New Disclosure Requirements Imposed On Internet Vendors

Electronic Commerce Act of 1984

California has long been a leader in providing consumer protections. Since these laws extend to e-commerce transactions between a California consumer and any company, (even those located out of state), all Internet companies should be aware of the regulations imposed by these laws.

New Disclosure Requirements Imposed On Internet Vendors

Section 17538 of the California Business and Professions Code requires Internet companies engaged in e-commerce to make certain disclosures. Some of the regulations apply only when a California consumer is involved. Nevertheless, in light of the penalties involved for non-compliance and the difficulties associated with determining the location of Web visitors, I recommend strict compliance with the following regulations imposed by Section 17538:

1. Before accepting payment for good or services ordered over the Internet, the Web site must disclose the following to the buyer: (a) its return and refund policy; (b) the legal name under which the business is conducted; and (c) the complete street address from which the business is actually conducted.

2. The abovementioned disclosures of the company's legal name and complete street address, if made via an on-screen notice, must appear on one of the following: (a) on the first page accessed by the visitor, (b) on the page where the goods or services are first offered for sale, (c) on the page in which the buyer places the order for the goods or services, OR (d) on the page in which the buyer may enter payment information. In addition, the disclosures must not be in a smaller or less legible font that the text offering the sale of the goods or services offered for sale.

3. The required disclosure of the company's legal name and complete street address must also be accompanied by a statement describing how the customer may receive the information at his or her email address. Why? Because, according to California a buyer should be afforded the opportunity to receive a message in their own mailbox confirming the disclosure information. Therefore, upon request, the Web site owner must supply such information to the buyer by email within five (5) days. I therefore recommend that the legal name and complete street address be a hypertext link to an email auto-responder that automatically generates and sends this information to the email address specified.

4. From the time the Web site owner accepts payment for the ordered goods or services until the goods or services are actually received by the buyer, the Web site must continue to provide all of the required disclosures listed in Paragraph 1. Therefore, if you decide to change a web page, ensure that the new page complies and archive and continue to make available superseded information.

Section 17538, as amended, provides that violations of this consumer protection law is a misdemeanor punishable by up to six (6) months imprisonment and / or by a fine up to $1,000.00. In addition, such violations are statutorily defined as an act of "unfair competition", which may subject a violator to suits by private litigants for injunctive and restitutionary relief, as well as attorney' fees.

The Electronic Commerce Act of 1984

Section 1789 of the California Civil Code also imposes certain information disclosure requirements on providers of "electronic commercial services", which is defined as "electronic shopping systems designed to conduct the purchase of goods and services via a telecommunications network." This law, however, applies only to providers of tangible goods and physical services or tickets or vouchers for such items or services). It does not apply to businesses providing information or services delivered online or in a printout.

Pursuant to Section 1789, electronic commercial service companies are required to provide California consumers the following information:

1. the name, address, and telephone number of the service provider;

2. any charges to the consumer imposed by the provider for the use of the service;

3. the procedures the consumer may follow to resolve a complaint regarding the service, including the telephone number and address of the Complaint Assistance Unit of the Division of Consumer Services of the Depart of Consumer Affairs.

The above-required disclosures must be made both at the time of contracting and annually, on or before June 30 of each year. Whether this law, enacted back in 1984, will actually be enforced against Internet companies is unclear. Nevertheless, the law may only be enforced by public prosecutors, who may request up to $5,000.00 im civil fines for each violation.

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