Legal Liability in E-commerce

5.7 Legal Liability in E-commerce

5.7.1 Civil Liability in E-commerce

1. Concept of civil liability in e-commerce

Civil liability means the legal consequence a civil entity has to undertake if it

Introduction to E-commerce

commits any violation of civil obligations. Civil liability is based on civil obligations; it is legal sanction against violation of civil obligations. The primary components of civil liability in e-commerce include facts of damage— only when there are facts of damage can the actor bear the civil liability; faults, i.e., the subjective intention or negligence; cause-effect relation, i.e., there is cause and effect relation between illegal actions and facts of damage, and only when the damage is caused by the illegal action can the actor bear the civil liability. The entity has to satisfy all the necessary conditions mentioned above to take civil liability.

(1) Principles of civil liability in e-commerce: As a totally new commercial form, e-commerce has many differences compared with traditional transactions. In e-commerce there are some social relations common in all traditional business while there are also some peculiar social relations of it. Yet no matter the common social relations or the peculiar ones, they have not changed the fundamental property of e-commerce as a commercial activity. Therefore, once there is violation of civil laws that infringes upon the legal rights of the country, legal persons or individuals, the liability principles of general civil laws also apply in this situation. On the other hand, e-commerce has some peculiarities that distinguish it from traditional commercial activities, which means the general provisions of civil law cannot all be applicable and some laws need certain changes to adapt to the development of high tech.

(2) Classification of civil liability in e-commerce: Civil liability as the legal consequence for violation of civil obligations or infringement upon civil rights is classified differently according to different criteria. For example, civil liability can be classified into contract liability and non-contract liability according to the basis on which the liability comes; it can be classified into fault liability, nonfault liability and fair liability according to the principle based on which the liability is to be borne. Disputes in e-commerce primarily include commercial disputes arising centered around e-transactions and non-commercial disputes arising based on e-transactions, so civil liability in e-commerce mainly refers to contract liability and tort liability.

(3) Means of assuming civil liability: There are ten primary means to assume civil liability, including cessation of infringements, removal of obstacles, elimination of dangers, return of property, restoration of original condition, repair, reworking or replacement, compensation for losses, payment of breach of contract damages, elimination of ill effects and rehabilitation of reputation, and extension of apology. The main means to assume contract liability include payment of breach of contract damages, continual performance, return of property and compensation for losses. The main means to assume tort liability includes cessation of infringements, removal of obstacles, return of property, restoration of original condition, elimination of ill effects and rehabilitation of reputation, and extension of apology. The violator of civil law in e-commerce has to assume one or more than one liability means according to the concrete circumstances so that the liability means can be given full play to better safeguard the legal rights of entities

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in e-commerce and guarantee the safe and rapid development of e-commerce.

2. Contract liability in e-commerce

Contract liability is the civil liability for violation of contract, also termed as liability for breach of contract. It is a kind of civil liability, which plays an important role in contract relations and has the function of safeguarding the contract credit and maintaining social economic order.

There are generally two kinds of principles for contract liability: one is the strict liability principle and the other negligence liability principle. Strict liability principle is also called non-negligence liability principle or objective liability principle, that is, the actor shall assume civil liability if his act causes damage, no matter the actor has any fault or not. In our country the liability principle for breach of contract is the strict liability principle, but there are still many named contracts applying the fault liability principle, such as bestowal contract, storage contract and lease contract.

The application of strict liability principle in contract liability in e-commerce on one hand can guarantee the proper performance of e-contracts and on the other hand is beneficial to protect the parties in the e-commerce contracts.

(1) Components of contract liability in e-commerce The breach of contract defined in e-commerce law refers to the non-performance,

partial performance or improper performance of the duties agreed upon in the e-commerce contract by one or both parties to the contract.

(2) Forms of contract liability in e-commerce The forms of contract liability in e-commerce refer to the forms of assuming

contract liability after the contract parties commit breach of contract. They mainly include payment for breach of contract damages, compensation for losses, mandatory actual performance and other remedial measures.

