08 Ethics, Law and E-commerce


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08 Ethics, Law and E-commerce

  1. 1. e-commerce business. technology. society. eighth edition Kenneth C. Laudon Carol Guercio TraverCopyright © 2012 Pearson EducationChapter 8Ethics, Law and E-commerce 1
  2. 2. Discovering Law and Ethics in a Virtual World Class Discussion  Why is “mischief” in virtual worlds more difficult to stop? What constitutes mischief in Second Life?  It’s in virtual world; Selling brand-name goods, conducting gambling, selling simulated prostitution service  Which behaviors have been banned in Second Life?  Intolerance, harassment, assault, disclosure of information about other people’s real-world lives, indecency sexual behavior, and disturbing the peace  Is there a consensus regarding whether or not in-game gambling and other virtual crimes are also actual crimes? What is Second Life’s stance?  No. They prohibited all forms of gambling in July 2007  How faithfully do you believe the law should be enforced in virtual worlds? Copyright © 2012 Pearson Education Copyright © 2006 Pearson Education, Copyright © 2012 Pearson Education SlideInc. 8-5 2
  3. 3. Learning Objectives  Understand why e-commerce raises ethical, social, and political issues  Recognize the main ethical, social, and political issues raised by e- commerce  Identify a process for analyzing ethical dilemmas  Understand basic concepts related to privacy  Identify the practices of e-commerce companies that threaten privacy  Describe the different methods used to protect online privacy  Understand the various forms of intellectual property and the challenges involved in protecting it  Understand how governance of the Internet has evolved over time  Explain why taxation of e-commerce raises governance and jurisdiction issues  Identify major public safety and welfare issues raised by e-commerceCopyright © 2012 Pearson Education Understanding Ethical, Social, and Political Issues in E-commerce Internet, like other technologies, can (see next Fig.):  Enable new crimes  Affect environment  Threaten social values Costs and benefits must be carefully considered, especially when there are no clear-cut legal or cultural guidelinesCopyright © 2012 Pearson Education Slide 8-7 3
  4. 4. Copyright © 2010 Pearson Education,Copyright © 2012 Pearson Education SlideInc. 8-8 A Model for Organizing the Issues Issues raised by Internet and e-commerce can be viewed at individual, social, and political levels (see next Fig.) Four major categories of issues:  Information rights– individual rights to their personal info in public marketplace and rights to access info about business and other organizations  Property rights – enforcement of traditional intellectual property rights in Internet world where perfect copies can be made and distributed worldwide within seconds  Governance – public laws to govern Internet and e- commerce, and the law-making bodies (state, federal, international) who have jurisdiction  Public safety and welfare – to ensure equitable access to Internet and e-commerce channels by schools and colleges, or to determine if pornography and gambling are threat to public safety and welfareCopyright © 2012 Pearson Education Slide 8-9 4
  5. 5. The Moral Dimensions of an Internet SocietyFigure 8.1, Page 538Copyright © 2012 Pearson Education Slide 8-10 Basic Ethical Concepts Ethics  Study of principles used to determine right and wrong courses of action Responsibility  individuals, organizations, and societies are responsible for actions they take Accountability  individuals, organizations, and societies should be held accountable to others for the consequences of their actions Liability  Laws permitting individuals to recover damages done to them Due process  Laws are known, understood  Ability to appeal to higher authorities to ensure laws applied correctlyCopyright © 2012 Pearson Education Slide 8-11 5
  6. 6. Analyzing Ethical Dilemmas Dilemma  A situation where there are at least two diametrically opposed actions, each of which supports a desirable outcome Process for analyzing ethical dilemmas: 1. Identify and clearly describe the facts: Find out who did what to whom, and where, when, and how 2. Define the conflict or dilemma and identify the higher- order values involved: E.g., advertising networks (DoubleClick) increases market efficiency at the price of individual privacy 3. Identify the stakeholders 4. Identify the options that you can reasonably take 5. Identify the potential consequences of your options : Ask yourself “What if I choose this option consistently over time?”Copyright © 2012 Pearson Education Slide 8-12 Candidate Ethical Principles Help determine actions when confronted with an ethical dilemma:  Golden Rule – Do unto others as you would have them do unto you.  Universalism – If an action is not right for all situations, then it is not right for any certain situation.  