EYE ON BUSINESS: E-COMMERCE ETHICS BY ROBERT FIORE, D.B.A.


Fraud can be found in all aspects of business, but fraud can be more subtle in e-commerce. E-commerce ethics are important for students to consider if they are going to own or work for a company that sells products on the Internet.


The following are some examples of unethical e-com- merce trade policies. Many sites offer products, but with no ready way to return defective items. Many sites “hide” return information or disclose return policies on pages available only after the item is purchased. Many sites fail to disclose any return procedures and even fail to provide a return address. Many sites describe the product with unsubstantiated claims.


Hidden costs are another common unethical e-commerce practice. Shipping fees, return fees, re-stocking fees, in- surance fees, upgrade fees, and maintenance policy fees are sometimes hidden on website pages separate from the check-out page. In some cases, the relevant informa- tion is not available anywhere on the site or only avail- able after the purchase is confirmed. These omissions are unethical and make transactions risky for consumers, if a return or exchange is necessary.


ROBERT FIORE, D.B.A. PROFESSOR OF BUSINESS MANAGEMENT


If you are employed as a webmaster or work for an online retailer, be aware. The Federal Trade Commission (FTC) has re- cently published a guide for online adver- tising called “Dot Com Disclosures.”


As advised by then FTC, e-commerce ad- vertisers should expect to follow some basic points:


• If your advertisement doesn’t pass muster offline, don’t post it online.


• If there’s something your customers ought to know — that the purchase price does not reflect hidden fees, etc. – disclose it.


• Make disclosures clear and conspicuous.


Robert Fiore received his D.B.A. from the Uni- versity of Sarasota. He joined the faculty at Springfield College in 1980 and his teaching area of specialization is Financial Management and Entrepreneurial Activity. He does consult- ing for area organizations and has several pro- fessional publications. Dr. Fiore has served on many college committees and task forces and is past chair of the All-College Committee on Tenure, Promotion, and Sabbaticals.


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The FTC has tried to make its guide as general and widely applicable as possible. Its authority for implementing the new guidelines is derived from Section Five of the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or prac- tices.” This prohibition covers:


• Advertising claims • Marketing and promotional activities


• General sales methods


The contents of any online advertisement must comply with three basic principles:


1. An ad must be truthful and not mis- leading (if an ad is likely to mislead an average consumer and that misperception influences a customer’s decision to buy or use the product, it is considered decep- tive); 2. Advertisers must be able to substanti- ate their claims (the company must have support for the claims the ad conveys. If there is more than one reasonable inter- pretation a consumer can make, the ad has to substantiate each interpretation); and 3. An ad cannot be unfair (according to the FTC, if the product or service causes or is likely to cause serious consumer in- jury that couldn’t have been reasonably avoided and isn’t justified by the potential benefit to consumers or competition, it is deemed unfair).


If any of the above three points are violat- ed, the FTC may shut down the site.


Finally, the company must disclose all hidden fees, and make all fees clear and conspicuous. Much of the FTC’s “Dot Com Disclosure” guide is devoted to a discus- sion of what constitutes a “clear and con- spicuous” disclosure.


BUSINESSMANAGER NEWS FROM THE SPRINGFIELD COLLEGE DEPARTMENT OF BUSINESS ADMINISTRATION


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