In partial fulfillment of the requirement for the course

E-Competences in Marketing

Submitted to:

FachhochschuleKufstein Tirol Bildungs GmbH

Master in International Business Studies – Marketing Management

Author:

Elchin Karimov 1110342691

Reviewer:

Carolin Egger

Date of submission: January 8, 2014

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Table of Contents

Introduction..................................................................................................................................................1

Objective of study.........................................................................................................................................1

Methodology................................................................................................................................................1

Legal implications.........................................................................................................................................2

Social implications........................................................................................................................................3

Ethical implications.......................................................................................................................................4

Conclusion....................................................................................................................................................5

Bibliography..................................................................................................................................................6

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IntroductionIn 1969, the internet was just a pilot project linking up four university campuses in the USA, but it now

boasts in excess of 300 million users across the world (Harris & Dennis, 2002, pp. 9-15). The rapid

advance of the internet has brought along number of developments in different fields of economies.

Probably, the most profound consequence of the internet has been e-commerce. By definition, “e-

commerce is the ability of a company to have a dynamic presence on the internet which allows the

company to conduct its business electronically, in essence having an electronic shop’’ (Grewal & Shivani,

2012). In its broad meaning, “e-commerce, commonly also known as electronic commerce or eCommerce

is online exchange of value, without geographical or time restrictions, between companies and their

partners, employees, or customers’’ (Singh, Tanuja, Jayashankar, Jay, & Jasvinder, 2001, pp. 6-17).

With the advent of e-commerce, as well as, fast developing internet and Information Communication

Technologies (ICT) have significantly changed the way how we do commerce. Now consumers/users have

more opportunities to get information before making decision on purchasing goods or services such as

future services or products, price discrimination on goods and services, gaining insights before usage etc.

It is really hard to imagine that purchasing goods and services is just a click away. E-commerce also

penetrates into our daily life though smartphones (defined as mobile commerce) and not only shapes our

traditional understanding of commerce but also the standards of conducting commerce.

As above mentioned, e-commerce was introduced some 40 years ago and, to this day, continues to grow

with new technologies, innovations, and thousands of businesses entering the online market each year. So,

the impact of e-commerce is as much about how we will live our lives in the future as how commercial

business will be conducted. As e-commerce changes business processes dramatically, it will have a big

impact on the future, therefore, social, legal, and ethical issues related to e-commerce should be

considered.

Objective of studyThe main objective of the study is to describe some of social, legal and ethical issues related to e-

commerce. Moreover, the paper tends to shed light on the implications of social, legal and ethical issues in

terms of practical examples.

MethodologyIn order to reach the objective of the investigation, the author uses the PESTLE model of analysis1. This

analysis helps the author create some understanding of the issue. Although this paper is focused on

1 PESTLE model refers to Political, Economic, Technical, Social, Legal and Ethical analysis, taking into account the investigation topic, the author uses only legal, social and ethical analysis. 1

exploring the three issues (sections) related to e-commerce, it should become clear as you read through

that issues dealing with ‘’legal’’ and ‘’ethical’’ are very much interrelated. The methodology intended to

be used as part of the research consists of secondary data mainly from academic journals, and books on e-

commerce, e-business and marketing. The final page of the paper is conclusion which also includes a short

discussion of results.

Legal implicationsFacilitation of e-commerce implies a unified set of laws on conducting commerce over the internet which

also means that it is difficult for an individual country to impose and maintain its own jurisdiction. A

comprehensive international legislation system that applies to global e-commerce does not exist for the

time being and is not expected to be in the near future (Harris & Dennis, 2002, pp. 295-310). In order to

describe the issue, we take some countries such as Iran, Saudi Arabia, where at present it is illegal for

someone to try to convert Iranians or Saudis from Islam to Christianity (Leithart, 2013). Imagine that a US

based charity foundation runs a web page, the organization’s main aim to spread Christianity and persuade

people to convert into Christianity, get donations etc. – whose laws are being violated? Not U.S. Maybe

not the current legal framework of the rules in Iran and Saudi Arabia because they apply within the

countries, not beyond them. Although there are some more examples of such situations due to confronting

laws starting from ban on social networks in some countries up to ban of some e-commerce companies

providing different products or services such as medicine, books etc. The following legal issues are worth

to be taken into account for e-commerce:

