Legal considerations when establishing an online Business

Operating an online business is key in today’s World.  So, what are the key legal and commercial issues that you need to consider?  Let’s take a look.  

Setting up your website

Domain names

Your first priority will undoubtedly be to secure one or more domain names for your website. As well as undertaking a search of the Whois database of domain names, you will also have to be mindful that the use of certain domain names and metatags (that is tags on webpages that provide information about who created the page, how often it is updated, what the page is about, which keywords represent the page’s content etc) can give rise to claims in passing off. In short, passing off is where goods are sold under the pretence that they are the goods of another (more famous) brand.

Website agreements

If you don’t have the internal skills to design, construct and host your website – very few businesses will at first – you will need to engage a third party to do this for you.  Assuming you do not have all the skills, you will need to put in place a website design, development and hosting agreement

In addition to the website design, development and hosting agreement, you are likely to need one or more of the following types of agreements:

  • website terms and conditions: you will need T&Cs that deal with access to, and use of, your website and its content. 
  • website content licences: if you are using, or need to use, content which you do not own the intellectual property rights to, then you will need a licence from the owner of that content to use and display it on your website. 
  • website linking agreements: linking is generally welcomed by website owners (because it promotes their site/brand) but if, for example, the link takes unfair advantage of your content then you might want third parties to enter into a website linking agreement.  

Mandatory information to be given to users

On your website, you must provide certain information where it is applicable to you and/or your business. For example:

  • The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 and the Electronic Commerce (EC Directive) Regulations 2002 set out the information which all websites operators must include on their website (e.g. name and contact details, and company registration and VAT numbers)
  • The Electronic Commerce (EC Directive) Regulations 2002 also set out information requirements for businesses who are members of regulated professions (e.g. details of any professional body or similar institution with which you are registered, together with a reference to the professional rules applicable to you in the UK and how they can be accessed by the user)
  • The Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015 set out the information which a company must include on its website (e.g. your company’s registered name, and if you are a limited company and exempt from the obligation to use the word ‘limited’ as part of your registered name, the fact that you are a limited company)
  • The Provision of Services Regulations 2009 also impose obligations on businesses providing services in the UK, unless they are providing a service that falls within the definition of an excluded service.  There is some overlap between the information provision obligations under these regulations, and the information provision obligations imposed by the other regulations mentioned in this guide. 

If your website will be used to conclude online contracts:

  • The Electronic Commerce (EC Directive) Regulations 2002 require that prior to the order being placed by the user, certain information must be given in a ‘clear, comprehensible and unambiguous manner’ (e.g. the different technical steps to follow to conclude the contract)
  • The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 require that certain information needs to be given pre and post contract ‘in a clear and comprehensible manner, and in a way appropriate to the means of distance communication used’ (e.g. a description of the main characteristics of the goods, services or digital content, information about the right to cancel and access to a model cancellation form (or confirmation that there is no right to cancel or how it can be lost), the arrangements for payment, delivery, performance, and the time by which you will deliver the goods or to perform the services)
  • The Consumer Protection from Unfair Trading Regulations 2008 include specific information rules which apply to ‘invitations to purchase’ (e.g. the main characteristics of the product, to the extent appropriate to the medium by which the invitation to purchase is communicated and the product)

Other considerations and information to be given to users

Privacy notice and cookie policy

Data protection is a key issue for all businesses. Data is a valuable asset but how you use individuals’ personal data is a very sensitive issue and compliance with data protection and privacy laws is not only a legal requirement but can make or break the trust of your customers and prospective customers and give rise to serious reputational issues.

Personal data collected via a website, or a mobile app, can include names, addresses, credit card details and IP addresses. 

If you are collecting personal data via your website or mobile app, then you will be classified under the Data Protection Act 2018 as a ‘controller’.  This means that you will have to provide users with fair processing information – that is information on what data you will be collecting, how you will be collecting, storing and using it, and for what purpose(s) you will be processing it.  If you are storing personal data outside the UK, the EEA or within the cloud, then further obligations may apply.

If your website or mobile app will be using cookies to enhance user experience, then you should obtain the users explicit consent to use such.  

Intellectual property

You should place a notice on each webpage making it clear who owns the intellectual property rights (e.g. copyright and trademarks) in the website content.  Where your website contains user-generated content, the website T&Cs should make it clear that such content is either owned by you, the website owner, or is owned by the user but with a licence granted to you to use such content.

If your employees are generating content for your website in the course of their employment, then the statutory default position is that you own the intellectual property rights in such content.  However, if employees are creating content when this is not in their job description confusion can arise and so their contracts of employment should clearly state that you own the intellectual property rights.

If you are sourcing content from third parties (e.g. graphic designs or written copy), then unless you have a written agreement with that third party which states that you own the intellectual property to such content then the third party will own it and you will have no right, or only a limited licence, to use it.  

If your website is going to use crawlers, spiders or bots, there may be legal risks associated with copyright, database right and other intellectual property rights.

Modern Slavery Act

Under section 54(7) of the Modern Slavery Act, a slavery and human trafficking statement must be published on your website if you operate in the UK and have a global turnover above £36m.  This is highly unlikely to apply to a start-up business and has been included in this guide for completeness.

Websites aimed at children

There are likely to be issues specific to the protection of children that you will need to consider, e.g. you will have to comply with the Information Commissioner’s guidance on data protection issues, such as getting parental consent, and with regulations and codes that control advertising targeted at children.

How we can help

We have extensive experience of advising companies on setting up and running a business online, including drafting and negotiating the above-mentioned agreements, and drafting the documentation setting out the steps to conclude a contract online.  If you would like further information, please contact us.

Disclaimer: This article is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from taking any action as a result of the contents of this article.