3. Tort liability principle in e-commerce

The tort liability principle for violation of e-commerce law refers to the choice of which standard and principle to determine the actor’s tort liability when his behavior causes others’ damage. From the current legislation, the tort liability principles in our country mainly include the principles of fault liability, fault presumption liability, strict liability and fair liability.

4. Torts of violation of e-commerce laws

Torts in e-commerce primarily include those in violation of intellectual property, honor rights of individuals and legal persons and consumers’ rights and interests.

Intrusion of privacy: privacy in the network space is more difficult to protect and control than in the real world. With the practical use of computers and Internet it becomes an important part in people’s daily life to send e-mails, do online shopping, work at home, and have distant diagnosis. A great deal of personal information, such as correspondence, income and expenses, educational

Introduction to E-commerce

background, health medical history, marriage status and family background, address, birth date and ID number is usually stored in people’s personal computer systems. This information can be easily copied and collected on the Internet, since it is no longer a technical problem to intercept personal letters and collect personal information by Internet monitoring. When you do online shopping you will leave such personal information as your name, address and telephone number in order to receive services after the purchase; in order to have distant diagnosis, all your medical material will be transmitted to hospitals scattered in all regions; when you are surveyed consciously or subconsciously you will provide your true information and data about yourself or your family. Once this information or data is collected and sorted by others, you may lose control of them forever, what’s worse, it may be broadcast on the Internet and republished or copied endlessly, which is a particular menace to personal privacy from the abuse of information technology and the degeneration of network morality. Hence how to protect personal privacy has become a problem demanding prompt solution. Compared to the communication security and personal data security, the peace of personal life is more important for a citizen. Once their e-mails and their personal information is thus leased, their personal life will be damaged.

5. Several major torts in violation of personal privacy

(1) Illegally enter into others’ personal computer systems; intercept, browse and have other’s e-mails without permission; announce others’ personal data without permission or divert others’ personal data for other uses; obtain others’ personal data without permission and by unfair means. Data users must use their personal data within the approved or agreed limit; commercial mails sent to network users shall be identified and may not entice or mislead the users to open any e-mails of no use to them at all.

(2) Torts against copyright: The two substantial conditions of the object protected by the copyright law are “originality” and “replicability”, and there is no requirement on the form and media of works. Since the online information is shared, once the works in traditional media are digitalized, they can be transmitted on line freely, and leave the works and information protected by copyright law in danger of being infringed upon. As works protected by copyright laws are easily used on line and there is great flexibility for their modification, it is easy for them to be modified, copied, deleted, changed, damaged or intercepted, and the personal property rights such as the rights of authorship, alteration, and integrity of an author are extremely difficult to be protected. Many developed countries and international copyright organizations such as world copyright organizations have modified the clauses not suitable to network environment in the current copyright systems and made provisions for the special problems concerning copyright of network works to protect the rights and interests of copyright owners. These laws include the World Intellectual Property Organization Copyright Treaty and the World Intellectual Property Organization Performance and phonograms Treaty.

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Since the torts of copyright of online works are different from those on the traditional media, they are classified into three kinds, namely “down load”, “on line” and “up load”. “Down load” refers to download the online works and publish them in newspapers without permission. The second kind refers to the infringement upon the copyright of online works by other networks. The “up load” means the tort of copyright of traditional media by networks. Some websites publish others’ works on line without the permission of the authors in order to gain benefit, and while other netizens read these works by visiting the websites, economic benefits are created for the websites in the process.

(3) Torts against domain names and trademarks: E-commerce has to involve domain name registration. Domain name is the address of the computer connected to the Internet, and is designed to facilitate the interconnection and communication between online computers. Because it is easy to be remembered and convenient to be used, it has been widely used as a commercial mark. The torts against domain names mean that some people register other people’s trademarks and enterprise names with certain popularity for ill purpose.

(4) Other torts: Apart form what has been mentioned above, there are other forms of torts such as infringement upon citizens’ rights of name, portrait, reputation and honor and upon legal person’s right of name, reputation and honor. The direct consequence of infringement upon these rights is to make the victims’ reputation, credit and status under attack or be in other disadvantageous situation, make the social environment where they live unfavorable to them and lead to their spiritual suffering and financial losses.

