![Legal and Ethical 11
References and Links
Davies, Thomas. Dykstra, DeVee. Ragothaman, Srinivasan. (2000) Legal aspects of
electronic commerce and their implications for the accounting
profession[Electronic version] Human Systems Management 19(4) retrieved from
EBSCOhost on August 27,2004
Ghost Sites Web site Museum of Failure Retrieved August
30,2004http://disobey.com/ghostsites/show_exhibit/egghead1
Retrieved August 28,2004
http://www.pcprofile.com/ManagingClouds/Managing_Clouds.htm
San Francisco Business Time Retrieved on September 02,2004
http://www.bizjournals.com/sanfrancisco/stories/2001/08/13/daily22.html](https://image.slidesharecdn.com/f0c4abf7-66dd-4572-9223-95b6de3e78c1-150116133505-conversion-gate01/85/Week5-paper-susbauer-11-320.jpg)
Week5 paper-susbauer
- 1. Legal and Ethical 1 The Legal, ethical, and regulatory aspects of running an eBusiness Kathryn Susbauer EBUS 500.1 University of Phoenix Online Jim Sternieri, M.B.A September 2, 2004
- 2. Legal and Ethical 2 The Legal, ethical, and regulatory aspects of running an eBusiness The expansion of ecommerce and the Internet has created new opportunities for business as well as new concerns. Business is being done on the Internet either by solely e-based businesses or businesses that have an ecommerce business and a retail business which are referred to as “click and mortar” in this paper. It seems that the increase of business being done on the Internet has created concerns that current laws and regulations are not adequate. This has led to new laws and regulations to help keep the Internet regulated. It also means that e-Businesses must also be aware of existing and new ethical concerns being created by doing the business over the Internet. Businesses run through the Internet or that have Internet components must consider the legal, regulatory, and ethical issues and ramifications when creating a business strategy. Every year, hundreds to thousands of new e-commerce sites are launched. Nevertheless, at the end of the same year some of those new businesses have failed because legal, regulatory, and ethical aspects have impacted the business and the business was not prepared. Others are out of business because their planning for start up was not sound. According to Legal aspects of electronic commerce and their implications for the accounting profession: “ In early February 2000, several popular Internet sites such as Yahoo, e-Bay, E*Trade, Amazon.com, CNN.com and others were impacted by cyber- terrorism” (Davies, Dykstra, and Ragothaman Intro Section).
- 3. Legal and Ethical 3 The type of attacks used is called Denial of service attacks. The affected businesses were faced with the possibility of lawsuits from irate customers (Davies et al Intro). Other than lawsuits other concerns of businesses are: • Loss of Income • Compromised Information Legal and Regulatory Issues in Running an EBusiness Many legal issues also involve regulatory issues. Depending on the size and type of the business with decide to how many legal and regulatory issues will be faced by that company in operating over the internet. EBusinesses are currently facing many issues of legal and regulatory nature. Some of them are: • Jurisdiction • Libel o Cyber Smearing • Sales Tax Collection over the Internet • Encryption regulation • E-crime • Copyright and Intellectual properties (Davies et al Section 3) The above-mentioned issues involve many aspects of eBusinesses. Businesses run over the Internet must also follow the same laws and regulations that regular businesses follow. The new laws and regulations are supposed to fill in the gaps in the laws that were written before the Internet was invented.
- 4. Legal and Ethical 4 Legal and Regulatory Ramifications and Changes Legal and Regulatory issues can led to changes. These changes affect whether a business is successful or whether it will go out of business. The ramifications of legal and regulatory issues can vary depending on the nature of the issue. Some of the ramifications deal with changes to the existing laws and others deal with new laws and regulations enacted because there have been problems and no current law or regulation covers it. Some of the legal changes to laws and regulations that have occurred because of eBusiness and the Internet are: • Variations in software licences terms and conditions • Increasing litigation for software piracy • Altered acts & regulations affecting your business • New & amended codes of practice • New compliance requirements for industry and other sectors • New governance measures and controls • Additional reporting to both internal & external bodies • Changes and trends in e-Commerce activities (http://www.pcprofile.com/ManagingClouds/Managing_Clouds.htm) Legal ramifications in operating at eBusiness can be different depending what the legal issue is that is being dealt with.
