E-commerce has become one of the important mantras of branching out and marketing, in the business circle. Technological convergence, deep urban/rural penetration of personal computers, increasing computer literacy and training, liberalization of telecommunication policy and the availability of cheap Internet connectivity are factors that influenced both consumer as well as business behaviour in favour of e-commerce. For business houses ‘the lure of conducting global operations through a web site has become irresistible…because a page on the World Wide Web can reach web surfers in every state in the nation and perhaps every nation on earth.’ Attracted to the possibilities of E-Commerce, for a possible market expansion, and with hope of exploiting more avenues of trade in the international market, Internet has become another market place, though virtual. There are many factors in the Internet that could encourage the business houses, in exploiting this new avenue positively.
Besides all these there are many affairs which have a great impact on global e-commerce. In this paper we will mainly analysis global e-commerce and the factors that affect it.
Keywords: B2B (business to business), C2C (customer to customer), e-commerce, State.
E-commerce has become one of the important mantras of branching out and marketing, in the business circle. Technological convergence, deep urban/rural penetration of personal computers, increasing computer literacy and training, liberalization of telecommunication policy and the availability of cheap Internet connectivity are factors that influenced both consumer as well as business behaviour in favour of e-commerce.
For business houses ‘the lure of conducting global operations through a website has become irresistible because a page on the World Wide Web can reach web surfers in every state in the nation and perhaps every nation on earth.’ Attracted to the possibilities of e-commerce, for a possible market expansion, and with hope of exploiting more avenues of trade in the international market, Internet has become another market place, though virtual. There are many factors in the internet that could encourage the business houses, in exploiting this new avenue positively. Some of them are:
When a business house runs its commercial activities in the real space the infrastructure support would be huge depending upon the nature, size and capacity of the business. For example, before launching of its web based ticket reservation system, the Indian railways were entirely depending on a reservation system through its reservation counters at railway stations. Then the need for physical infrastructure like space, buildings etc. were so large. The railways also had to employ huge manpower including reservation staff, security staff and others. Money was transacted in hard cash though this counters and deposited in banks. The customers also had to standing long queue for reserving the ir ticket. But after its web based reservation system was launched, the requirement of such physical infrastructure has come down. Now tickets can be reserved and payment can be made through its online portal by anyone by accessing its web portal. The railways benefited because, infrastructure and manpower requirements have come down to great extent. It also benefited the customers because they could avoid standing in long queues and reserve tickets sitting in the comfort of their home.
Decentralized Electronic Markets and Accessibility
As pointed out earlier, a web page has the potential of reaching different parts of the world, probably in any country and in any market system with less restriction to a larger number of customers. The business houses have realized this potential of the internet and are largely using this medium for finding appropriate market for their products and retailing. Using the internet, it is easy for them to access the customer’s in different parts of the world without their physical presence. For example, a publishing house can find markets anywhere in the world through online books tours such as www.amazon.com. It is also beneficial for the consumers particularly when he needs to buy a book, which is not available in the area where he is living. Another important advantage of e-commerce is that, these portals could be accessed at any time of the year unlike the shops in their space, which closed down during nights.
Minimum Number of Intermediaries
In commerce in the real space the large number of intermediaries such as wholesaler, retailer, agents and brokers makes the prices increased when it reaches the end customers. But the number of intermediaries is less in the e-commerce when compared to this. The benefits of this could be analyzed in both economic and non-economic terms. In non-economic terms, to take an example, a direct relationship between the seller and the buyer could be developed by the seller so that the buyer remains always ‘loyal’ to the seller. The absence of intermediaries might also give economic benefit to both the seller and buyer in terms of cost and price.
Less Costs and more Profits
E-commerce also has the potential of reducing the cost for the business houses which would automatically be reflected in the profits.
Similarly, the customers also have some benefits in e-commerce.
Easy Information about Products
In the normal commerce information about products and markets is difficult together. In e-commerce information can reach customers more effectively.
It is another great benefit of e-commerce. If example of online reservation system of Indian railway is taken, it helped customers from the pain of standing in long queues at railway counters.