6. Tort liability forms in e-commerce

The tort liability forms in e-commerce primarily include cessation of infringements, removal of obstacles, elimination of dangers, return of property, compensation for losses, elimination of ill effects and rehabilitation of reputation, and extension of apology.

5.7.2 Administrative Liability in E-commerce

Administrative liability means negative legal consequence caused by violation of administrative laws or by other legal facts. As an important part of legal liability, it includes two aspects: one is the legal liability assumed by citizens, enterprises, institutions, social organizations and administered for violation of administrative laws and regulations or non-performance of administrative obligations, and the other is the legal liability assumed by state organs and their staff for illegal or improper behavior.

1. Administrative liability in e-commerce

Administrative liability in e-commerce refers to the negative legal consequence

Introduction to E-commerce

assumed by the participants in the e-commerce caused by their illegal administrative behavior or some legal facts. It includes the following two aspects: one is the legal liability assumed by the state organs and their staff for their illegal or improper behavior in administering the e-commerce, and the other is the legal liability assumed by the administrative participants for their violation of relevant administrative laws and regulations or non-performance of relevant administrative obligations. Some main administrative liability in e-commerce is as follows:

(1) Administrative liability in e-commerce taxation: The act damageable to e-commerce taxation is mostly the administrative illegal act. The State Compensation Law shall be applicable for the illegal administrative act of taxation organs, all forms of administrative sanctions shall be applicable for the illegal administrative act of the individual taxation collectors, and the relevant laws such as Law of the people’s Republic of China on Administrative Penalty and the Law on Tax Administration shall be applicable for the act against rules and regulations of taxation organs.

(2) Evasion of tax and refusal to pay tax in e-commerce. “Evasion of tax” means that a taxpayer or a withholding agent fails to pay or underpays the amount of tax payable through the adoption of the means of forging, revising, concealing or destroying without authorization accounting books or supporting vouchers for the accounts, or of overstating expenses or not stating or understating income in accounting books, or of filing fraudulent tax returns. “Refusal to pay tax” means refusal to pay tax payable by using violence or menace. In accordance with the relevant provisions in the Law Tax Administration, if the act does not constitute a crime, the tax authorities shall pursue the payment of the amount of tax the taxpayer or withholding agent has failed to pay or underpaid, and impose

a fine no more than five times the amount of tax the taxpayer or withholding agent has failed to pay or underpaid.

2. Administrative liability about intellectual property involved in e-commerce

Administrative liability involved in domain names: Order the actor to stop illegal act, confiscate the illegal gains, fine, or revoke the business license.

3. Administrative liability about copyright involved in e-commerce

Besides civil responsibilities, the administrative sanctions can be imposed by copyright administrative authority in the form of public warning, injunction in relation to the production and distribution of infringing copies, confiscation of unlawful gains and seizure of infringing copies and equipments used for making infringing copies, as well as fine.

4. Administrative liability about customer rights protection in e-commerce

The consumers enjoy wide rights, including: right of security, right of information

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access, right of independent selection, right of fair trade, right of compensation according to law, right of association according to law, right of consultation and obtaining knowledge, right of maintaining dignity and right of supervision and criticism. In case the operator’s act infringes upon any of the above rights and interest enjoyed by the consumers, the industrial and commercial administrative departments shall order it to make amendment and inflict separately or concurrently a penalty of warning, confiscation of illegal gains and a fine of not less than one time and not more than five times the illegal gains. If there are no illegal gains, a penalty of not more than 10,000 yuan shall be imposed. If the circumstances are serious, the operator shall be ordered to suspend business for amendment, revoked its business license. Besides the above traditional act that infringes upon consumers’ rights, one particular phenomenon in e-commerce is the infringement upon consumers’ privacy. Yet there have been no definite applicable laws concerning this aspect.

5.7.3 Criminal Responsibility in E-commerce

Crime is the prerequisite of criminal responsibility, without crime there will not

be criminal responsibility. Criminal responsibility has to meet three fundamental elements: First, the occurrence of act damageable to society. Second, this damageable act shall be forbidden by the criminal law. Third, the act forbidden by the criminal law shall be punished by the criminal law. A large fortune has been rapidly accumulated in the field of e-commerce, which, while bringing infinite commercial opportunities to society, has as well brought serious social problems such as the outflow of crimes. Thus criminal problems in e-commerce have drawn wide attention of the society.

