Behind the Webfront
by: Stanley Jaskiewicz 
Did you get your online holiday orders
on time? Were you able to reach customer service whenever you
tried? For months, the e-commerce press has warned of the risk
of an inadequate "back office". Functions crucial
to customer satisfaction (processing and billing of orders,
and human assistance) must all go live at the same time as the
website. Certainly, no e-tailer spending millions in advertising
to attract new customers wants to lose them right away because
a few dollars were saved in staffing or warehouse costs. Many
even believe that these non-Internet functions will decide which
dot-com retailers will survive. In fact, the back office may
be the "built-in" advantage of existing retailers,
particularly their online ventures. Not only do such firms already
have brand recognition, many have already mastered getting your
call answered on the first ring, whether to place an order or
ask a question.
However, a well-oiled operation isn't
just good business. Many laws apply equally online as to established
operations. For example, must a web-merchant collect sales taxes?
In theory, the customer must pay the tax directly, if the seller
does not collect. Since few of us do that, however, states are
particularly eager to force merchants to collect it directly.
But when and where must an online seller collect, with customers
hitting its website from everywhere? Many firms, like catalog
retailers, collect only where they actually exist in the "bricks
and mortar" world (through warehouses or call processing
centers, for example). Other firms with a national presence
use different corporations for online sales to avoid this rule.
But should this loophole work if online sales can be returned
in person? What if your online order comes with an "offline"
coupon? Obviously, knowing that you can fix problems at the
mall can overcome many concerns about online shopping. But that
marketing advantage may help state and local tax collectors.
In fact, California is already investigating whether online
bookstores should collect taxes. Michigan even asks about online
purchases and tax payments in personal tax returns. This is
one of many questions confronting the panel created by 1998's
Internet Tax Freedom Act.
Online sellers can't ignore consumer
protection either (as emphasized in a recent FTC press release
available at http://www.ftc.gov/bcp/online/pubs/alerts/intbalrt.htm).
Greatly oversimplified, the FTC's rules are really just good
business. Sellers must be honest with customers about expected
shipping and delivery times, and provide refunds or cancel the
order if circumstances change. (See http://www.ftc.gov/bcp/online/pubs/buspubs/mailordr/intro.htm).
Even if the seller subcontracts out its back office functions,
it remains responsible to the customer for problems. The FTC
rules have holes, however. Services aren't covered, and often
only the government, rather than the consumer, can sue to enforce
a violation.
What about billing problems? Again, existing
laws still govern online sales. Most importantly, it is the
form of payment that makes the difference. Different rules apply
to payments by credit card, debit card (such as an ATM bank
card) or "stored value" or "gift" cards.
The widely known $50 liability limit, for example, applies only
to true credit card purchases. A customer that uses a combined
credit and ATM card, but pays by direct withdrawal from a bank
account (rather than by credit) can be liable for up to $600
- or even all charges - even if the seller or card issuer is
at fault. Even worse, stored-value cards are like cash, carrying
few obligations for sellers - or protection for users.
Of course, the 1999 Net shopping rush
may test many other generally applicable laws. Is a website
product description a warranty? Websites that market to kids
face many additional risks and responsibilities.
For many online firms, the back office
can be just another overhead item, getting far less attention
than the PR campaign or website design. Without that attention,
however, it can devour not only the profit margin, but also
the hard-won customer base.
Copyright 1999 Stanley P. Jaskiewicz,
Esquire, Spector Gadon & Rosen, P.C., 1635 Market Street,
7th Floor, Philadelphia, PA 19103; Voice 215-241-8866; Fax 215-241-8844;
Unencrypted Email digitallaw@technologist.com
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