Copyright protection/intellectual property: One of the main challenges in e-commerce is copyright or

intellectual property protection. It is always hard to protect intellectual property once the information such

as the service or product is made available on a web page. As Griseri and Grocutt argue (Griseri &

Groucutt, 2004) , “copyright symbols, the demonstration of trademarks or patent registration in one

country are unlikely to deter those in distant jurisdictions wishing to copy or pass off an innovation as

their own’’. One of famous examples in terms of copyright protection can be the ongoing dispute over the

piracy of music on MP3 sites. Sites such as www.napster.com allow user to share the content of their

computers, hard drives, and this technological innovation makes the worldwide sharing of music files even

easier. In this case the US legal system moved to the rescue of the record companies (Griseri & Groucutt,

2004, pp. 60-85).

Form of publication: Since e-commerce is a business entity, the laws relating to free speech (or

restriction), defamation, fraud, etc. that apply to any business entity also apply to websites. For instance, in

some countries human rights and freedom of speech are highly valued and protected, while in mainly

developing countries these issues are still main problems. What would happen if one company used

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setbacks in democracy as advertisement and ran this in order to draw clients on the webpage? So form of

publication is significant issue in terms of legal issues in e-commerce.

Social implicationsSocial implications of e-commerce can be defined as the impact on societies as e-commerce establishes,

and grows. There are number of impacts on societies, for instance, e-commerce being a part of

Information Communication Technology (ICT), Patterson and Wilson (2000) argue that new ICT

innovations bring along knowledge creation, dissemination and an educated work force for the successful

societies, or according to Obura and Majanja, e-commerce can be the main tool to decrease gender

inequality and tackle poverty for the regions as underdeveloped as rural areas of Africa (Obura & Majanja,

2010, pp. 27-49).

The other major social issue in e-commerce can be the ability of e-commerce to engage immobile

members of societies. People with severe physical difficulties often find it very difficult to travel or even

visit local restaurants, shops etc. With the advance of e-commerce across the globe makes it easy for

disabled people to meet their needs. Moreover, the same can be applied to older population who find it

hard every time to walk to the nearest facilities (Tay, 2000).

Apart from above mentioned examples, e-commerce might also have impact on people’s living patterns.

For example, with the development of the internet, as well as, the ability of e-commerce to engage people

to communicate, share, order, purchase processes have created so called ’’24/7 society – operating 24

hours a day 7 days a week’’ (Griseri & Groucutt, 2004, pp. 50-65). There are a lot of companies who

provide service on 24/7 base such as Pizza Hut in the world (Lierow, Sarrat, & Janssen, 2013).

A lot of researches indicate that e-commerce offers a promising way to organizations to meet challenges

of an ever-changing environment. Although e-commerce gives a big advantage to both societies and

companies, there are also social or cultural barriers to deter the acceptance of e-commerce as a way of

doing business. In countries such as India, Sri Lanka and Pakistan, shopping is a social activity and

personal face-to-face contacts with seller is an important part of the social part of the shopping experience.

With the impact of increasing impact of e-commerce some social habits will be lost and each year more

people will get used to e-commerce and its services (Kapurubandara & Lawson, 2012).

Ethical implicationsEthics is the branch of philosophy that studies what is right and wrong (Bostrom, 2009). Ensuring

individuals’ ethical behavior is the significant matter in conducting business, moreover, over the centuries,

as civilization, and organizations have evolved and developed, ethics have shifted from focusing on not

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only individuals but also on to organizations highlighting importance of ethical issues in e-commerce in

organizational context (V., Lewis, & . Speck, 1990).

