Etsy, Shopify, Bay, and a host of other online marketplaces have made it easier than ever to make your products available for your customer base. Often, these digital marketplaces handle legal requirements on behalf of sellers, but there are times when sellers/shop owners have to be responsible for knowing and following the rules and regulations for selling.
For example, there are rigorous restrictions for shipping certain products like nail polish, alcohol, cigarettes, and dry ice. The following list of things to consider is by no means comprehensive, but here are five legal things you should know before selling online.
1. Intellectual property protection
Before you set up your online store and begin selling, it’s crucial you put legal standards in place about your intellectual property. This means trademarking, patenting, and copyrighting your logo, your content, your brand in general. This prevents others from passing off your hard work as theirs. Even more important, putting these legal measures in place will help you double check that no one else has already claimed your business name. Take the necessary steps to research your product or service, and make it legally official
2. Terms of Service
Your customers deserve transparency about the way your business operates and what rights they have as users. If signing up for your service or purchasing your product online comes with weekly emails, recurring charges, or an auto-renewal, this should be outlined in your Terms of Service and presented conspicuously to your customers.
Customers should be given notice of and be able to acknowledge the Terms before signing up. Otherwise your new business runs the risk of having unenforceable Terms and a higher chance of facing a class action suit. Having notifications about the contents and updates of your Terms of Service is an easy way to build trust and transparency with your customers.
Doing your research and protecting your business before you even start it will help you get further, faster, and protect you from potential litigation. Starting an online business is easy enough; however, without the proper legal protections in place, you might start losing money before you make it.
3. Adherence to privacy laws
Non-compliance is an expensive lawsuit waiting to happen. Understand the steps you need to take to encrypt credit card data for your checkout flow and do away with other purchasing data.
Just like any retailer, online retailers must have reputable payment gateways. If your online marketplace isn’t using third party companies (Paypal, CashApp, Venmo, etc) for your avenue of payment, it is your responsibility to be compliant with local data protection standards. If you serve customers that are based in the EU, for example, you must protect users’ data in accordance with the GDPR. While the U.S does not have a nation-wide privacy law, California law requires websites that process the data of California residents to follow CalOPPA, and starting in January 2020, CCPA.
4. Product insurance
Whether you’re selling software, a service, or materials, it’s important to protect your product or service. In some cases, this might mean having delivery insurance and an exchange policy. In others, it can be as simple as providing customers with a cancellation policy upfront, or a process for service review and feedback.
5. Robust recordkeeping
None of the previous four tips matter if there is no record of transactions or record of which customers agreed to your Terms before completing the transaction. Easily accessible records of online interactions with customers go a long way in helping you establish expectations between yourself and customers. It is as much for your protection as it is for theirs. Exceptional digital recordkeeping is too often an afterthought and lands companies in hot water. Telling customers how you are protecting them is not enough; your company needs to record when and how customers were notified of your online terms in order for any of your legal efforts to be considered legitimate.
Good communication is important; no one wants to be left in the dark, particularly customers in the digital age. Nurture customer relationships like you would any other—with trust and accountability. If everyone is aware of how they are being held responsible in this two-sided relationship, there is less room for legal blunders.
Eric Prugh is the cofounder and CEO at PactSafe, where he oversees product, customer success, solutions engineering, and partnerships. PactSafe is a SaaS company that securely powers high-velocity acceptance for contracts.