June 5, 2018

Legal Corner - Consumed by Digital: Legal Tips For Expanding Into E-Commerce

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Consumers in the GCC are increasingly turning to e-commerce when purchasing goods or services, meaning that most businesses will need to establish an e-commerce platform.

Extending into e-commerce business is not a matter of simply acquiring a domain name and adding a payment process. There are some legal matters that need to be addressed in order to start an e-commerce business.

TRADE LICENCE

An e-commerce business should be able to undertake e-commerce activities as part of their current trade licence. If these activities are not included, then the company must extend its business activities to cover e-commerce.  When adding activities, authorities will want to determine if the new activities are compatible with the activities already listed. In addition, there may be further licence requirements from the National Media Council pursuant to the 2018 Electronic Media Resolution Regulation.

Even when e-commerce is permitted under their current trade license, many companies chose to set up a separate entity for their e-commerce platforms.  This helps to centralise e-commerce operations and also ensures that any risk associated with the new enterprise is contained within a separate entity.

TERMS AND CONDITIONS, PRIVACY POLICIES

It is common practice to attach terms and conditions to the use of a website which then govern the way that the business and its customers interact with each other.  They help to establish guidelines for the relationship and, importantly, trust from the consumer.

These terms and conditions will often include details relating to delivery, refund policies, termination of accounts, and interactions between the users. They should also contain any terms that are required by the payment gateway.  The payment gateway typically will not allow the e-commerce site to commence operations until it has seen the final version of these terms and conditions.

The privacy policy of an e-commerce site must be appropriate for the country in which it operates.  This may mean complying with the EU’s new GDPR – you will need to assess your activities and technology to determine whether this is applicable. If your business plans to target EU residents, those terms (and the way you actually handle your data) will be very important.

CONTENT

Content on e-commerce sites can fall broadly into three categories:

  1.  content created by the operators of the e-commerce site;
    B.    content provided by third parties for use on the e-commerce site; and
    C.    content created by the customers, commonly known as user generated content.

The owner of the website is considered to be the publisher of all of this content, and so may be found liable if it breaks any laws or regulations. Federal Law No 15 for 1980 concerning Publications and Publishing contains a list of material that is unacceptable for publication, and further resolutions passed by the National Media Council pursuant to that law do provide further context and clarifications to the prohibitions.  Further, Federal Law No 5 of 2012 on Combating Cybercrimes (known as the “Cybercrimes Law”) contains a list of much more serious matter that are not permitted in relation to activities on the internet.  

Although few e-commerce sites will venture into prohibited territory, it is advisable to know that these laws exist.  Because the owner of the site is generally liable for its content, even if they did not create it, an e-commerce site operator must consider these laws in relation to its own content as well as for user generated content.  This is important to bear in mind - user generated content can become aggressive and confrontational and may inadvertently lead to a breach of these laws.  Because of this, many companies check user generated content before they permit it to be published.

COPYRIGHT

A person (or company) that creates content usually has the legal right to determine whether or not a third party can use that content. Thus, if the operator of an e-commerce site is commissioning a freelancer to produce content for the site, then it needs to enter into an agreement with that freelancer which will determine the ownership of the material created as well as the use that can be made of the material by both parties.

For ad hoc content, the operator should obtain a written licence from the owner of the material before use.

Stock image libraries and music libraries should be used cautiously.  These libraries do have limits on the use that can be made of their materials and it is wise to check the fine print.  There have also been numerous cases of ‘bait and switch’ tactics with music libraries, where “unlimited use of music” was advertised but was not reflected within the standard terms that are sent to, and signed by, the user.  

ADVERTISING REGULATIONS

Since e-commerce sites fundamentally contain advertising content, they are subject to the regulations that apply to normal advertising.  The main advertising regulations are contained within Resolution No 35 of 2012 on the Standards of the Media Advertising.  The resolution covers material such as false and misleading claims, and the need for advertising to be clear and unambiguous.  They also include provisions about clearly determining the identity of the advertiser in each case, and separating editorial and advertising content.  

CONCLUSION

E-commerce means extending usual business operations beyond the retail sector and into the publishing sector.  As many retail operators are unaccustomed to considering the liabilities that arise in the online sector, it is important that they not only set up appropriate documentation but also establish protocols to ensure internal compliance with the various laws that will apply to their new business operations.  It sounds complex and may take some time to put into place, but it is worth the peace of mind in the long run.


Fiona Robertson is a media and entertainment lawyer within Al Tamimi & Co’s Technology Media & Telecommunications team.  She advises many retail operators on transitioning from traditional business models to modern digital models encompassing e-commerce, social media advertising and the use of influencers. Fiona can be contacted at F.Robertson@tamimi.com.

Topics: Legal Corner, E-commerce, Business in Dubai

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