Advent of e-commerce has brought along ethical issues surrounding customer privacy, risk, security and

reliability (Grewal & Shivani, 2012). It is worth to mention that most often the problems arise from the

lack of trust in e-commerce which ultimately lead to ethical issues, since trust is the central attribute to any

e-commerce organization, and any e-commerce vendor fails to establish a trusting relationship with

costumers will phase out (Beatty, Reay, Dick, & Miller, 2011). The following points regarding customer

privacy, security and other risks should be considered in terms of ethical issues in e-commerce:

Customer privacy probably is the biggest ethical concern in e-commerce. While shopping online,

consumers are required to provide some degree of personal information such as bank details, current

location, or other credentials to authorize a transaction by placing themselves at significant risk (Boritz &

No, 2011). By providing personal details, consumers run risk of handing over their bank details to a third

party. Most often, special types of applications e.g. malicious programs are used to get consumers’

personal details (mainly bank details). For instance, web spoofing is a malicious program used to set up a

fake e-commerce web page almost identical to the original one in order to hack bank details of consumers

when they by mistake proceed transactions on this fake page (Grewal & Shivani, 2012). Moreover,

consumers also run risk of handing over their personal information such as buying habits to a third party

without their consent, for example, one of the most recent cases is that Facebook is facing a class action

lawsuit over allegations that it monitors users’ private messages to sell them to a third party (BBC, 2014).

Once e-commerce organizations possess data on consumers, most often consumers are not aware how

their personal information will be used.

Security concerns arise as many firms involve in conducting business on the internet, the process that

leading to dependency on the information technologies which are very vulnerable to defect. The main

aspect of security is information security. The consequences of defection such as loss of data, revenues,

trust etc., can be catastrophic for both e-commerce vendors and consumers (Anderson, Hansen, Lowry, &

Summers, 2006). For instance, one of most widely spread security concerns is online piracy defined as

usage, distribution and displaying the copyrighted work without permission from the copyright holder. As

Grewal and Shivani define (2012), such an ethical activity occurs when internet users obtain intellectual

properties such as music, videos, ebooks illegally and most often via special types of illegal software. It is

worth to mention that the consequences of unethical issues fall into legal aspects of e-commerce, for

instance, above mentioned www.napster.com can be viewed as ethical or legal issue in e-commerce.

Risks associated with other ethical concerns such advertising or inappropriate e-commerce web site

content can also be defined as rising ethical issues in e-commerce. It is well clear to everyone that

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advertising attracts us in a number of ways, but there are also a number of controversies associated with

advertising, so a question might arise whether advertising in e-commerce is always ethical or not. For

example, one of the most persuasive techniques for advertising is sending unwanted or unsolicited email

messages called ’’Spam’’, and most of time these spam messages also contain malicious programs to track

consumers (Laczniak & Murphy, 2006).

Inappropriate e-commerce web site content is also rising ethical issue, for example, in the UAE, the state

telecommunication company Etisalat censors web sited considered to breach local moral values by

disconnecting offending customers such as LGBT oriented e-commerce platforms (Harris & Dennis,

2002). It is important to know that the content which is considered quite normal cannot be considered the

same way in some other countries across the globe.

Ethical issues are not limited to above mentioned examples, of course ethical issues will also evolve and

increase as e-commerce advances along with advancing technology.

ConclusionWe live in a world of constant changes in history. Our world is being shaped by the widespread

availability of computers and smartphones, the trend which has provided unprecedented opportunity to

communicate and conduct commerce in a completely different way. At the social front, e-commerce can

definitely bring better future for the people by giving job opportunities to the poor, encouraging societies

and individuals to gain more knowledge and education, as well as, provision assistance to immobile

people such as the elderly, disabled of societies. Although, e-commerce generally contributes to the

prosperity of societies, it may also ultimately shape shopping or even reading habits of individuals (taking

into account ebooks etc.).

Most of e-commerce companies collect, store, and exchange personal information of individuals which

ultimately leads to ethical issues such as consumer privacy, information security, and intellectual property

etc. Any lapse in ethical standards can be devastating for e-commerce vendors and will definitely lead to

distrust of web sites and web services which is main deterrent to the internet use and e-commerce.

While social and ethical issues in e-commerce are somewhat unified and highly visible among societies

and individuals, legal issues can be quite different from country to country. In terms of legal framework,

the central issue is to protect both consumers and e-commerce companies, however, there is a long way to

go to accomplish unified legal regulations on e-commerce, while the regulations currently in place ensure

consumer privacy, intellectual property, information security, anti-fraud activities and etc. and are subject

to changes depending on countries.

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It is also important to consider future increase in both diversity and number of legal, social and ethical

issues in e-commerce with the advance of the internet and communication technologies.

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