Kennedy, Dennis M., Key Legal Concerns in E-Commerce: The Law Comes to the New Frontier, 18 T.M. COOLEY L. REV. 17, 18-19,

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1 Writer #153 Essay.uk.com Sample paper Trade and commerce, throughout the 21 st century, has brought a wide range of new challenges both for those undertaking such trades and also for those attempting to put in place a comprehensive and efficient regulatory system. Some of the key trends have involved electronic commerce. The Internet has become so widely available that most organisations now recognise that, in order to remain competitive, they will have to offer their customers the ability to trade online. This has been fuelled by the fact that consumers are becoming increasingly unwilling to make a trip to the shops and prefer to shop online, thus allowing a much greater choice and also considerably greater convenience. This far greater choice and opportunity is, of course, seen as when it comes to the business to consumer area of law and this also brings about a wide range of new challenges, particularly for those involved in regulation 1. Based on this, businesses have had to become familiar with a raft of legislative rules and trade requirements. As a result, lawyers have also begun taking the steps involved in the process of regulating online business and assisting businesses in understanding how exactly they can comply with e-commerce regulations, at a global level 2. Two of the most developed markets in the world are found in North America and the EU. Moreover, it is primarily these regions that have driven the different approaches to e-commerce regulation. In this paper, the differences between the two regions will be discussed in order to understand exactly how e- commerce can be regulated and what the different approaches potentially bring to the discussion. It should be noted that, although the strict analysis is between the UK and the US, in reality, the UK follows the EU regulation and the two can be discussed largely as one. There are, inevitably, multiple areas within e-commerce that can be analysed when it comes to comparing regulation. Typically, these include how electronic contracts are formed, how jurisdiction is chosen, how signatures are dealt with electronically and how taxes are collected. Naturally, e-commerce can occur between businesses or even between businesses and government bodies, but for the purposes of this analysis, the relationship between business and consumer will be focused on. 1 Kennedy, Dennis M., Key Legal Concerns in E-Commerce: The Law Comes to the New Frontier, 18 T.M. COOLEY L. REV. 17, 18-19, Owen, Mark, International Ramifications of Doing Business On-line: Europe, 661 PLI/PAT 627, 657, 2001.

2 Where consumers can be found in different locations to the businesses or multiple jurisdictions are involved, issues relating to the choice of law will become vitally important. Clearly, a country will want to protect its own local consumers; however, offering this protection when the business itself is outside its jurisdiction can prove challenging. The US is particularly forward thinking in this regard. It recognises that there is a free market and that, generally speaking, economic deregulation is preferred. This transcribes itself in terms of the way that the US generally operates a minimalist attitude when regulating commerce of any type, including e-commerce. Bill Clinton, during his presidency, established a framework for global economic commerce which acts as the core approach to e- commerce regulation in the US 3. This framework laid out five guiding principles which it felt that the US should follow when establishing regulations for e-commerce. It was stated that there was a belief that the private sector should lead when it comes to regulation and should not be driven by governmental whim. Linked to this is the notion that governments should not place restrictions that are unnecessary on any form of electronic commerce 4. It is recognised, however, that in some cases interference in regulation will be necessary; however, when it does become necessary, the approach should be as minimal as possible and should remain as simple as possible. Any regulation that is necessary needs to be fully in line with the needs of the Internet and the fact that it is a global phenomenon. Based on these principles, regulation in the US has focused on facilitating strong competition by ensuring that intellectual property is protected and that the whole process is transparent and fraud is not prevalent. In contrast to this approach, regulation in the EU is slightly different, in as much as it has to deal with the needs of several different member states. Therefore, any EU regulations need to be acceptable to all the member states so that they can be implemented across the board. Therefore, when regulation in the UK is considered, it needs to be considered in the context 3 Geist, Michael, Is There a There There? Toward Greater Certainty For Internet Jurisdiction, 661 PLI/PAT 561, 575, The White House, A Framework for Global Electronic Commerce (July 1, 1997), at (Accessed July 27, 2009)

