Avoiding common ecommerce legal pitfalls

Products approved for sale in your home country may carry a different legal status in other jurisdictions. For example, selling something as innocuous as medical gloves into the United States of America may land you in hot water, if the product in question is not approved by the US Food and Drug Administration (FDA).

Likewise, face creams that are available without prescription here may be prescription-only in another country. If you do start selling there, it may result in a fine from the card brands. It is important you know the legal status of your products for each country and state you intend to sell into.

The FDA maintains a list of tainted ‘nutraceuticals’. These are products advertised as herbal but, when tested, found to contain active ingredients that would normally require a prescription.

A list of some of the identified products in the US can be found here. However, it is the responsibility of the ecommerce business to make sure the ingredients of their products are okay to sell, in order to avoid fines and/or legal action.

On a similar theme, health supplements are constantly under review and different countries will have different views on the legality of their ingredients.

Intellectual property (IP) infringement is another area that businesses can unwittingly find themselves caught up in.

Ongoing challenges in the UK are the terms of UK design laws and that reproduction of designer furniture is potentially covered by copyright law in other countries.

Visa and Mastercard have taken the view that although the sale of such items might not necessarily breach local laws, it represents an integrity risk – and they will issue fines as a result.

Whether it is the sale of furniture, clothing replicas – or, indeed, gadgets to watch premium television channels – making sure you have the right to sell your products will ensure you avoid any challenge from the card brands.

The owners of illegal, prohibited or highly regulated businesses typically ‘get creative’ when they are looking to process transactions but cannot do it legitimately.

We’ve seen firms that have been asked to process on behalf of an another, undisclosed website. They may use the excuse that they need to get their affairs in order before opening their own account, asking you to process their payments on a temporary basis.

Legitimate ecommerce businesses have been unknowingly processing transactions on behalf of online casinos or illegal content providers. They then end up being fined because they are the account signatory.

Make sure you have full control over what transactions are processed through your account and make sure they relate only to what was indicated on your application form.