Two years ago, all the knowledge about e-commerce could fit in a bucket. Two years from now, one can swim in the ocean of digital signature regulation alone. Almost every area of the Basic Law has been affected by the e-issue and this is all a cyber lawyer can do to maintain his position better. The broad definition of e-commerce is “to transact through electronic means”. In the interest of water safety, this chain will float in a small pond. We will focus exclusively on the purchase of goods and services from online stores on the web. Perhaps the most important feature of the Internet is its fluid and fleeting character. Web pages disappear in the blink of an eye. Users pass through cyberspace at a speed previously restricted to comic book superheroes. Identity is largely self-chosen. Rights are imaginary, remedies are supernatural. Technology is changing daily, creating a steady stream of new causes of action. The law comes flowing slowly, heavily stepped into the vortex, leaving footprints in the mud that are sometimes so deep as to create a bend in the flow, but are often irrelevant to floating traffic on the surface. Nevertheless, legislative beavers and social engineers have lost their fear of water and have begun building their dams and bridges. In an unprecedented way, they are reaching out to like-minded enthusiasts on the other side across the water, uniformity of design that will result in stronger periods. One can imagine how long this stream will continue to flow with full force and freedom.
Different stages of the e-commerce process
This article will focus primarily on the phases of the e-commerce venture that are specific to the online experience, such as hosting and website development agreement terms, general advertising arrangements, digital signatures, encryption technology, consumer privacy, and the emerging field of online dispute resolution It is designed primarily for the use of lawyers who are new to e-commerce. Unfortunately, we have very limited time to cover a number of important e-commerce developments. For example, a start-up may first establish its corporate structure, establish ownership shares, prepare a management team, seek initial or payable capital, rent an office and hire employees. At this stage of Internet development, it often happens that the information presented today becomes obsolete by tomorrow. This lecture is just a glimpse into today’s e-commerce legal issues. The flow of information changes as new issues inspired by new technology emerge. We hope that this series will help the businessman to deal with some of the major challenges faced in the stream of e-commerce.
E-commerce refers to the online sale of products and services through a website, usually paid for online through a credit card. However, e-commerce transactions can also occur through cash on delivery (COD). E-commerce may include business-to-business (B2 B) or business-to-customer (B2 C) transactions. The growth of e-commerce business in India is still in its infancy, but it is expected to attract more consumers and grow significantly in the future. Unlike the US, online shopping in India is still largely limited to purchasing airline/train tickets and through online auctions. It is still not common for consumers to do their regular grocery shopping online. However, it is anticipated that middle-class consumers will soon begin purchasing greater amounts of goods and services via the Internet as online shopping eliminates the geographical and time constraints of physical shopping.
E-commerce transactions raise many legal issues. The first group of issues relates to contract formation, that is, it is considered when the offer recipient has accepted the offer and the exact time of notice of acceptance of the offer. Additional issues also arise from shrink wrap and click wrap contracts, which have evolved due to the nature of the Internet, where to protect sellers, consumers are required to comply with contractual obligations before making online purchases. Online payments through credit cards are a key element of e-commerce transactions. Therefore, an understanding of how electronic payment gateways work, especially the issues raised under Indian law, is important for the analysis of legal issues related to e-commerce. E-commerce transactions clearly raise security issues as the customer discloses personal information while making payments with his credit card. Furthermore, neither the cardholder nor the card is physically present in online credit card transactions. All e-commerce transactions are cardholder absence (CNP) transactions – this type of transaction accounts for most credit card frauds in India. Therefore, confidentiality of information and procedures in online payments has to be ensured so that customers, merchants and banks can identify each other and avoid credit card fraud.
Apart from contractual disputes, e-commerce business is particularly prone to give rise to various types of disputes. The first type of disputes relate to deceptive business practices, such as false advertising claims and violations of advertising codes and regulations. Online disputes may arise due to crimes such as using websites to display child pornography in various jurisdictions or displaying other illegal content, such as the famous French case involving Nazi souvenirs, discussed further in this chapter. Therefore, jurisdictional issues, namely determining which country’s courts will have jurisdiction over a dispute involving parties from different countries and arising from a website accessible in every country of the world, are important issues related to e-commerce.
In addition to determining which country’s courts have jurisdiction over the owner of a website, which may be internationally accessible, another important legal issue is which country can claim the tax revenue generated by the website. International taxation issues arise from e-commerce transactions that are inherently cross-border. This chapter examines the following legal issues related to e-commerce: 1) the creation of e-contracts and key contractual issues 2) electronic payment gateways 3) security-related issues 4) taxation 5) foreign investment in e-commerce business.
