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How To Make Profits Online, Without Upsetting Uncle Sam (1 in a seris of 3)

By Ian Sumter
Posted Tuesday, September 14, 2004

If you are to succeed in your online business, there are several cyberlaws which you simply have to know in order to ensure that you stay on the right side of the law.

As the internet grows bigger day by day, the government is taking a much more active interest in online trading. Laws relating to the internet are changing day by day.

The frightening truth is that simple 'mom and pop' businesses are facing the same penalties and restrictions as the Microsofts of the internet. And, of course, ignorance is no defence in the eyes of the law.

Now I am no lawyer, just a well-informed freelance internet writer, so by sharing this information with you I am not giving you legal advice or creating a client-attorney relationship.

This article is intended to make you better informed about potential issues which could arise online. If yo have a specific issue on these or any other internet legal matter, you should consult a qualified attorney.

Trading online is regulated in the US by the Federal Trade Commission (FTC). The FTC has the remit to protect online customers, prevent deceptive advertising and ensure that the integrity of internet trading is preserved.

The FTC has wide ranging powers to investigate breaches of federal law. The commission has the ability to close down your website, take away material for investigation, and levy heavy fines.

Do not assume that your site is immune from FTC attention. The commission regularly scans the web themselves to check for violations of trading laws. Also, any dissatisfied customer could write to the FTC complaining about your site, and this will bring them right to your door.

So, what are your responsibilities for material placed on your website?

Put simply, as the webmaster, you are liable for any statements or claims posted on your site. This not only includes things you say directly, but also applies to omissions (or things you don't say) or attempts to mislead.

In such cases as there isuncertainty in wording or explanations, the courts will be minded to find against the person seeking to rely on the uncertainty or ambiguity - ie the webmaster.

Basically, any implication that may affect the behaviour or purchasing decision of your customers will be your responsibility. If these claims are likely to mislead, then you may well have problems.

This liability is not limited to claims you make personally on your website. As webmaster, you are liable for the truth and accuracy of all parties involved in the website. In practice this means:

- It is your responsibility to check the accuracy of any testimonials you receive that you subsequently place on your site - especially where they contain earnings or performance claims

- It is your responsibility to ensure the authenticity of any claims or warranties made by the manufacturers of products which you resell through your site.

- It is your responsibility to ensure the accuracy of any claims made in advertisements in your ezine.

You are provided with a limited degree of protection by inserting disclaimers and warranties - but this will provide you with no legal position to rely on if the claims made are blatantly untrue.

Now in practice, everyone selling online knows that copywriting is designed to extol the benefits of products in high-powered terms. In assessing whether this copy is misleading, the FTC will apply a 'reasonable customer' test - that is would an average customer be led to think or act in a particular way as a result of your sales copy.

In deciding this, the FTC will look at the overall impression of your site - whether its claims are truthful or can be substantiated. In simple terms - are your customers getting what they think they are paying for.

Any terms and conditions or warranties should be clearly visible on the site - how many sites have you seen where there are no legal terms and conditions at all. I shall be discussing what these should be in the third part of this article series. They should also be expressed in simple, easily understood language - no some legal gobbledegook.

Some shopping cart programs now have a statement contained within the order pages that continuing with a transaction implies acceptance of the terms and conditions of that site. Other sites have a specific box which needs to be checked to confirm that you have read and accept the conditions.

Again, none of this will help if your site does not contain this information - or if it only made available to the customer after they have purchased the product.

This article is an overview of some of the liability issues arising when you trade online. In the second article of this series, I shall consider some important issues when licensing or reselling other people's products.

More on the legal implications of trading online can be found from websites included in Secret Websites for Online Profits at ( For more information on this e-cyclopaedia please contact

About the Author
Ian Sumter is the publishing director of IGS Marketing - a company providing high quality information products to people trading on the internet. You are free to publish this article in your ezine or newsletter - but please include the resource box giving our contact details and website - and paragraphs 4 and 5 setting out our legal position on the advice we give.

More articles on internet law will be posted at regular intervals to this site.


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