Chapter 17 Legal, Ethical, and Social Impacts of EC

Learning Objectives Describe the differences between legal and ethical issues in EC. Understand the difficulties of protecting privacy in EC. Discuss issues of intellectual property rights in EC. Describe unsolicited ad problems and remedies. Understand the conflict between free speech and censorship on the Internet.

Describe the differences between legal and ethical issues in EC.

Understand the difficulties of protecting privacy in EC.

Discuss issues of intellectual property rights in EC.

Describe unsolicited ad problems and remedies.

Understand the conflict between free speech and censorship on the Internet.

Learning Objectives Describe major legal issues in EC. Describe the types of fraud on the Internet and how to protect against them. Describe representative societal issues in EC. Describe the role and impact of virtual communities on EC. Describe the future of EC.

Describe major legal issues in EC.

Describe the types of fraud on the Internet and how to protect against them.

Describe representative societal issues in EC.

Describe the role and impact of virtual communities on EC.

Describe the future of EC.

Legal Issues Versus Ethical Issues ethics The branch of philosophy that deals with what is considered to be right and wrong

ethics

The branch of philosophy that deals with what is considered to be right and wrong

Legal Issues Versus Ethical Issues The Major Ethical and Legal Issues Discussed in this Chapter Privacy Intellectual property rights and online piracy Unsolicited electronic ads and spamming Free speech versus censorship Consumer and merchant protection against fraud

The Major Ethical and Legal Issues Discussed in this Chapter

Privacy

Intellectual property rights and online piracy

Unsolicited electronic ads and spamming

Free speech versus censorship

Consumer and merchant protection against fraud

Legal Issues Versus Ethical Issues EC Ethical Issues Non-Work-Related Use of the Internet Employees are tempted to use e-mail and the Web for non-work-related purposes In some companies, this use is tremendously out of proportion with its work-related use The utility of monitoring employee usage can be considered “one of the most controversial EC issues”

EC Ethical Issues

Non-Work-Related Use of the Internet

Employees are tempted to use e-mail and the Web for non-work-related purposes

In some companies, this use is tremendously out of proportion with its work-related use

The utility of monitoring employee usage can be considered “one of the most controversial EC issues”

Legal Issues Versus Ethical Issues Codes of Ethics: Useful guidelines for a corporate Web policy: Issue written policy guidelines about employee use of the Internet Make it clear to employees that they cannot use copyrighted trademarked material without permission Post disclaimers concerning content, such as sample code, that the company does not support Post disclaimers of responsibility concerning content of online forums and chat sessions

Codes of Ethics: Useful guidelines for a corporate Web policy:

Issue written policy guidelines about employee use of the Internet

Make it clear to employees that they cannot use copyrighted trademarked material without permission

Post disclaimers concerning content, such as sample code, that the company does not support

Post disclaimers of responsibility concerning content of online forums and chat sessions

Legal Issues Versus Ethical Issues Codes of Ethics: Useful guidelines for a corporate Web policy: Make sure that Web content and activity comply with the laws in other countries Make sure that Web content and activity comply with the laws in other countries Make sure that the company’s Web content policy is consistent with other company policies Appoint someone to monitor Internet legal and liability issues. Have attorneys review Web content to make sure that there is nothing unethical, or illegal, on the company’s Web site

Codes of Ethics: Useful guidelines for a corporate Web policy:

Make sure that Web content and activity comply with the laws in other countries

Make sure that Web content and activity comply with the laws in other countries

Make sure that the company’s Web content policy is consistent with other company policies

Appoint someone to monitor Internet legal and liability issues.

Have attorneys review Web content to make sure that there is nothing unethical, or illegal, on the company’s Web site

Privacy privacy The right to be left alone and the right to be free of unreasonable personal intrusions Collecting Information about Individuals Web Site Registration Cookies Spyware and Similar Methods RFID’s Threat to Privacy Privacy of Employees Privacy of Patients

privacy

The right to be left alone and the right to be free of unreasonable personal intrusions

Collecting Information about Individuals

Web Site Registration

Cookies

Spyware and Similar Methods

RFID’s Threat to Privacy

Privacy of Employees

Privacy of Patients

Protection of Privacy Notice/awareness Choice/consent opt-out clause Agreement that requires computer users to take specific steps to prevent the collection of personal information opt-in clause Agreement that requires computer users to take specific steps to allow the collection of personal information

Protection of Privacy

Notice/awareness

Choice/consent

opt-out clause

Agreement that requires computer users to take specific steps to prevent the collection of personal information

opt-in clause

Agreement that requires computer users to take specific steps to allow the collection of personal information