Important Affairs in Global E-Commerce
In the present times e-commerce has progressively more emerged as an imperative means of business and trade. But at the same time it has posed various challenges to national policy makers and legislators as regards its governance. Furthermore, its born global nature has created various jurisdictional issues, raising controversies over who should have authority to decide in case of a dispute as well a show they should be handled. Because of these reasons e-commerce and its governance are involved in various policy dilemmas and issues. The following issues need special attention.
- Affairs relating to Access
- Affairs relating to Trust
- Affairs relating to Ground Rules
Affairs relating to Access
The following are the major affairs related to access. If e-commerce is to spread into the inhabitants within a country as well as globally, these affairs must be addressed and resolved in a timely manner at the domestic and global levels.
Access to Infrastructure
In order to conduct commercial transactions over the Internet, consumers and business people must first have access to telecommunications networks and services, including backbone e-networks. Once connection to the networks and services is ensured, in turn, their capacities and quality become important for the users. It is thus of critical significance for e-commerce to ensure that a proper and efficient access be available.
Access to Content
While access to infrastructure is a necessary condition for people to adopt and partake in e-commerce, various types of content transmitted over this infrastructure are also critical elements for the success of e-commerce. The contents have to be competitive as well as respecting the cultural values of others.
Connectivity to telecommunications networks is a prerequisite for enjoying the benefits of e-commerce. With the increasing importance of information and communication technologies in our everyday lives, universal availability of various communication services, including basic telephone service, is regarded as a principal policy objective in competitive market environment. At the same time a large number of people are even without the basic telephone services. This gap in the globe inhabitants is called as digital divide.
Affairs relating to Trust
There is a need of trust when we engage in an association or interaction with other people. Generally, lack of knowledge of those people requires us to take risks in the association or interaction. Renowned scholar Arrow says “virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.” Any type of commercial transaction presupposes trust between the transacting parties. In any contract parties to it must trust each other and perform their part of the contract. In normal contracts the rules and procedures for dealing within stances of breach of trust are already laid down. But this continues to be problem in e-commerce.
Any form of e-commerce will never become successful unless the trading parties trust each other as well as the system through which the transaction is made. An analysis of this area would reveal that the following elements are decisive for developing trust in an e-commerce system:
Privacy and Data Protection
Generally it is believed that privacy is a necessary precondition for trust. But the increase of electronically mediated transactions over the information and communication network raises regulatory concerns on the collection, storing and manipulation of personal information without consent or even knowledge of consumers. Databases of consumer information may contain personal information. There is a chance that without the consent or knowledge of consumers, those databases may be shared with or sold to others to whom the consumers have not chosen to give their personal information. Because of these matters the protection of privacy has emerged as one of the most important policy issues among policy-makers, businesses and consumers. At the same time the growth of e-commerce is inevitably connected with and relies on the collection, storing of personal information obtained by voluntary and involuntary consumer surveillance. Taking these things into consideration the task of the policymakers to balance these conflicting interests becomes difficult.
The full potential of e-commerce cannot be achieved until the system is capable of providing the same levels of trust found in traditional commercial transactions. This can be accomplished only if consumers of e-commerce are confident of the security of transmitted information. Among the prime security concerns of e-commerce confidentiality, authentication and integrity of information are most important.
Price and production formation are essential for consumers to make informed purchasing decisions in any market. When a commercial transaction is made between parties without a direct face-to-face contact or a physical inspection of products, the lack of this information affects legitimate expectations of the consumers to receive quality goods and products. Unfortunately, most of the B2C e-commerce transactions are of this kind. The following two factors make this issue even more complex:
- Competition among the business: The competition results in an increasing entry of businesses into the E-market and the tendency of these people to go for unethical and unfair trade practices are also on the increase.
- Convergence: When convergence offers bundles of communication services in the same platform, the provision of reliable and detailed product and price information become more critical for the consumers. The consumers must be confident that they will be protected in the electronic market place as much as they are in the real marketplace. There are many consumer protection issues identified at various international forums as crucial for the further growth of electronic commerce.
