PracticePeople In PracticeLegal doubts persist over online trading

Legal doubts persist over online trading

Companies joining internet-based electronic marketplaces expose themselves to financial risk because organisers of most trading communities do not accept liability if anything goes wrong.

That is one of the findings published by analyst Forrester Research in its new report, Emarketplaces Face the Law. Forrester claims companies that have joined emarketplaces are starting to have ‘deep concerns’ about legal issues such as security and data protection, despite having signed contracts which fail to address these issues.

‘By signing the initial contracts, participants give the emarketplaces every right to use their information without having to accept liability,’ said analyst Jaap Favier in the report. ‘The terms and conditions of almost every emarketplace exclude liability for data inaccuracy, delay in communication and financial damages to the seller or buyer.’

‘The emarketplace doesn’t make it clear who owns which information, where it is stored, and who can sell it,’ said one company surveyed by Forrester, a buyer in the office suppliers industry. ‘But we can’t do anything about it, and we have to join because all our suppliers are in it.’

Forrester surveyed 40 European companies using emarketplaces. Some 77% said that legal concerns affect the volume of business they carry out through the online trading community.

Some 53% of companies highlighted transaction security as a concern, but only 25% felt this was adequately covered in the contract.

‘You have to be clear who the contract is with, who you are trading with, and who has responsibility if anything goes wrong,’ said Paul Golding, a partner at law firm Nabarro Nathanson.

First published in Computing magazine

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