- 5. Legal and Ethical 5 Jurisdiction Jurisdiction is an issue that has ramifications that exist both legally and regulatorial because new laws cannot be passed or enforced until the appropriate jurisdiction is found. In enforcement of the laws, knowing whether a case is in the jurisdiction of the state, county, or federal government is necessary to charging the guilty. It also influences the regulatory side in that if Congress does not have the right to create laws over the internet then who does. Cyber-Smearing and Libel Another issue that has legal ramifications and potential regulatory ramifications is cyber-smearing under libel. According to Legal aspects of electronic commerce and their implications for the accounting profession: “Cyber-smearing is when false and disparaging stories about a company, management, or stock are posted on the Internet. The increase of cyber-smearing is leading companies affected by cyber-smearing to file lawsuits against internet portals in effort to identify those responsible”(Davies et al Section 3.4). In addition, the companies, stock exchanges and the SEC are trying to curtail cyber- smearing or at least to minimize the impact of it on business. Companies are trying to do this by adopting new corporate policies and damage control policies to reduce the risk. Collection of Sales Taxes A legal and regulatory issue is related to collection sales taxes and who controls the regulation. In the beginning, nobody really knew who regulated the taxation since the Commerce Clause grants the power to the Congress to regulate interstate commerce. E-
- 6. Legal and Ethical 6 commerce that is done over the state lines is still considered interstate commerce and is under federal jurisdiction to regulate. The Commerce clause also a requirement that part of the test is whether a business has a substantial nexus to face state or local taxes. In most cases, the substantial nexus is a business having a physical presence in the state. With the Internet, physical presence cannot exist. In addition, the 14th Amendment Due Process clause must also be considered. This clause requires some minimum connection between the state and the person, property or transaction sought to be taxed (Davies et al Section 3.5). The ramification of this issue deals with the fact that for most states that are already budget strapped that they need all the sales tax income that they can receive from all businesses. The lack of money has affected the states by forcing them to cut services and cut programs. Regulatory Ramification of Encryption Codes and software The ramification related to the government wanting access to encrypted information for law enforcement and national security reasons especially after the events on September the 11th . The ramification of the government not having access to encrypted information like banking information, and other information. Businesses want to protect their information and trade secrets as well as customer information. Consumers want to be able to trust that their information is safe being transmitted over the Internet or they will not consider doing business on the Internet. Ramification from consumers not spending over the Internet is more eBusinesses would fail and consumer would use the Internet less for other things.
- 7. Legal and Ethical 7 Ethical Problems and EBusiness In looking at ethical problems that exist when operating an eBusiness, several problems and concerns came up. . A few examples of problems dealing with ethics are: • How customer data is used • Whether customer data is sold for marketing purposes • Monitoring of employee email and internet use in larger eBusinesses • Outsourcing EBusiness gathers information with every click of a mouse at a website. When a customer registers at a website of a eBusiness they must give information that could be used for marketing. If the customer has stated that they do not want the information shared or they do not want to receive email trying to get them to buy something else, a company must respect this. The ramification of this ethical problem is company wants to make money and the more time the brand is visible to the customer the more likely the customer will buy. But the customer in saying do not sell my information and not send me unsolicited email that I am giving you my trust and that I hope that it is given correctly. If a customer finds out that a customer requested the above and the company still did it then the company is at risk of a lawsuit and will probably lose one customer if not more. Another ethical problem facing eBusinesses as they expand is the monitoring of employee email and Internet use. Most businesses are setting up a written policy but in some cases, business is not equally enforcing the policy. This leads to employees feeling that they are not respect or that the higher you are the less you become responsible.
