1. MGT546 E - COMMERCE Prepared by Hawa Haji Nahar SEPTEMBER 2014

7. CHAPTER 8 ETHICAL AND INTERNET REGULATION ISSUES 8.1Ethical, social and Political issues 8.2Privacy and information rights 8.3Intellectual Property Rights 8.4Governance, Public Safety and Welfare

8. 8.1Ethical, Social and Political issues INTRODUCTION a.Internet technology and its use in e- commerce disrupt existing social and business relationships and understandings. b.Costs and benefits of technology must be carefully considered, especially when there are as yet no clear-cut legal or cultural guidelines.

9. Cont… BASIC ETHICAL CONCEPTS a.Ethics: Study of principles that individuals and organizations can use to determine right and wrong courses of action. b.Responsibility: as free moral agents, individuals, organizations ad societies are responsible for the actions they take. c.Accountability: Individuals, organizations and societies should be held accountable to others for the consequences of their actions. d.Liability: Extends the concepts of responsibility and accountability to area of law. e.Due process: refers to process by which laws are known and understood, with ability to appeal to higher authorities to ensure that laws have been correctly applied.

10. Cont… ANALYZING ETHICAL DILEMMAS a.Dilemma: Situation in which there are at least two diametrically opposed actions, each of which supports a desirable outcome. b.Process for analyzing ethical dilemmas: i.Identify and describe clearly the facts ii.Define the conflict or dilemma and identify the higher-order values involved iii.Identify the stakeholders iv.Identify the options that you can reasonably take v.Identify the potential consequences of your options

11. Cont… CANDIDATE ETHICAL PRINCIPLES: One or more of the following well-established ethical principles can be used to help you determine your actions when confronted with an ethical dilemma: Golden rule Universalism Slippery Slope Collective Utilitarian principle Risk Aversion No Free Lunch The New York Times Test (Perfect Information Rule) Social Contract Rule

12. Cont… A MODEL FOR ORGANIZING THE ISSUES a.Issues raised by Internet and e-commerce can be viewed at individual, social and political levels. b.Four major categories of issues: i.Information rights: what rights do individuals have to control their own personal information when internet technologies make information collection so pervasive and efficient? ii.Property Rights: how can traditional intellectual property rights be enforced when perfect copies of protected works can be easily mad and distributed? iii.Governance: should the internet and e-commerce be subject to public laws, and if so, who has jurisdiction? iv.Public Safety and Welfare

13. 8.2Privacy and information rights a.Major ethical issue related to E- Commerce and privacy: Under what conditions should we invade privacy of others. b.Major social issue: Development of ‘expectations of privacy’ and privacy norms. c.Major political issue: Development of statutes that govern relations between record keepers and individuals.

14. Cont… Information Collected at E-Commerce Sites a.Personally identifiable information (PII): Data that can be used to identify, locate or contact an individual. b.Anonymous information: Demographic and behavioral information that does not include any personal identifiers. c.Almost all e-commerce companies collect PII and use cookies to track clickstream behavior.

15. Cont… Profiling: Privacy and Advertising Networks a.Profiling: Creation of digital images that characterize online individual and group behavior. b.Anonymous Profiles: Identify people as belonging to highly specific and targeted groups. c.Personal profiles: Add personal identifiers. d.Advertising networks can: Track both consumer behavior and browsing behavior on the Web Dynamically adjust what the user sees on screen Build and refresh high-resolution data images or ehavior profiles of consumers.

16. Cont… The Concept of Privacy a.Privacy: the moral right of individuals to be left alone, free from surveillance or interference from other individuals or organizations. b.Information privacy: Includes both the claim that certain information should not be collected at all, as well as the claim of individuals to control the use of whatever information is collected about them.

17. Cont… Informed Consent a.Consent given with knowledge of all the material facts needed to make a rational decision. b.Two models: Opt-in: Requires an affirmative action by the consumer to allow collection and use of information. Opt-out: Default is to collect information unless consumer takes an affirmative action to prevent the collection of data. c.Many U.S. e-commerce firms merely publish information practices as part of privacy policy without providing for any form of informed consent. d.Microsoft’s. Net Passport privacy policy illustrates some of difficulties of understanding privacy policies and risks.

18. Cont… Legal Protections for Privacy a.May be explicitly granted or derived from constitutions (U.S., Canada, and Germany) b.May also be found in common law (U.S, England) c.In U.S, also found in federal and state laws and regulations.

19. Cont… Private Industry Self-Regulation a.Safe harbor: Private, self-regulating policy and enforcement mechanism that meets objectives of government regulations and legislation, but does not involve government regulation or enforcement. Example: Privacy seal programs such as TRUSTe Internet privacy protection program. b.Industry associations include: Online Privacy Alliance & Network Advertising Initiative.

20. Cont… European Directive on Data Protection a.Privacy protection much stronger in Europe than in U.S. b.European approach: comprehensive and regulatory in nature c.European Commission’s Directive on Data Protection; Standardizes and broadens privacy protection in European Union countries. d.Department of Commerce safe harbor program for U.S. firms that wish to comply with directive.