Privacy Protection of Privacy Access/participation Integrity/security Enforcement/redress

Protection of Privacy

Access/participation

Integrity/security

Enforcement/redress

Privacy The USA Patriot Act E-mail and Internet searches Nationwide roving wiretaps Requirement that ISPs hand over more user information Expanded scope of surveillance based on new definitions of terrorism Government spying on suspected computer trespassers with no need for court order Wiretaps for suspected violations of the Computer Fraud and Abuse Act

The USA Patriot Act

E-mail and Internet searches

Nationwide roving wiretaps

Requirement that ISPs hand over more user information

Expanded scope of surveillance based on new definitions of terrorism

Government spying on suspected computer trespassers with no need for court order

Wiretaps for suspected violations of the Computer Fraud and Abuse Act

Privacy The USA Patriot Act Dramatic increases in the scope and penalties of the Computer Fraud and Abuse Act General expansion of Foreign Intelligence Surveillance Act (FISA) authority Increased information sharing between domestic law enforcement and intelligence FISA detours around federal domestic surveillance limitations; domestic surveillance detours around FISA limitations

The USA Patriot Act

Dramatic increases in the scope and penalties of the Computer Fraud and Abuse Act

General expansion of Foreign Intelligence Surveillance Act (FISA) authority

Increased information sharing between domestic law enforcement and intelligence

FISA detours around federal domestic surveillance limitations; domestic surveillance detours around FISA limitations

Privacy Privacy Protection in Other Countries In 1998, the European Union passed a privacy directive (EU Data Protection Directive) reaffirming the principles of personal data protection in the Internet age The directive aims to regulate the activities of any person or company that controls the collection, storage, processing, or use of personal data on the Internet

Privacy Protection in Other Countries

In 1998, the European Union passed a privacy directive (EU Data Protection Directive) reaffirming the principles of personal data protection in the Internet age

The directive aims to regulate the activities of any person or company that controls the collection, storage, processing, or use of personal data on the Internet

Intellectual Property Rights intellectual property Creations of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs, used in commerce

intellectual property

Creations of the mind, such as inventions, literary and artistic works, and symbols, names, images, and designs, used in commerce

Intellectual Property Rights copyright An exclusive grant from the government that allows the owner to reproduce a work, in whole or in part, and to distribute, perform, or display it to the public in any form or manner, including over Internet Literary works Musical works Dramatic works Artistic works Sound recordings, films, broadcasts, cable programs

copyright

An exclusive grant from the government that allows the owner to reproduce a work, in whole or in part, and to distribute, perform, or display it to the public in any form or manner, including over Internet

Literary works

Musical works

Dramatic works

Artistic works

Sound recordings, films, broadcasts, cable programs

Intellectual Property Rights Copyrights Piracy of Software, Music, and Other Digitizable Material Copyright Protection Approaches digital watermarks Unique identifiers embedded in digital content that make it possible to identify pirated works Digital Rights Management

Copyrights

Piracy of Software, Music, and Other Digitizable Material

Copyright Protection Approaches

digital watermarks

Unique identifiers embedded in digital content that make it possible to identify pirated works

Digital Rights Management

Intellectual Property Rights trademark A symbol used by businesses to identify their goods and services; government registration of the trademark confers exclusive legal right to its use Domain Name Disputes and Resolutions cybersquatting The practice of registering domain names in order to sell them later at a higher price

trademark

A symbol used by businesses to identify their goods and services; government registration of the trademark confers exclusive legal right to its use

Domain Name Disputes and Resolutions

cybersquatting

The practice of registering domain names in order to sell them later at a higher price

Intellectual Property Rights patent A document that grants the holder exclusive rights to an invention for a fixed number of years Fan and Hate Sites cyberbashing The registration of a domain name that criticizes an organization or person

patent

A document that grants the holder exclusive rights to an invention for a fixed number of years

Fan and Hate Sites

cyberbashing

The registration of a domain name that criticizes an organization or person

Unsolicited Electronic Ads: Problems and Solutions E-Mail Spamming unsolicited commercial e-mail (UCE) The use of e-mail to send unwanted ads or correspondence What Drives UCE? Many spammers are just trying to get people’s financial information

E-Mail Spamming

unsolicited commercial e-mail (UCE)

The use of e-mail to send unwanted ads or correspondence

What Drives UCE?