3 of the fact that the EU will not necessarily be focusing entirely on the UK when it is creating its regulation 5. With this in mind, the EU set out a basic framework in 2000 as to how e- commerce should be regulated in the future. In contrast to the US approach, which attempts to establish an international marketplace, the EU takes a much more insular approach that aims at growing the internal market at the same time as trying to ensure that consumers are protected and that the member states maintain their sovereignty. Naturally, there is a much greater drive within the EU regulation towards ensuring that there is regional facilitation and promoting the internal market, rather than on promoting globalisation. Where the degree of regulation in each of the EU directives is concerned, there is some considerable similarity between the EU and the US in terms of the desire to take a simple and consistent approach when it comes to the regulation of e-commerce transactions 6. Jurisdiction on the choice of law offers two polar choices. Firstly, the jurisdiction can be based on the country of origin or production and secondly, the jurisdiction can be based on the location of the purchaser or consumer. Typically, businesses will prefer the former approach as this gives them a degree of certainty, whereas consumers will prefer the second approach for the same reasons. The issue of jurisdiction has been left largely untouched by the US government. Whilst it is acknowledged that an international agreement should be formed on this issue, it has not yet been undertaken by the US. Essentially, the US courts have taken the approach of dealing with e- commerce jurisdictions in much the same way as traditional contracts. This means that jurisdiction is determined by the minimum contacts test which argues that the defendant when not actually present in the jurisdiction would have to have a degree of minimum contact, before he can be subjected to that jurisdiction in order to conform with the requirements of fair play 7. There are, of course, certain merits with the minimum contacts test; nevertheless, the nature of e-commerce and the Internet means that most companies can now argue that they have a minimum contact with just about any jurisdiction in the world and, therefore, the minimum contacts test has to evolve to deal with this change. Based on this argument, a higher degree of contact is now deemed necessary in order to show jurisdiction. 5 Maxwell, Elliot, Electronic Commerce Policies for the Emerging Marketplace, 7 B.U. J. SCI. & TECH. L. 195, 196, Reidenberg, Joel R., E-Commerce and Trans-Atlantic Privacy, 38 HOUS. L. REV. 717, 718, Mazzotta, Francesco G., A Guide to E-Commerce: Some Legal Issues Posed by E-Commerce for American Businesses Engaged in Domestic and International Transactions, 24 SUFFOLK TRANSNAT'L L. REV. 249, 273, 2001.

4 One of the cases in relation to e-commerce jurisdiction in the US has been that of Mfg. Co. v. Zippo Dot Com, Inc 8. This extended the original approach to minimum contacts by recognising that there should be a sliding scale involved where e-commerce transactions are involved and issues such as how many instances of contact with the jurisdiction have happened will become relevant. For example, one sale to the jurisdiction in question is unlikely to meet with the minimum contacts test for the purpose of e-commerce. Other factors such as whether or not it is an active website or whether it is purely for browsing will come into play, as well as the commercial nature of the site and the way in which information is transmitted. In the US, therefore, the minimum contacts issue remains in place, but it has evolved in terms of the way it is tested to take account of e-commerce transactions 9. The position in the EU is somewhat more complicated. The nature of the EU and the way in which it consists of a number of individual sovereign states all of which are aiming to maintain autonomy whilst also gaining from the collective power that the EU brings into play, makes decisions in relation to jurisdiction that bit harder to deal with. The main body of regulation that the UK, as part of the EU, is subject to is that of the Brussels Convention which suggests that, by doing business on the internet, organisations are subjecting themselves to a potential law suit in any of the EU jurisdictions. Based on the way that the EU operates, in this regard, it means that every country (UK included) is subjecting itself to the need to comply with regulations from across the entire EU, if it operates on the Internet in such a way that there is contact to be had with any of these member states. As a way of managing this situation, the EU looks more towards alternative dispute resolution mechanisms within each jurisdiction, with the background understanding that all countries are, ultimately, required to comply with EU regulations 10. Other mechanisms such as the distance selling regulations have also been brought into existence, in order to govern specific situations such as selling goods and services across jurisdictions F. Supp (W.D. Pa. 1997) 9 Aciman, Carole & Vo-Verde, Diane, Refining the Zippo Test: New Trends on Personal Jurisdiction for Internet Activities, 19 THE COMPUTER & INTERNET LAW, January Slate, William K. II, Online Dispute Resolution: Click Here to Settle Your Dispute, DISP. RESOL. J. 8, 12, 2002.

5 The two different approaches to jurisdiction show an interesting difference in the way that the two large powers approach one of the most important issues in e-commerce regulation. The US has taken a much more holistic approach, trying, where possible, to follow the traditional approaches when applying to e-commerce. The EU, on the other hand, has taken a more proactive approach and worked towards harmonising the systems, across all member states, to create a flexible yet efficient internal market that is specifically regulated 11. The other three areas of electronic contracts, electronic signatures and e-commerce taxation show similar trends. For example, in the case of US electronic signatures, once again, it follows more in line with the traditional concepts of contract formation arguing that, where a consumer shows acceptance, they have been deemed to have signed the contract. Shrink-wrap agreements (for example) where the terms and conditions are placed within the shrink-wrap packaging of the software and are only available to the consumer, once they have purchased the item, will show acceptance and signature at the point at which the consumer begins to use the software. In the US, this has been deemed to be binding with signature occurring at the point of loading, unless the terms are so onerous that they are deemed objectionable 12. The notion that the US deals with e-commerce issues much in the same way as traditional contracts is further supported by the weight given to the Uniform Commercial Code (UCC) where there is no specific code in place for the electronic contract; here, the US courts will fall back on the regulations in the UCC. Recognition of the differences between e-commerce requirements and traditional contractual requirements can be seen in the development of the Uniform Computer Information Transactions Act; this, however, has not been widely adopted across many states 13. By contrast, the EU approach is to have a specific regulation known as the Electronic Commerce Directive (2003/31/EC) and the Electronic Signatures Directive (1999/93/EC), where rules are laid out for all member states, including the UK, about when electronic signatures are accepted and the processes that businesses must follow, e.g. through the use of ensuring that acknowledgement of orders are sent to electronic consumers, without delay. 11 EU Actions, Accelerating E-Commerce: EU Actions, supra note 57; E-Commerce and Financial Services, supra note 57, at 2, 15; European Initiative, supra note 57, at 1, Federal Trade Commission, Electronic Signatures in Global and National Commerce Act, 15 U.S.C. [subsection] 7001 et seq. (2000) [hereinafter E-Sign] at (Accessed July 27, 2009). 13 Nimmer, Raymond T., Understanding Electronic Contracting; UCITA, E-Signature, Federal, State, and Foreign Regulations 2001, 649 PLI/PAT 15, 40, 2001.