21. Cont… Technological Solutions to Privacy Invasion on the Web a.Many privacy-enhancing technologies being developed emphasize security. b.Platform for Privacy Preference (P3P): Comprehensive technological privacy protection effort sponsored by W3C: -Is a standard designed to communicate to Internet users a Web site’s privacy policy, and to compare that policy against user’s preferences or to other standards such as FTC’s FIP guidelines or EU’s Data Protection Directive.

22. 8.3Intellectual Property Rights a.Intellectual property: Encompasses all tangible and intangible products of human mind. b.Major ethical issue: How should we treat property that belongs to others? c.Major social issue: Is there continued value in protecting intellectual property in the Internet age? d.Major political issue: if, and if so, how, should internet and e-commerce be regulated / governed to protect intellectual property? e.Main types of intellectual property protection: Copyright, Patent, Trademark law.

23. Cont… Copyright: The Problem of Perfect Copies and Encryption: a.Copyright Law: Problem of Perfect Copies and encryption: b.Look and feel copyright infringement lawsuits involve distinction between and idea and its expression. c.Fair use doctrine: under certain circumstances, permits use of copyrighted materials without permission. d.Digital Millennium copyright Act of 1998 (DMCA): first major effort to adjust copyright laws to internet age. e.DMCA implements WIPO treaty that makes it illegal to make, distribute, or use devices that circumvent technology-based protections of copyrighted materials.

24. Cont… Patents: Business Methods and Processes a.Patent: Grants owner of 20-year exclusive monopoly on ideas behind an invention. b.Most of early inventions that made internet and e- commerce possible were not patented by their inventors. c.With commercial development of internet, came desire for patents. d.Business methods patents have been widely sought by internet and e-commerce companies e.Many business methods internet patents granted are overbroad, and if enforced, would significantly impact e-commerce.

25. Cont… Trademarks: Online Infringement and Dilution a.Trademark: Mark used to identify and distinguish goods, and indicate their source. b.Trademarks protect public by ensuring it gets what it pays for / expects to receive; protects trademark owner against piracy and misappropriation. c.Infringement (Violation): use of a trademark that creates confusion with existing marks, causes consumers to make market mistakes or misrepresents origins of goods. d.Anti cyber squatting Consumer Protection Act (ACPA): Creates civil liabilities for anyone who attempts in bad faith to profit from an existing famous or distinctive trademark by registering an internet domain name that is identical or confusingly similar.

26. Cont… Types of Trademark abuse on Internet a.Cyber squatting: Registration of infringing domain name, or other internet use of existing trademark, for purpose of extorting payments from legitimate owners b.Cyber piracy: involves same behavior as cyber squatting, but with intend of diverting traffic from legitimate site to infringing site. c.Meta tagging: Using another’s trademarks as meta tags in a misleading or confusing manner. d.Deep linking: Bypassing target site’s home page and going directly to content page. e.Framing: Displaying content of another site within frame or window.

27. 8.4Governance, Public Safety and Welfare GOVERNANCE a.Involves issue of social control. b.Primary Questions: i. Who will control internet and e-commerce? ii. What elements will be controlled and how? c.Stages of governance and e-commerce: 1.Government Control Period (1970 – 1994) 2.Privatization (1995 – 1998) 3.Self-Regulation (1995- present) 4.Government Regulation (1998 – present)

28. Cont… Who Governs E-Commerce and the Internet? a.Currently we are in a mixed mode policy environment where self-regulation, through a variety of internet policy and technical bodies, co-exists with limited government regulation. b.Not true that internet cannot be controlled – in fact, internet can be very easily controlled, monitored, and regulated from a central location (such as done by China, Singapore, etc)

29. Cont… Taxation (USA) a.Issue of taxation of e-commerce sales illustrates complexity of governance and jurisdiction issues. b.National and international character of internet sales wreaking havoc on traditional taxation schemes in U.S. based on local commerce and local jurisdictions. c.November 2001: Congress extended Internet Tax Freedom Act moratorium on ‘multiple or discriminatory taxes on electronic commerce’ until November 2003. d.Unlikely that comprehensive, integrated rational approach to taxation issue will be determined for some time to come.

30. Cont… PUBLIC SAFETY AND WELFARE ISSUES a.Protection of children and strong sentiments against ponographing: Passing legislation that will survive court challenges has proved difficult: communications Decency Act, Children’s Online Protection Act struck down, but Children’s Internet protection Act recently upheld by Supreme Court. b.Efforts to control gambling and restrict sales of drugs and cigarettes: Currently mostly regulated by state law. c.Equity and the Digital Divide (differences in internet and e-commerce access among income, ethnic, and age groups).

31. Cont… Cont…PUBLIC SAFETY AND WELFARE ISSUES The Internet Drug Bazaar a.Online pharmacies expected to account for over S1 billion in revenue in 2003 b.E-commerce challenging traditional notions of drug distribution c.Many prescription drugs made available, without prescription d.FDA has thus far been slow to respond to issue e.Some federal legislation proposed, but thus far none has passed f.Efforts at self-regulation by legitimate online pharmacies g.Countervailing issue: Many want to be able to purchase drugs from Canada, Mexico – less expensive.

32. QUESTIONS ETHICAL AND INTERNET REGULATIONS ISSUES Explain privacy, information privacy, and informed consent and discuss the ways in which the practices of e- commerce companies, particularly the advertising networks threaten people’s privacy.