E-commerce has drastically reduced the costs and logistical difficulties associated with starting a business, removing the need for bricks and mortar shops.
You’ve decided to start an e-commerce business, you have your domain name and are now finally taking the “online” leap with your innovative business idea. Great news!
But wait a moment! Being functional online is not just about having an agile mind-set, embracing change, setting up a website, using key words and writing blogs. As increasing numbers of consumers and business customers turn to the internet to purchase a wide range of goods, services and digital content, it’s important for YOU as an online entrepreneur to understand the relevant legal requirements associated with setting up an e-commerce business.
Whilst the Internet may have broken down the borders between foreign markets, THE LEGAL BORDERS REMAIN.
Businesses that sell goods to UK consumers online must comply with several legal requirements that protect consumers’ rights. As a seller you need to be familiar with the law surrounding online selling and ensure that you are aware of what you need to do to sell legally on the internet.
There are many rules, regulations and laws that govern how websites should work. Most of the legal requirements that apply fall under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the CCRs), the Electronic Commerce (EC Directive) Regulations 2002 and the Companies Act 2006. These rules set out the information that companies must provide on their website and in email footers to comply with the law. Failure to comply with these rules may result in a fine.
There are other legal requirements that apply to specific sectors and professions. What you need to know depends mainly on the kind of seller that you want to be. Will you just be selling some unwanted Xmas or birthday gifts on eBay or Amazon or do you want to become a fully-fledged business seller?
The information in this Article is but a brief guide. If you would like to talk to us about your legal obligations regarding your website, please contact Eve Jarrett (Legal Director) on Tel no 01234 938057/938058 or at email email@example.com.
The Essentials: Things you need to know
Law of Contract
First, Remember: the basic laws of contract formation namely offer, consideration, intention and acceptance apply to online sales as for shop sales.
Second, you need to know if you should be paying tax on the items that you sell. You will have to pay tax if your income is more than your tax-free allowances and any reliefs for which you may be eligible. HM Revenue and Customs (HMRC) have a guide on the government website (www.gov.uk) under the heading (“Income from selling services online”) to help online sellers.
You can also contact HMRC’S Income Tax Helpline if you are not sure whether you should be paying Income Tax on any of your earnings.
Consumer Protection Law (Individuals)
Online sales to individuals are covered by the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013. These regulations cover any form of distance selling for instance telephone sales and require you to give your customer full details of the offer and certain specified information before they place an order. You also need to send written confirmation of any order to the customer by post or email. Broadly speaking the required information includes your details, a description of the goods or services, delivery and payment arrangements and information about their right to cancel. ("cooling-off period"). These Regulations do not cover sales to other businesses.
Under the Consumer Rights Directive, you also need to include information on the duration of any contract, the total cost including any deposits that may be payable and the customer’s responsibility for the cost of any returns.
E-Commerce Regulations (Businesses)
If you are selling items online the E-Commerce Regulations govern business to business sales. These regulations came into effect in 2002 and apply to every business website. Whether you have your own website, use eBay or Amazon or even sell through a mobile phone or on digital television the regulations will apply to you.
So, what are the E-Commerce regulations? These regulations require you to provide the same information as under the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 but do not include an automatic right for business customers to cancel any contracts. As a matter of good practice, a lot of businesses do include cancellation rights for business customers.
As a bare minimum, you must give the trading name of your company, an address from which you operate and an email address. If you are selling under a company name or as a limited liability partnership your website must show:
The full name of your company or LLP
Your company’s or LLP’s registered office address
The registered number of your company or LLP
Your company or LLP’s place of registration
If your company is being wound up
Your company’s VAT number if VAT registered
Membership details of any trade or professional association to which you belong
You must also show your prices and ensure that your customer knows the final price too including tax and delivery charges.
Before a customer makes an order, your website should inform the customer of all the steps needed to complete the order, state whether the order will be completed by you or outsourced to another seller and inform the seller of how to amend errors before placing an order. You should ensure that your terms and conditions are downloadable so that customers can view the terms and conditions before putting in their order and store their own copy of their order too.
Receipts of an order must be acknowledged expeditiously but a seller is allowed to say that an order is being processed rather than accepted if there is a provision to that effect in their terms and conditions.
The E-Commerce regulations also cover sellers' marketing techniques so if you send a customer a text message or an email to advertise any product you should inform them clearly that it is a form of commercial communication and outline any conditions applicable to the communication.
The Data Protection Act 2018
The Data Protection Act 2018 regulates the processing of personal data by companies, specifying, for example, that data must be kept accurate and secure. The Act requires all businesses who process personal information in an automated form to notify and (if applicable) register with the Information Commissioner’s Officer (ICO) unless they are exempt from registration.
Failure to notify the ICO is a criminal offence. Register entries must be renewed annually on payment of a fee and failure to renew a registration if required to do so is a criminal offence. The Act also requires businesses to provide certain information to their customers and users. This includes details of how the information will be used, whether it will be transferred outside the EEA and or sold to third parties.
All businesses no matter how big or small must comply with the Data Protection Act 2018 and the General Data Protection Regulations (GDPR}. GDPR is a law by the European Union (EU) to protect the rights of individual’s personal information by controlling how businesses handle their customers personal information e.g. age, name, date of birth, payments and bank account information etc. It applies worldwide and applies to any business around the world with whom an EU resident has business dealings.
Consumers share confidential information with businesses online and they expect the businesses to keep this information confidential. Leakage of valuable information of a customer may result in the loss of a customer, the tarnishing of your reputation and or your company’s reputation and image and the imposition of a sanction by the information Commissioner (UK).