online marketing legal issues
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R'tist @ Tourism
Online Mktg – Legal Issues
© Ramakrishna Kongalla, Assistant Professor
Indian Institute of Tourism & Travel Management(An Organization of Ministry of Tourism, Govt. of India)
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E-Marketing Ethical and Legal Issues
Privacy on the Internet• Right to Privacy– Individual privacy vs. meeting consumer needs– Financial Services Modernization Act of 1999 establishes a
set of regulations concerning the mgmt of consumer info• Network Advertising Initiative (NAI) July 1999– NAI represents 90% of Web advertisers– Established to determine the proper protocols for managing
a Web user’s personal info on the Internet
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• Employer and Employee– Businesses monitoring employee activities on corporate and
communications equipment– Keystroke software is used to monitor productivity and the abuse
of company equipment– Issue of company time and company equipment vs. employee’s
right of expression– Notice of Electronic Monitoring Act proposed in 2000 – requires
employers to notify employees of telephone, email, and Internet surveillance
• Cookies– “…bits of info collected and stored by a Web browser
when a person navigates the Web.”• Online Profiling– “…aggregating data about customers by tracking their
clickstream.”
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• Protecting the business– Privacy policy on the Web site– Platform for Privacy Preferences (P3P) – industry
standard to allow Web users to gain more control over the personal info being collected on the Web and to make privacy policies easier to find and understand; determine if Web site privacy policies match users’ privacy needs
• Consumer Privacy Act of 2000– Must give notice, obtain consent, etc., when collecting
personally identifiable information• Online Privacy and Disclosure Act of 2000– Display seal on website when comply with the
Principles for Fair Personal Information Practice
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• Privacy of Consumer Financial Information Act (GLB Act) :– U.S. financial institutions must provide its customers
with a notice of its privacy policies and practices.– It prohibits a financial institution from disclosing
nonpublic personal info about a consumer to a nonaffiliated third party unless the institution satisfies various disclosures and opt-out requirements and the consumer has not elected to opt-out of the disclosure.
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– Federal Trade Commission (FTC) established 5 Core Fair Info Practices:
1.Consumers should be aware that personal info will be collected
2.Consumers should have a say in how this info will be used3.Consumers should have the ability to check the info
collected to ensure that it is complete and accurate4.Info collected should be secure5.Web site should be responsible for seeing that these
practices are followed
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Other Legal Areas of Concern• Defamation– Injuring another’s reputation, honor or good name through
false written or oral communication– Good Samaritan provision, Section 230 of the
Telecommunications Act protects ISPs from defamation lawsuits
• Children and the Internet– Younger Internet audiences are able to gain access to the same info as
adults without the constraints that might be found in real space– Communications Decency Act of 1996 (CDA) and Child Online Protection
Act of 1998 (COPA) were designed to restrict pornography on the Internet, particularly in the interest of children
– Children’s Online Privacy Protection Act of 2000 (COPPA) prohibits Web sites from collecting personal info from children under the age of 13 without parental consent
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• Intellectual property– Copyright – “…protection given to the author of an original
piece, including ‘literary, dramatic, musical, artistic and certain other intellectual works,’ where the work has been published or not.”
– To have a copyright, creators must only fix their creation in a “tangible medium,” such as paper or magnetic disk. Authors DO NOT have to add their names, dates, or copyright sign on the medium to have a copyright.
– Napster ?– Digital Millennium Copyright Act of 1998 (DMCA)
represents the rights of creative bodies to protect their work, as well as the rights of educators and resource providers to receive access to the work
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• Trademark and domain name registration– Distinctive symbol, word or phrase used to identify a
business’s products and distinguish them from other business’s products
– Parasite – selects a domain name based on common typos made when entering a popular domain name
– Cybersquatting – buys an assortment of domain names that are obvious representations of the brick-and-mortar companies
– Anticybersquatting Consumer Protection Act of 1999 (ACPA) – protects traditional trademarking in cyberspace
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• Spam– Unsolicited email– Unsolicited Electronic Mail Act of 1999 – protects against spam (must be
able to get off of email list)– Unsolicited Commercial Electronic Mail Act of 2001 – “protects
individuals, families, and Internet service providers from unsolicited and unwanted electronic mail”
– Mail Abuse Prevention System (MAPS) – takes consumer complaints and places address on a list of offenders who are then blocked
• Online contracts– Electronic Signatures in Global and National Commerce Act of 2000 (E-
Sign bill) promotes online commerce by legitimizing online contractual agreements
• User agreements– Click-Throughs – must agree to before proceeding
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Internet Taxation• Use Tax
– If vendor and consumer are located in the same state, then a sales tax can be imposed
– If vendor and consumer are not located in the same state, then the sale is subject to a use tax
• Internet Tax Commission recommendation in April 2000• Streamlined Sales Tax Project designed to resolve Internet
taxation issues – suggests that taxation should occur in the state where a product is delivered and that the state should determine the percentage taxed
• The National Academy of Science’s National Research Center suggests a flat tax rate should be collected by the vendor and returned to the state in which the vendor resides
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Accounting Issues• Revenue Recognition– Net vs. Gross– Barter – counted as revenue but should be treated as “fair
value”– Coupons, Discounts, Loss Leaders – putting sales at full price
and deferring costs– Fulfillment Costs – are being classified as a marketing
expense instead of cost of sales (which hides operational expenses amongst huge marketing costs)
• Auctions – are recognizing revenues immediately, but should be recognizing them over the period that the item is on the block
