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E-Commerce - Running An Online Business
This article provides an overview of the legal issues to be aware of when running an online business to ensure that your business and website are compliant with relevant laws and that your business has adequate legal protections in place to mitigate business risk. Relevant documents available for Alinea Law Members to download are cross-referenced throughout. If you are not already an Alinea Law Member join now to get all the legal documents you need for your business plus legal and business support and a host of other benefits.
For information about setting up an on-line business, along with links to relevant template legal documents to download, please see E-Commerce - Setting Up An Online Business.
Content produced by employees of the business
Most intellectual property rights created during the course of employment belong by law to the employer, and most employment contracts confirm this in writing. However, there may be uncertainty over ownership if an employee produces content when this is not within their job description.
You may decide to commission content such as graphic designs or written copy. Remember that, unless there is an agreement to the contrary, copyright will belong to the designer or writer, rather than to your business. Your business should therefore always commission content under a written contract that assigns copyright to it, especially if it wants exclusivity over the content. It is important to always have a written Commissioning Agreement in place.
Taking a licence of content
Another way for a business to acquire rights in content is to enter into a licence. Relevant template legal documents:
If your business wants to license in content to be displayed on the site, it will need to enter into a licence with the content owner. Relevant template legal document:
If your business is going to reproduce material from published works, it will need to take out a licence from the Copyright Licensing Agency and (in relation to visual art) the Design and Artists’ Copyright Society. For the reproduction of material from newspapers and periodicals, a licence must be acquired from the NLA.
If your site sells goods or services, the business is likely to be transacting electronically, rather than by paper means.
Selling goods or services
Terms of sale
Different terms and conditions for sale of goods and services to consumers are required for those for selling to businesses due to the different legal regimes which apply. Alternatively, different clauses for B2B and B2C can be combined in a single set of terms and conditions. Relevant template legal documents:
- Online business and consumer goods, services and digital content terms and conditions
- Online consumer goods, services and digital content terms and conditions
If your site retails to the public, the business will need to comply with the rules on cancellation, return of goods and information to be provided to consumers at the point of sale.
Intellectual property infringement: jurisdiction
Sometimes, a business can find itself unwittingly selling counterfeit goods, or offering goods or services that infringe trademarks or copyright. Within the UK, the general rule is that these claims will only be made out in relation to UK copyright and trademarks if the site is targeted at UK users or customers.
If your business plans to sell outside the UK, cross border transactions and the application of such taxes as VAT will need to be considered.
If your website will be used to sell the goods or services of more than one group company, your business will need to consider the basis on which costs are allocated between them or commission charged. This is known as transfer pricing.
If your business intends to supply goods from non-UK sources, it will need to assess whether its arrangements for doing so create a permanent establishment and therefore give rise to a tax liability in the country from which the supplies are made.
As part of setting up a website offering of goods or services, your business may make agreements with entities at a different level of the supply chain such as manufacturers. EU competition law (primarily Article 101(1) of the Treaty on the Functioning of the European Union) prohibits the inclusion in these so-called “vertical agreements” of any arrangements that prevent, distort or restrict competition in the EU. Internet selling is generally regarded as a passive form of selling which should not be subject to restrictions, so vertical agreements such as exclusive distribution agreements between manufacturers and suppliers cannot normally restrict sales via websites. They can, however, prohibit active promotion into other distributors’ exclusive territories or customer groups.
Transfer and storage of data
Advertising and marketing
Many websites use the data collected from users to send them marketing emails. To ensure that your business is compliant with its legal obligations relating to consent and preference services under the GDPR, DPA 2018 and PECR use forms of consent to this marketing, such as:
Your business may wish to operate an affiliate network of websites that will refer users to the site. Relevant template legal document:
Advertising keywords are terms purchased specifically to be referenced by search engines. The most well-known example is Google Ads, which involve the display of a list of sponsored advertising links in a particular part of the Google search results page.
Many online advertising campaigns involve buying keywords so that the advertiser’s product comes up as a sponsored link when a user searches for a competitor’s product. However, care should be taken, as this can make the advertiser liable for trademark infringement in some circumstances.
Dealing with ISPs
A business may have dealings with internet service providers (ISPs) in a variety of contexts: for example, it may need to approach an ISP to ask it to disable access to defamatory or IP-infringing content, or to obtain details of suspected infringer.
Issues likely to arise when operating specific types of business
Sites aimed at children
If your online business involves interacting with children, there are likely to be issues specific to the protection of children that your business will need to consider. For example, your business should comply with the Information Commissioner’s guidance on data protection issues, such as getting parental consent, and with regulations and codes that control advertising targeted at children.
If your site has an element of social media, there will be issues around data protection. Equally, any site that permits users to post comments, product reviews or other content will need to consider what liability might arise from this.
Streaming of content
If your business intends to stream live content on the site this will infringe the copyright in that content unless the business has a licence to do so.
In relation to the playing or offering of music on the site, a licence can be obtained from the relevant collecting societies, PRS for Music (in relation to the underlying musical work) and PPL (in relation to the sound recording itself).
Licensing of digital content
If the site will be licensing others to use digital content (such as software or journals) on an on-demand basis, it will need to use a click-wrap licence that sets out the terms on which users are allowed access to the content. The site user then agrees to the terms of the licence by clicking on an icon or link. Relevant template legal document:
If the site is a comparison site that uses spiders, bots or crawlers to seek out and collect information from other websites, there may be legal risks associated with copyright, database right and other intellectual property rights.
If your business plans to run an auction site, you may have joint or secondary liability if the site carries goods that infringe intellectual property rights or are counterfeit.
Alinea Law Template Legal Documents for E-Commerce
Click here to view all E-Commerce template legal documents, available for immediate download by Alinea Law Members.