legal matters in e-commerce
DESCRIPTION
This topic was presented by Benan İlhanlı, senior lawyer of B+B Law Firm on 2nd of October in our lesson.TRANSCRIPT
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Plan - Definition
- Startup / Establishment - IP rights
- Consumer protection in E-commerce
- Other relevant regulations
- Investment & Exit Process
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Definition - Most basic definition : commercial activities between
distant parties. - It is not legally defined under current regulations, but only
in the draft law on E-Commerce.
- Electronic ≠ Internet : It may be done via internet (Ebay, Markafoni), telephone (insurance brokers), SMS (Turkcell), etc.
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Start-up // Establishment - Choosing the right company type
- A.Ş. (Joint Stock Company) - Minimum capital 50,000 TL, - Board of directors, - More flexible, - Attractive for investors.
- Ltd.Şti (Limited Liability Company) - Minimum capital 10,000 TL, - Directors (higher responsibility), - Suitable for closely held companies, more difficult to
transfer the shares.
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Start-up // Establishment - Corporate documents
- Shareholders Agreement (‘SHA’) : The agreement organizing the relation between the shareholders, exit rights, share transfers. Best to have from the beginning.
- Articles of Association (‘AoA’) : The agreement between the shareholders which must be registered before the Trade Registry and published. Contains most of the SHA provisions.
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Intellectual Property - Most valuable asset of an E-Commerce Business. (i.e
Google, Philips)
- Trademark - The trademark (i.e. Gittigidiyor) to be used shall be
original and registered before Turkish Patent Institute. - The non-registered use is possible but harder to
protect, important to act fast and register before the launch of the business.
- Third parties may register the trademark beforehand and that would cause a significant problem for the business (i.e. Polo trademark).
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Intellectual Property
- Specific protection with 556 s.KHK on Protection of Trade Marks, providing indemnification and penal prosecution for violations.
- Dispute resolution : Specialized IP Courts. - It is required to register the trademark or to have the
trade name in order to obtain ‘.com.tr’ domain name (i.e www.markafoni.com.tr)
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Intellectual Property - Domain Name
- Core value of the E-Commerce business. - Vital to buy as many as possible variations of the name to be
used. For example: - markafoni.com, markafoni.net, markafoni.org, etc. - zizigo.com, zzigo.com, zuzigo.com, etc. - misspera.com.tr, mısspera.com, mişpera.com, etc
- Dispute resolution : for international domain names (i.e .com, .net, etc) WIPO arbitration. The main evidence is always the trademark.
- Dispute resolution : for turkish domain names (.com.tr, .net.tr, etc) almost inexistent, a group in ODTU.
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Intellectual Property
- Trade Name - It is the company name (i.e Sahibinden Bilgi
Teknolojileri Pazarlama ve Ticaret A.Ş.) - Provides a generic protection on the name based on
Turkish Commercial Code.
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Intellectual Property - Protecting the IP Rights
- The photographs or other similar materials produced by an E-Commerce business is in its own property and shall be duly protected.
- Employment contracts shall always include a provision that the Company owns the IP rights of even if produced by an employee.
- On the other hand, an E-Commerce business shall respect the rights on IP protected material and shall not use these material on the website, nor import counterfeit products.
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Consumer Protection
- Draft Law on E-Commerce : Pending to be enacted. - Regulates both B2B and B2C. - Provides private data protection and sanctions
unwanted commercial messages (SMS, e-mail) without the prior approval of the consumer.
- Law on Protection of Consumers and Regulation on Distant Contracts
- Regulates the distant contracts (contracts stipulated between the seller and consumer without physical presence and trough written, visual, phone and electronic means).
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Consumer Protection
- Since the E-Commerce Businesses rely mostly on consumers, the transactions are mainly based on these regulations.
- Issues Related to Distant Contracts - Turkish law requires the E-Commerce businesses to stipulate
a distant sales contract and pre-information form with the consumers.