Slippery Slope – If an action can’t be taken repeatedly, then it is not right to take at all.  Collective Utilitarian Principle – Take the action that achieves the greater value for all of society.  Risk Aversion – Take the action that produces the least harm, or the least potential cost.  No Free Lunch – If something someone else has created is useful to you, it has value and you should assume the creator wants compensation for this work.  The New York Times Test (Perfect Information Rule) – Given your decision on a matter, will the reaction of readers be positive or negative?  The Social Contract Rule – Would you live in a society where the principle you are supporting would become an organizing principle of the entire society?Copyright © 2012 Pearson Education 6
  7. 7. Privacy and Information Rights Privacy  Moral right of individuals to be left alone, free from surveillance, or interference from other individuals or organizations Information privacy  Subset of privacy  Includes:  The claim that certain information should not be collected at all  The claim of individuals to control the use of whatever information is collected about themCopyright © 2012 Pearson Education Slide 8-15 Privacy and Information Rights (cont.) Major ethical issue related to e-commerce and privacy:  Under what conditions should we invade the privacy of others? Major social issue:  Development of “expectations of privacy” and privacy norms Major political issue:  Development of statutes that govern relations between recordkeepers and individualsCopyright © 2012 Pearson Education Slide 8-16 7
  8. 8. Information Collected at E-commerce Sites Data collected includes  Personally identifiable information (PII) - Data that can be used to identify, locate, or contact an individual (see next Fig.)  Anonymous information - Demographic and behavioral information that does not include any personal identifiers (e.g., age, occupation, income, zip code, ethnicity) Types of data collected  Name, address, phone, e-mail, social security  Bank and credit accounts, gender, age, occupation, education  Preference data, transaction data, clickstream data, browser typeCopyright © 2012 Pearson Education Slide 8-17Copyright © 2012 Pearson Education Slide 8-18 8
  9. 9. Copyright © 2012 Pearson Education Slide 8-19Copyright © 2012 Pearson Education Slide 8-20 9
  10. 10. Social Networks and Privacy Social networks  Encourage sharing personal details  Pose unique challenge to maintaining privacy Facebook’s facial recognition technology and tagging Personal control over personal information vs. organization’s desire to monetize social networkCopyright © 2012 Pearson Education Slide 8-21 Profiling and Behavioral Targeting Profiling  Creation of digital images that characterize online individual and group behavior  Anonymous profiles  Identify people as belonging to very specific and targeted groups  E.g., 20-30-yr-old males, with college degrees and income >$30,000/yr, and interested in high-fashion clothing  Personal profiles  Add personal identifiers (email, postal address, phone number) to behavioral data Advertising networks can  Track consumer and browsing behavior on Web  Dynamically adjust what user sees on screen  Build and refresh profiles of consumers Google’s AdWords programCopyright © 2012 Pearson Education Slide 8-22 10
  11. 11. Profiling and Behavioral Targeting (cont.) Deep packet inspection  Records every keystroke at ISP level of everyone and uses information to make suggestions and target ads Business perspective:  Increases effectiveness of advertising, subsidizing free content  Enables sensing of demand for new products and services Critics’ perspective:  Undermines expectation of anonymity and privacy Consumers  show significant opposition to unregulated collection of personal informationCopyright © 2012 Pearson Education Slide 8-23 The Internet and Government Invasions of Privacy Various laws strengthen ability of law enforcement agencies to monitor Internet users without knowledge and sometimes without judicial oversight  CALEA, USA PATRIOT Act, Cyber Security Enhancement Act, Homeland Security Act Government agencies are largest users of private sector commercial data brokers, e.g., Experian and TransUnion Retention of individual’s online behavior data by ISPs raises privacy concernCopyright © 2012 Pearson Education Slide 8-24 11
  12. 12. Legal Protections In United States, privacy rights explicitly granted or derived from:  Constitution  First Amendment—guarantees freedom of speech and association  Fourth Amendment—protects against unreasonable search and seizure of one’s personal documents or home  Fourteenth Amendment—guarantees due process  Specific statutes and regulations (federal and state)  Common law – court decisions involving wrongful acts or personal injuriesCopyright © 2012 Pearson Education Slide 8-25Copyright © 2012 Pearson Education 12