Many spammers are just trying to get people’s financial information

Unsolicited Electronic Ads: Problems and Solutions Why It Is Difficult to Control Spamming Spammers send millions of e-mails, shifting Internet accounts to avoid detection Spammers use different methods to find their victims Solutions to Spamming Junk-mail filters Automatic junk-mail deleters Blocking certain URLs and e-mail addresses

Why It Is Difficult to Control Spamming

Spammers send millions of e-mails, shifting Internet accounts to avoid detection

Spammers use different methods to find their victims

Solutions to Spamming

Junk-mail filters

Automatic junk-mail deleters

Blocking certain URLs and e-mail addresses

Exhibit 17.1 How Spam Blockers Work

Unsolicited Electronic Ads: Problems and Solutions E-Mail Spamming Anti-spam Legislation Do-not-spam lists Protecting employees

E-Mail Spamming

Anti-spam Legislation

Do-not-spam lists

Protecting employees

Unsolicited Electronic Ads: Problems and Solutions Protecting against Pop-Up Ads Pop-Up stoppers Concluding Remarks The spam situation has not yet been resolved. However, it seems that both e-mail spamming and pop-ups are not increasing, and they may even be declining

Protecting against Pop-Up Ads

Pop-Up stoppers

Concluding Remarks

The spam situation has not yet been resolved. However, it seems that both e-mail spamming and pop-ups are not increasing, and they may even be declining

Free Speech Versus Censorship and Other Legal Issues On the Internet, censorship refers to government’s attempt to control, in one way or another, the material that is presented “ Donham’s First Law of Censorship.” This semiserious precept states: “Most citizens are implacably opposed to censorship in any form—except censorship of whatever they personally happen to find offensive.” Children’s Online Protection Act (COPA) exemplifies the protective approach

On the Internet, censorship refers to government’s attempt to control, in one way or another, the material that is presented

“ Donham’s First Law of Censorship.” This semiserious precept states: “Most citizens are implacably opposed to censorship in any form—except censorship of whatever they personally happen to find offensive.”

Children’s Online Protection Act (COPA) exemplifies the protective approach

Free Speech Versus Censorship and Other Legal Issues Other Legal Issues Electronic Contracts A legally binding contract requires a few basic elements: an offer, acceptance, and consideration These requirements are difficult to establish when the human element in the processing of the transaction is removed and the contracting is performed electronically Intelligent Agents and Contracts Uniform Computer Information Transactions Act ( 2000), makes clear that contracts can be formed even when a human is not directly involved

Other Legal Issues

Electronic Contracts

A legally binding contract requires a few basic elements: an offer, acceptance, and consideration

These requirements are difficult to establish when the human element in the processing of the transaction is removed and the contracting is performed electronically

Intelligent Agents and Contracts

Uniform Computer Information Transactions Act ( 2000), makes clear that contracts can be formed even when a human is not directly involved

Free Speech Versus Censorship and Other Legal Issues Taxing Business on the Internet This issue is extremely important because it is related to global EC, as well as to fairness in competition when EC competes with off-line marketing channels, which requires the collection of taxes

Taxing Business on the Internet

This issue is extremely important because it is related to global EC, as well as to fairness in competition when EC competes with off-line marketing channels, which requires the collection of taxes

Free Speech Versus Censorship and Other Legal Issues The Tax-Exemption Debate The Internet Tax Freedom Act 1(998) sought to promote e-commerce through tax incentives, by barring any new state or local sales taxes on Internet transactions until October 2001 The U.S. Congress extended the tax moratorium until 2006, giving it time to digest the contents of the report and hash out contentious tax issues

The Tax-Exemption Debate

The Internet Tax Freedom Act 1(998) sought to promote e-commerce through tax incentives, by barring any new state or local sales taxes on Internet transactions until October 2001

The U.S. Congress extended the tax moratorium until 2006, giving it time to digest the contents of the report and hash out contentious tax issues

Free Speech Versus Censorship and Other Legal Issues The Tax-Exemption Debate Proposed Taxation in the United States The National Governors’ Association, the National League of Cities, and the U.S. Conference of Mayors fought the Tax Free Bill for the Internet The U.S. Congress blocked state and local governments from taxing connections that link consumers to the Internet, at least until November 2007

The Tax-Exemption Debate

Proposed Taxation in the United States

The National Governors’ Association, the National League of Cities, and the U.S. Conference of Mayors fought the Tax Free Bill for the Internet

The U.S. Congress blocked state and local governments from taxing connections that link consumers to the Internet, at least until November 2007

EC Fraud and Consumer and Seller Protection Fraud on the Internet Online Auction Fraud Internet Stock Fraud Other Financial Fraud

Fraud on the Internet

Online Auction Fraud

Internet Stock Fraud

Other Financial Fraud

EC Fraud and Consumer and Seller Protection Fraud on the Internet Identity Theft and Phishing identity theft A criminal act in which someone presents himself (herself) as another person and uses that person’s social security number, bank account numbers, and so on, to obtain loans, purchase items, make obligations, sell stocks, etc.

