E-commerce Store – 5 Key Things to Know Before You Start

12
Sep 2019

e commerce lawyer

The expansion of e-commerce stores, both worldwide and in Serbia has marked the last couple of years. The clear benefits of online sales, as well as rapid technological development, have contributed to the fact that virtually every retailer offers online shopping.

Apart from the global retail giants, e-commerce has proven to be a good fit for smaller retailers as well, as it provides the opportunity to make large profit margins with significantly less investment.

Another proof in favor of the development of e-commerce in Serbia is reflected in the data that 1,8 million people bought goods online last year, which is a 50 percent increase compared to 2015.[1]

If you have already come up with an idea for an e-commerce store and are ready to embark on the e-commerce journey, be sure to carefully read this blog.

Further on, we will explain the key things to know before starting an e-commerce store.

Do I Need E-Commerce Terms of Use?

First and foremost, keep in mind that everything that applies to brick and mortar sales applies to online sales as well. The fact that the customer will not be able to physically walk through your store and check the products, does not mean that he cannot do the same while looking at the product offer from the convenience of his home.

The same rules of the game apply for e-commerce store!

You have to give buyers the same rights and opportunities, while you, as the retailer, have all the obligations as you would otherwise have when selling goods at a boutique, department or convenience store.

On top of that, there are additional obligations for e-commerce retailers.

To fulfill your legal obligations, you have to provide all the necessary information about your store, products, and how can the customers, i.e., consumers exercise their rights.

The first step is to draw up comprehensive Terms of Business, which will provide the buyers with both their rights, as well as obligations buyers have towards you. For example, how to complete a purchase, is the price VAT included, shipping costs, how to file a claim or replace the purchased product, responsibility for defect goods and the proper functioning of things, etc. The more comprehensive your Terms of Business are, the less risk you face of eventual litigation or inspection.

The lawsuit against Amazon.com is an indicator of how important Terms of Business are to e-commerce retailers. Specifically, a customer filed a lawsuit against Amazon[2] for injuries received from a faulty coffee machine, which the customer had purchased through that e-commerce platform. As someone who enabled the sale of a faulty device, the questions of responsibility for the goods sold and the proper functioning of things should also be addressed . If you have not set the court jurisdiction and the application of substantive law in the General Terms of Business, you risk being subject to the national law of the country where the injury occurred, as well as running the proceedings in that country, which may be significantly less favorable to you.

For a giant like Amazon.com, the potential payout of USD 2 million and court costs could be perceived as pocket money. Still, ask yourself if your e-commerce startup would survive such a financial blow and negative publicity.

Make All Necessary Notices Available to Buyers

Many e-commerce stores and platforms fail to indicate their background and real ownership structure.

Apart from the fact that such behavior fosters distrust in customers, it is also illegal, which can ultimately result in fines.

According to the Consumer Protection Law, you are obliged to inform the consumer clearly and understandably, among other things, of your business name, company identification number, registered address and telephone number, all before entering into a contract for the sale of goods.

Whatsmore, the Law on Electronic Trade obliges you to give notices of the procedure that applies to the conclusion of the agreement, contractual provisions, general Terms of Business, if they are an integral part of the agreement, the language versions in which the agreement can be concluded, etc.

Failure to provide consumers with all necessary information will result in penalties for legal entities ranging from RSD 300,000.00 to 2,000,000.00.

online ecommerce store

Interestingly, the issue of leaving a phone number for consumers has also been raised at the European Union level. Again, Amazon.com electronic was “accused”, but according to the EU authorities, without any merit.

Specifically, the German Consumer Federation[3] appealed to the European Court of Justice, claiming that Amazon did not honor its legal obligations by failing to provide consumers with effective means of communication, that is, by not informing consumers clearly and understandably about their telephone and fax numbers.

The European Court of Justice ruled[4] in favor of Amazon, saying that Amazon was not obliged to always provide consumers with telephone contact before entering into a contractual relationship, provided that simple communication was enabled in another direct and effective manner.

Why are Website Terms of Use Important?

In addition to the Terms of Business, which, as the name implies, represent the general conditions under which you operate as a company, it is necessary to define the Terms of Use of the website.

The most common misconception retailers have is that the website Terms of Use have absolutely no function, as well as that nobody reads them.

However, consumer awareness has been raised to a much higher level in recent years, and inspections are increasingly controlling businesses and their operation.