1. Creation of e-contracts and key contractual issues
An electronic contract or e-commerce agreement encapsulates all types of commercial contracts that are concluded on an electronic medium or network, namely the Internet. In e-commerce, the exchange of draft contracts in paper form has been replaced by instantaneous electronic communications via email and the Internet. The Indian Contract Act, 1872 regulates the creation of all contracts in India. Section 10-A of the IT Act 2000, as amended by the Information Technology (Amendment) Act, 2008, recognizes contracts concluded in electronic form as legally binding. Section 10-A of the IT Act, as amended, states that S. 10-a. Validity of contracts made by electronic means: where in contract formation, communication of proposals, acceptance of proposals, revocation of proposals and acceptances, as the case may be, is expressed in electronic form or by means of electronic records, such contract shall not be deemed unenforceable on the sole ground that such electronic form or means was used for that purpose.
2. E-payment/Electronic Payment Gateway
Government e-payment gateway (GePG) is envisaged to provide a payment gateway for citizen ministries and departments with the specific objective of developing an integrated payment and accounting system for all levels of use with seamless interface and data communication by leveraging existing IT capabilities of core banking systems and application software functionalities of CGA’s organization This will result in the elimination of the physical check processing system and the traditional problems associated with it, thereby significantly increasing overall payment processing efficiency and ensuring large cost savings for the Department; Online reverse file (payment scroll) providing MIS on specific e-authorization IDs for all e-payment fund transfers; Large savings in time and effort and online auto-reconsolidation to accelerate the compilation of accounting procedures; and to ensure a secure single point data capture of transaction data thereby eliminating duplication of work and data incompatibility.
The online payment process involves credit card payments or electronic fund transfers. To make credit card payments for online payments, an electronic payment gateway is required. Payment gateway is an e-commerce application service provider that authenticates online buyers and sellers, enables real-time credit card processing online and protects credit card information delivered over the Internet by connecting the merchant to the financial institutions through which Payment is made. Payment gateways connect paying customers and merchants by encrypting sensitive information to ensure that credit card details reach the customer to the merchant and payment processor only securely. In addition, a credit card interchange provides information about the availability of funds in the customer’s credit card account and communicates the information to the merchant bank processor.
When the customer places an order to purchase goods or services on the seller’s portal, the transaction details are sent from the merchant’s site, which uses the HTTPS application. HTTPS application means ‘Hyper Text Transfer Protocol Secure’. Information is sent by the HTTPS application through a Security Sockets Layer (SSL) application. SSL is a payment gateway security protocol used by SSL servers. SSL is a security layer that provides secure connections between the customer and the merchant. It carries out the encryption process using two keys. Information provided by the customer, such as login details and personal information, is encoded and sent to the recipient. The version is decoded and viewed by the recipient. The key to decoding information is known only to the recipient.
The HTTPS application with SSL encrypts transmitted information that secures networks, servers and protects payments made online. SSL is a combination intended to provide encrypted information and secure identification of a network web server. The HTTPS connection is used for sensitive transactions and secures the information transmitted to the payment gateway. Thus, a payment gateway establishes a secure contact between the merchant, customer and credit card processor. The payment gateway ensures that the credit card holder is reliable and keeps the information secure and sends it to the processor for further transactions.
The payment gateway sends transaction information from the merchant’s website to a payment credit card processor used by the merchant’s acquiring bank. The payment processor sends the information to the credit card interchange, which is the institution responsible for processing, clearing and settling credit card transactions.
Next, the credit card interchange sends the transaction to the customer’s credit card issuer, where it is approved or rejected based on the balance available on the credit card. If the transaction is approved, the funds are sent back to the credit card interchange, which provides the transaction results to the merchant’s bank processor. The transaction goes back to the payment gateway, which is responsible for notifying both the customer/card holder and the merchant/e-commerce seller of the acceptance/rejection of the transaction. Finally, the credit card interchanges the funds to the merchant’s bank.
A payment gateway can be installed on the merchant’s server. For this the merchant will have to follow all the security measures of encryption. Installation of a payment gateway allows the merchant to collect all customer information in the database. If the payment gateway is operated by a third party, customer information and details are not under the control of the merchant and it may be difficult for the merchant to track chargebacks. However, the merchant site must provide all possible security measures to keep customer information secure. In addition to existing security systems (HTTPS and SSL), new security codes are being introduced worldwide to improve security levels. These new systems include: 1) 3 D Secure Protocol/Virtual Payer Authentication (VPA), 2) IP Address and Address Verification System (AVS), 3) Card Verification Values (CVV), PCI and SET.
