Starting an Online Business in Singapore Part 3: Regulatory Regime
Setting up an online business is an attractive business option as it helps you reach more customers, facilitates international expansion, and increases your sales. In recent years, there has been an increase in the number of e-commerce businesses. At the same time there has also been an increase in the amount of legislation that governs e-commerce businesses. Like many other developed nations, Singapore too has adapted its legal and regulatory environment to cater to the new digital age. Before launching your Internet business in Singapore you should familiarize yourself with the various rules and regulations governing e-commerce in Singapore including regulations regarding online business activities, Internet IPR protection, consumer protection legislation, online advertising regulation, etc.
Licensing Requirements for E-Retailers
For regulatory purposes, Internet content in Singapore is considered to be broadcast media content and therefore it falls under the purview of the Singapore Broadcasting Authority (SBA). Under the Singapore Broadcasting Authority (SBA) Act, all licensable broadcasting services, including computer online services provided by Internet Service Providers (ISPs) and Internet Content Providers (ICPs) must be licensed. Certain persons are considered to be automatically licensed i.e. “class licensees” without the need for them to make a separate license application. This includes e-commerce website owners. Furthermore, Internet Content Providers (ICPs) are required to register with the Singapore Broadcasting Authority (SBA) if their website promotes political or religious causes or if they sell online newspapers in Singapore.Regulation of Internet Content
All class licensees, including e-merchants, are legally bound to comply with the Internet Code of Practice that prohibits the broadcast of materials that are considered objectionable on grounds of public morality, public order, public interest and public security or materials that are otherwise prohibited under Singapore law. How about ICPs that are located outside Singapore and are therefore providing content from outside Singapore but are accessible by users in Singapore over the Internet? Are these ICPs regulated by the class license scheme and are they bound by the Internet Code of Practice? The answer is that the SBA does not claim to have an extra-territorial jurisdiction over content providers that are not based in Singapore. In other words, the class licensing scheme and Internet Code of Practice is limited to only local ICPs. Therefore, if your servers are located outside Singapore, you are not covered by SBA.Regulation of Online Business Activities
Depending on the type of products or services that you are offering online, you might be subject to the rules and regulations that currently apply to the physical provision of those goods and services. Some examples include the following:
- Online Gambling Service Providers: Although there is currently no legislation that prohibits or regulates online gambling activities in Singapore, online gambling service providers may be regulated under the Betting Act and Common Gaming Houses Act – legislation that regulates gambling activities that are carried out in physical premises. However, given that there is no extraterritorial application of this legislation it is difficult to enforce the local legislation against offshore or foreign owners of gaming websites.
- Provision of online financial services and products: The online provision of financial services and products to investors may be governed under existing regulations that cover financial service providers. In addition, any public offering of securities through the web is subject to the rules set out in the Companies Act and must adhere to the Guidelines on Offer of Securities made through the Internet.
- E-retailing of second hand goods: E-merchants selling second hand goods online will be covered by the Second Hand Dealers Act, which mandates that every person dealing in secondhand goods (with certain exceptions as listed under Schedule 2 of the Act) be licensed by the Deputy Commissioner of Police. These regulations are designed to prevent the sale of stolen goods.
- Online promotional activities: Depending upon the type of promotional activity that a website operator conducts, (s)he may be required to comply with the provisions set out in the Common Gaming Housing Act and the Public Entertainment Act.
- Web advertising: The web advertisement of certain products such as medicines, alcohol, and even financial services and products should not breach any statutory marketing restrictions or advertisement regulations that may be applicable to that particular product. Furthermore, online ads must generally comply with a) the Singapore Code of Advertising Practice and b) advertising guidelines issued by the Singapore Broadcasting Authority (where applicable). As regards spamming, although there is no specific legislation in Singapore, spammers may be liable to prosecution under the Computer Misuse Act. In addition, as a website operator you must also be aware of the Consumer Protection (Trade Descriptions and Safety Requirements) Act that prohibits misdescriptions and prescribes certain specific requirements relating to any trade description of goods sold in Singapore.
