Ethical, social, and political issues in e-Commerce

INFO 3435 eCommerce9. Ethical, Social, and PoliticalIssues in eCommerceAlexander Nikov

Outline1. Understanding Ethical, Social, and Political Issues in eCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-2

Teaching Objectives• Explain why e-commerce raises ethical, social, and political issues.• Identify the main ethical, social, and political issues raised by e-commerce.• Identify a process for analyzing ethical dilemmas.• Explain basic concepts related to privacy.• Identify the practices of e-commerce companies that threaten privacy.• Describe the different methods used to protect online privacy.• Explain the various forms of intellectual property and the challengesinvolved in protecting it.• Explain how the governance of the Internet has evolved over time.• Explain why taxation of e-commerce raises governance and jurisdictionissues.• Identify major public safety and welfare issues raised by e-commerce9-3

Discovering Law andEthics in a Virtual WorldClass Discussion• Why is “mischief” in virtual worlds more difficult tostop? What constitutes mischief in Second Life?• Which behaviors have been banned in Second Life?• Is there a consensus regarding whether or not ingamegambling and other virtual crimes are alsoactual crimes? What is Second Life’s stance?• How faithfully do you believe the law should beenforced in virtual worlds? 9-4

Outline1. Understanding Ethical, Social, and Political Issues ineCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-5

Understanding Ethical, Social, and PoliticalIssues in eCommerce• Internet, like other technologies, can:– Enable new crimes– Affect environment– Threaten social values• Costs and benefits must be carefully considered,especially when there are no clear-cut legal or culturalguidelines9-6

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A Model for Organizing the Issues• Issues raised by Internet and e-commerce can be viewedat individual, social, and political levels• Four major categories of issues:1. Information rights2. Property rights3. Governance4. Public safety and welfare9-8

The Moral Dimensions of an Internet SocietyFigure 8.1, Page 5009-9

• EthicsBasic Ethical Concepts– Study of principles used to determine right and wrong courses ofaction• Responsibility• Accountability• Liability– Laws permitting individuals to recover damages• Due process– Laws are known, understood– Ability to appeal to higher authorities to ensure laws appliedcorrectly9-10

Analyzing Ethical Dilemmas• Process for analyzing ethical dilemmas:– Identify and clearly describe the facts– Define the conflict or dilemma and identify thehigher-order values involved– Identify the stakeholders– Identify the options that you can reasonably take– Identify the potential consequences of your options9-11

Candidate Ethical Principles• Golden Rule• Universalism• Slippery Slope• Collective Utilitarian Principle• Risk Aversion• No Free Lunch• The New York Times Test• The Social Contract Rule9-12

Outline1. Understanding Ethical, Social, and Political Issues in eCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-13

Privacy and Information Rights• Privacy– Moral right of individuals to be left alone, free fromsurveillance or interference from other individuals ororganizations• Information privacy– Subset of privacy– Includes both:• The claim that certain information should not becollected at all• The claim of individuals to control the use of whateverinformation is collected about them9-14

Privacy and Information Rights• Major ethical issue related to e-commerce and privacy:– Under what conditions should we invade privacy ofothers?• Major social issue:– Development of “expectations of privacy” and privacynorms• Major political issue:– Development of statutes that govern relationsbetween record keepers and individuals9-15

Information Collected at eCommerce Sites• Data collected includes– Personally identifiable information (PII)– Anonymous information• Types of data collected– Name, address, phone, e-mail, social security– Bank and credit accounts, gender, age, occupation,education– Preference data, transaction data, clickstream data,browser type9-16

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Social Networks and Privacy• Social networks– Encourage sharing personal details– Pose unique challenge to maintaining privacy• Facebook’s facial recognition technology and tagging• Personal control over personal information vs.organization’s desire to monetize social network9-20

Mobile and Location-based Privacy Issues• Smartphone apps– Funnel personal information to mobile advertisers fortargeting ads– Track and store user locations• 42% of users say privacy a concern• Mobile Device Privacy Act– Not yet passed– Requires informing consumers about data collection9-21

Profiling and Behavioral Targeting• Profiling– Creation of digital images that characterize online individual andgroup behavior– Anonymous profiles– Personal profiles• Advertising networks– Track consumer and browsing behavior on Web– Dynamically adjust what user sees on screen– Build and refresh profiles of consumers• Google’s AdWord program9-22

