Basic Regulations and Guidelines That Govern eCommerce
The eCommerce industry is welcoming to everyone, sellers and buyers. While everyone can start an online retail business, the eCommerce industry has changed a lot from its early days. Before, anyone who did retail online could get away with anything because it was a lawless industry. Buyers and sellers suffered during these wild times, and it quickly birthed eCommerce laws and regulations to create a safe environment for business. If you have an eCommerce business or want to start an online retail business, you must learn about the basic regulations and guidelines that govern eCommerce to prevent sob stories. You don’t want to get sued for accidentally violating a law you didn’t know. Remember, ignorance of the law is not an excuse.
eCommerce Laws Every Online Retail Business Owner Needs to Know
First, this article should not replace your need to seek legal counsel about your eCommerce business. You will benefit more from consulting a lawyer to learn about the eCommerce laws and regulations that govern your eCommerce niche than from relying on an article for legal advice.
That said, here are eight eCommerce laws you can ask your lawyer about to protect your eCommerce business and its customers.
When creating a business online or offline, you need to define your business entity. Your business ownership structure and federal and state laws in your location will affect the type of entity you can choose for your eCommerce business. Some options to consider are sole proprietorship, C or S corporation, and limited liability company (LLC). However, you will find that making your online retail business an LLC entity has more benefits than other types of entities. What if you have other partners? No worries, LLC acknowledges partners.
An LLC is arguably the best for your eCommerce business because it legally separates you (and partners) from your business. Hence, LLC protects your personal assets if your business falls into financial problems. Whatever financial debts your business owes will be charged to the funds in your business bank account(s).
Licenses and Permits
Not all eCommerce niches require licenses and permits, but your business niche may require a few federal, state, and local licenses and permits. For example, if you sell alcohol or firearms online, you will be required to get some licenses and permits. Failure to get the required licenses and permits for your business will attract punishments, so talk to a lawyer to learn about the licenses and permits that affect your business.
Intellectual Property (IP); Trademarks, Patents, and Copyrights
Intellectual property thefts were common during the early days of eCommerce, and the most clever thieves usually win. Now, businesses can protect their intellectual property using trademarks, patents, and copyright laws. What is the difference between trademarks, patents, and copyrights?
Copyright: copyright protects written products, such as songs, books, movie scripts, and artworks to some extent.
Trademarks: Trademarks are words, phrases, symbols, and designs that represent each business and differentiate one business from the other. No two businesses can use the same trademarks.
Patents: according to the United States Patent and Trademark Office, a patent grants an inventor limited duration protection right over their invention in exchange for sharing the invention with the public.
Find out from your lawyer whether your product qualifies for copyright, trademark, and patent protection, and ensure to apply for the relevant IP protection for your product and brand. Being familiar with IP laws can prevent you from accidentally using registered and protected elements of other businesses.
Although the eCommerce industry is a global market, federal and state tax laws in the country you operate from will apply to your eCommerce business. Your first duty is to apply for a tax ID for your business. That said, the location of your customers will also determine whether you can use pre-tax or post-tax pricing. Of course, the type of products you sell will determine the tax laws that affect your business. For example, value-added tax (VAT) is common in many European and African countries. In California, products sold in plastic bottles attract a $0.11 recycling fee and additional taxes.
Upon learning the tax laws that affect your business, you may discover that your business qualifies for sales tax exemption and resale certificates. Besides avoiding tax violations, getting familiar with tax laws that affect your business can also have benefits. See a tax professional to tell you more.
In 2006, MasterCard, American Express, Visa, and other payment card industry leaders created the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS protects buyers and sellers in online payment transactions. Although PCI compliance is not a legal requirement, businesses that are PCI compliant create a safe and secure channel for buyers to pay without fear, thereby building trust.
Additionally, PCI compliance can protect your business against government and payment card issuer fines, lawsuits, and insurance claims in the unfortunate case of a data breach. Choosing to remain PCI non-compliant can cause loss of money, customers, and your business.
Finally, being PCI compliant is not enough. Your payment gateway must also be safe and secure. Consider these factors when choosing a payment gateway;
- does it have anti-fraud features
- is the payment gateway provider PCI compliant
- how does it handle payment processing issues, holdbacks, chargebacks, and other related concerns
First, read the Federal Trade Commission’s Electronic Commerce: Selling Internationally guide to learn more about duties, customs, and tax laws. That said, not all goods can be shipped the same way. Shipping laws vary in different countries for international shipping, and some states have shipping restrictions on some products. Hence, you will do yourself a lot of good by learning about all shipping regulations and laws that concern your products. A general rule of thumb is to learn about the shipping laws of the region you operate from and where your customers are.
You can depend on carriers for shipping information because most will state restricted items.
Your website must comply with the Children’s Online Privacy Protection Act (COPPA) regardless of the products you sell online. COPPA prevents you from collecting personal information from children under 13 years. However, if you sell children’s products, you need to follow COPPA regulations regarding your category. But if you sell age-restricted products for adults, your website must comply with COPPA and any other laws and regulations governing the sales of age-restricted products in your country.
If you plan to run marketing and ad campaigns online for your business, you must pay attention to the Federal Trade Commission (FTC). Here are some required practices to maintain to remain FTC compliant
- The FTC CAN-SPAM Act gives email recipients the right to opt out, so you must add an opt-out option in your emails if you’re sending emails to customers.
- The FTC Consumer Review Fairness Act allows customers to leave online reviews about products, services, and brands. So, get ready for that.
- The FTC doesn’t support false advertisement, so ensure that your marketing practices are free of deception — big, small, white lies, omissions, etc.
We can’t address everything in one article, which brings us to the message we’ve been repeating in this article — consult a lawyer.