By: John Glover (MBA)

E-commerce has transformed the way businesses operate and how customers buy products and services all around the world. The worldwide e-commerce business is predicted to reach $7 trillion by 2025 and continue to expand in the future years. However, with the growth of e-commerce comes the need for strong consumer protection laws to safeguard online transactions and maintain consumer trust in online marketplaces. A lack of strong online consumer protection laws can lead to a variety of issues, including identity theft, fraud, and unfair company practices, all of which can stifle e-commerce growth.

This article will discuss consumer protection laws, how they protect consumers, and their impact on e-commerce businesses.

Businesses Impacted by E-Commerce Regulations

It’s no secret that the e-commerce industry has witnessed significant growth in recent years and is only expected to keep growing–by up to 8.8% in 2024. As more businesses move all or part of their operations online, it’s crucial to understand the laws and regulations that apply to e-commerce. Here are some common examples of businesses that may be subject to these laws:

• Online retailers
• Social media influencers
• Healthcare providers
• Online payment processors
• Online education platforms
• Digital marketing agencies

This list is not exhaustive. With the rise of online marketing and mobile apps, it’s easier than ever to run at least a portion of your business online. No matter your industry, if you are marketing to or collecting data from current or prospective customers online, then it’s important to learn about consumer protection and data privacy laws that may affect you. You can get in touch with your legal adviser or a local small business attorney for professional help and guidance.

Consumer Protection Laws in E-Commerce

The e-commerce industry thrives on innovation and global reach. Progressing in such a dynamic landscape requires a clear understanding of the legal framework governing online business operations. Although the U.S. currently lacks a single, comprehensive law for e-commerce, several key federal regulations establish baseline consumer protection and data privacy standards. Some of the most critical laws impacting e-commerce businesses are, 

Federal Laws Shaping E-Commerce

Federal Trade Commission Act (FTCA)

The FTCA was established in 1914 and empowers the Federal Trade Commission (FTC) to promote consumer protection and prevent unfair business practices. The FTC enforces various regulations to curb deceptive advertising, deceptive pricing, and unfair contract terms. It is a must for e-commerce businesses to use marketing practices that avoid misleading consumers.

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA safeguards the privacy of individually identifiable health information (PHI). This regulation, which was enacted in 1996, applies to “covered entities,” which primarily include healthcare providers, health plans, and healthcare clearinghouses.

Entities must implement laws to protect PHI from unauthorized access, disclosure, use, or alteration. E-commerce businesses operating in the healthcare sector, such as those selling medical devices or offering online consultations, must comply with HIPAA’s data security and privacy requirements.

Children’s Online Privacy Protection Act (COPPA)

COPPA was introduced in 1998 to prioritize the privacy of children under 13 online. It mandates specific requirements for websites and online services directed towards children or those knowingly collecting personal information from children. 

E-commerce businesses targeting children or inadvertently collecting their data must adhere to COPPA’s regulations, including obtaining verifiable parental consent for data collection and providing parents with access to their children’s data upon request.

Gramm-Leach-Bliley Act (GLBA)

GLBA, also known as the Financial Services Modernization Act, was enacted in 1999. The law is responsible for regulating the collection, use, and sharing of non-public personal information (NPI) by financial institutions.

E-commerce businesses handling financial transactions or offering financial services, such as online payment processors, must comply with GLBA’s Safeguards Rule, which mandates implementing a comprehensive information security program to protect customer NPI.

International and State Considerations

As previously said, these are only a few instances of laws and regulations that may be relevant to e-commerce and other online businesses. The internet enables businesses to drastically expand their reach in ways that were previously impossible. As a result, depending on where you do business, different state and international laws governing online consumer protection and data privacy may be applicable.

International Laws: The European Union’s General Data Protection Regulation (GDPR) is a prominent example of a comprehensive data privacy framework. Businesses targeting or collecting data from EU citizens must comply with GDPR’s stringent requirements, regardless of their physical location. Other countries may have their own data privacy regulations that e-commerce businesses need to consider when conducting international operations.

State Laws: Individual U.S. states can enact their own consumer protection and data privacy laws that supplement or differ from federal regulations. For instance, some states have enacted stricter data breach notification requirements than the FTC. E-commerce businesses with a physical presence or conducting significant business within a particular state should familiarize themselves with relevant state laws to ensure compliance.

Practices for Compliance with Online Business Law and E-Commerce Regulations

Operating an online business requires you to navigate a myriad of laws and regulations. This can be overwhelming. It makes no difference whether you run the business as a sole proprietor or have gone the route of creating an LLC or other appropriate legal business entities. 

Here are some pointers to help you get started and better safeguard your business and customers in the future:

• Familiarize yourself with the laws applicable in every jurisdiction where you operate, advertise, or store customer data.
• Implement and prominently display clear terms and conditions, along with a comprehensive e-commerce privacy policy on your website. These documents should transparently outline how you collect, use, and share customer data.
• Collect only necessary data essential to your business operations, respecting customer privacy preferences whenever feasible.
• Provide customers with options to opt in or out of data collection and storage practices where appropriate.
• Conduct regular audits of your data collection and handling practices to ensure ongoing compliance with relevant laws and regulations.

Conclusion

The rapidly expanding scene of e-commerce requires solid consumer protection laws to foster trust. With foundational regulations, businesses must navigate a complex landscape to protect consumer interests and maintain integrity. International frameworks like GDPR highlight the global nature of compliance in today’s interconnected marketplace. Prioritizing transparent policies, respecting data privacy, and conducting regular audits can help e-commerce businesses meet legal obligations and build enduring trust with customers, driving sustainable growth in the digital economy.

Disclaimer: “The content in this article is provided for general knowledge. It does not constitute legal advice, and readers should seek advice from qualified legal professionals regarding particular cases or situations.”

Published by: Nelly Chavez