If you offer services and goods online, you are subject to the Law on Electronic Trade and the Law on Advertising, among other laws. These laws introduce a series of obligations for you, and to provide all necessary notices, as an “IT service provider”, you must publish the appropriate Terms of Use on the website.

In the Terms of Use, you are required to define to whom is the website or platform intended, the rules of behavior of the website users, third-party advertising conditions, sending commercial messages and much more other information.

Violation of these regulations can result in the imposition of fines on legal entities of RSD 100,000 to even 2,000,000.

If you thought the Terms of Use were unnecessary, think twice.

Privacy Policy and Cookie Policy

You have certainly noticed that almost every website you click on displays information on cookies privacy policy, and personal data protection. You certainly got bored of clicking and giving a bunch of various consent without even knowing what you are consenting to.

Unfortunately, the Privacy Policy along with the Cookies Policy and Terms of Use has become a crucial element of any website and is especially important if you are in e-commerce business.

privacy policy for ecommerce website

The Law on Personal Data Protection has introduced many obligations for companies (which we wrote about in the blog Tic-Toc: Is Your Company Compliant With the New Law on Personal Data Protection? ), and one of them is to notify data subjects. This is achieved precisely through the Privacy Policy and the Cookie Policy.

To keep your business in line with the new legal regulation, you should start by creating a clear and comprehensible Privacy Policy that will contain all the necessary elements required by the new Law. In addition, you need to inform all users transparently (whether they are customers or just browsing your website) about the cookies you use, for what purposes and how they can be adjusted.

Also, the links to these Policies should be easily accessible and visible on your website.

Security Related to Electronic Transactions

What will set you apart from competitors is to offer the possibility of online payment to your customers.

However, the introduction of electronic payment options raises many questions as well as obligations to ensure the purchase is as secure as possible.

ecommerce store, online ecommerce store,

In addition to the crypto protection, which has become essential, as well as the SSL certificates, you have to delve deeper into this issue to prevent or at least reduce the risk of fraud.

Another way to increase the security of electronic transactions is to comply with the PCI standards[5]. These standards are important for all retailers who accept credit card payments and provide data security both during the transaction and during storage and verification.

It is enough for at least one of your customer’s data to leak and you are already on the way to lose the trust of the consumers you have been building for years. Surely, no one will want to buy and leave their data if there is the slightest chance that the data will end up in the wrong hands, especially if it is card numbers or checking accounts.

However, if there is a leak, you must notify the person whose data was breached, and in some cases, even the general public. Also, under the Law on Personal Data Protection, you are required to notify the Commissioner of the data breach within 72 hours of becoming aware of the breach.

In addition to the risk of losing clients, there is also the risk of being punished for a personal data breach. Penalties under the Law on Personal Data Protection go up to 2 million dinars, and according to the GDPR, up to 20 million euros or 4% of the annual company turnover, whichever is higher.

It is important to emphasize that a number of internal procedures need to be put in place, both concerning consumers and in matters relating to the protection of personal data. Your staff must know their roles and procedures and keep all the necessary records at all times.

Finally, if all of this seems like science fiction that certainly won’t affect you, keep in mind that as many as 89,271 personal data breaches[6] have been reported at the EU level in a single year.

Summary

Pravni okvir e-trgovine postaje sve složeniji, s obzirom da se radi o oblasti koja konstantno raste, kako u pogledu broja učesnika na tržištu, tako i u pogledu propisa koji uređuju ovu oblast. Osim toga, ukoliko planirate da svoj biznis proširite i na teritoriju EU, sigurno je da ćete morati detaljno da se informišete o važećim zakonima i obavezama koje Vam ta regulativa nameće.

Razumevanje svih propisa je neophodno za stvaranje stabilnog biznisa, ali i za zaštitu potrošača koji će postati Vaši redovni kupci.

Informacije u ovom tekstu ne predstavljaju pravni savet i isključivo su informativnog karaktera.

[1]  Source: N1 Website http://rs.n1info.com/Biznis/a452988/U-Srbiji-u-prosloj-godini-1-8-miliona-ljudi-obavljalo-elektronsku-trgovinu.html
[2] Eberhart v. Amazon.Com, Inc., No. 1:16-cv-08546 Court: New York Southern
[3] German Consumer Federation
[4] Case C 649/17 Bundesverband der Verbraucherzentralen und Verbraucherverbände — Verbraucherzentrale Bundesverband eV v Amazon EU Sàrl
[5] Payment Industry Security Standards
[6] Source: European Data Protection Board

NEWSLETTER

NEWSLETTER

CONTACT

CONTACT