3. 3 D Secure Protocol/Virtual Payer Authentication
The VISA 3 D Secure service is known as Verified by Visa’ and provides PIN protection when using VISA credit cards over the Internet to make online payments more secure. It is an XML-based protocol developed by VISA that has been licensed to other credit card companies. It is used by MasterCard as MasterCard Secure Code and has been selected as the standard for global, interoperable, authenticated payments.
VISA 3 D Secure functions as follows. The security card holder is required to be registered in the 3 D Secure System and will be issued with a secure code including a password. When the credit card issuer has verified the responses, the cardholder is enrolled and the verification information is stored on the access control server. Subsequently, a VISA 3 D Secure request is generated by the merchant whenever the cardholder makes a purchase with his credit card with a participating merchant. The cardholder must type the PIN and the enrollment information stored on the access control server will be used to verify the cardholder’s identity. If no match occurs, the server will reject the information as invalid and the payment will be rejected. However, for the customer/cardholder to use this feature, the merchant’s website must make the necessary provisions for a pop-up window – for which they must pay a setup fee, monthly fees, and fees for each transaction. Nevertheless, Visa 3 D Secure promises to reduce some of the problems faced by online merchants, such as the distance between seller and buyer and customer identification.
4. IP Address and Address Verification System (AVS)
Address Verification System (AVS) has been developed to check whether the address given by the buyer matches the address recorded in the credit card records used. This system helps to confirm the address of the card holder. The billing address is checked against the address given to the card company to authenticate the identity of the user. Credit card fraud can be prevented by merchant account service providers installing IP firewalls.
5. Card Verification Value (CVV), PCI and SET
Card Verification Value (CVV) is now familiar to all credit card holders. It is a three-digit code that is calculated from the data on the magnetic stripe on the back of the card and cannot be forged just by knowing the credit card number. To keep data information secure on the server, a hardware called PCI (Peripheral Component Interconnect) must be used, which can be mounted in the computer’s motherboard. In addition, SET (Secure Electronic Transactions), developed by Visa and MasterCard, ensures the confidentiality and authentication of three parties thereby enabling secure transactions over unsecured networks. SET facilitates a dual signature in which the dual signature contains order information and payment information and is sent to the merchant bank and merchant. This double signature is an encrypted message digest. SET enables the merchant to view payment information without having access to the information.
Payment gateway in india
Choosing a suitable payment gateway in India is especially important for an e-commerce company as there have been many issues related to both fees and reliability. There are two main options in choosing a payment gateway for a start-up e-commerce company: a third-party service provider and a bank providing its own payment gateway. Typically, a start-up e-commerce company will select a third-party service provider while a larger company will select a bank as a payment gateway. Third-party companies have a lower setup fee, but can charge up to 7% of TDRS (percentage charged per transaction gateway) and this fee should not be less than 2.5%. A larger, more established e-commerce company, which does more business, should choose the bank as a payment gateway because they have lower TDRS and can give less than 2.5% TDR. However, if the e-commerce company is doing only a few businesses, using the bank will become expensive.
Generally, payment gateways do not interact with small e-commerce companies, as a result, they are forced to accept their contracts as they stand. However, e-commerce companies should consider the issue of currency and also whether customers purchasing goods and services in them would prefer to pay in Indian Rupees or US Dollars. The e-commerce company needs to check whether the payment gateway supports transactions in Indian Rupees or only in US Dollars, and whether the gateway will add currency conversion charges. Indian consumers are unlikely to buy goods and services online in US dollars, therefore, it is important to find a gateway that supports payments in Indian rupees. Ideally, payment gateways should support payments in both currencies so that foreign customers can pay in US dollars and Indian customers can pay in Indian rupees. The Reserve Bank of India (RBI) was expected to work on the Payment Systems Regulation Act in consultation with the National Payments Council. The Act would probably have regulated settlements through electronic payment gateways, stock and commodity exchanges and clearing houses. It is noteworthy that the IT Act does not apply to negotiable instruments which limits its jurisdiction over electronic payment mechanisms.
Read Also:
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- Important Tips And Methods To Protect Your Personal Data From Fraud And Scams
- Reshipping Scams: Modern Global Fraud That Exploits Trust And Opportunity
