legal issues that e-commerce website owners need to understand is the importance of owning the content that is placed on the website.

"You need to consider how your website is being developed and hosted," Goldberg said. "There are times when a website developer or host may have a contract in place where they own the data and that can cause some issues down the line."

There are also procedures that entrepreneurs should know that can help them define their site as one trusted by Google, and therefore more likely to be visited by qualified leads or shoppers.

Carter's goal is to give small businesses, many of them family owned, the awareness needed to successfully run an online retail website. Such clients generally will require a lawyer to provide an overview of regulatory aspects that are required, such as details pertaining to the Uniform Electronic Transfer Act. That federal statute outlines the requirements for electronic signature usage and what conduct is suitable for an electronic signature to be accepted as a contract.

"I try to provide clients with what is needed to ensure that enforceable contracts are in place," Carter said. "When done properly there is no difference between an electronic contract and one signed by pen and paper. However, it is important to define the different types of online transactions."

Published: Tue, Dec 7, 2010