  13. 13. Copyright © 2012 Pearson EducationCopyright © 2012 Pearson Education 13
  14. 14. Informed Consent U.S. firms can gather and redistribute transaction information without individual’s informed consent  Illegal in Europe Informed consent:  Opt-in – requires affirmative action by consumer to allow collection and use of information  Opt-out – default to collect information unless consumer takes affirmative action to prevent collection of data by checking a box or filling out form  Many U.S. e-commerce firms merely publish information practices as part of privacy policy without providing for any form of informed consentCopyright © 2012 Pearson Education Slide 8-29 The FTC’s Evolving Privacy Approach Fair Information Practice principles (1998)  Notice  Choice  Access  Security  Enforcement  Restricted collection New privacy framework (2010)  Privacy by design  Simplified choice  Greater transparencyCopyright © 2012 Pearson Education Slide 8-30 14
  15. 15. Copyright © 2012 Pearson Education Slide 8-31Notification and Choice Strengthen the FIP’sAdded tothe FIP’s Copyright © 2012 Pearson Education Slide 8-32 15
  16. 16. Copyright © 2012 Pearson Education Slide 8-33Copyright © 2012 Pearson Education Slide 8-34 16
  17. 17. The European Data Protection Directive Privacy protection much stronger in Europe than United States European approach:  Comprehensive and regulatory in nature European Commission’s Directive on Data Protection (1998):  Standardizes and broadens privacy protection in European Union countries Department of Commerce safe harbor program:  For U.S. firms that wish to comply with directiveCopyright © 2012 Pearson Education Slide 8-35 Private Industry Self-Regulation Safe harbor programs:  Private, self-regulating policy mechanism to meet objectives of government regulations without government involvement  e.g., Privacy seal programs Industry associations include:  Online Privacy Alliance (OPA)  Encourages self-regulation as a reaction to growing public concerns  Developed online “seals” that attest to privacy policies on a site  E.g., privacy seal programs (TRUSTe, BBB Reliability Seal)  Network Advertising Initiative (NAI)  Formed by advertising network industry  Developed privacy principles in conjunction with FTC  Members include DoubleClick, Advertising.com, and 24/7 Real Media  CLEAR Ad Notice Technical SpecificationsCopyright © 2012 Pearson Education Slide 8-36 17
  18. 18. Private Industry Self-Regulation Privacy advocacy groups  Monitor developments in privacy Emerging privacy protection business  E.g., reputation.com, SocialShield, AbineCopyright © 2012 Pearson Education Slide 8-37 Technological Solutions Spyware blockers Pop-up blockers Secure e-mail Anonymous remailers, surfing Cookie managers Disk/file erasing programs Policy generators Privacy Policy Reader/P3P Public key encryption (see next Fig.)Copyright © 2012 Pearson Education Slide 8-39 18
  19. 19. Copyright © 2012 Pearson Education Slide 8-40 How P3P WorksFigure 8.2(A), Page 522 SOURCE: W3C Platform for Privacy Preferences Initiative, 2003.Copyright © 2012 Pearson Education 19
  20. 20. Intellectual Property Rights Intellectual property:  Encompasses all tangible and intangible products of human mind Major ethical issue:  How should we treat property that belongs to others? Major social issue:  Is there continued value in protecting intellectual property in the Internet age? Major political issue:  How can Internet and e-commerce be regulated or governed to protect intellectual property?Copyright © 2012 Pearson Education Slide 8-43 Intellectual Property Protection Three main types of protection:  Copyright  Patent  Trademark law Goal of intellectual property law:  Balance two competing interests—public and private Maintaining this balance of interests is always challenged by the invention of new technologiesCopyright © 2012 Pearson Education Slide 8-44 20
  21. 21. Copyright Protects original forms of expression (but not ideas) from being copied by others for a period of time E.g., writings, art, drawings, and music 95-year protection for corporate-owned works, or life + 70- year protection of individual’s works “Look and feel” copyright infringement lawsuits involve distinction between an idea and its expression  E.g., Apple sued Microsoft and HP for infringing Apple’s copyright on Macintosh interface Fair use doctrine : Under certain circumstances, permits use of copyrighted materials without permission (see next Fig.) Digital Millennium Copyright Act, 1998  First major effort to adjust copyright laws to Internet age  Implements WIPO treaty that makes it illegal to make, distribute, or use devices that circumvent technology-based protections of copyrighted materialsCopyright © 2012 Pearson Education Slide 8-45Copyright © 2012 Pearson Education Slide 8-46 21