Fraud on the Internet

Identity Theft and Phishing

identity theft

A criminal act in which someone presents himself (herself) as another person and uses that person’s social security number, bank account numbers, and so on, to obtain loans, purchase items, make obligations, sell stocks, etc.

EC Fraud and Consumer and Seller Protection Consumer Protection Third-Party Assurance Services TRUSTe’s “Trustmark” Better Business Bureau WHICHonline Web Trust Seal and Others Online Privacy Alliance Evaluation by Consumers Authentication and Biometric Controls

Consumer Protection

Third-Party Assurance Services

TRUSTe’s “Trustmark”

Better Business Bureau

WHICHonline

Web Trust Seal and Others

Online Privacy Alliance

Evaluation by Consumers

Authentication and Biometric Controls

EC Fraud and Consumer and Seller Protection Seller Protection Customers who deny that they placed an order Customers who download copyrighted software and/or knowledge and sell it to others Customers who give false payment (credit card or bad checks) information in payment for products and services provided Use of their name by others Use of their unique words and phrases, names, and slogans and their Web addresses by others

Seller Protection

Customers who deny that they placed an order

Customers who download copyrighted software and/or knowledge and sell it to others

Customers who give false payment (credit card or bad checks) information in payment for products and services provided

Use of their name by others

Use of their unique words and phrases, names, and slogans and their Web addresses by others

EC Fraud and Consumer and Seller Protection What can Sellers Do? Use intelligent software to identify possibly questionable customers Identify warning signals for possibly fraudulent transactions Ask customers whose billing address is different from the shipping address to call their bank and have the alternate address added to their bank account

What can Sellers Do?

Use intelligent software to identify possibly questionable customers

Identify warning signals for possibly fraudulent transactions

Ask customers whose billing address is different from the shipping address to call their bank and have the alternate address added to their bank account

Societal Issues digital divide The gap between those who have and those who do not have the ability to access electronic technology in general, and the Internet and EC in particular Other Societal Issues Education Public safety, criminal justice, and homeland security Health aspects

digital divide

The gap between those who have and those who do not have the ability to access electronic technology in general, and the Internet and EC in particular

Other Societal Issues

Education

Public safety, criminal justice, and homeland security

Health aspects

Virtual (Internet) Communities virtual (Internet) community A group of people with similar interests who interact with one another using the Internet Characteristics of Communities One possibility is to classify members as traders , players , just friends , enthusiasts , or friends in need

virtual (Internet) community

A group of people with similar interests who interact with one another using the Internet

Characteristics of Communities

One possibility is to classify members as traders , players , just friends , enthusiasts , or friends in need

Virtual (Internet) Communities Search communities Trading communities Education communities Scheduled events communities Subscriber-based communities Community consulting firms E-mail-based communities Advocacy communities CRM communities Mergers and acquisitions activities Commercial Aspects of Communities

Search communities

Trading communities

Education communities

Scheduled events communities

Subscriber-based communities

Community consulting firms

E-mail-based communities

Advocacy communities

CRM communities

Mergers and acquisitions activities

Virtual (Internet) Communities Types of Virtual Communities Transaction Purpose or interest Relations or practice Fantasy Financial Viability of Communities: Revenue model of communities can be based on: Sponsorship Membership fees Sales commissions Advertising Combination of these

Types of Virtual Communities

Transaction

Purpose or interest

Relations or practice

Fantasy

Financial Viability of Communities: Revenue model of communities can be based on:

Sponsorship

Membership fees

Sales commissions

Advertising

Combination of these

Exhibit 17.5 Value Creation in Electronic Communities

Virtual (Internet) Communities Increase traffic and participation in the community Focus on the needs of the members; use facilitators and coordinators Encourage free sharing of opinions and information—no controls Obtain financial sponsorship. This factor is a must. Significant investment is required Consider the cultural environment Provide several tools and activities for member use; communities are not just discussion groups Involve community members in activities and recruiting Guide discussions, provoke controversy, and raise sticky issues. This keeps interest high Eight critical factors for community success:

Increase traffic and participation in the community

Focus on the needs of the members; use facilitators and coordinators

Encourage free sharing of opinions and information—no controls

Obtain financial sponsorship. This factor is a must. Significant investment is required

Consider the cultural environment

Provide several tools and activities for member use; communities are not just discussion groups

