Regulatory Issues for Global E-Tailers: Marketing Implications

Academy of Marketing Science Review, 2001 by de B, Heiko, Little, Michael W

Both the U.S. and the EU also have to cope with the tug-of-war between pro-business and pro-consumer groups. These developments have created an uncertain environment for e-tailers in both entities (Tucker & Eaglesham 1999).

The issue of how to determine jurisdiction in e-commerce cases, presents a unique challenge. The U.S. is trying to follow "traditional" laws as much as possible. As with other direct marketing cases, the home state of the purchaser (usually the consumer) normally has jurisdiction in laws regulating such transactions. In contrast, the EU, until recently, has been emphasizing the so-called "home-country control" principle. According to the latter, the seller's home country has jurisdiction. Now, a EU directive requires each country to harmonize certain regulatory laws relating to e-commerce. This means that all fifteen member states will have to incorporate this rule in their respective laws within eighteen months of the date the directive was issued. When suing a seller, U.S. customers can usually sue in their own states. In the EU this is also the case if the e-tailer was "directing its activities" into the customer's member state. It has been left to the courts to this phrase (Business Europe 1999; Financial Times 1999; Waldmier 1999; Maquire 2001). This topic will be explored in more detail in the Marketing Implications section of this paper.

REGULATORY POLICY

The issues referred to above have surfaced in a number of specific regulatory policies, which are analyzed below. The positions for each area taken by the U.S. and the EU, respectively, are compared with marketing challenges presented to firms considering a global e-commerce strategy. Table 1 presents regulatory positions of direct relevance to e-retailers. When comparing the positions of the EU and U.S. administrations on these areas, the greatest difference is to be found on safeguarding consumer privacy.

TABLE 1

Specific Regulatory Positions Taken by U.S. and EU Affecting E-Commerce Trade

Privacy & Transfer of Data

A particularly sensitive issue has arisen in the area of consumer privacy law. The EU has adopted a directive on data protection that sets strict privacy standards. Any firm that wants to use personal information, must first explain to the individual what the information will be used for and then obtain the individual's permission. It must also undertake not to use the information for any other purpose without the person's consent. In addition such individuals have the right to scrutinize such information, to correct or even delete it and to file suit for data abuse. Businesses from countries with less stringent regulations may face legal sanctions if they do not comply with the EU rules. The U.S. with its emphasis on self-regulation, and on placing the onus or obligation on consumers to request denial of data use, is such a country. Hence, to conform with this EU directive, American firms, both e-commerce and traditional, are required to adjust their (consumer) privacy policies to those of the EU if they want to collect and use consumer data there. This may include allowing inspections by European investigators of European databases stored in their American head offices, e.g. Citigroup (Simnett 1999; Reidenberg 1999; Baker, Johnson & Echikson 1998).