There are several legal risks while starting and running an online business. If we are aware of these risks and the methods to overcome these, we or our clients can start and run an online business successfully. In my experience in the cyberspace, I have seen several online businesses facing the following legal risks. Although there are several other legal risks, which I listed below are the most common and occurring very often in cyberspace.
Most Common Legal Risks:
- Legal Issues Related to Marketing and Affiliates
- Copyright, Trademark, and Registered Business Name
- Security of Client Data (Financial Data)
- Bulk Mailing/Spam
- Agreements and Contracts
- Governmental Policies on Specific Online Businesses (Medicines, Drugs and Adult etc)
As the Internet Law is a growing field, there are several countries still framing OR yet to frame Internet Laws, hence we cannot say that the following risks and suggestions are applicable in all jurisdictions. So I am considering the US, UK and India to explain the legal risks and suggestions. Further, I must state that the Legal Risks may vary depends on the type of Business (Sole Proprietor, Partnership, Limited Liability Company etc) as well as the Business Model (Drop shipping, Reseller Sites, White Label sites, Affiliate Sites etc). Example 1: If there are two online defamations, and if one is by Sole Proprietor Website, and another is by a staff of a website owned by a Limited Liability Company, one of the directors of the Limited Liability Company may not be held liable, but in the case of Sole Proprietor Website, the owner of the website will be held liable. Example 2: If a website is offering a service on its own and another website is offering services as the reseller, the reseller may not be held liable for service deficiency by the service provider.
Legal Risks related to Marketing and Affiliates: Since there is very little control over affiliates, an online business cannot monitor or control the methods used by affiliates to generate sales/revenue. Some greedy affiliates may abuse and use spam and other unscrupulous activities to generate sales. Since the beginning, Affiliate Marketing is considered to be the major source of Spam and false advertising. Affiliates use spam emails or bulk emails to reach out clients. Some of the affiliates also spam search engines by using doorway pages which are seen by Search Engine Bots and index those doorway pages. But major search engines like Google had updated their algorithms and slapped the websites using doorway pages. You could have seen that recently after Penguin update by Google, several hundreds of websites were slapped down in rankings by Google. Most of these websites affected by Penguin update of Google are affiliate sites and Google consider these as not valuable to the users. Affiliate Marketers create websites for the affiliate products and target particular keywords. They also use blackhat methods, software, and bots to build backlinks to their affiliate websites. As you may know, Backlinks are important to get high ranking in search engines for the particular keyword, they use all available unscrupulous methods to build thousands of backlinks.
To overcome the legal risks involved in Affiliate Marketing:
- An Online Business must choose the right affiliate. It is very important to avoid unwanted legal issues.
- Strict Legal Contract. There must be a legally binding strict contract/agreement between the online business and affiliate.
- The Business Owner must be aware of current updates in technology, recent regulations etc.
- If you allow your affiliates to recruit sub-affiliates, you must have details of the affiliates and all sub-affiliates and have a contract protecting you from the activities of sub-affiliates.
- Never allow your affiliates to use your own content. Ask them to create new and fresh content to promote your online business.
- Click fraud is a major concern nowadays and it is wise to choose affiliates who are willing to get paid per sale instead of click.
Copyright, Trademark and Business Name Issues: Copyright issues may affect you if you blindly copy contents from other websites and publish on your commercial website. This will also affect you in another way. Search Engines may slap your website down in rankings if they found duplicate content on your website. Most of the affiliates use spinners to copy and make the contents unique. Although it is enough to overcome the duplicate content issue with search engines, those spun contents are not usually comfortable to be read by a human. These spun articles are mostly machine-readable. For Example: “Eat Apple for health life”. The Spun version use synonyms: Intake/Ingest/Swallow Apple for Nice/Well/Fit/Fine/life/existence/ being/aliveness. So the Spun Version may look like: “Swallow Apple for Fit Existence”
Several website owners use spun content to avoid a duplicate content issue with Search Engines, but these spun content gives very bad user experience and thus to be avoided. Some affiliates and business owners use trademark names and brand names to take advantage of the traffic that the brand names get on search engines and other sources of traffic. Example: Since Twitter.com is very famous, there are services offering Twitter Marketing (Selling Twitter Followers) and they use domain names containing the word Twitter, which is strictly an infringement. Example:twittercounter.com, twitterwind.com. There are some businesses and affiliates registering domain names containing the product name as soon as a new product is launched. Example: nascargearhere.com
Security of Client Data: It is one of the major aspects to be considered with any online business especially when financial transactions are done online.
I suggest following methods to protect client data:
- Regularly monitoring and updating Data Encryption Processes.
