POSTED IN DATA SECURITY, FTC, PRIVACY, STARTUPS, TECHWEEK
Posting terms of use document on your website or mobile application defines the terms which govern your customer’s use of your website or mobile application and greatly reduce your exposure to liability when providing goods or services through a web-based application. A privacy policy describes to your consumers what information you collect, how you collect it and how you use it. Posting a privacy policy provides notice to your customers so that they can make an informed decision on whether or not they want to use your web-based application after considering the data you collect and how you use it.
Building Your E-commerce Cruise Ship
Most new businesses and startups focus on providing a product or service through a web-based transaction with their customers. In my experience, the main focus of the start-up business owner is the vehicle in which the product or service is offered. This focus is well warranted as the website and/or mobile application is the virtual storefront that gives your customers an impression of the quality of your goods or services. In following the theme of this post, I consider this “building the cruise ship.” This is your chance to impress the guests with the visual presentation, functionality and features which you have developed to distinguish your goods and services from your competitors’.
However, in the ocean of e-commerce, there are a number of “icebergs” which may hide under the surface. The chances of hitting one is relatively low at launch, but increases exponentially the longer your voyage. Such icebergs can be a product-liability suit, a disgruntled customer, actions by a customer which expose you to liability, actions by an employee which expose you to liability, a state or federal enforcement agency, or sloppy handling of a customer’s personal or financial information.
Why is this important? Terms of Use and Privacy Policies Reduces Your Chance of a Titanic Event.
Spending resources on drafting the terms of use and a privacy policy creates a navigation system that helps you safely travel the ocean of e-commerce and reduces the likelihood that your cruise ship will hit an iceberg. Developing and posting your terms of use and privacy policy reduces your exposure to risk from both a customer liability and civil regulatory compliance perspective. Failure to develop and post these documents on your application will result in your transaction or services being governed by the default commercial terms, which are much more consumer friendly.
The terms of use can reduce your exposure to liability by establishing the terms which govern your transactions. Through the disclaimer of warranties, limitations of liability and indemnification obligations, your exposure to financial liability due to a claim by a customer or an unsavory action of one of your customers which harms another is greatly reduced. In addition, posting the terms of purchase, payment terms, and other notices can further strengthen your position if a customer fails to pay or otherwise use your application as intended.
Establishing your data collection and usage plan and drafting a privacy policy that accurately describes your practices can help you avoid running into a government iceberg of unknown size. Such icebergs include a state or federal agency action alleging unfair trade practices or, in certain situations, violations of civil laws. Consultation with a privacy attorney can guide your decisions on what information you collect and how you use it. Some uses will require you to set up additional administrative features to engage with consumers. Thus, correctly setting your data collection and usage policy and procedures initially may save you headaches and legal fees associated with dealing with an agency enforcing privacy laws, namely the Federal Trade Commission or a state’s Attorney General.
By taking these proactive steps of preparing and posting application terms of use and a privacy policy, once your ship is launched, you can enjoy Mai-Tais on the Promenade Deck while you chat up Isaac, all while having some comfort that if you do hit an iceberg, it will likely be small and should not sink what you have worked so hard to build.
Bob Bowman practices in Husch Blackwell’s Kansas City office. He and several other Husch Blackwell attorneys are participating in Techweek, which begins in Kansas City on September 12.
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