Online Entrepreneurs: Legal Tips for your E-Commerce Business

Ever evolving technology solutions designed to connect businesses to a global customer base mean it has never been easier to move your business online, and in the wake of COVID-19, it is clear e-commerce has come out on top.

As part of its 2020 budget, the Government announced a $10 million fund to provide incentives and grants to encourage e-commerce, train digital advisors and provide information and support for SMEs wanting to incorporate e-commerce into their business models.

While e-commerce offers an exciting growth opportunity for many businesses, it also creates a unique set of legal issues.  In this article we take a look at some of the key legal points to consider when taking your business online.

Terms and Conditions

Nobody reads them, so why do you need them?

Terms and conditions are essentially a contract between a business and its website users/customers. They should be comprehensive, yet clear, and should be readily accessible to the website user. They should cover use of the website (i.e. ‘terms of use’) as well as the terms relating to the sale of the goods or services through the website (i.e. ‘terms of trade’).

Terms of use will cover matters such as intellectual property ownership and content disclaimers. Such terms are particularly important if users have an account or are able to upload content, as they allow a business to set parameters on how these functions can be used.

Terms of trade should limit the liability of the business, and cover payments, refunds, warranties, and any other aspects relating to the transaction. If a business is providing goods, the terms and conditions should include delivery and cancellation information. If a business is providing services (i.e. through online software or mobile applications), the terms and conditions should include security and service level provisions.

Unlike privacy policies (discussed below), terms and conditions are not required by law.  However, they can prove their worth in the event of a dispute.

To ensure your terms and conditions can be relied on, it is important that you do not include any unfair contract terms or seek to exclude any rights that cannot be excluded by law, such as under the Consumer Guarantees Act.

Privacy and Data Protection

Most e-commerce platforms collect large amounts of personal information, through contact forms, account registrations and the checkout process. Personal information can also go beyond a name and contact information, and can include data automatically collected through the use of cookies, or other tracking technologies.

Under New Zealand’s Privacy Principles, a business that collects personal information has certain obligations in respect of its collection, use, storage and disclosure. Included in these obligations is the requirement to notify individuals that you are collecting personal information, the purpose for which it will be used, and the rights the individual has in respect of that information.

Businesses should post an up-to-date privacy policy that reflects its actual practices with respect to collection, use and disclosure of user information, including through the use of cookies, if relevant.

New Zealand’s Privacy Principles also require businesses to ensure they have reasonable security safeguards in place to protect the personal information they hold.  This is important, as websites can be the target of hackers and other cyber-criminals, who can cause a range of issues for the business if they gain access to that personal information.  In addition, New Zealand’s new Privacy Act, which comes into force on 1 December 2020, introduces mandatory reporting requirements in the event of a notifiable data breach.

It is also important that businesses consider their information handling activities in a global context. If a business is targeting customers in the United Kingdom/European Union, compliance with the European General Data Protection Regulation may be required. If it is targeting customers in the United States, businesses should consider whether the California Consumer Privacy Act, which came into force in January 2020, or any other US law, applies.

Marketing

The laws that apply to the content of offline (e.g. print) advertisements also apply to advertising goods and services online or via social media. In New Zealand, advertising is primarily regulated under the Fair Trading Act, which prohibits advertisers from conduct likely to mislead or deceive consumers. In addition to obligations under the Fair Trading Act, businesses should be aware of any specific laws that regulate advertising in their industry.

In terms of direct marketing, New Zealand’s anti-spam legislation prohibits the sending of marketing communications without the consent of the individual. This means that before a business adds a customer to its mailing list, it should ensure that the customer has actually consented to receiving such communications (i.e. by way of a tick box). Email communications should also contain clear instructions on how to unsubscribe.

In terms of social media, guidelines issued by the Advertising Standards Authority (ASA) suggest that if businesses are using a social media influencer to advertise its goods, the advertisement should be clearly disclosed, for example, through the use of identifiers “#ad” or “#sponsored”.  Earlier this month the ASA upheld four complaints made about social media posts by an Auckland influencer on the basis the label #gifted was not sufficient to signal a commercial arrangement between the influencer and the promoted company.

Intellectual Property

A business should own its branding and website content, or ensure it has the appropriate licence rights necessary to use that material.

We recommend that a business register the domain name associated with its branding, and take steps to register a trade mark too.  A registered trade mark provides the business with an exclusive right to the use of the mark in relation to its business. Trade marks are jurisdictional, so if a business has a global customer base, it is important to consider whether international trade mark registration is also required.

In terms of content, if a business does not own the content, or have the rights to use it, the business may find it is faced with a ‘cease and desist’ letter, claiming copyright infringement. If you allow your users to upload content, it is also important they do not post infringing material. This can be covered in your terms and conditions (discussed above).

If you are outsourcing your marketing, or the development of your website, online software or a mobile application, you should ensure confidential information (i.e. trade secrets) and intellectual property ownership is clearly covered in the terms of your agreement with the third party provider.

What to do

In order to reap the rewards of a successful e-commerce business, it is important to stay informed, understand the relevant laws, and protect yourself and your business.

This article is intended to be general in nature. If you would like specific advice relating to your e-commerce business, please get in touch with one of our corporate team.

Contact

Graeme Crombie is a Lane Neave partner in the corporate team

Graeme Crombie
Partner, Lane Neave

t +64 3 372 6392
m +6 21 634 849
e (click to email)

Whitney Moore
Senior Solicitor, Lane Neave

t +64 3 372 6376
e (click to email)