Sharing Responsibility

Online confidence elicits growth in E-commerce and provides an opportunity to realize the benefits of online buying.

To put it simply - conducting business online means there is the initiating of a request and the giving and receiving of payment between two strangers - and the expectation that each party will deliver the desired outcome. What we put our faith on as businesses and consumers is that certain laws will protect us and ensure we obtain the desired end-result.

For consumers, the issue is ensuring they attain the same level of service and protections they receive when they shop in a traditional retail environment, outcomes that are difficult to determine when they do not know exactly from whom they are buying online.

The bottom line, however, is that there are regulations governing how business should be conducted over the Internet and these regulations are no different than those for the traditional retail environment. Basically, merchants must deliver the product they say they are going to deliver and conduct fair business practices.

In the late 90s, the Internet reached a high point - and E-commerce was the talk of the day. Consumers were buying online in great numbers, particularly over the holiday season. The explosive growth in Internet sales took online retailers by surprise - demand was greater than supply, inventories were depleted, deliveries were not made on time - and customers were disappointed. Even worse was some retailers failed to notify customers of delays, which meant they could not cancel the order and buy from another company. Some retailers also repeated empty promises knowing they had huge backlogs and were unable to deliver orders on time. Both retailers and consumers learned a hard lesson during this time. The experience sparked distrust in online business by consumers, and an understanding by E-businesses that their traditional business models still had a place in the online retail environment.

What they also learned, or were reminded of, was this kind of activity is illegal. Merchants are now reviewing their obligations under the Federal Trade Commission’s (FTC) Mail or Telephone Order Merchandise Rule, which outlines ground rules for shipment promises, notifying consumers about unexpected delays, and refunding consumers’ money.

Basically, the Rule says merchants must ship within the promised time, or 30 days if no promise is provided. If there are delays, the customer must be notified, a revised shipment date must be provided and the customer must be informed of his or her right to cancel and get a full refund. For delays of up to 30 days a customer’s silence is seen as an agreement to the delay. But, for longer delays, the merchant must obtain written, electronic or verbal consent to the delay. If the customer does not provide consent, the merchant must provide the customer with a full refund of his or her money regardless of whether or not it was requested by the customer. Merchants can also cancel orders that cannot be filled, but they must notify the customer and provide a refund.

Another problem addressed by regulations is fraudulent debits to a consumer’s account. Many consumers mistakenly believe that if someone gains access to their account, and withdraw funds from it; they have no way to regain the funds. Similarly, when consumers make an online purchase and then decide to cancel the order, there is a tendency to worry about not getting their money back. Fortunately, consumers are protected by a regulation called Regulation E, which provides limits on consumer liability.

For instance, you receive your credit card statement and review the transactions made for that month. You notice there is an unauthorized transaction made to your account and remember back a couple weeks ago when you made an online purchase with your card and then subsequently cancelled the order. Unfortunately, the cancellation was not completed and your account was debited. Regulation E states that if you notify your financial institution of the unauthorized transaction within 60 days of receiving your bank statement, your liability is limited to whichever is less - the amount of the unauthorized transactions or $500. If you do not notify your bank within 60 days, you will face liability for all unauthorized transfers up to the balance in your account.

Generally, there are other precautions consumers can take to ensure they have the best possible experience when buying online.

Research the Business – Setting up an online business is not a difficult task these days. Companies or individuals have access to a wide range of web building tools that make building a site an easy and relatively inexpensive process. As a result, it is important that consumers understand whom they are dealing with. To determine if a company is legitimate, consumers should do their homework. Where is the company located? Is there contact information available? Does the site have a professional look-are their return policies and privacy policies?

Research the Product – When deciding to make an online purchase, consumers obviously do not have the benefit of using all their senses to help make a purchase decision. Consequently, they depend on the information provided to them on the site. Customers should look for detailed product information that is clear, accurate and easily accessible through the site. It is also useful to look for quality assurance certificates or seals, or a list of organizations that support the business.

Determine the Level of Privacy – To process orders, merchants require particular information from consumers. Before they provide information about themselves, consumers should know how it will be used. Online businesses should have a privacy statement that identifies how consumer information will be used, give customers an opportunity to refuse having their information sold or shared with others, and provide customers with a chance to add or delete information the company has collected. If a policy is not accessible on the site, it is worthwhile to email or write a message to the company asking it about its policy.

Understand the Terms and Conditions of Sale – Before making a final purchase, consumers should ensure they know exactly what they are getting for their money. Does the company have a customer service guarantee? Does the company have a product guarantee? How are the costs itemized? What are the conditions and methods of payment? What are the terms of delivery and performance? Are there any restrictions? What are the cancellation or refund policies?

Online Payment Protection – When making online payments, consumers often have a variety of options available to them. The most common method of online payment is the credit card. To ensure their card number is not stolen and used, it is important for customers to understand a company’s online security features and policies. Most sites should have encryption technology in place called Secure Sockets Layer (SSL), which will protect data as it travels over the Internet. If a company’s security policy is not easily accessible, a way to determine if they are using secure connections is to check the web site address. If the address has an ‘https’ instead of ‘http’, then the site is securely protected. A secure site can also be identified by a locked padlock at the bottom of the screen.

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A fundamental requirement of consumers when they buy online is an understanding of the laws that protect them. Consumers have a responsibility to educate themselves about their rights and to take an active role in moving E-commerce forward. With a better understanding of the laws that protect them comes a confidence that elicits growth in commerce and an opportunity to realize the benefits of online buying.

Go to article on Online Merchant Laws.