Regulatory Framework for Web Contracts
As an e-retailer you should exercise caution while making any online promises or implied contracts because web contracts are bound by Singapore contract law. One statute that you must be aware of in this regard is the Electronic Transactions Act (ETA) that was enacted in 1998 in order to boost consumer confidence in e-commerce and to provide legal recognition to web contracts. The Act is divided into twelve parts and deals with: definitions; recognition of electronic records and signatures; liability of network service providers; electronic contracts; public key infrastructure; and government use of electronic records and signatures. In essence, the ETA facilitates the following:
Electronic communication via reliable electronic records;
- All e-commerce aspects including writing and signature requirements;
- Electronic filming of documents with government agencies;
- Minimizing forgery and fraud in e-commerce transactions; and
- Establishing rules regarding the authentication and integrity of electronic records.
Consumer Protection Legislation
All e-retailers must take cognizance of certain provisions outlined in specific statutes that relate to protecting consumer rights. These include:
- The Unfair Contract Terms Act (UCTA) that regulates exclusion clauses and limited liability clauses in most consumer and standard form contracts. Note that the UCTA does not apply to international contracts i.e. where one contracting party is based in a foreign country outside Singapore.
- The Sale of Goods Act (SOGA) that governs contracts for the sale of goods in Singapore. According to the SOGA, any contract entered into for the sale of goods carries with it certain implied terms. For example: goods should be of satisfactory quality or goods that are sold on the basis of a sample or description should in reality correspond with that sample or description. If the goods sold contravene these implied terms then the SOGA entitles the buyer to reject the goods and terminate the contract or claim damages.
- If a website contains untrue pre-contractual statements that affect a customer’s decision making process then the e-retailer will be held accountable under the Misrepresentation Act. Hence, as an e-merchant you should familiarize yourself with this statute and be aware of your liabilities.
Protection and Security of Digital Data
- The Computers Misuse Act protects computers, computer programs, and data that is stored in computers from unauthorized access, modification, interception and interference.
- Privacy and protection of personal information: When a web user accesses a website or makes an online purchase, a record of his preferences and personal data is stored online. Given that an e-retailer might have access to or possess some personal or confidential information about his/her customers, (s)he must ensure that there is an information management policy to safeguard the information from inadvertent disclosure. This could take the form of employee access control, corporate firewalls, system audits or encryption technology.
- Security in credit card payments: The biggest obstacle in the growth of the e-commerce industry is the lack of security or the commonly held perception that there is a lack of security in e-transactions and that credit card details are capable of being intercepted. However, in most cases, the online transmission of such sensitive information is protected by using encryption technology that encodes the information before releasing it into the Internet. This reduces the chances of fraud as the credit card details are not really made known to the e-retailer but are rather kept within a secured encrypted environment. But as an online vendor, you must ensure the protection of any credit card data that is transmitted to you.
Intellectual Property Protection in Cyberspace
The ease with which pictures, information, and data can be transferred across the Internet has created the need to protect IP rights in cyberspace. Copyright law and trademark law are of particular significance in the e-commerce industry.
Copyright
Copyright is protected in Singapore under the Copyright Act and extends to creative work (such as literary works, computer programs, plays, music and paintings) that is tangible (i.e. is either recorded or in written form). Copyright also extends to work that is transmitted through the Internet. In Singapore, an author automatically enjoys copyright protection as soon as he creates and expresses his work in a tangible form. There is no need to file for registration to get copyright protection. Copyrights may be licensed by the owner to another party.
Copyright protection prevents anyone other than the owner of the copyright from copying, reproducing, broadcasting, publicly distributing, or adapting the work. Copyright infringement in Singapore occurs when one of a copyright owner’s exclusive rights is violated such as when someone copies, distributes, performs or displays all or part of a copyright work without the permission of the copyright owner.
