Business Law & Compliance

Keeping on top of legislation: Cyber laws for online SMEs

7 min read

18 August 2015

Unlike the ancient tomes of law that regulate more traditional forms of trade, a lot of laws for business on digital platforms are relatively recent and as such are more frequently side-lined by companies with eyes on the prize.

While laws are always chasing digital innovations, the internet, is now a regulated, legally restricted network, and SMEs looking for and taking money from customers via this medium should take time out to truly understand their legal obligations, in case they are penalised. 

The “opt in, opt out” rule

EU regulations on protecting privacy, confidentiality and the way you store and use customer data are rules that you need to be aware of as an online business. 

Regulations came into force in December 2003 through the Privacy and Electronic Communication EU Directive, to guard citizens’ details from aggressive marketing by introducing the law asking for proof of “positive consent” – or opting in. The rules aim to limit how subscriber, location data and compiled directories of subscribers can be used. E-communications are also regulated – which includes direct marketing techniques.

Consent must be sought from the receiver if someone is to be sent marketing material via email or SMS – hence the heavy reliance of data capture and sign up to newsletters by businesses when a customer purchases an item over the web. 

E-marketing software can warn the marketer and even bar them if the software concludes that the way the list was obtained was against the rules, such as, compiling lists of people’s email addresses to market to without their knowledge. If an unreasonably large amount of people are unsubscribing from your sent newsletter, the assumption is you have spammed them, which the software can flag up. The recipient of any emails must have been given an easy chance to refuse the sign-up process (usually this is a simple tick box). 

Saying this, emails to businesses can be permissible – the law is more there to protect individuals and not disarm business to business communications. We advise you talk to a lawyer if you are worried about the differences here.

To put your mind at ease with digital marketing laws – a simpler way to look at it is just think of the mantra ‘need prior consent’ before you act. 

Running a competition 

Many businesses want to run competitions online – specifically on social media – to win items they are selling or to generate customer communities. However, there has to be care around the gambling laws – since 2005 it’s not been so easy to run a competition. If you make anyone pay to get something in order to enter a competition, or there is no skill involved in the competition, this is in fact a lottery and not a competition and you might be breaking the law.

VAT laws for digital services

A new piece of legislation came into force on 1 January 2015 which affects digital businesses as they have to charge VAT when trading outside the UK – even when annual earnings are below the threshold for UK VAT. The new law affects businesses that sell digital services, like e-books, WordPress themes, mp3s and online courses to other countries in Europe. VAT will now be charged in the country that the service is bought in rather than the country where the service is sold, making it a more complex process. 

It has been suggested that it will dramatically affect many low-earning micro-businesses as the cost of compliance and extra administration may mean that it’s not viable to carry on trading. The laws may expand in January 2016 to cover online shopping for physical goods. This could have a big impact on online trading.

Copyrights debate

Copyright law is at a moment of flux in the UK. The way people use the internet means that swapping, copying and sharing of content on a daily basis likely infringes copyright in an on-going way that defies enforcement. 

Read more about copyright:

You’ll be hard pressed to fine everyone in the country for using social media and downloading of files, as access is so easy – it’s unrealistic but on the other hand, the abuse involving illegal copying within creative industries has reached enormous and damaging proportions – so there is an ongoing debate about the best way forward. 

The government realised this and tried to separate the small-time personal sharing and copying and mashing-up of content from the industrial scale infringement. However, as recently as June this year a High Court judge stated that infringement on a low level could harm the rights of copyright owners. Justice Green stated that the government could, as they would like, “implement a private usage exception”. However, the government should create a compensation mechanism for rights holders if the harm caused to them by the introduction of the private copying exception was above a defined level. 

So – there is a grey area in the law that has not been fully settled yet.
This is the truth of digital laws, they are being forged a new all the time and with every new digital forum, platform, device and social media – keeping on top of the changes in law is something that you will need to pay close attention to.

Richard Forsyth works for website marketing company Varn MediaWith thanks to Halebury.