Over half of UK e-tailers breaking law

By Wendy McAuliffe
Wed, 04 Apr 2001 15:14:24 GMT
URL: http://www.zdnet.co.uk/news/2001/13/ns-22069.html

Companies could face unlimited fines for complacency over e-trading laws

Thousands of British online retailers may be heavily fined for failing to
comply with the Data Protection Act, warns a report released on Tuesday
by the London Chamber of Commerce (LCC).

The study found less than half -- 44 percent -- of UK e-tailers complied
with basic recommendations of the Data Protection Act such as giving
customers information about how their registration details might be
passed on to other parties. This is a criminal offence for which firms
could face unlimited fines in a Crown Court. Company directors could also
face charges of personal liability.

"We want companies to be up front and transparent with their customers,
and stick to the agreement," said Iain Bourne, information commissioner
for the strategic policy manager at the Data Protection Commissioner.

Online retailing has created the need for e-tailers to be much clearer in
the way they handle customer information, as well as disclosing their
refund, exchange and order cancellation policies.

The LCC report revealed 40 percent of firms have either not carried out
an audit to ensure compliance with the Data Protection Act or did not
know if they complied. Only 27 percent were concerned about regulatory
issues involved in cross-border trading, despite the obligation to comply
with foreign laws and regulations.

"The Internet has created a distance between the customer and the
e-tailer, which has created a huge amount of potential for
misunderstanding and confusion for customers in particular," said Chris
Owen, partner at technology law firm Manches. "The legislation gives
customers some breathing space, and asks retailers to be as precise as
possible in the service they are offering, ensuring consumers have
sufficient protection."

Owen believes the worrying levels of complacency over the legal
implications of e-trading are largely due to a lack of knowledge in the
Act. "A huge educational process is needed... retailers have been used to
working with one regulation regime, but suddenly there is a new one to
deal with which a lot of companies don't know how to cope with," he
argued.

While the Data Protection Commissioner accepts this explanation is partly
true, it insists the Act contains nothing but common sense. "There are
basic standards of fairness that anyone running a good business should
employ -- there are ways of complying with the Act without even knowing
anything about it," said Bourne.

The report also found that 44 percent of firms questioned had no
recognised policy for staff use of email or the Internet, meaning they
have no recourse if employees are found to be misusing these services.
The dangers of sending email from work were highlighted last December
when a lawyer at city firm Norton Rose faced disciplinary action
(http://www.zdnet.co.uk/news/2000/49/ns-19703.html) for circulating an
email about his girlfriend's sexual tastes, which had reached over one
million people within a week. There have been several other cases in
which employees have been sacked for improper use of the Net or email.

"Cases like this can have a serious affect on a company's reputation,"
said Owen. "Employers need to create a new discipline in what has become
a free-for-all market, and realise the implications of this incredible
communication system." Owen explains the most serious issue facing
employers is the risk of employees posting libellous comments about other
companies on the Internet. The downloading of pornography in an office
context is also a matter of increasing concern.

Owen believes e-tailers will only begin to take notice of data protection
legislation after some high profile damage claims have been brought
against companies found to be in breach of the Act. Bourne however argues
that things will not come to that. "I hope not -- the Data Protection Act
should foster trust, and we would hope that this will come through a
cultural evolution between retailers and their customers."

The Data Protection Act is not the only one being breached by UK
e-tailers. The Office of Fair Trading recently carried out a "mystery
surf", which revealed (http://www.zdnet.co.uk/news/2001/10/ns-21578.html)
52 percent of the 637 UK Web retailers it investigated were breaking the
law by failing to give any information on their policies for exchanging
or refunding goods.

Find out how the Internet is revolutionising the economy at the
E-commerce Special
(http://www.zdnet.co.uk/news/specials/1999/03/ecommerce/).

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