1. Phenomena and features of crimes in e-commerce

There are usually three phenomena in e-commerce crimes: Computer crimes in e-commerce, which only requires the damage of computer systems. E-commerce crimes related to computer crimes. Traditional commercial crimes in e-commerce with nothing to do with computer technologies.

Crimes in e-commerce have their own features, mainly including: clear aims, that is, they are intended crimes and the main difference between e-commerce crimes and computer crimes or network crimes is that criminals have direct criminal aims. Illegal gains. High intelligence. No spots, that is, no matter for the transaction or settlement of the e-commerce based on the virtual space on Internet, the transaction parties do not have to do the business on the spot. High occurrence of crimes. Low risks for crimes and high difficulty of prevention and control.

2. Crimes and criminal responsibilities in e-commerce

Many criminal responsibilities in e-commerce can be punished according to

Introduction to E-commerce

Articles 287, 286, 264, 266 and 215 of the “Criminal Law of PRC”, including the crimes of damaging the data and applications of computer systems, of making and spreading devastating computer programs, of illegal intruding computer systems in e-commerce field in order to steal commercial information, of committing fraud by usurping others’ e-commerce ID and of infringing upon commercial secrets, computer-related e-commerce crimes and corresponding criminal responsibilities, crimes of counterfeiting and using online payment accounts and its corresponding criminal responsibilities and relevantly traditional commercial crimes in e-commerce.

3. Problems and challenges in the application of criminal laws

The crimes in e-commerce have become more and more common and complicated nowadays. However, how to apply the criminal law and deal with the situation that there is no specialized legislation concerning e-commerce crimes have been big problems in terms of cracking down on crimes and investigating the criminal responsibilities.

(1) Application of current criminal laws: A fairly large number of crimes in e-commerce can be punished according to the current criminal law. However, there are some problems in concrete practices. Some crimes do not satisfy all the constitutional elements of a crime defined in the criminal law as it covers narrowly; some crimes do not have the same description as in the special provisions of the criminal law, which leads to the inappropriateness in application.

(2) The application of criminal law concerning the computer-related crimes: The computer-related crimes have taken a large part in e-commerce crimes. The suspect commits the e-commerce crime by taking advantage of his skillful or even superb computer expertise or the knowledge of interior computer resources. This kind of crime has dual harmfulness. On one hand, it causes harm to computer systems; on the other hand, it causes harm to the whole e-commerce system. This crime ought to be punished by the criminal law. However, in practice this crime cannot be established, since the crime object is quite complicated. So the effect is not so clear after it being cracked down upon.

(3) The application of the criminal law to the relatively traditional e-commerce crimes: The current criminal law is more applicable to situations involving relatively traditional crimes in e-commerce; however, there are some new problems like the conviction of theft crime. The theft in e-commerce is primarily carried out using digital information and the crime succeeds by transferring fund from an account to other virtual spaces. Furthermore, online money laundry is also difficult to identify because the flow of fund is hard to track.

4. Blind area of current criminal law

(1) Crimes concerning intellectual property in e-commerce: In e-commerce, illegal interception and copy of data is particularly serious. The criminal suspect illegally intercepts or copies the data of the parties in the trade by taking

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advantage of the open network and intercepting of data in online transmission in order to gain benefit. This kind of crime mainly involves commercial confidentiality, which would cause tremendous loss to the right-owner. However, the provisions about theft of commercial secrets in the current criminal law cannot cover this kind of act, thus making it difficult to investigate the criminal responsibilities upon such acts seriously damageable to the e-commerce transactions.

(2) Tax evasion problems in e-commerce: Tax evasion in e-commerce is a very urgent practical problem faced by all the governments in the world nowadays. The transaction amount involved in e-commerce is tremendous, but there have been no laws and regulations concerning taxation in this new mode of trade. Therefore it has become a legal loop. Traditional regulations concerning tax evasion is hard to fit in the new tax evasion crimes, which has become a legal dilemma to all the countries in the world.