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What online business owners need to do to avoid breaking the law

Starting an online business can be one of the fastest, easiest, and least expensive ways to start a business. This is because for many online businesses, all you need is a laptop and an internet connection. However, selling online does not exempt you from complying with laws and regulations.

Many online business owners are unaware of their obligations under various laws and may unintentionally lead their business into trouble by breaking the law.

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In this article, Farrah Motley, Legal Principle of Prosper Law and an online lawyer, explains what you need to do to avoid breaking the law for your online business.

What laws do online businesses need to comply with

Online businesses are not a new way of doing business. For the most part, laws apply equally in an online context. Selling online does not exempt a business from complying with applicable laws and regulations. The law considers all businesses, whether online or offline, to be equal, and therefore online businesses must abide by the same obligations as traditional bricks-and-mortar businesses.

Similar to other business methods, your online business operations are regulated by various laws such as corporate law, privacy, consumer protection, and digital-specific internet laws and regulations.

You must comply with all the laws at all times to maintain the trust of your customers and prevent your business from receiving a hefty fine (or worse). An online lawyer can help you to understand what laws apply to your business and how to comply with them.

The Australian Consumer Law

Online or not, every business in Australia is affected by the Australian Consumer Law. You need to know how consumer laws work in Australia, whether you work with consumers or businesses, provide services, or sell goods.

A good online lawyer will have a solid understanding of Australian Consumer Law.

The ACL is a national law designed to protect consumers. The Australian Competition and Consumer Commission (ACCC) administers the ACL in conjunction with State and Territory consumer protection agencies.

It regulates how businesses deal with their consumers and protects consumers, ensures fair trade in Australia, and ensures that companies do not engage in unfair practices towards consumers.

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The ACL regulates:

  1. standards for business conduct
  2. unfair contract laws
  3. harmful business practices
  4. certain types of business-to-consumer transactions
  5. basic consumer rights
  6. consumer product safety

If you do not comply with the Australian Consumer Law, you could face severe penalties. Maximum penalties for ACL violations apply to unconscionable conduct, making false or misleading representations, and supplying consumer goods or certain services that do not meet safety standards or are prohibited.

You should always seek online legal advice to determine whether your online business is compliant.

For corporations, it will be the greater of:

  1. $10,000,000
  2. 3 times the value of the benefit received; or
  3. 10% of the annual turnover of the preceding 12 months if the court cannot determine the benefit derived from the offence.

Whereas, for individuals, the penalty is $500,000.

Online reviews

As an online lawyer, I am often asked how negative online reviews can be removed.

When customers write reviews for your business, they act like advertisements, and it helps you publicise your business and products and reinforce who you are and what you do. Sometimes online reviews even provide mass exposure that traditional marketing channels do not, and that’s the power online reviews have.

There are many cases where businesses use online reviews in an unethical way. People ask their friends and family to write reviews without using the product themselves, and these are illegal and are against the Australian Consumer Law. The only people who should write reviews are those who have personally experienced the product.

In other words, you cannot ask your friends and relatives to write reviews of your products without making their connection or business relationship with your business transparent. If in doubt, seek advice from an online lawyer.

online lawyer

Many online businesses offer incentives to their customers for submitting reviews, which is something you can do as well. However, you need to ensure that the incentives apply equally to all reviews, positive and negative, and are clearly communicated to users.

In the event that you receive fake reviews, you need to notify the review platform right away and request that they be deleted. An online lawyer can help you with this.

Meanwhile, respond directly and professionally to the review to correct the public record. A violation of the Australian Consumer Law may occur if either you or the review platform fail to remove the fake review.

An online tasking platform, Service Seeking Ptv Ltd, allowed customers to receive quotes from businesses registered on the platform for tasks such as gardening. Companies could produce their own reviews and send them to customers using a template, and the review was automatically published on the online platform without a response. Due to false representations, the Federal Court ordered Service Seeking to pay a $600,000 fine.

Truthful content on your website

Online marketing and promoting your business online have become increasingly important. Any content or information on your business website must be truthful, accurate, and substantiated, and you must not publish misleading or false content. An online lawyer will be able to provide you with detailed advice about what misleading and deceptive conduct means in a practical sense.

Because content representing your online business will be subject to fines if it’s misleading and deceptive. It won’t matter whether false or misleading information was provided intentionally or not.

