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The Legal Risk of Doing Business Online

In the wake of recent tough economic times, many people who have been retrenched or forced to close their businesses have turned to the Internet to start a new business. Many business owners who have survived these challenges have turned to the Internet as a way to reduce operating costs. Whatever the case may be, many of those people do not realise that the laws of the paper-based world also apply in the online environment. This article highlights some of the more relevant laws that apply when doing business online and the importance of ensuring full legal compliance.
There are many laws, which apply when doing business online, including:

  • trade practices law;
  • privacy law;
  • spam law;
  • copyright law; and
  • trade marks law.

Trade practices law
The object of trade practices law is to promote competition and fair trading and provide for consumer protection. The most common breaches of trade practices laws relate to businesses engaging in conduct that it capable of misleading or deceiving consumers.
Privacy law
If you are operating a website, users of your website have a right to know:

  • what information is being collected about them;
  • how that information will be used;
  • to whom that information will be disclosed to and under what circumstances; and
  • how to access and verify the accuracy of that information.

Spam law
The term spam refers to unsolicited commercial electronic messages. Australian law provides that a person must not send (or cause to be sent) a commercial electronic message without the consent of a recipient. Consent may be express or inferred and is often central to disputes involving allegations of spamming.
Copyright law
A copyright infringement takes place where a person substantially reproduces another persons work, which is subject to copyright. In the online environment, this often relates to the reproduction of text, images, video and sound recordings.
Trade marks law
Trade mark infringement occurs where one trader uses the trade mark of another trader creating the likelihood of confusion in the market place. In the online environment, this often relates to the use of logos, brand names and under certain circumstances, domain names.
So, are you placing the future of your business at risk?
You may be placing the future of your business at risk if you:

  • display text or images on your website, which you or an employee did not create;
  • display trade marks owned by other parties;
  • run competitions without the relevant licenses (if required);
  • link to other websites;
  • do not display important legal documents; or
  • send electronic messages without recipient consent.

To reduce risk arising from your online business practices, you should engage an Internet Lawyer to conduct a full legal audit of your website. Often, there are various legal issues that will be cited as a consequence of your online business practices and consequently, one common recommendation is that you display on your website specifically drafted legal documents. These documents usually include a Terms of Use document, Privacy Policy and a Spam Statement, which set out information such as:

  • your expectations with respect to the conduct of visitors to your website;
  • intellectual property notices;
  • legal disclaimers; and
  • which laws will apply in the case of a dispute.

The benefits of displaying specifically drafted legal documents include the limitation of liability for damage or loss sustained by visitors to your website and the efficient resolution of any disputes arising from use of your website.
There is a real tendency for people to overlook legal issues when doing business online. This is mostly due to the absence of education relating to electronic commerce and the associated laws that apply. However, ignorance of the law is not a defence. You must ensure that you take steps to ensure that your online business practices do not contravene any laws, otherwise you may be subject to crippling financial penalties.
9 out of 10 websites are not legally compliant…is yours?