Profiling and Behavioral Targeting• Deep packet inspection• Business perspective:– Increases effectiveness of advertising, subsidizingfree content– Enables sensing of demand for new products andservices• Critics’ perspective:– Undermines expectation of anonymity and privacy– Consumers show significant opposition tounregulated collection of personal information9-23

Internet and Government Invasions of Privacy• Various laws strengthen ability of law enforcementagencies to monitor Internet users without knowledgeand sometimes without judicial oversight– CALEA, PATRIOT Act, Cyber Security EnhancementAct, Homeland Security Act• Government agencies are largest users of private sectorcommercial data brokers• Retention by ISPs of user data a concern9-24

Legal Protections• In the United States, explicitly granted or derived from– Constitution• First Amendment—guarantees freedom of speechand association• Fourth Amendment—protects againstunreasonable search and seizure• Fourteenth Amendment—guarantees due process– Specific statutes and regulations (federal and state)– Common law9-25

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Informed Consent• U.S. firms can gather and redistribute transactioninformation without individual’s informed consent– Illegal in Europe• Informed consent:– Opt-in– Opt-out– Many U.S. e-commerce firms merely publishinformation practices as part of privacy policy withoutproviding for any form of informed consent9-29

The FTC’s Evolving Privacy Approach• Fair Information Practice principles (1998)– Notice– Choice– Access– Security– Enforcement– Restricted collection• New privacy framework (2010)– Privacy by design– Simplified choice– Greater transparency9-30

FTC’s Fair Information Practice PrinciplesNotice/AwarenessChoice/ConsentAccess/ParticipationSecurityEnforcementSites must disclose information practices before collecting data.Includes identification of collector, uses of data, other recipients of data,nature of collection (active/inactive), voluntary or required,consequences of refusal, and steps taken to protect confidentiality,integrity, and quality of the dataThere must be a choice regime in place allowing consumers to choosehow their information will be used for secondary purposes other thansupporting the transaction, including internal use and transfer to thirdparties. Opt-in/Opt-out must be available.Consumers should be able to review and contest the accuracy andcompleteness of data collected about them in a timely, inexpensiveprocess.Data collectors must take reasonable steps to assure that consumerinformation is accurate and secure from unauthorized use.There must be in place a mechanism to enforce FIPprinciples. This can involve self-regulation, legislation giving consumerslegal remedies for violations, or federal statutes and regulation.SOURCE: Based on data from Federal Trade Commission, 1998, 2000a.9-31

FTC Recommendations: Online ProfilingPrincipleNoticeChoiceAccessSecurityEnforcementRestrictedCollectionRecommendationComplete transparency to user by providing disclosure and choiceoptions on the host Web site. “Robust” notice for PII (time/place ofcollection; before collection begins). Clear and conspicuous noticefor non-PII.Opt-in for PII, opt-out for non-PII. No conversion of non-PII to PIIwithout consent. Opt-out from any or all network advertisers froma single page provided by the host Web site.Reasonable provisions to allow inspection and correction.Reasonable efforts to secure information from loss, misuse, orimproper access.Done by independent third parties, such as seal programs andaccounting firms.Advertising networks will not collect information about sensitivefinancial or medical topics, sexual behavior or sexual orientation,or use Social Security numbers for profiling.9-32

The European Directive on Data Protection• Privacy protection much stronger in Europe than theUnited States• European approach:– Comprehensive and regulatory in nature• European Commission’s Directive on Data Protection(1998):– Standardizes and broadens privacy protection in European Unioncountries• Department of Commerce safe harbor program:– For U.S. firms that wish to comply with Directive9-33

Private Industry Self-Regulation• Safe harbor programs:– Private, self-regulating policy and enforcement mechanism thatmeets objectives of government regulations and legislation, but doesnot involve government regulation or enforcement– E.g., privacy seal programs (TRUSTe, BBB Reliability Seal)• Industry associations include:– Online Privacy Alliance (OPA)– Network Advertising Initiative (NAI)• CLEAR Ad Notice Technical Specifications• Privacy advocacy groups– E.g., Epic.org• Emerging privacy protection business9-34

• Spyware• Pop-up blockers• Secure e-mail• Anonymous remailers, surfing• Cookie managers• Disk/file erasing programs• Policy generators• Public key encryptionTechnological Solutions• Privacy Policy Reader/Platform for Privacy Preferences (P3P):– Comprehensive technological privacy protection standard– Works through user’s Web browser– Communicates a Web site’s privacy policy• Compares site policy to user’s preferences or to other standardssuch as FTC’s FIP guidelines or EU’s Data Protection Directive9-35