The Global Information Infrastructure Commission points out certain areas of concern, which are as follows:
- Online fraud: The instances of online frauds are on the increase. A person who loses money in any of such frauds may face difficulty in enforcing his rights.
- Privacy protection: It is also important that confidential information such as credit card information, bank account number etc. should be protected. Internet is a medium through which this information is very often misused.
- Authentication and security of information: Similarly, an ordinary consumer would also face difficulty in verifying the authentication and security information in an online atmosphere.
- Lack of Consumer education: Many persons who use online platforms to engage in commercial activities fail to understand the vulnerability of Internet and taking appropriate safeguards.
In order to create a trust-conducive environment for e-commerce consumer protection issues will have to be answered. The governments across the globe will have to device reliable protection mechanisms with the help of industry and others. As a useful form of aid, the new information and communication technologies may be utilized by regulators and consumer advocates for devising innovative solutions for consumer protection and education.
With the opening of borders and markets and the elimination of barriers to almost any form of communication, there will inevitably be certain types of transmission that will be deemed inappropriate, offensive or harmful to certain segments of consumers and users of e-commerce. Adult materials, hate speech against minors and sedition are leading examples of those expressions that raise public concerns. There are various conflicting interests in these issues. For example, those who bother about the vulnerability of minors to these harmful internet contents advocate for regulatory intervention by administration. At the same time another class argues against any such intervention on the ground of speech and expression. This is a problem for policy makers that the problem should be solved without deterring the growth of e-commerce.
Affairs regarding Ground Rules
When the e-commerce develops as a significant method of domestic as well as worldwide trade and business, there is a requirement of common ground rules and standards across the globe apart from the existing standards that are based on the national boundary of each State. New or modified rules and standards of governing E-Commerce are needed with respect to many issues of crucial importance to the development of electronic commerce. The important issues are as follows:
As E-Commerce enlarged commercial transactions across national borders, the taxation issue has become one of the most debated topics. E-commerce is considered by many national tax administrations not only as having the potential for creating a new stream of revenues but also as presenting frightening challenges to national tax systems because new technologies used for e-commerce open up probabilities of tax evasion and avoidance. In order to properly tax commercial transactions, it is grave to establish the systems by which the tax authorities can obtain accurate and necessary information on those transactions, regarding transacting parties, time, place and volume. However, unlike traditional commerce, some unique aspects of electronic commerce greatly affect the way national tax systems operate. Even though many scholars believe that existing domestic and global tax regulations may well fit e-commerce, none the less, this new type of commercial transaction raises the need of modification and adjustment of these existing regulations because of the born-global nature of e-commerce. In the past few years mainly three taxation issues have been much debated in worldwide discussion. They are:
Issues regarding classification
The main issue regarding classification is that whether e-commerce transactions are regarded as transactions of goods or services. This is really significant for cross-border transactions because different classes of transactions are treated differently for tax purposes. In other words, the question would be the applicability of General Agreement on Tariffs and Trade (GATT) or General Agreement on Trade in Services (GATS).
Customarily, goods are treated a send product that can be converted into a tangible or physical product. But Services are intangibles that cannot be converted into physical goods. If e-commerce transactions were classified as sales of goods, GATT rules would apply because when goods are physically moved across national borders, they are usually subjected to tariff as the GATT rules apply. On the contrary, if e-commerce transactions were classified as sales of service, GATS rules would apply where tariffs will not be applied. At the same time a clear distinction between goods and services is always confusing in e-commerce.
For example, when software is ordered electronically and then is shipped physically in a CD, it could be classified as goods and are subject to tariffs. The confusion arises when the software is directly downloaded from the Internet across the border. It is unclear whether this software should be classified as goods or services and what multilateral rules would apply to them. Due to this problem of classification in 1998 that a member states agreed to a two-year moratorium on tariffs on e- commerce.
Issues regarding source and place of residence
The direct tax system in any country would normally be clear regarding who is liable for taxes and, for those who are what income is subject to tax. Conventionally, source and residence are two basic concepts, which determine these questions.
