How Much Trouble Could You Be In If Online Customers Can Hide Where They Are?

One of the largest Internet providers in New Zealand is now letting customers pretend they're somewhere else when it comes to buying things online. That's likely to be a thorn in the side of digital content providers such as movie producers and e-book publishers, but it could also set up online retailers for a whole host of complications. What happens when your transaction is subject to the laws of a country you're not expecting?

Slingshot, the third-largest ISP in New Zealand with about 10 percent of the market, last week rolled out its Global Mode service, which lets users block Internet geolocation. That's used by many digital content providers to prevent movies and e-books from being viewed in regions where they haven't officially been licensed.

According to the Wall Street Journal, the service is officially for international visitors, but Slingshot admits it can't stop locals from using the feature. That means digital content that would otherwise take months or years to arrive from the other side of the world can be available as soon as it's online in the U.S.

That in itself isn't a problem for most E-tailers, since they're not delivering digital goods. If a customer buys a pair of shoes, those shoes have to be delivered to a physical address—which pretty much blows the geoanonymity of the customer, right?

Maybe not. Retailers already have limited control over who can buy from them, thanks to online-buying proxies such as BayRu, which lets Russian consumers buy from U.S. retailers, using a Chicago-area address to transship the merchandise. The advantage for customers is that BayRu handles the shipping, customs and currency issues. The downside: BayRu charges a hefty fee for being the middle man.

But what happens when the expensive middle man can be easily cut out of the transaction? Say a customer in New Zealand masks her location and buys a pair of shoes, having them shipped to a company in New Jersey that handles transshipping for a smaller fee. (The currency issue? That customer can claim she's from New Zealand but visiting friends in New Jersey.)

Now suppose the shoes are somehow allegedly defective, and the customer ends up in the hospital after falling down a flight of stairs. Could the retailer end up being sued in a New Zealand court?

And if that happened, would not knowing that the customer was from New Zealand be a defense for the retailer? After all, if that customer bought the shoes on an actual (as opposed to virtual) trip to the U.S., then went home and fell down stairs, would that make a legal difference?

That might depend on the e-tailer's terms-and-conditions page. But that's not something any retailer would want to depend on, since geoanonymous proxies could put a customer anywhere in the world—meaning there are only a few hundred sets of laws that the retailer could be sued under.

Of course, that's just the worst-case scenario. What happens if the retail is a merged channel/omnichannel chain that sends coupons and catalogs to customer addresses unless they opt out? That means the transshipping service in New Jersey could be getting a lot of CRM-based coupons that will never be delivered—dragging down the coupon response rate, and distorting the statistics for that particular CRM program.

Then there's the remote possibility that a retailer could get in trouble for shipping a product that's illegal or unlicensed where the customer actually lives. (The retailer not knowing probably would be a defense in that case, but who wants to make that defense in a court half a world away?)

Internet geolocation blocking could be messy in a dozen other ways. In practice, the only way to deal with it may be to beef up terms and conditions with as much location-based legalese as you can. Either that, or expand your online delivery to the whole world—that way, at least it's not someone else who gets paid for that long-distance delivery.