- Using Data Loss Prevention techniques
- Customer Privacy should be an aspect in all agreements/contracts (even with your resellers and affiliates)
- Always keep backups and retain them for years
- Perform security audits at specific intervals
- Consider having a breach policy
- Consider insurance for data breach expenses
Bulk Mailing/Spam: It is again a major issue when you use affiliates and resellers and there are online business owners who use spam to sell their products/services. Sending a commercial email to unsubscribed user is called Spam Mailing. There are sellers who build a list using email autoresponders and it is usually called safe list. In this method, the sellers offer some valuable information or ebook or service in return for email list subscription and thus build a list of subscribers. Sending emails to these subscribers is perfectly legal and there are some sellers selling these lists for a consideration amount. To avoid these issues, have a good autoresponder and build a good list from scratch. It is easy to build a quality list if your service quality is good and if you offer value to your clients. Never ever use Blackhat techniques in online marketing. Although Black Hat techniques and methods will give you instant results, those are temporary and they are not equal to the efforts and money you invest in. Instead of using such techniques, use legal, white hat methods to systematically and gradually increase the online exposure of your business and this will give you long lasting results and revenues.
Nowadays spamming has not only affected emails, it has also affected Instant Messengers, Mobile SMS, Forums, Social Networking Sites, Search Engines, and Blogs.
Bulk SMS: Sending bulk SMS to unsubscribed mobile numbers/users is also a major issue in the recent years. In the advent of technology, we get several benefits and few issues coming up and we are doing all we can to overcome the few issues.
Forums: There are spammers in almost all forums who post spam threads and spam posts to build backlinks to their websites as well as to increase traffic. Most of the forum moderators keep an eye on such spamming activity and remove such spam posts and threads.
Social Networking Sites: Spammers use various techniques to bring in traffic from Social Networking Sites. They use Click to Reveal buttons to make people subscribe/like.
Instant Messengers: There is Web Based Messengers like Google Talk, MSN Talk, Yahoo Chat and mobile based messengers like Whatsapp. There are some spammers using these platforms to reach the unsubscribed users and send out unsolicited messages.
Search Engines: As explained earlier Search Engines are spammed by unscrupulous sellers and affiliates who created doorway pages to get high ranking in search engines. They also build massive backlinks using Black Hat Techniques and illegal methods to get high rankings. Search Engines update algorithms regularly to slap down such websites. Recent Penguin Update from Google which has slapped down millions of affiliate websites is a good example.
Defamation: False Reviews, Paid Reviews by Competitors, Reviews by Non-Customers etc are some of the forms of Online Defamation against Online Businesses. For example: If you run a small business and if you don’t give Free or Low-Cost Review copy to a customer, he/she may get angry and post negative comment/review to spoil your business. Mr. “A” started a thread in Warrior Special Offers of Warrior Forum and offered a WSO. Mr. “B”, an unregistered user requested the WSO owner “A” to give a review copy. Mr. “A” denied giving a review copy as Mr.”B” had no reputation in the forum. Mr. “B” got angry and posted a negative comment about “A” and his WSO. It is defamation as per law.
Paid Reviews by Competitors: It is also an issue with businesses with high competition. It is also a big issue when there are only two or three competing businesses. The competitor may hire a user to post negative comment or feedback about the product of online business. For Example Mr. “A” was selling Apple iPad Newsstand Apps. Mr. “B” was competing with “A” to capture the market. To reduce the ranking of Mr. “B” hired persons with iPad devices to download the Apps sold by “A” and to post negative feedbacks.
Reviews by Non-Customers: There are affiliates who create comparison websites to sell the products/services with which they are affiliated. They may simply post negative remarks about our products while comparing our products with the products from which they get a commission for the sale. These non-customer affiliates may simply review our product without even accessing or using it for a single time. For example: Mr. “A” is an affiliate of a hosting service. Mr. “B” has his own hosting company. Mr. “A” may create a comparison website for hosting services and compared his affiliate hosting with Hosting offered by Mr.”B”. If “A” posts negative remarks/review without even using the services of “B”, it is considered as a violation. The above are some of the major legal risks and issues related to Online Businesses. An Online Business Owner must be careful about the legal risks and implications he/she may face while starting and running online businesses.
Conclusion: When doing online business, people are not careful about the legal risks and issues. They do not consider these risks as major issues and overlook these. It is due to the unawareness of regulations, laws, and technical advancements. While talking about unawareness of regulations, I must state that Ignorance of the law is not a defence. It is the responsibility of the Online Business Owner to make sure that the Online Business complies with all relevant laws and do not contravene with regulations and intellectual property laws, or else the Online Business owner will have to shell out several thousand as penalties.