6 As with the general approach to jurisdiction, it can be seen that the approaches used by the US and the UK to electronic contracts and signatures are similar in nature. The US prefers to use the same traditional approaches, whereas the UK (directed by the EU) has established more proactive regulation to deal with the specific issues raised by e-commerce. The actual effect remains similar, but the approach is different and, ultimately, could lead to divergences across the courts. Similar trends can be seen in the area of e-commerce taxation, with the US taking a much more wait and see approach regarding how e-commerce transactions should be taxed across states. Once more, the EU can be seen to have taken a more proactive approach in establishing rigorous regulations. This divergence may be attributed to the unique complexities that are seen in the EU. However, the general trend towards greater specific regulation, in Europe, rather than the US, remains evident in the arena of e-commerce 14. In conclusion, it is reasonably clear to see that the approaches taken in the US and the UK are basically aiming to achieve the same result, namely freedom of trade and encouraging competitive behaviour, whilst also ensuring a sufficiently high level of consumer protection for those using the Internet. The US, however, has taken a much more hands off approach, attempting to use traditional regulatory regimes and applying them to the new challenges of e-commerce 15. The UK (largely by virtue of being a member of the EU) has taken a more proactive and regulation based approach, ensuring that new regulations are brought in as needed to deal with the unique issues raised by the growth of e-commerce. Regardless of which approach is favoured, it is clear that the globalisation of commerce is going to be a challenge for many years and as such harmonisation of regulation is something that should be at the forefront of the agenda of any regulatory body in this field. Bibliography Aciman, Carole & Vo-Verde, Diane, Refining the Zippo Test: New Trends on Personal Jurisdiction for Internet Activities, 19 THE COMPUTER & INTERNET LAW, January Hardesty, David E., Taxation of E-Commerce: Recent Developments, 618 PLI/PAT 177, Beck, John C., Get a Grip! Regulating Cyberspace Won't Be Easy, Bus. L. Today, May/June, 2001.

7 Beck, John C., Get a Grip! Regulating Cyberspace Won't Be Easy, Bus. L. Today, May/June, EU Actions, Accelerating E-Commerce: EU Actions, supra note 57; E-Commerce and Financial Services, supra note 57, at 2, 15; European Initiative, supra note 57, at 1, 4-5. Federal Trade Commission, Electronic Signatures in Global and National Commerce Act, 15 U.S.C. [subsection] 7001 et seq. (2000) [hereinafter E-Sign] at (Accessed July 27, 2009). Geist, Michael, Is There a There There? Toward Greater Certainty For Internet Jurisdiction, 661 PLI/PAT 561, 575, Hardesty, David E., Taxation of E-Commerce: Recent Developments, 618 PLI/PAT 177, Kennedy, Dennis M., Key Legal Concerns in E-Commerce: The Law Comes to the New Frontier, 18 T.M. COOLEY L. REV. 17, 18-19, Maxwell, Elliot, Electronic Commerce Policies for the Emerging Marketplace, 7 B.U. J. SCI. & TECH. L. 195, 196, Mazzotta, Francesco G., A Guide to E-Commerce: Some Legal Issues Posed by E-Commerce for American Businesses Engaged in Domestic and International Transactions, 24 SUFFOLK TRANSNAT'L L. REV. 249, 273, Nimmer, Raymond T., Understanding Electronic Contracting; UCITA, E-Signature, Federal, State, and Foreign Regulations 2001, 649 PLI/PAT 15, 40, Owen, Mark, International Ramifications of Doing Business On-line: Europe, 661 PLI/PAT 627, 657, Reidenberg, Joel R., E-Commerce and Trans-Atlantic Privacy, 38 HOUS. L. REV. 717, 718, Slate, William K. II, Online Dispute Resolution: Click Here to Settle Your Dispute, DISP. RESOL. J. 8, 12, The White House, A Framework for Global Electronic Commerce (July 1, 1997), at Commerce-Al-Gore.pdf (Accessed July 27, 2009)