Issues In E Commerce Law Information Technology Essay

1.1 INTRODUCTION

The role of the internet in today’s world has unexpectedly fast evolved from a medium of pure communication and information derivation to one additionally facilitating the direct sale and purchase of goods and services. Welcome to the era of electronic commerce [1] in which, human wants and needs ranging from foodstuff, property, electronic gadgets to shares listed on the Nairobi Stock Exchange, delivery services, books, clothes and many more in this day and age, can be satisfied with a mere click (or two). The phenomenon has not been lost on the Kenyan populace with some of the popular local online shops providing internet based transactions being: Rachel’s bargain corner; N-soko; Eastafricanized; Gadgetsguru; and Onlineduka. However, as much as e-commerce derives its upward growth rate and prides itself from and in respectively the ease and convenience in the conduct of business transactions, it is not bereft of the legal pitfalls associated with internet based transactions and internet use in general.

This work studies the major legal issues in e-commerce and their proposed resolution via regulation. Specifically, it addresses the question of the appropriate level of control, if established necessary, the Government of Kenya and its agencies may enforce on internet based transactions.

In the achievement of the foregoing objective, this work in its first chapter covers the introductory phase of the study providing the background and problem necessitating the study, skimming through the major legal issues in addition to outlining the scope of the work. It further stipulates how the work is to be tackled. The second chapter conducts an in-depth examination of the differences between e-commerce and traditional modes of transactions that justify separate regulation, the legal issues arising in e-commerce and the extent to which the laws of Kenya currently in existence act as barriers to e-commerce. The third chapter conducts a comparative study of the United Kingdom’s internet based transactions regulatory system with the aim of deriving lessons from it. Finally, the fourth chapter suggests an appropriate level of control the Government of Kenya and its agencies may enforce on internet based transaction including the role of the private sector towards this end and the kind of restrictions the government should avoid in coming up with a regulatory framework.

1.2 THE PROBLEM

1.2.1 BACKGROUND OF THE PROBLEM

E-commerce involves the use of information technology to enhance communications and transactions with all of an organisation’s stakeholders. Such stakeholders include customers, suppliers, government regulators, financial institutions managers, employees and the public at large. [2] In brief, it is the carrying out of commercial transactions on the internet.

Websites offering internet based commercial transactions may be classified either as business to consumer (B2C), business to business (B2B) or consumer to consumer (C2C) [3] the last of which is the latest entry in the classifications.

E-commerce generally affords users improvement of organisational performance, increased profitability, increased market share, improved customer service, faster product delivery, [4] round the clock utility, global reach, reduces the cost of acquiring serving and retaining customers, offers an extended enterprise that is easy to build, dispenses with the need for intermediaries due to directly approaching customers, improved customer service, knowledge of customer behaviour, defiance of distance limitations, defiance of time limitations, larger markets, increased economic productivity, less advertising costs among numerous other benefits associated with the electronic age. In this light, the internet promotes trade, both local and international, in a way and to an extent not previously envisaged.

Its main stumbling block however, is the sluggish pace at which government regulators are keeping abreast with the information technology revolution in addressing the arising legal issues such as the protection of consumer privacy, the security of consumer payments, contract regulation, protection of intellectual property, the borderless nature of the internet and dispute resolution mechanisms especially for parties in different geographical jurisdictions.

The internet is often regarded as a wide frontier in which regulation, policies and conventions lag behind developments. The making of case law which demonstrates how laws and regulations are likely to be interpreted also lags behind the specification of laws and regulations. Because the internet and e-commerce are fairly new in the legal perspective, it is extremely difficult to predict the legal consequences of any action. [5] 

Governments the world over know that the internet has become a vital tool in the modern business environment but are not sure whether it deserves their attention and if so how. The aim of this study is therefore to assess the need for government regulation of internet based transactions in Kenya and suggest a form in which the same may take.

1.2.2 STATEMENT OF THE PROBLEM

With the arrival of high-speed cables to East Africa, e-commerce in Kenya is poised for exponential growth due to the increased web traffic and accessibility offered by this infrastructure that is pegged on affordable broadband access to the internet. This requires an accurate policy and regulatory framework to shape the environment into which the new bandwidth arrives. However, despite an increase in internet based transactions, little has been done to analyse and formulate a clear, structured form of regulation to address the legal issues arising from internet based transactions.

Currently the indication of it is to be found in the National ICT Policy 2006 at 3.3.2 ‘Electronic Commerce’ which states that,

In recognition of the important role e-commerce plays in economic development, the use of e-commerce in trade and investments as a means of integrating Kenya into the global economy will be promoted.

To this end, the Government will:

Support the development of e-commerce by enacting appropriate legislation to support e-business…

Certain issues are left unresolved in this provision such as, what is the legal framework to ensure the entrenchment of the policy’s provision? What timeframe should be given to enact such legislation? Which issues is such legislation to address? What is the role of the private sector in developing internet based commerce regulations? What kind of restrictions should the government avoid in coming up with a regulatory framework?

If these questions are not seriously addressed and acted upon soonest, opportunities that would otherwise have been available to the business community and the general public due to the increased internet accessibility, will become foreclosed due to the lack of a substantive and procedural framework to address the everyday issues arising in e-commerce previously highlighted such as the protection of consumer privacy, the security of consumer payments, contract regulation, protection of intellectual property, the borderless nature of the internet and dispute resolution mechanisms especially for parties in different geographical jurisdictions.