Copyright and the Internet
The Copyright Act was amended in 1999 to improve copyright protection in the digital environment. The amendments clarified that copyright owners enjoy protection against the making of electronic and transient copies of their work. Online activities such as browsing of web sites or caching websites in order to enable better access to web users is not considered to be infringement of copyright protection. The amendments also detail the circumstances under which intermediaries such as Internet Service Providers are exempted from liabilities. Singapore also offers protection of foreign copyrighted works. The country is a signatory to major conventions such as the Paris Convention, Berne Convention, Madrid Protocol, etc. The only difficulty in prosecuting copyright infringements over the Internet is in identifying the infringing party. Nevertheless, there are efforts being made in this area in order to deal with these practical issues. The copyright and internet infosheet published by the Intellectual Property Office of Singapore is a valuable tool that discusses the issue of what might constitute copyright infringement on the Internet.
For more information on this topic, please refer to our guide on Copyright Law in Singapore.
Trademark
A trademark is a name or symbol secured by legal registration that identifies its owner’s product or service and distinguishes it from other products and services of other companies. A registered trademark gives its owners the right to exclude all other businesses from using a similar mark on related goods or services. Trademark registration under the Singapore Trademark Act only has effect in Singapore. To obtain trademark rights and protection in other countries, it is necessary to register the trademark in those countries or pursue international trademark registration through the Madrid Protocol. Anyone who copies the trademark or uses a similar trademark will be infringing upon the registered trademark. It should be noted that a suit for an infringement of a registered trade mark is only possible if the trade mark is registered.
Trademark and the Internet
Given the global nature of the Internet, there is a great potential for trademark clashes to occur in this domain. An e-retailer should be particularly careful about the use of meta tags as there lies the danger of infringing upon trademarks. Meta-tags are keywords that are embedded in the code of web-pages. Search engines index sites using these keywords which in turn help them provide relevant search results to match the inquiry made by a web user. Given that these meta tags are invisible to the users, some website owners may include famous trademarks or trade names so that the user will be directed to their sites instead of the genuine site that actually owns the trademark. Under Singapore law, in such cases, the original trademark owners can take action against the infringers.
Another area that one needs to be careful about is that of domain names. Given that a domain name can be registered by only one entity and is done on a first come first serve basis, there are chances of cyber squatters reserving domain names of registered trademark. The squatters can later resell these domain names to the original owner of the trademark or in some cases to their competitors. Sometimes, cyber squatters may also resort to misspelling a domain name so that it appears to be closely related to the original trade name or trademark. Therefore, it is imperative for e-merchants to register their trademark or trade name as early as possible and ensure that it does not infringe upon anyone else’s trademark. For more information, please refer to our Trademark Guide.
All in all, e-commerce owners must be mindful of the IP rights owned by third parties and ensure that they do not infringe upon those rights. The challenge of IPR protection in cyberspace is the difficulty of identifying the infringer (infringers can get away by using a false IP address), difficulty of identifying the location where the infringement took place (for instance, online material can be easily moved to another computer located in a foreign jurisdiction), and difficulty in identifying where the IP rights can be enforced (due to the territorial nature of IP rights).
Law governing Jurisdictional Issues in E-commerce
One of the major challenges posed by e-commerce is that of jurisdiction and choice of law in the event of any dispute. In general, a Singapore court will have jurisdiction over a matter if (a) the defendant is served with a claim in Singapore or (b) the court permits service on a defendant outside Singapore. Furthermore, a court judgment obtained in one country can be enforced against a defendant in another jurisdiction only in accordance with that jurisdiction’s enforcement rules. Choice of law is concerned with what legal principles will be applied in order to resolve a dispute. In other words, there is no blanket rule that in the event of a dispute, the laws of the country that claims jurisdiction over the issue will apply. If the web contract does not specify an explicit choice of law then the Singapore court will decide on which law will be applicable depending upon whichever law is most connected to the contract.
To learn more about setting up an e-commerce business in Singapore, refer to the following other articles in our five-part guide:
Starting an Online Business in Singapore – Step-by-Step Guide
Starting an Online Business in Singapore – Industry Overview
Starting an Online Business in Singapore – Taxation
Starting an Online Business in Singapore – Funding and Financial Assistance