Businesses often only take an interest in the legal requirements of their operations when they encounter problems, but the law is not intended solely to resolve disputes; it also helps prevent them from arising in the first place. “Those who are aware of this rule are far less likely to face legal challenges, the resolution of which costs far more than their prevention,” says Egidijus Kieras, an attorney at the AVOCAD law firm. He highlighted the most important international legal aspects of e-commerce that individuals developing an e-business must know for participants of the “GlobalShop” academy organized bythe “Innovation Agency.”
According to the lawyer, anyone starting or running an e-business should be aware that failure to comply with legal requirements can result in a fine of up to 4% of annual turnover. “If fines don’t scare you, be aware that if violations are repeated, your online store could simply be blocked,” warns Egidijus Kieras.
What is important for an entrepreneur to do with e-commerce?
According to E. Kiero, almost every action has a legal basis, and thus the rules of trade are also established in legislation. There are two types of legislation: national and international.
Each country makes laws that apply only to itself, regulating the activities of individuals, their requirements, etc. For example, there may be differences in terms of return periods, delivery, etc.
The rules and requirements for e-commerce are, in most cases, laid down in directives issued by the EU, but they are not directly applicable in the country and each country has to incorporate the provisions of the directives into its national legislation, i.e. issue laws, e.g.: after the adoption of a directive, the Civil Code or other laws in Lithuania are revised.
“The terms and conditions of sale must be adapted to the provisions of the specific country in which the goods are sold to consumers. A website is tailored to consumers in that specific country if it is available in their language, the website’s presentation is automatically adapted to the user’s country (it has the appropriate domain extensions), and there are other clear indications that such an offer of goods is a targeted action specifically in that territory,” the lawyer states.
Remote sales contract: what must be specified in it?
The legal relationship between the consumer and the trader is established by the sales contract. What must it contain?
- Key product features. Although, according to the lawyer, it seems to be very clear to everyone, there are a number of fines for this. Last year, the State Office for Consumer Rights Protection fined €45,624 to a company" that operates an online shop. The Office found that the information published by the portal was incomplete and that the goods presented to consumers differed from their description, for example, they were scratched, there were certain irregularities, etc. Thus, the bottom line is that the description of the product must be specific and not mislead the consumer.
- Trader's identity: name, address, telephone, email;
- The total price of goods or services, including taxes and other costs. If all costs cannot be reasonably calculated in advance, the method used to calculate the price must be specified. "It is important to understand that if you do not specify the total price including all taxes, you will not be able to claim them from the buyer later," notes E. Kieras.
- If you apply personalisation of the price, this must be stated. The buyer must understand that you have personalised the price he sees according to certain automated criteria. What problem does this rule solve? Businesses can use algorithms based on a consumer's purchase history or the websites they visit to determine whether a consumer is interested in a particular product, and if the answer is yes, they increase the price of the product or service. So, if you have personalised the price, you need to make that clear to the buyer.
- Payment, delivery, the procedure for performance of the contract and the period by which the trader undertakes to deliver the goods.
- If a right of withdrawal applies, the conditions, time limit and procedure for exercising this right, as well as a model withdrawal form. If there is no possibility to withdraw, this must also be stated. If applicable, it shall state that the consumer must bear the costs of returning the goods after withdrawal. If you do not specify this beforehand, you will not be able to claim later.
- A reminder that there is a legal guarantee on the goods (2 years).
- Commercial warranties (warranties provided by the manufacturer or seller).
- Illegitimate dispute procedures.
And these are just some of the conditions required for a contract.
What is unfair trading?
Egidijus Kieras also points out which actions are considered unfair in all EU countries and which should be avoided. A commercial practice is unfair if it prevents the consumer from making an informed decision or influences his free economic behaviour:
- Illegal indication of the reliability and quality mark.
- Fraudulent claiming of a licence (authorisation), or product approval.
- You make an offer with a price, but you know that you won't actually sell the goods on those terms.
- Misleading claims that the product will only be available for an extremely short period of time.
- Specifying the consumer's statutory rights as an exclusive condition of the offer.
- Fraudulent closures by announcing sales.
- Deceptive claims that the product cures.
- Offering to enter a competition or receive a prize, but not giving the prizes or their equivalents specified.
- Including an invoice or similar payment document in marketing materials.
- Creating a pyramid distribution system.
- Inappropriate labelling of advertising.
- Rating.
What is important to know about ranking on an e-marketplace?
E-Commerce operators that allow consumers to search for products offered by different sellers must inform consumers of the main criteria that determine the ranking of the products provided to the consumer as a result of his search query. For example, it may indicate that products are ranked on the basis of price, the ratings of the customers who have purchased the product, popularity, or a combination of different criteria. If the ranking of a product in the search results is based on paid advertising or other payments received from the relevant merchants, this information should also be clearly indicated to users.
Genuineness of feedback, who guarantees it?
Where a trader makes product reviews available to the consumer, information on whether and how the trader ensures that the reviews published are from consumers who have actually used or purchased the product shall be considered essential. The aim is to better inform the online shopper so that he is not misled and makes a correct, informed decision.
It is up to the business owner to ensure that the review is genuine. “Most often, authorities contact us to verify data, and then you have to provide evidence proving that the reviews were written by your actual customers, as well as how these reviews were obtained, whether users have the opportunity to submit negative comments, and whether they are visible to the public,” notes E. Kieras.
In his view, these questions must be answered, as failure to do so could result in sanctions.
The delivery deadline must be taken seriously
The product must be delivered no later than 30 days. If the consumer does not receive the product within this period, they have the right to cancel the distance contract, and the seller must immediately refund all money paid by the consumer. “In practice, the timeframe depends more on the consumer’s preferences. However, this timeframe must be taken seriously, as a significant number of fines are imposed precisely for this reason,” says E. Kieras.
The lawyer advises that, in any case, businesses should cooperate with both consumers and regulatory authorities. “In such cases, fines—even if violations are found—are significantly lower. Keep in mind that the most common sanctions are imposed specifically for failing to refund funds on time and failing to respond to consumer complaints in a timely manner,” notes Egidijus Kieras.