B2B and B2C: Their ethical, legal, and regulatory environments Essay
B2B and B2C: Their ethical, legal, and regulatory environments
The marketplace of internet commerce is rapidly expanding. Although there are wide variations within each category, internet-related businesses are usually classified as being either B2B (business-to-business), or B2C (business-to-consumer) enterprises. The economic landscape in which these companies operate is always changing. For that reason, it is all the more necessary for there to be a firm concept of the ethical, legal and regulatory responsibilities within this emerging marketplace. B2Bs and B2Cs share many of these responsibilities in common.
In some cases, however, there are particular nuances of operating a B2B that may call for a different framework than is necessary for operating a B2C and vice versa. The variations between these businesses are continually widening, meaning that the particulars of the ethical, legal and regulatory frameworks will differ. The overall goal of these frameworks is the same-establishing the concept of trust. Trust is the key to establishing any reputable, successful and long lasting business. Overview B2Bs (business-to-business) are business that interconnect using the internet.
In other words, they are businesses that buy and sell to each other. B2Cs are businesses that use the internet to sell to the end consumer. It may be the internet site of a well-established department store, or it may be a business that uses the internet as its only point of contact with consumers. The world of internet business is still relatively new. As it continues to grow, it will have to adapt to regulatory and legal changes. The continued emergence of variations within the E-marketplace is a challenge to those concerned with ethical and regulatory issues.
Far from being on the wane, these issues are more common than ever. According to market forecasters “Security and privacy issues along with e-business regulatory issues will become more prevalent” (Warholic, 2007). Ethical environment Conduct of B2B transactions is reliant on the two-way sharing of information. As a result businesses on both ends of the transaction must make sure that information platforms are secure, and accessible only to authorized personnel. Since trust is a critical element in E-business as well as more traditional forms of business, professional codes already in existence are applicable in both areas.
Unfortunately, industry-wide adherence to these codes is lacking. Companies are struggling with the wide array of issues raised by internet commerce. A recent report on the publications industry highlighted one of the many potential ethical problems of conducting business in an advertising-driven media. “…several respondents indicated that there was too much of a blur between editorial and advertising departments” (ASBPE, 2006). Another likely area of ethical focus for the B2B industry is highlighted by Laura Spense: “What about the facilitating of fraudulent activity? (Spense, 2002).
In an environment with a multitude of partners, platforms and subsidiaries how much responsibility does a B2B company bear for the actions of its partners? In Spense’s example, a B2B bank was knowingly enabling one of its partners to conduct illegal activities overseas. Again, examples similar to this could arise in any number of industries. Ethical responsibilities for B2C companies often revolve around the protection of customers’ information. Some companies have developed software limiting customer information to only a few responsible parties.
Others have not been able to resist the financial lure of information sharing or selling. This division is likely to continue until it is addressed more completely by legal and regulatory efforts. In the mean time, there is an opportunity for ethical businesses to develop strong reputations that will benefit them far into the future. Legal environment Legal concerns in E-business span a wide array of areas. There are the obvious concerns such as customer security and privacy, internet fraud and identity theft that relate most often to B2C businesses.
Most case law that has been developed addresses these issues. Because these crimes are the most high profile, they are the predominant focus of the legal system. As criminals adjust to these legal efforts in any number of ways it will require a sophisticated and ongoing effort to prevent their actions. There are also possible legal issues below the surface that can be just as important. For example, the difficulty of determining the legality of electronic documents can pose issues, particularly for multinational B2B companies. What appears to be a legal document may not be admissible in court as evidence.
Time differences can also result in an agreed upon document bearing one date in one country but having another effective date in another country. Because B2Bs can employ many networks and partners, it can be difficult to determine legally who bears responsibility on a particular issue. These are examples of small details, in the B2B context, that can have large legal consequences if not properly attained to. Regulatory environment The internet is still relatively unregulated. That is beginning to change in a few areas, however.
Most regulation is targeted toward B2C companies, coming in the form of consumer protection measures. The government is becoming more assertive in prosecuting internet fraud, gambling, child pornography and spamming violations. It is likely that additional laws in these areas will be enacted in the coming years. The issue of taxation is also currently under debate. This is of particular concern to B2Cs, which in years past have been able to lure customers by selling their product without any sales tax. That practice has already been ended in some states. As more states become cash-strapped, this process is likely to continue.
B2C firms will have to innovate in order to continue the growth of their customer base. The Uniform Commercial Code (UCC) applies to both B2B and B2C enterprises. The UCC outlines warranty, ownership and expert status issues, making some delineation between the responsibilities of B2Bs and B2Cs. For example, under the UCC, a business client is assumed to have a greater level of expertise about the transaction at hand. Therefore, statements or claims made to that client do not necessarily have to meet the same standards of reliability as statements made to an end user in a B2C transaction.
The main regulatory concern in regards to B2Bs involves the prevention of monopolistic practices, including price fixing. The formation of some large B2B firms such as Covisint, a firm formed by Ford, DaimlerChrysler, and General Motors, has raised concerns about the potential domination of market share. Critics fear the emergence of monospony – a shift of pricing power from buyers to sellers (IGE, 2001). Conclusion The only thing that is certain about the internet business environment is that it will continue to change and evolve.
The government will likely become a bigger factor in terms of laws and regulations, particularly within the B2C market. The B2B market, in contrast, is better able to self-regulate. Ethically both markets would be best served by anticipating potential regulatory and legal action. This has a dual purpose. It helps to establish the company as a trustworthy entity. Also it can help to head off future government interference in the market. The consequences of a lack of trust are particularly high for a B2B company, but the issue is important for any company hoping to operate profitably over the long-term.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 20 February 2017
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