General Legal Issues Confronting Those Starting and Maintaining an Online Business

Starting an online business is definitely different from opening a traditional store.  Initial investments for online businesses include web page design, server fees, marketing, and merchandise. 

However, unlike traditional businesses, online business faces several legal challenges. The on-line environment has become a fertile ground for fraud schemes of all kinds.  Though in most cases, companies doing business on-line may not be responsible for fraud committed using their products and services; there are several factors that might cause the company to accrue liability.  This includes the level of knowledge the company had about the fraud, the fact that the company products might be specifically designed, or easily used to commit the fraudulent act, and the amount of revenue the company derived from the fraudulent activity.

The laws regulating Child Pornography are strict liability laws.  This means that if the company has violated the laws when the company knowingly creates, distributes or view material considered to be child pornography.  For companies in high-risk areas, such as web hosting companies, this means that when the company receives a complaint that it is hosting child pornography, the employees may not look at the content to determine whether it is in fact child pornography.  There is no safe harbor provision in the law for engaging in “private investigations” into child pornography.   Consequently, companies in areas that are might be attractive to child pornographers should develop policies to address these reports, and any investigative activities. 

In the U.S., most marketing to children is covered by the “Children’s On-line Privacy Protection Act” or “COPPA.”   COPPA regulates the methods companies may use to solicit and use certain information from children.   For the purposes of COPPA, children are under 13 years of age.   Companies engaged in direct marketing to children are required to implement procedures to secure the consent of adults to the collection of personal information about children, and create data protection policies, among other things.  Companies not directly involved in marketing to children, should familiarize themselves with the provisions of COPPA to avoid inadvertently violating it based on general marketing campaigns, and implementation of privacy policies.


Inside General Legal Issues Confronting Those Starting and Maintaining an Online Business