Terms of Service (‘ToS’) Legal disclaimer and considered to be approved by being read in the website.
Distant Sales Contracts This is a legal document approved electronically (opt-in) by the consumer
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Consumer Protection
- Withdrawal Right of Consumers
- The consumers are entitled to withdraw from their purchases within 14 days of delivery in accordance with the new Consumer Protection Law.
- Exceptions: Hygienic products, DVD, CD, printer cartridges, etc.
- Seller shall return the payment within 10 days from the withdrawal and the consumer shall return the good within 20 days (at the expense of the Seller).
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Consumer Protection
- Defective Goods
- Apart from the withdrawal right, consumers are entitled to 1. return the good, 2. ask for a replacement, 3. reduction on the price, or 4. ask for repair for visible defects within 6 months of the delivery.
- The invisible defects, which may appear with the use of the good, are subject to 2 years-period of claim. This term expires in 5 years for the real-estate for residence or vacation purposes.
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Consumer Protection - Dispute Resolution
- Consumer Arbitration Commissions - County Commissions (up to TRY 2,000) - City Commissions (up to TRY 3,000) - Between TRY 2000-3000 TL City Commissions are
mandatory in metropolitan areas.
- Consumer Courts - The consumer courts are competent for the sums
above the limits given above.
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Other Relevant Regulations
- Customs
- Sending goods from abroad : All goods with a value superior to Euro 75 are subject to importation procedures (taxes, duties, etc.). The perfumery products cannot be delivered from abroad. (i.e. Strawberrynet)
- Importing goods : All imports shall be done in accordance with Turkish law, parallel import is possible but the goods shall be original (the counterfeit products may be confiscated by the customs).
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Other Relevant Regulations
- Regulatory Authorities & Criminal Regulations
- Internet is regulated by Information and Communications Technologies Authority (‘ICTA’) in Turkey.
- ICTA and other bodies under its supervision are entitled to suspend the access to a certain website, non compliant with laws. Thus, it is very important for E-Commerce businesses to comply with the regulations.
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Other Relevant Regulations
- The following categorical crimes are mentioned in the Law numbered 5651 on the Crimes Committed on Internet;
- Manipulation for suicide, - Sexual abuse of children, - Enabling narcotic materials, - Providing dangerous materials to health, - Pornography, - Prostitution, - Gambling, - Crimes against Ataturk.
- Any content published in the website and falling under the mentioned categorical crimes would cause the suspension of the access to the website by ICTA.
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Other Relevant Regulations - The article added to the law numbered 5651 on 06.02.2014
provides the suspension based on the protection of the privacy.
- The claimants are entitled to ask the suspension directly from ICTA.
- Should ICTA approves the claim, the internet service providers shall comply with the suspension within 4 hours.
- The suspension shall be applied based on the URL of the
violating publication, picture, video.
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Other Relevant Regulations
- The violations of third parties’ IP rights might cause the suspension by a court resolution as well.
- The directors of the company might be criminally liable for the content, thus better act prudently than to be sorry.
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Other Issues
- Inspections from the Ministry of Customs and Trade - Charge back issues
- Complaints to prosecutors’ offices, claiming that the E-Commerce business has committed a fraud
- Complaints to the ministry or the minister himself
- Complaints and/or insults on social media
- Copy cat websites
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Investment
- Finding investments : a matter of life or death. - Choosing your partner : Angel investor, VC or strategic
investor. - Phases of Investment:
- Primary negotiations and valuation - Term Sheet / Letter of Intent (LOI) / Memorandum of
Understanding (MOU) / Heads of Terms - Due diligence and Subscription and Shareholders
Agreement - Payment of the money (finally) - General Assembly meeting and capital increase
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Exit
- The governing document would be Share Purchase Agreement (‘SPA’).
- Not so easy because of the lock-up periods. - In most cases, several years of non-compete obligations. - In most cases, the exiting shareholders would be giving
pages of representations and warranties and indemnify the purchaser in case of a breach.
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