- 8. Legal and Ethical 8 In recent years, the outsourcing of IT related work to overseas countries have created ethical problems. Business must balance profits and lower costs versus employee loyalty and staying in the United States. The Ethical problem affects “click and mortar” as well as established eBusinesses that must hire employees. Ethical problems related to outsourcing are not new in the United States. Until recently, it involved manufacturing jobs going to contracted Third World countries where the labor costs could be reduced. The ethical problem of this for eBusiness is that if you do not know the sourcing of the products that you are selling especially if you are running an e-commerce retail site. Several major companies that operate as “click and mortar” have received bad publicity because most of their manufacturing is overseas and groups have alleged sweatshop practices. The largest to be hit with this was Nike Inc. over their Asian factories. Because of the low cost of labor and their low minimum wages, the countries are trying to attract businesses to set up shop. Most companies over there pay higher than the minimum wage while some of the labor organizations act like the companies need to pay the minimum wage mandate in the United States. EBusiness Failure In the past few years, there have been many failures by eBusinesses. Somewhere eBusinesses that were website only based and others were “Click and mortar” in which the entire business may have gone out of business. There are many reasons for eBusiness failures and some of them are: • Under funding on start-up • Too much debt • Wrong target market or audience
- 9. Legal and Ethical 9 • In affective Management I chose as an example of eBusiness failure Egghead.com. Egghead.com was the ecommerce site of Egghead. They were a retail chain that sold discounted office and computer equipments. They also sold the accessories, supplies, and other computer related material. When they were in business, I went to the stores in Oregon. In August of 2001, Egghead began operated under Chapter 11 bankruptcy protection. In October of the same year, Egghead reached the point where they could not continue as an active operation (http://disobey.com/ghostsites/show_exhibit/egghead1). Certain assets were sold to Fry’s Electronics under the bankruptcy including the brand. When the parent company went bankrupt then the website side of it when out of business as well. (http://www.bizjournals.com/sanfrancisco/stories/2001/08/13/daily22.html). Chapter 11 usually means that the business has a large amount of debts that cannot be paid or a lack of cash and inability to gain funding through other means. Chapter 11 allows a business to reorganize and sell part of operation off which is what Egghead did. Even though a good brand name was built, there also were a large number of competitors that meant that in some areas of business they had to spend to compete. From the availability of information on the Internet, it is hard to say whether sound financial planning was used. Personally, if a business has too file for Chapter 11 bankruptcy protection then there might have not been sound financial planning. Conclusion Whether running a website based business or a “click and mortar” several things that both must considered are some of the following:
- 10. Legal and Ethical 10 • Legal and Regulatory Issues and Ramifications • Ethical problems • Why eBusinesses failure and importance of financial planning The above-mentioned items are necessary to consider and analyze because to not consider them could lead the company open to: • Lawsuits • Fines by regulators and government • Loss of Income o Loss of Sales o Bad Publicity • Criminal charges EBusiness owners and managers must stay current on regulations and laws that affect the type of business they run and what they sell. Laws and regulations over e-commerce is still being changed by the authorities this is why business policies for eBusiness must have some flexibility as well as be keep current.
- 11. Legal and Ethical 11 References and Links Davies, Thomas. Dykstra, DeVee. Ragothaman, Srinivasan. (2000) Legal aspects of electronic commerce and their implications for the accounting profession[Electronic version] Human Systems Management 19(4) retrieved from EBSCOhost on August 27,2004 Ghost Sites Web site Museum of Failure Retrieved August 30,2004http://disobey.com/ghostsites/show_exhibit/egghead1 Retrieved August 28,2004 http://www.pcprofile.com/ManagingClouds/Managing_Clouds.htm San Francisco Business Time Retrieved on September 02,2004 http://www.bizjournals.com/sanfrancisco/stories/2001/08/13/daily22.html