eCommerce Glossary: Disclosure Statement

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What is a Disclosure Statement’s Purpose?

What Is A Disclosure Statement?

For a business, a disclosure statement implies the information that the business is legally obliged to provide to the public by the land laws. A business has to follow compliance with a variety of disclosure requirements which relate mainly to the following areas:

  • Consumer protection
  • Companies Act regulations
  • E-commerce business practices
  • Services provided to customers
  • Data collection and protection
  • Privacy policy
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Disclosure statements are made mandatory by the Government to ensure the protection of consumer and investor rights. The disclosure statement intends to inform the customers or investors about certain data so that they don’t end up making a misguided decision.

Let us understand with an example of a disclosure statement. Consider that you run an online blog where you publish reviews of electronic gadgets. You always make sure that your reviews are impartial and oriented towards providing the best benefits to your viewers. In this case, you will be required by the law to issue a disclosure statement on your blog site, provided you perform any of the following activities:

  • Even though you provide neutral reviews, you are an affiliate marketer for one or more of the products you have reviewed.
  • You share the link of the products that take the visitor to the product’s purchase page or share any promotional content in your blog that acts as a revenue source.

A simple example of a disclosure statement in the above case would be: “We are an affiliate in the XYZ Associate Program, an affiliate marketing program aimed to provide an opportunity for us to get a small affiliate commission by linking you to xyz.com and any of its affiliated sites.” So, as you can understand, it is a matter of legal compliance and an ethical issue that gets addressed when you include a disclosure statement.

The Importance Of Understand The Different Types of Disclosure Statements

Types Of Disclosure Statement

Now, that we have understood what a disclosure statement is and its significance, let us understand the actual legal requirements of disclosure.

Disclosures On Consumer Protection

Any company that sells its products or services to consumers has to follow these disclosure requirements. Different countries have different disclosure compliance requirements; however, the focus is always to ensure that the information is provided clearly and understandably to help them make informed decisions.

This information generally includes:

  • Name and address of the supplier.
  • A detailed description of the product or service being sold.
  • Unit price, order quantity, and total order value of the product or service.
  • Whether the price is inclusive of discounts, taxes, and delivery charges.
  • Modalities of payment method, delivery, installation, service, performance, order cancellation.
  • The validity period of the offer.
  • Rights of the customer after placing the order.

Disclosures On Company Law Compliance

Every country has a Companies Acts in effect that is used to regulate how companies are formed and run in that country. Companies must abide by this Companies Act to start or continue doing business in the country. Few basic disclosures that companies have to generally mention on their website, invoices, letterheads, or receipts are mentioned below:

  • Registered name of the company.
  • Valid registration or identification number.
  • Address of the place of registration.
  • Valid address for communication.
  • Valid contact details like phone number, fax number, email address, etc.
  • Type of company - private limited or public.

In case it is a public limited company, the Law requires the companies to disclose all their detailed business activities and audited financial statements in their quarterly or annual reports, to ensure the protection of shareholders’ rights.

Disclosures On eCommerce Business

Due to the rapid boom of e-commerce ventures, Governments across the world have come up with disclosure requirements to ensure that the business is conducted legally and ethically. Generally, any e-commerce venture is treated as a service or information provider since in most cases they act as a platform to bring together sellers and buyers. Some basic disclosures that are required to comply are:

  • Business name, address, and contact details of the e-commerce entity.
  • Tax registration number.
  • All the compliance requirements on Consumer protection if it operates on the B2C model.

In case it operates on a B2B model, the company may choose not to disclose the various modalities of order execution and instead form a case-to-case basis agreement with their customer.

Disclosures On Service Regulations

These sets of disclosures generally are related to the services offered by a company. Even though it does not directly address the sale of goods, it includes any after-sale service and workmanship related disclosures. Generally, the following information is required to be disclosed:

  • An official and valid contact and address details for registering complaints.
  • Any after-sales service warranties.
  • Detailed scope of service agreement.
  • Service provider’s affiliation to any trade body that requires adherence to a code of conduct, if applicable.
  • Service provider’s insurer details, if applicable.

Disclosures On Data Protection

This is done to ensure that customer’s data is not misused. Basi c disclosures that any company has to comply with when it is collecting customer’s data are:

  • The identity of the data collector and controller.
  • The purpose(s) for data collection.
  • The intention to store the data, the duration of data storage, and any intention to process it further.
  • Any intention to share the data with other companies and details of those companies and their purposes.
  • Whether the customer must share the data and any eventual loss of benefit if the customer refrains from sharing the data.

Dsclosures on Privacy

Cookies are used by the website to enhance the customer experience. However, to do so, companies collect data from the customers, which include their location through these cookies. Disclosure about the cookies collecting the data and consent from the customer is required to be followed by all websites.

This article's objective has been to provide a brief overview of what is required as a disclosure so that you can better understand how it affects you. There are many additional disclosure requirements you need to follow based on case-specific instances.

For example, you have to disclose health warnings if you’re selling tobacco products, as per the Government directives applicable in the place of your business. Hence, it is always advisable to seek legal guidance to understand the intricacies of the Government’s regulatory requirements and ensure compliance.