Residence is thought of as “the country with which a tax payer has the closest personal links and source as the country with which income has its closest economic connection” Direct taxes are typically levied by a country on “the domestic and foreign income of its residents and on the domestic source income of non-residents.” Similarly the collection of direct taxes relies somewhat on evidence of physical connection. Similarly, like the physical connection, eternal establishment is also very important to determine particular tax jurisdiction like in which country income has been generated and is therefore taxed. According to Article5 of the OECD Model Tax Convention, permanent establishment means “a fixed place of business through which the business of an enterprise is wholly or partly carried on.”
Double Taxation and Tax Evasion
As e-commerce has increased the number of online suppliers who are often subjected to double taxation and tax evasion have also significantly increased, posing serious problems to national tax systems. In order to solve these problems in e-commerce and reconcile different national positions, the OECD has developed a set of rules to setup an internationally consistent and harmonized taxation framework. As a result of this effort, the OECD has proposed the Taxation Framework Conditions in 1998. In these framework conditions, five basic principles of international taxation for e-commerce were presented to help national governments to implement internationally consistent taxation rules. Those five principles are neutrality, efficiency, certainty and simplicity, effectiveness and fairness, and flexibility.
As e-commerce has mushroomed as an imperative means of doing business across national borders, various policy issues relating to the international trade aspects of e-commerce have arisen in international discussions. There are mainly three widely discussed policy issues, which affect international trade. They are:
Is it a trade in goods or trade in services?
The answering of this issue is very critical because e-commerce transmissions will be subject to the different WTO rules, depending on whether such a transmission is classified as trade in goods or services. If it is considered trade in goods, the GATT rules apply. On the other hand, if it is regarded as trade in services, it is subject to the GATS rules. There are many differences between these two sets of trade rules in terms of application of National Treatment, Most Favoured Nation, and Quota principles. The National Treatment principle obliges countries to treat all foreign products equal to their similar domestic products. Under the GATT, this principle applies to all goods as a general duty. However, it is not a general duty under the GATS, under which it only applies to sectors in which members have explicitly scheduled commitments. Moreover, under GATS, member states can make conditions or limitations on their application of the National Treatment principle, which may restrict the market access of Foreign Service providers.
This issue also significant for determining custom duties or Tariffs because the GATT rules impose custom duties on all imported goods while the GATS rules don’t impose custom duties on services, which is particularly critical for developing countries where custom duties account for a considerable portion of national revenues. In order to ensure that the unresolved classification issue does not hamper the development of e-commerce, countries made the decision not to impose custom duties on e- commerce transmission in the 1998 WTO Ministerial Conference Declaration on Global Electronic Commerce.
‘Cross-border Supply’ or ‘Consumption Abroad’?
The difference between a Cross-Border Supply and Consumption Abroad is that informer the supplier enters the jurisdiction of the consumer and in the later the consumer enters the jurisdiction of the supplier. The distinction between the set methods has significant implications for market access and domestic regulations of service trade. Under the GATS, member countries may make commitments to liberalize specific service sectors and these commitments may differ depending on the modes of supply. Therefore, how e-delivery of services classified affects the way e-commerce is regulated in a particular member country. At the same time, unless the classification issue is clarified globally, service providers would be left with some uncertainty about what rules apply in a jurisdiction in which they supply services.
Domestic Regulation of E-commerce and its impact on International Trade
Usually national governments bring regulation of e-commerce for various public policy objectives such privacy, intellectual property rights, consumer protection and promotion of national cultural diversity. But sometimes these regulations create unnecessary trade barriers for conducting e-commerce. So an appropriate balance need to be struck between the need of government to pursue these public policy objectives through domestic regulation and the need to ensure that these regulations do not constitute redundant trade barriers which hamper the further development of e-commerce.
In order to ensure that domestic regulations should not constrain international trade unreasonably, various rules governing domestic regulations have been included in international trade agreements. For example, Article VI of the GATS stipulates that WTO members must ensure that in areas where definite commitments have been made, ‘all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.’
