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California regulates e-commerce

A landmark California sales law goes into effect, aiming to protect consumers from fraud on the Internet. It could also help legitmize electronic commerce.

A landmark California sales law that protects consumers from fraud on the Internet and could help legitmize electronic commerce quietly went into effect January 1.

The law--the first of its kind for a state--applies provisions for telephone, mail-order, and catalog sales operations to online vendors.

Under the law, online vendors can't accept payment from consumers unless they disclose through email or their site their refund policies, addresses, and contact information so that customers can complain and resolve disputes.

In addition, online vendors who don't ship products or give refunds within the time frame of their policies are subject to prosecution. Violators can receive up to six months in jail or a fine of $1,000.

Introduced last year by now retired Assemblywoman Jackie Speier, the bill was signed by Governor Pete Wilson in September.

The law is supposed to reduce online consumer fraud, and was supported by Attorney General Dan Lundgren. His office will investigate tips about violating merchants, as well as, seek out online business that aren't in compliance, a spokesperson from his office said today.

The law went into effect this week, although it got little attention from e-commerce supporters. The legislation, however, was discussed on a mailing list for the San Francisco chapter of Webgrrls, a network for businesswomen on the Net. Members were urged to investigate how the law will apply to them.

Analysts say the law will give consumers confidence by holding online vendors accountable.

"All of those actions that are forcing business regulations to the Internet will advance the marketplace," said Aaron Feigin of Fleishman Hillard, which represents electronic commerce organizations such as eTrust and CommerceNet.

"Being responsible for what you're selling as a vendor online is a very appropriate element of the adoption of the Internet as a marketplace," he said. "Consumers must have trust in the medium for it to be successful."

Ann Navarro owns WebGeek Communications, a Web design company based in California. She is seeking a legal opinion about some of the law's provisions for herself and her customers. For example, she uses a post office box for her home office, which in some cases may not apply as a legal address.

Updating current customers' sites with return policies and contact information could be time consuming, she said.

"It will be a few updates here and there on some Web sites, and I will probably write it off as a good-will service for our customers," she said. "But it might add a half-hour or so of work for building sites in the near future, and that could cost them."