Shree Rastogi , B.com LLB (5 Semester), Legal News Reporter



E-commerce is a place where it presents a world of opportunity for doing business, attaining global markets and buying without leaving home, just as any fresh business tool has linked issues and risks, E-commerce does have some issues too. It is necessary to know the legal and ethical issues regarding to e-commerce to ensure a safe and secure environment for trading with customers and other businesses.

E-commerce is not about the technology itself, it is about doing business leveraging the technology. A technology innovation is shadowed by frequent combination of ethical standards into law. New forms of E-commerce that allows new business practices have many benefits but also bring several risks.

What is E-commerce?

Buying and selling of goods (product) and services by business and consumers through an electronic medium. It is a type of business model that enables a firm or individual to conduct business over an electronic network, typically the internet. “Electronic commerce is sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks”.

E-commerce businesses have many advantages but it also brings numerous risks. E-commerce has some advantages like entrance to a global market, open for 24hrs a day, decreases marketing costs, better customer information, lots of choices etc. and some disadvantages like credit card frauds, security issues need for an internet connection and internet access device, lack of personal touch etc.

Meaning of Business Ethics:-

Ethics is a branch of philosophy that studies what is wrong or right. Ethical rules are rules to follow in our interactions with other people and in our actions that affect other people. They apply to everyone and are intended to achieve good results for people in general and for situations in general, not just for ourselves, and not just for one situation. Business ethics is concerned with the numerous ethical questions that managers must confront as part of their daily business decision makings.

Issues in E-commerce

Ethical Issues in E-commerce:-

  1. Web Spoofing: – It is an electronic fraud which relates to the internet. It occurs when the attacker sets up a fake website which almost the same as the original website in order to trap consumers to give their credit card number or other personal information.
  2. Cyber-Squatting: It is registering, trafficking in, or using an internet domain name with bad faith aim to profit from the goodwill of the trademark belonging to someone else.
  3. Piracy Invasion: – It occurs when the personal details belonging to customers are exposed to the unauthorized party.
  4. Online Piracy: – The online piracy can be defined as unauthorized copyright of electronic intellectual property such as: E-books, music or videos, etc. This unethical activity occurs when the internet user uses the software and hardware technology in an illegal manner to transfer the electronic intellectual property over the internet.
  5. E-mail Spamming: – It is type of electronic spam where unsolicited messages are sent by emails. The individual who spam others email is usually called spammer. Many spammers broadcast their email for the purpose of trying to get people’s financial information such as: credit card or account bank numbers in order to defraud them.

Legal Issues: –

There is a chance of criminality over internet when buyers and sellers do not know each other and cannot even see each other. During the first few years of e-commerce the public witnessed many frauds committed over the internet. Some legal issues of e-commerce are as follows:-

1.E-Contract:- Electronic contracts are governed by the basic principles provided in the Indian Contract Act,1872, which mandates that a valid contract should have been entered with a  free consent and for a lawful consideration between two adults. Section 10A of the Information Technology Act, 2000 provides the validity to e-contracts.

In the case of Trimex International FZE Ltd.  Dubai Vs Vedanta Aluminum Ltd.,  the supreme court has  held that e-mails exchanges between parties regarding mutual obligations constitute a contract.

In an online environment, the possibility of minors entering into contracts increases, more so with the increasing usage of online medium among teenagers (minors here) and their preference to shop online or purchase online goods and services.

  1. Copyright and Trademarks:- the copyright and trademark laws protect Intellectual property in its various forms, and cannot be used easily. It is very difficult to protect Intellectual property in E- commerce. For example, if you buy software you have a right to use it and not the right to distribute it, the distribution rights is with the copyright holder. Also, copying contents from the websites also violates copyright.
  2. Domain Names:- The competition over domain names is another legal issue. Internet addresses are known as domain names. Problem arises when several companies have similar names competing over the same domain names. Security features such as authentication, non-repudiation and escrow services can protect the sellers in e-commerce. One needs to be careful while doing e-commerce activities.
  3. 4. Security:- Security over the Internet is of vital importance to promote e-commerce. Companies that have sensitive information on their websites must ensure that they have adequate security measures to safeguard their websites from any unauthorized intrusion. A company could face security threats externally as well as internally. Externally, the company could face problem from hackers, viruses and Trojan horses and internally, the company must ensure security against its technical staff and employees.
  4. Jurisdiction Issues:- Applicable law and choice of forum are different concepts that must both be addressed while addressing internet jurisdiction concerns. Applicable law refers to which country’s law will be applied to a particular dispute. While some contracts will specify which law governs should a dispute arise, where such a clause has not been included. It is left to the courts to determine which law should be applied.

The list of issues in e-commerce are not limited to only these points, there are also many issues related to e-commerce business.


Legal Formalities Required For Starting E-Commerce Business

E-commerce laws and regulations in India are still evolving. This has created a lot of confusion and uncertainty among e-commerce entrepreneurs in India. It usually had to work in correspondence with the Information Technology Act, 2000.


  • Legal Registration of the company:- To register an e-commerce business a company must have to complete some formalities. The Company has a valid name. A valid company name has two components. The first word denotes the unique name of the company. The second word denotes the nature of the company. While starting an e-commerce venture it is good to have a company or LLP to have limited liability protection and improve the ease of doing business.
  • VAT Registration or GST Registration: To make your e-commerce business a separate legal entity you need to obtain a tax id number form Indian Revenue Services. By doing so you e-commerce business transactions can be tracked by IRS, thereby making your business transactions straightforward.

Certain laws are to be taken care of by a company. Make sure you add VAT or GST for all applicable products and pay taxes to the government.

  • A Unique Domain Name:- To attain the security for the domain name under Intellectual Property Rights, one need to choose a unique name and preferably it has to separately trademark protected from an appropriate national registry which gives the exclusive right to use that particular name.
  • .Attain a Privacy Policy :- Attaining a well drafted privacy policy is a must for every E- commerce portal to prevent  itself from being sued under section 43A of the Information Technology Act, 2000 where penalty can reach up to 5crores.
  • Make a Vendors Agreement:- Making an agreement for vendor with well-defined clauses and terms to deal with the problems like default in product, late delivery, lack in quality etc and many other provisions which can be included keeping in mind the business model.
  • The Documents That Need To be Submitted For Obtaining a Payment Gateway:
  1. Bank account in the name of the business
  2. PAN Card of the Business
  3. Certificate of Incorporation
  4. Memorandum of Association
  5. Articles of Association
  6. Identity Proof
  7. Address Proof
  8. Website Terms of Use
  9. Website Privacy Policy etc.










Leave A Comment