Commercial Law and Standards
As e-commerce has emerged as a significant means of conducting business, there has been an increased need of changing the existing commercial laws to accommodate this new type of transaction. The most basic and fundamental commercial law issue in e-commerce is concerning the validity, legal effect and enforceability of electronic transactions. Almost all existing commercial law provisions are drafted on the basis of paper instruments and manually written signatures governed by the laws of one national jurisdiction. Even though many states, including India have legally recognized the e-contracts, there are many states which have not made any initiative yet. The requirements for the use of paper documents and physically written signatures in commercial transactions are viewed as major obstacles to the development of e-commerce at both domestic and global levels. In addition, different national rules and regulations governing commercial transactions significantly hamper the worldwide diffusion of electronic commerce, which thus raises a need for international harmonization of different national commercial laws.
According to UNCTAD the main commercial law issues, which are regarded as creating obstacles for e-commerce, are:
- Requirement of written documents
- Requirement of signature
- Requirements of original documents
- Evidential value of internet transactions
- Storage of data messages
- Documents of title and negotiability
- Validity and formation of contracts
UNCITRAL model law on electronic commerce, 1996
In the above issues, in order to provide a model for national legislators the United Nations Commission on International Trade Law Model Law on Electronic Commerce was adopted in the year 1996. The Model Law aims at placing electronic transactions on par with the legal treatment accorded to traditional paper-based types of transactions. The main aim of this Model Law is to harmonies commercial law of all the states. With this aim the Model Law provides rules and norms that validate and recognize contracts formed via e-communications. For example, the provisions of the Model law not only define the characteristics of “original”, “writing” and “signature” in relation to e-transactions but also address admissibility and evidentiary weight of data messages, the formation and validity of contracts, and recognition by parties to data messages. Since it was adopted in 1996, many countries, including India, have enacted legislation based on the Model Law to ensure the enforceability of e-transactions.
Changes in Law relating to Acceptance of Digital Signature
Digital signature is “a particular type of e-signature which is very specific, being created with the use of asymmetric or public key cryptography”. It functions as an authenticating mechanism of electronic documents in the same way as that of a manual signature authenticates written paper documents. In addition, there are other important functions attached to a digital signature:
- It authenticates the sender of messages.
- It assures integrity of a message, verifying that a message has not been intentionally or accidentally altered during transmission.
- It ensures the non-repudiation of origin and receipt.
UNCITRAL Model Law on E-Signatures, 2001
The UNCITRAL adopted the Model Law on E-Signature sin2001. The Model Law on e-signature addresses various criteria for reliable e-signatures, the duties of signatory, certification service provider and relying party, and the recognition of foreign certificates and signatures. By establishing internationally applicable rules and norms, the Model Law provides a framework for countries wishing to enact digital signature legislation.
Standards mean the “decisions about the acceptable design, capacities, or by-products of products, industrial processes, or technological systems.” The extensive use of e-commerce has increased the need for standards in various products and applications of e-commerce, including physical networks and devices as well as enabling technologies and electronic applications. The functions of standards are mainly here:
- Standard scan increase price competition by allowing comparison of standard products and applications
- Standards can increase compatibility and inter-operability, encouraging new suppliers to compete in producing products and applications related to the underlying standards
- Standards can increase the use of a particular technology, attaching enhanced economic and functional value to the technology.
Dispute Resolution in E-commerce
Disputes may arise in a commercial transaction at any time between the parties so is the case with e-commerce. The efficiency of the system lies in its ability to resolve these disputes amicably by protecting the interests of all the parties. In the real space commerce there are various judicial and non-judicial forums through which these disputes are resolved. These forums also can assume jurisdiction in disputes that arises in e-commerce. At the same time there are other mechanisms of dispute resolution in e –commerce which analyzed below.
Online Dispute Resolution Mechanism
Online dispute resolution is also a kind of Alternative Dispute Resolution, which uses technology to facilitate amicable resolution of disputes between parties. Like ADR this also involves the techniques like negotiation, mediation or arbitration or a combination of these techniques. The technology used for ODR is usually Internet, even though it need not be always so.