Involve community members in activities and recruiting

Guide discussions, provoke controversy, and raise sticky issues. This keeps interest high

Virtual (Internet) Communities Key Strategies for Successful Online Communities Handle member data sensitively Maintain stability of the Web site with respect to the consistency of content, services, and types of information offered Provide fast reaction time of the Web site Offer up-to-date content Offer continuous community control with regard to member satisfaction Establish codes of behavior (netiquette/guidelines) to contain conflict potential

Key Strategies for Successful Online Communities

Handle member data sensitively

Maintain stability of the Web site with respect to the consistency of content, services, and types of information offered

Provide fast reaction time of the Web site

Offer up-to-date content

Offer continuous community control with regard to member satisfaction

Establish codes of behavior (netiquette/guidelines) to contain conflict potential

The Future of EC Nontechnological Success Factors Internet Usage Opportunities for Buying M-Commerce Purchasing Incentives Increased Security and Trust Efficient Information Handling Innovative Organizations Virtual Communities

Nontechnological Success Factors

Internet Usage

Opportunities for Buying

M-Commerce

Purchasing Incentives

Increased Security and Trust

Efficient Information Handling

Innovative Organizations

Virtual Communities

The Future of EC Nontechnological Success Factors Payment Systems B2B EC B2B Exchanges Auctions Going Global E-Government Intra-business EC E-Learning EC Legislation

Nontechnological Success Factors

Payment Systems

B2B EC

B2B Exchanges

Auctions

Going Global

E-Government

Intra-business EC

E-Learning

EC Legislation

The Future of EC EC Technology Trends Clients Embedded Clients Wireless Communications and M-Commerce Pervasive Computing Wearable Devices RFID Servers and Operating Systems Networks

EC Technology Trends

Clients

Embedded Clients

Wireless Communications and M-Commerce

Pervasive Computing

Wearable Devices

RFID

Servers and Operating Systems

Networks

The Future of EC EC Technology Trends EC Software and Services Search Engines Peer-to-Peer Technology Integration Web Services Software Agents Interactive TV Tomorrow’s Internet

EC Technology Trends

EC Software and Services

Search Engines

Peer-to-Peer Technology

Integration

Web Services

Software Agents

Interactive TV

Tomorrow’s Internet

The Future of EC EC Technology Trends utility computing Computing resources that flow like electricity on demand from virtual utilities around the globe—always on and highly available, secure, efficiently metered, priced on a pay-as-you-use basis, dynamically scaled, self-healing, and easy to manage Grid Computing coordinates the use of a large number of servers and storage, acting as one computer

EC Technology Trends

utility computing

Computing resources that flow like electricity on demand from virtual utilities around the globe—always on and highly available, secure, efficiently metered, priced on a pay-as-you-use basis, dynamically scaled, self-healing, and easy to manage

Grid Computing coordinates the use of a large number of servers and storage, acting as one computer

The Future of EC Integrating the Marketplace with Marketspace Probably the most noticeable integration of the two concepts is in the click-and-mortar organization A major problem with the click-and-mortar approach is how the two outlets can cooperate in planning, advertising, logistics, resource allocation, and so on and how the strategic plans of the marketspace and marketplace can be aligned The impact of EC on our lives will be as much as, and possibly more profound than, that of the Industrial Revolution

Integrating the Marketplace with Marketspace

Probably the most noticeable integration of the two concepts is in the click-and-mortar organization

A major problem with the click-and-mortar approach is how the two outlets can cooperate in planning, advertising, logistics, resource allocation, and so on and how the strategic plans of the marketspace and marketplace can be aligned

The impact of EC on our lives will be as much as, and possibly more profound than, that of the Industrial Revolution

Managerial Issues What sorts of legal and ethical issues should be of major concern to an EC enterprise? What are the most critical ethical issues? Should we obtain patents? What impacts on business is EC expected to make? Do we have a community?

What sorts of legal and ethical issues should be of major concern to an EC enterprise?

What are the most critical ethical issues?

Should we obtain patents?

What impacts on business is EC expected to make?

Do we have a community?

Summary Differences between legal and ethical issues. Protecting privacy in EC. Intellectual property rights in EC. Unsolicited ads and spamming. Conflict between free speech and censorship.

Differences between legal and ethical issues.

Protecting privacy in EC.

Intellectual property rights in EC.

Unsolicited ads and spamming.

Conflict between free speech and censorship.

Summary Legal issues. Protecting buyers and sellers online. Societal issues and EC. The role of virtual communities. The future of EC.

Legal issues.

Protecting buyers and sellers online.

Societal issues and EC.

The role of virtual communities.

The future of EC.