What Are the Legal Requirements of Selling Products Online?

Updated on March 4, 2021

Reading time: 6 minutes

More and more people are choosing to operate their business online, as there are many benefits to e-commerce. You can work from anywhere, and you have the potential to reach a broad customer base. But, online businesses still have to follow the same laws that physical businesses do. There are also laws specific to operating online that would be relevant to your online business. Having robust terms and conditions and other legal documents for your online business is imperative for avoiding liability. This article will cover some of the law that applies to your online business so that you are aware of your legal obligations and avoid liability.

Consumer Law

Anyone that is ‘in trade’ has legal obligations to the consumers that they sell to. You are in trade when you:

regularly sell goods or services;
create products for the express purpose of selling them; or
regularly buy products with the intention of reselling them.

If you only sell products occasionally, like selling old clothes on TradeMe or having a garage sale, you are not in trade.

You should clearly display somewhere on your website that you are in trade. This ensures that customers know that consumer laws apply to their transactions and contracts with your business. If you do not, you could open yourself up to legal penalties.

There are two key areas of consumer protection law that you should know about as a business in trade. These are the:

Fair Trading Act

Consumer Guarantees Act

You have an obligation to:

clearly and accurately represent the good or service you provide;
only make claims about your business that you can back up with facts or evidence;
sell in good faith and not engage in any unfair sales tactics, such as bait advertising or harassment;
follow the safety standards for specific products, like children’s toys; and
disclose important information about your products, such as care labelling and country of origin.

Your products must:

be fit for purpose and have acceptable quality;
match the description you give;
match any photos or demonstrations that you provide;
be sold at a reasonable price; and
be sold legally.

Your services must be:

fit for their intended purpose;
carried out with appropriate and reasonable care and skill;
priced reasonably; and
finished within a reasonable time frame.

If a customer finds a reasonable fault with a good or service you provide, such as a damaged product, then you need to give them a remedy.

Privacy

If your business deals with a customer’s personal information, you must take steps to protect that personal information. Personal information is data that identifies a person, which includes:

full names;
IP addresses;
email addresses;
physical addresses;
photos; or
payment information.

Privacy issues are becoming a more significant concern for consumers online, so make sure that you have relevant cybersecurity measures in place to protect your customers’ information. Set this out in a privacy policy, so that you can clearly display your methods for keeping up with your privacy obligations as a business. This also lets customers know that you care about protecting their privacy rights.

If your business deals with credit card transactions online, make sure you have a secure payment processing system that is PCI DSS compliant. This standard aims to prevent credit card fraud.

Intellectual Property

Your business name or logo is your intellectual property, and you have certain rights when dealing with that property. You can take steps to protect that intellectual property, which may be a good idea for your business.

For example, say you find that someone else is using the domain name you intended for your business’ website. If you can prove you have the intellectual property rights to use that name, this will favour you greatly.

Take care when using other people’s intellectual property. If you do not have their permission to use their logo or business name, you will find yourself in legal trouble.

Record Keeping

Just like a brick and mortar store, you have certain record-keeping obligations attached to your business. If your business is audited or receives some other kind of investigation and your records are not up to date and kept in good condition, you could face legal penalties.

For your online business, it may be convenient to keep your records in a cloud-based service. Just make sure you have reliable backups if something goes wrong.

Tax Obligations

You also have tax obligations, just like any other business. Make sure you register for GST if you:

generate an annual turnover of over $60,000; or
include GST in your pricing.

You have to fill out your own tax returns, which will be much easier if you keep good records of your business dealings. The way you structure your business will affect what taxes you have to worry about, so if you are unsure, make sure to get legal or accounting help.

Key Takeaways

Even though your business is online, you still have to follow the same laws any physical business would. Make sure you take steps to comply with your obligations and note that this may function differently because you are operating online. If you would like more information or help with your online business’s legal obligations, contact LegalVision’s New Zealand E-commerce lawyers on 0800 005 570 or fill out the form on this page.

FAQs

Will my online business have the same obligations as a physical business?

Your online business still trades and sells goods or services, so you will be liable under the same laws any physical business would. You may also have some extra obligations unique to operating online.

Is it easier to run an online business?

It is true that some aspects of running a business online are more convenient. You do not have to worry about finding commercial property or deal with running a physical store. Whether it is easier to run an online business versus a physical business depends on the context and your unique situation.

What are my consumer law obligations as a business?

If you are regularly selling goods or services to consumers, then you have certain legal obligations attached to that practice. You have an obligation to make sure your products work and are fit for purpose, and that you sell honestly and do not misrepresent any aspects of your business.

Do I need to keep records if my business is online?

All businesses need to keep records of their dealings, even if that business solely operates online. Organising your documents and keeping track of your business information means that you can avoid legal penalties later if you are audited. A cloud-based service can help, and make sure you back up important documents.

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