ODR can be looked at in two perspectives. It can be viewed as the resolution of online disputes, i.e., solving of disputes which arises out of an online transaction. This can be solved by online mechanisms or offline mechanisms. Another approach to analyze ODR is by viewing it as a method of solving disputes online, be the disputes are the results of online transactions or offline transactions.
The following are the important types of ODR used in the modern e-commerce:
- Automated Negotiation: In this type of ODR the technology replaces human involvement. A good example for automated negotiation would be the instances of ‘blind-bidding’ services. “Blind bidding” is an auction mechanism where some oral information about the parties is hidden from each other. The parties are asked to financially bid an amount for which they would agree to resolve the dispute. If the bids of parties come within a predetermined range, the dispute is settled. An example for this kind of ODR is Cybersettle.com.
- Assisted Negotiation: In this kind of ODR, technology assists a human negotiator in the negotiation process between the parties. Here the parties are given an atmosphere through online efforts through which the disputes can be settled amicably. Here the parties are given an opportunity to negotiate through online face-to-face meetings, conference calls etc. to reach a settlement. The human negotiator with the help of technology helps parties to reach a solution. An example for this type of ODR is Smart Settle.
- Online Negotiation-cum-Mediation: In this kind of ODR a dual process of negotiation and mediation is adopted and the parties can initiate ODR process by opting online negotiation and make an attempt to negotiate their differences and reach a settlement. If this attempt fails, a mediator is appointed for conducting an online mediation. An example for this type of ODR is Squaretrade.com.
- Document/email arbitration: In this method of ODR, the whole process of arbitration is carried out through emails like filing of arbitration agreement, filing of disputes, filing of documentary evidence; written submissions, written hearing, closing statements etc. are all done through email. An example for this is Cyber Arbitration.Com.
- Peer Jury: This is another type of ODR where the volunteer jurors select disputes they would like to decide, review them, seek clarifications and give their decisions. Similarly, many jurors would decide a single dispute and the parties are given a summary of the decisions which contains the number of jurors decided in favour of and against each party. An appropriate example for this would be i.courthouse.com.
Commercial transaction through internet and other electronic media is so important that in the future, most of the business-to-business transactions would invariably use them. The case is also not different in consumer-to- consumer contracts, at least when the transactions involve two parties from distant places. Possibly the legal issues in both these types of ecommerce could become more complex and challenging for the legal system. So it is better that, persons who seek technological assistance for entering into commercial relationship in online platforms understand about the law relating to e-commerce.
 B.B.A.LL.B.(H), 2014-2019 Batch, Amity Law School, Amity University Haryana
 B.A.LL.B, 2013-2018 Batch, Dept. Of Law, Maharishi Markandeshwar (Deemed to be University), Ambala
 Nandan Kamath, Computers Internet and E-Commerce, Universal Law Publishing Co p.17 (2007)
 Samarajiva, “Interactivity as Though Privacy Mattered” in P. Agre, & M. Rotenberg (Eds.), Technology and Privacy: The New Landscape Cambridge 91997) at p.282
 Ibid., p. 284
 Global Information Infrastructure Commission, Consumer Protection in Electronic Commerce: An Overview of Current Initiatives (1999) at pp.4.5
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 Teltsher, S. Tariffs, Taxes and Electronic Commerce: Revenue Implications for Developing Countries. Policy Issues in International Trade and Commodities Study Series No. 5, UNCTAD (2000) at p.5
 Supra note 18 at p.18
 Ibid at pp, p. 22-23
 Ibid at pp, p 24
 OECD Ministerial Conference, “A Borderless World: Realizing the Potential of Electronic commerce”
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 Supra note 25
 Townsend, D.(1998), Regulatory issues for Electronic Commerce: Briefing Report, Report to the ITU 8th Regulatory Colloquium(1998) at p. 60
 The information Technology Act, 2000, No. 21, Acts of Parliament, 2000
 UNCTAD, Building Confidence, Electronic Commerce and Development (2000)
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 Supra note 27 at p.61
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