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How P3P WorksFigure 8.2(A), Page 522SOURCE: W3C Platform for Privacy Preferences Initiative, 2003.9-38

Internet explorer 9’s and Google ChromeImplementation of P3P9-39

Outline1. Understanding Ethical, Social, and Political Issues in eCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-40

Intellectual Property Rights• Intellectual property:– Encompasses all tangible and intangible products of human mind• Major ethical issue:– How should we treat property that belongs to others?• Major social issue:– Is there continued value in protecting intellectual property in theInternet age?• Major political issue:– How can Internet and e-commerce be regulated or governed toprotect intellectual property?9-41

Intellectual Property Protection• Three main types of protection:1. Copyright2. Patent3. Trademark law• Goal of intellectual property law:– Balance two competing interests—public and private• Maintaining this balance of interests is always challengedby the invention of new technologies9-42

Copyright• Copyright law:– Protects original forms of expression (but not ideas) from beingcopied by others for a period of time• Look and feel copyright infringement lawsuits• Fair use doctrine• Digital Millennium Copyright Act, 1998– First major effort to adjust copyright laws to Internet age– Implements WIPO treaty that makes it illegal to make, distribute,or use devices that circumvent technology-based protections ofcopyrighted materials9-43

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Patents• Grant owner 20-year monopoly on ideas behindan invention– Machines– Man-made products– Compositions of matter– Processing methods• Invention must be new, non-obvious, novel• Encourages inventors• Promotes dissemination of new techniquesthrough licensing• Stifles competition by raising barriers to entry9-46

eCommerce Patents• 1998 State Street Bank & Trust vs. SignatureFinancial Group– Business method patents• Most European patent laws do not recognizebusiness methods unless based on technology• Examples– Amazon’s one-click purchasing– DoubleClick’s dynamic delivery of online advertising9-47

Internet and eCommerceBusiness Method PatentsFigure 8.2, Page 538SOURCE: U.S. Patent and Trademark Office, 2010.9-48

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Trademarks• Identify, distinguish goods, and indicate theirsource• Purpose– Ensure consumer gets what is paid for/expected to receive– Protect owner against piracy and misappropriation• Infringement– Market confusion– Bad faith• Dilution– Behavior that weakens connection between trademark and product9-51

Trademarks and the Internet• Cybersquatting– Anticybersquatting Consumer Protection Act (ACPA)• Cyberpiracy– Typosquatting• Metatagging• Keywording• Deep linking• Framing9-52

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Outline1. Understanding Ethical, Social, and Political Issues in eCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-54

Governance• Primary questions– Who will control Internet and e-commerce?– What elements will be controlled and how?• Stages of governance and e-commerce– Government Control Period (1970–1994)– Privatization (1995–1998)– Self-Regulation (1995–present)– Government Regulation (1998–present)9-55

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Who Governs eCommerce and the Internet?• Currently: mixed mode policy environment– Self-regulation, through variety of Internet policy andtechnical bodies, co-exists with limited governmentregulation• ICANN in charge of Domain Name System• Internet can be very easily controlled, monitored, andregulated from a central location (e.g., China, Singapore,etc.)9-57

Taxation• E-commerce taxation illustrates complexity of governanceand jurisdiction issues• U.S. sales taxed by states and local government• MOTO retailing• E-commerce benefits from tax “subsidy”• October 2007: Congress extends tax moratorium for anadditional seven years• Unlikely that comprehensive, integrated rational approach totaxation issue will be determined for some time to come9-58

Net Neutrality• Neutrality: All Internet traffic treatedequally—all activities charged the same rate, no preferentialassignment of bandwidth• Backbone providers vs. content providers• December 2010 FCC approved “compromise” net neutralityrules• Telecom providers adopting compromise position betweenwired and mobile wireless access9-59

Outline1. Understanding Ethical, Social, and Political Issues in eCommerce2. Privacy and Information Rights3. Intellectual Property Rights4. Governance5. Public Safety and Welfare9-60

Public Safety and Welfare• Protection of children and strong sentiments againstpornography– Passing legislation that will survive court challenges hasproved difficult• Efforts to control gambling and restrict sales of drugs andcigarettes– Currently mostly regulated by state law– Unlawful Internet Gambling Enforcement Act9-61