many people shopping online these days,1
the Internet is an easy target for scam artists. The increase in frauds2
has resulted in legislation regulating companies conducting business online.3
California has a set of laws aimed specifically at Web merchants. Anyone selling (or attempting to sell) to a California citizen through the Web must comply with specific statutes intended to reduce the incidence of fraud. Not only must online merchants adhere to the same laws that a merchant in the real world must follow, but they must also comply with additional requirements. The first is that before any product can be sold, the vendor must state the legal name of the business, the full text of the vendor's return and refund policy and the street address where they conduct business. 4 A post office box may be used if certain other requirements are met. The disclosure may be made either on the website or via email.
1. The first screen displayed
when the site is accessed;
2. The screen where the goods are first offered;
3. The screen where an order is placed for the goods; or
4. The screen where the buyer enters payment.
The required information cannot be smaller or less legible than the offer of goods or services. The merchant must also state a method for the buyer to receive this information by email. The email disclosure must be made within five days of request. Webpages that advertise a toll-free phone number may implicate telemarketing laws depending on the individual state and its laws.
Failure to comply with these requirements can subject a vendor to a misdemeanor conviction in California5 and either six months in jail or a fine up to $1,000. California requires that all websites aimed at California consumers adhere to the requirements. As a result, some attorneys advise that all websites selling goods comply no matter where the vendor is located.6 Another way to avoid the law would be to include a disclaimer on the website stating that no sales will be made to citizens of California.
When tangible goods are sold
over the Web, California exerts other requirements as well. The Electronic
Commerce Act of 19847 demands that
businesses make certain disclosures to consumers which include:
1. The name, address and phone number of the webmaster (if different from the vendor of the goods);
2. Any extra charges imposed by use of the Web (rather than another medium for sale); and
3. Procedures for resolving complaints, including the telephone number and address of the Complaint Assistance Unit of the Division of Consumer Services of the Department Consumer Affairs.
Businesses should also consider their policies when it comes to collecting personal information for marketing purposes. Some websites aimed at children have demanded that users fill out an online form including name, email address, postal address and phone number before accessing other areas of the site. The Federal Trade Commission has examined this practice and is in the process of determining whether it violates privacy rights.8 It is considered good “netiquette” for websites that collect such personal information to disclose a policy regarding the circumstances under which the information is used. A Georgia Tech University study found that 70% of Americans refuse to register at Websites due to privacy concerns.9 No laws require private companies to have privacy policies,10 nor adhere to them if they do, but it is an important customer concern.
Businesses also do well to
consider the usefulness of databases prior to adding them to a website.
Online databases are occasionally used for purposes other than those intended.
One such instance arose when “spammers”11
began to harvest email addresses from DejaNews, a searchable online database
of USENET postings. Another insidious example is the reverse phone number
database that Yahoo! installed which allowed one to input a phone number
and find out the name of the person at the number. This feature was being
misused for negative purposes. Consumer complaints resulted in the removal
of this feature from the Yahoo! website.12
1 See Cyberscope, Newsweek, January 12, 1998 at 8 (stating that in 1997, online sales topped $1 billion).
2 The National Consumer League claims that Internet fraud has risen by 300%. Seehttp://www.fraud.org/ifw.htm.
3 Some applicable laws and regulations not discussed here may be found at the Software Publishers Association site: http://www.spa.org.
4 Cal. Bus. & Prof. Code § 17538.
5 See discussion of jurisdictional issues, infra..
6 California Consumer Protection Law Extend to Internet Vendors, Cooley Godward LLP, September 10, 1997.
7 Cal. Civ. Code § 1789 et seq.
9 Matthew Weinstock, Psssst... Want the Dope On What Turns Off Consumers?, Financial Service ONLINE, November, 1997, at 45.
10 While government Websites are required to display Privacy Act statements, OMB Watch claims that only 17% of such sites actually do carry adequate statements.
11 Companies using unsolicited email to market products and services.
never disabled the software though. At least two Websites other then Yahoo!
have software that allows surfers to use the Yahoo! database to search
by phone number.
2000 Timothy J. Walton
9515 Soquel Dr.
Aptos, CA 95003
Vox: (831) 685-9800
Fax: (650) 618-8687
All Rights Reserved
2000 Timothy J. Walton