  22. 22. Copyright © 2012 Pearson Education Slide 8-47 Patents Grant owner 20-year monopoly on ideas behind an invention  Different from copyrights since patents protect idea and not just expression of idea  Four types of inventions: Machines, Man-made products, Compositions of matter, Processing methods  Invention must be new, non-obvious, novel Benefits  Encourages inventors  Promotes dissemination of new techniques through licensing Danger  Stifles competition by raising barriers to entryCopyright © 2012 Pearson Education Slide 8-48 22
  23. 23. E-commerce Patents  1998 State Street Bank & Trust vs. Signature Financial Group  Business method patents  U.S. Patent Office, European Patent Convention hold different standards  Most European patent laws do not recognize business methods unless based on technology  Patent reform  Patent trolls: companies that buy patents on a speculative basis and then use them to threaten other companies violating the patent  2011 America Invents Acts  Switch from “first-to-invent” to “first-to-file” system  New ways to challenge patents out of court  Allow startup firms to get fast-track consideration of their patent applications, within 12 months, rather than 30-plus months Copyright © 2012 Pearson Education Slide 8-49Internet and E-commerce Business Method Patents Figure 8.2, Page 576 SOURCE: Based on data from United States Patent and Trademark Office, 2010. Copyright © 2012 Pearson Education Slide 8-50 23
  24. 24. Copyright © 2012 Pearson Education Slide 8-51Copyright © 2012 Pearson Education Slide 8-52 24
  25. 25. Trademarks Identify, distinguish goods, and indicate their source Purpose  Ensure consumer gets what is paid for/expected to receive  Protect owner against piracy and misappropriation Infringement  Market confusion: creating confusion with existing marks, causes consumers to make market mistakes  Bad faith: intentional misuse of words and symbols to extort revenue from legitimate trademark owners Dilution  Behavior that weakens connection between trademark and product  Blurring – weakening connection between trademark and goods  Tarnishment – using trademark in a way that makes underlying products appear unsavory or unwholesomeCopyright © 2012 Pearson Education Slide 8-53 Trademarks and the Internet Cybersquatting  Anticybersquatting Consumer Protection Act (ACPA) Cyberpiracy  Typosquatting Metatagging Keywording Deep linking FramingCopyright © 2012 Pearson Education Slide 8-54 25
  26. 26. Copyright © 2012 Pearson Education Slide 8-55 Governance Primary questions  Who will control Internet and e-commerce?  What elements will be controlled and how? Stages of governance and e-commerce  Government Control Period (1970–1994)  Privatization (1995–1998)  Self-Regulation (1995–present)  Government Regulation (1998–present)Copyright © 2012 Pearson Education Slide 8-56 26
  27. 27. Copyright © 2012 Pearson Education Slide 8-57 Who Governs E-commerce and the Internet? Currently: Mixed mode environment  Self-regulation, through variety of Internet policy and technical bodies, co-exists with limited government regulation ICANN : Domain Name System Internet could be easily controlled, monitored, and regulated from a central location , e.g., network access points, routers, and servers (e.g., China, Singapore, Thailand etc.)Copyright © 2012 Pearson Education Slide 8-58 27
  28. 28. Taxation E-commerce taxation illustrates complexity of governance and jurisdiction issues U.S. sales taxed by states and local government MOTO retailing E-commerce benefits from tax “subsidy” October 2007: Congress extends tax moratorium for an additional seven years Unlikely that comprehensive, integrated rational approach to taxation issue will be determined for some time to comeCopyright © 2012 Pearson Education Slide 8-59 Net Neutrality Neutrality: All Internet traffic treated equally—all activities charged the same rate, no preferential assignment of bandwidth Backbone providers vs. content providers December 2010 FCC approved “compromise” net neutrality rules; prohibit ISPs from blocking traffic such as Skype on wired networks, and prohibit “unreasonable” discrimination on such networks Telecom providers adopting compromise position between wired and mobile wireless access: maintain existing rules for land lines, but implement differential pricing for mobile wireless networks, e.g., $15/month for 200MB of data to $45/month for 4GBCopyright © 2012 Pearson Education Slide 8-60 28
  29. 29. Public Safety and Welfare Protection of children and strong sentiments against pornography  Passing legislation that will survive court challenges has proved difficult Efforts to control gambling and restrict sales of drugs and cigarettes  Currently, mostly regulated by state law  Unlawful Internet Gambling Enforcement ActCopyright © 2012 Pearson Education Slide 8-61Copyright © 2012 Pearson Education Slide 8-63 29