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Two companies; Amaysim Australia Ltd and Lycamobile Ptv Ltd, were accused by the Australian Competition and Consumer Commission (ACCC) of misrepresenting their mobile tariffs as ‘unlimited’ in social media ads designed to lure new customers. However, the tariffs had a maximum data allowance.

Both companies were issued a breach of contract notice by the ACCC for false or misleading mobile tariffs. As a result, Amaysim paid $126,000, and Lycamobile paid $12,600 in penalties.

Always seek online legal advice if you are unsure whether your marketing is compliant.

Making sure goods and services comply with the consumer guarantees

Any online business must adhere to certain conditions and warranties, called consumer guarantees. This applies to yours as well. These consumer guarantees include guarantees that goods will:

  1. be of merchantable quality
  2. be fit for the purpose or task for which they are intended
  3. conform to the description or sample
  4. be free from defects and deficiencies
  5. be free from financing or encumbrances not disclosed to the consumer

However, if you operate an online business that provides services, you guarantee that those services:

  1. are provided with due care and skill;
  2. are fit for a particular purpose (express or implied); and
  3. are delivered within a reasonable time (if no time is specified).

The Australian Consumer Law provides that a consumer has the right to request a repair, replacement, or refund if the product or service he or she purchased does not conform to the consumer’s guarantees.

Arguments with customers over whether consumer guarantees apply may lead to disputes. If you experience a dispute with a customer about consumer guarantees, contact an online lawyer.

The Spam Act 2003

Spam is the electronic equivalent of junk mail. The term refers to unsolicited, bulk – and often unsolicited – email. These commercial e-mails fall under the Spam Act 2003, which regulates commercial email and commercial messages in Australia. The law restricts spam and the collection of e-mail addresses.

If you send emails promoting your products to customers, you need to make sure you do not violate the Australian Spam Act. Because if you do, you could be buried under a hefty fine.

You should not buy bulk mailing lists and send emails to unsuspecting business owners promoting your products and services. One company that sells mailing lists says, “A lot depends on what you want to send, but if you have any doubts about compliance, do not do an email campaign.”

However, if you want to send mass emails, you must meet three requirements:

  1. recipients of your message must give their consent to receive emails from you;
  2. you must provide identification of your company’s contact information; and
  3. you must provide a working unsubscribe link.

Again, if you are in doubt about whether and how your business can comply with spam laws, contact an online lawyer.

online lawyer

Trademark and copyright law

Images and other art forms are ideal for grabbing the attention of your website visitors. However, you must be mindful of trademark and copyright laws. You cannot just take any photo or artwork from the Internet and use it on your website. Because your online business is bound by general copyright and trademark laws, just like a physical business.

Many businesses are surprised when an online lawyer provides advice that they cannot use any images found on the internet.

For example, if you want to sell mugs with Avengers characters, you should get the appropriate consent to avoid intellectual property infringement. You must make sure that you do not infringe the intellectual property rights of others.

Be sure to get permission from the copyright owner if you want to post someone else’s content on your website or social media. Get a license for the use and ensure that the licence is broad enough. For example, you might pay to license the copyright to a photo, but the license does not allow you to use it for advertising or commercial purposes. It’s important to make sure you have a broad enough licence to use all your photos, graphics, vectors, and illustrations as you wish.

You can contact an online lawyer for advice regarding online copyright and trade mark infringement.

Privacy Act 1988

Online businesses collect, manage, and use the data of customers and visitors. Once your business receives such data, it becomes your obligation to handle and protect it under the Privacy Act 1988. You must proactively comply with Australian privacy laws to avoid potential legal penalties, reputational damage, and regulatory action.

A good practice is to have a policy that complies with the Australian Privacy Principles. An online lawyer can prepare a privacy policy for you.

Although they apply to specified entities, it is advisable to have one. Because they promote trust with your customers by providing transparency about what information you collect, what you plan to do with that information, and how you store it.

How can Prosper Law help?

Prosper Law is Australia’s online law firm with experience in providing legal services to online businesses across Australia. Our experience in providing online legal advice is second to none.

Contact our team today if you are an entrepreneur starting or operating an online business and need online legal advice for your online business in Australia.

Farrah Motley | Director

PROSPER LAW – A Commercial Law Firm for Businesses

P: 1300 003 077

E: farrah@prosperlaw.com.au

W: www.prosperlaw.com.au

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About the Author

Farrah Motley
Director of Prosper Law. Farrah founded Prosper online law firm in 2021. She wanted to create a better way of doing legal work and a better experience for customers of legal services.

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