This will in the long run impede Kenya’s goals in its search for dominance in the world’s dynamic economic environment. The expediency with which the regulation on this front is required cannot therefore be stressed enough. It therefore becomes the intention of this work to suggest a regulatory framework for the same in Kenya.

1.2.3 RESEARCH QUESTIONS

Main Research Question

As a guide in formulating a solution to the stated legal problem, the question that begs an answer is:

What appropriate level of control, if established necessary, may the Government of Kenya and its agencies enforce on internet based transactions?

Specific Research Questions

Specific questions without which the foregoing cannot be answered are formulated as hereunder:

To what extent are differences between e-commerce and traditional modes of transactions existent that justify separate regulation?

To what extent do legal issues arise in e-commerce bringing about the need for regulation?

To what extent do the laws of Kenya currently in existence act as barriers to e-commerce?

To what benefit is a comparative study to the United Kingdom’s system in coming up with a regulatory framework?

1.3 POINTS OF DEPARTURE, SIGNIFICANCE, PRESUMPTIONS AND HYPOTHESIS

THEORETICAL FRAMEWORK [6] 

1.3.2 SIGNIFICANCE OF THE STUDY

This study is of potential usefulness to the ICT Board of Kenya and Ministry of Information and Communication in their endeavour for a regulatory framework for e-commerce in Kenya and in the achievement of the ambitious Vision 2030 agenda.

It can also be utilised in the impartation of knowledge on the legal aspects of Information Technology-an upcoming area of law-to the entire legal fraternity via continuous legal education and basic undergraduate learning.

Further, it can be used for the sensitization of legal issues in internet based commercial transactions and how to effectively tackle them to the business community and the public at large.

1.3.3 PRESUMPTIONS OF THE STUDY

The following presumptions are made regarding regulation of internet based transactions limited to the scope of this study;

That the internet is gaining ever-increasing importance in commercial transactions conducted in Kenya.

That E-commerce for the purposes of this work refers to internet based transactions. It is not the intention of this paper to cover mobile money transfer services such as M-Pesa, Yu Cash, IkoPesa and Zap offered by various telecom service providers.

That this work shall not delve into the case for or against government regulation based on the free market economy and planned economy theories.

That this work shall not deal with cyber-crimes unless the same relate to commercial transactions over the internet.

That based on the dynamism of the internet, boundaries have to be clearly set out.

That for the aforementioned boundaries to have the full force of the law, they should be anchored in adequate legislation.

1.3.4 HYPOTHESIS

The work will dedicate a significant amount of its time and resources in an endeavour to analyse the accuracy of the following statement:

The purpose for which power can be rightfully exercised over a citizenry is to prevent harm to others and facilitate amicable transactions. Failure to achieve rules at all in a particular system so that every issue must be decided on an ad hoc basis leads to abject chaos and the degeneration of such a system.

1.4 RESEARCH DESIGN

A comparative analysis will be conducted between various jurisdictions which have regulation of e-commerce in place and the efforts made in Kenya. This will seek to establish whether and how the issues related to e-commerce can be resolved. An examination is also conducted into why the different jurisdictions tackle the issue as they do in addition to utilising common elements to suggest a solution to the issue at hand.

A comparative study given the present case finds its suitability on the premise that it will contribute to deeper or expanded insights and a better understanding of the work. Further, given the fact that Kenya’s efforts on this front have been largely unsuccessful or vague at best, it becomes prudent to seek some form of clarity if this work is to effectively answer its main research question. Finally, regard must be had to defiant nature of the internet towards geographical borders which restricts the use of a single national system in this work.

This will be undertaken mainly with reliance upon a diverse range of text books and various academic articles derived from various documents and electronic sources.

This is in addition to unstructured interviews with stakeholders such as ICT consultants, banking staff, ICT Board of Kenya officials and Ministry of Information and Communications officials. The reason for using unstructured interviews is the flexibility involved. Due to the lack of pre-defined questions and range or type of answers, the respondents can freely respond to an issue thus availing more information which can be relied upon given the relaxed atmosphere. Further, it is expected that answers to some questions thought to be non-existent in documented material might be discovered upon further digging thus dispensing with the need for the particular interview in the first place.

This work is expected to be complete by mid-February 2011.

1.5 LITERATURE REVIEW

Regulation takes the form of public law in the form of constitutional criminal and administrative law and private law in the form of tort law, property and contractual law. A further aspect is competition law whereby public law instruments are used to intervene in free contracts ruled by private law when the market fails. This occurs when the players in the market threaten to abuse dominant positions, negative externalities arise and information inadequacies such as the lack of information on the side of the consumer to make a well informed and free choice in the market rear their ugly head. The government may use different instruments to achieve its goal to redress such market failure. The list of available instruments ranges from command and control (under public law) to self regulation and enforcement of rights and liabilities (under private law). [7] 

Transactions taking place between a supplier in one jurisdiction and one in another is a difficulty in the determination of disputes. He further notes that the internet promotes international trade in a way not previously envisaged and has therefore become a wide frontier in which regulation policies and conventions lag behind developments while the making of case law which demonstrates how laws and regulations are likely to be interpreted also lags behind the specification of laws and regulations. Because the internet and e-commerce are new, it is very difficult to predict the legal consequences of any action. [8] 

On the local front, it is noted that the ICT policy is silent on the security challenge, the pricing issue, the intellectual property issue, protection of harmful content among others. [9] 

The same is galvanized by pointing out that the laws of Kenya at present do not recognize electronic transactions with some of the requirements in place acting as clear indications of this. These include giving information in writing, providing a signature, producing a document, recording information and retaining a document all of which must be in material form. [10]