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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY TRANSACTIONS, OUTSOURCING, AND COMMERCIAL CONTRACTS NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

Expanding a business into new markets presents a myriad of challenges, and companies should evaluate and consider financial plans, marketing strategies, operational issues, and corresponding legal implications in connection with any such expansion.

At this stage, many companies offering goods and services through mobile applications (App(s)) ask their legal advisors a common question:

"Can we provide customers in the new region [for example, the United Arab Emirates] with the same App we already use in other jurisdictions [typically, in the European Union or the United States] or do we need to change it? Do we also need to change our terms of use for the App? If so, how?"

There is no unqualified answer without first evaluating the circumstances on a case-specific basis. Below we briefly highlight questions that digital businesses should ask and answer when considering expanding into a new market.

Questions to Prompt Analysis

Start with the following basic questions:

  • What is the type of business?
  • What products and services are provided? (For instance, does the App function as a marketplace for third-party products or services, a platform selling its own goods, or a platform providing its own services?)
  • Are there any in-App purchases?
  • What functionalities does the App offer?
  • Does the App include a chat function allowing users to communicate?

Responses to these gating questions are essential to identify sector-specific and ecommerce regulations (for instance, health and safety regulations when the App provides health-related services or products, or telecom rules on telecom registration and data transmission if the App includes messaging functions).

Of note, the laws in the UAE stipulate that all invoices for products or services must be in Arabic, with additional languages optional. Ecommerce companies in the UAE must provide customers and authorities with their names, legal status, addresses, licensing bodies, and sufficient Arabic information about the product or service, including its specifications and contracting terms, payment, and warranty.

  • Which methods of interaction with customers are used? Does the App clearly disclose the applicable terms and conditions? Are these terms clear and comprehensive?
  • Is there a loyalty program? What are the terms and benefits of such program?
  • Are in-App purchases and subscription terms clearly explained and transparent to customers?
  • How are refunds, cancellations, and customer complaints handled?

The above questions are necessary to evaluate current practices and ensure they comply with the new market’s consumer protection laws. For instance, in the UAE it is mandatory to provide clear, accurate, and comprehensive terms of use in Arabic (it is permissible to have terms in both English and Arabic). Additionally, all information must be transparent and not misleading, and any provisions detrimental to customers will be deemed null and void.

Data Protection and Security

Another set of associated questions has critical importance with the rise of authorities’ focus on the protection and security of personal data.

  • What personal data is collected by the App? How is this data processed and where is it stored? Is there a risk that personal data will be provided by a minor?
  • What are the existing and planned data flows?
  • How is personal data protected? What (1) organizational and technical and (2) security and safety measures are implemented?
  • Are users informed about their data rights and can they easily exercise these rights (e.g., access, correction, deletion)?

Considering these questions assists in understanding both the current (expected) data processing activities and applicable data protection requirements, along with necessary safeguards to be implemented.

For example, while some jurisdictions allow companies to use legitimate interest as a basis for collecting and processing customers’ personal data, some jurisdictions (mainland UAE or the Sultanate of Oman) do not recognize such legal basis. Consequently, entering markets such as mainland UAE or the Sultanate of Oman would require amending existing processing practices and obtaining customers’ consent, which can be displayed to customers during the account registration process in the App.

Content and Intellectual Property

Another important set of questions relates to the content and intellectual property provided and used by the App.

  • Are the App’s materials or content properly licensed to be used in a new market?
  • Are the relevant trademarks registered to protect the brand of the business?

As trademarks have a territorial nature (meaning their protection is limited to the countries where they are registered), it is important to conduct preliminary trademark searches and file trademark applications prior to entering a new market.

  • Is the App’s content compliant with local regulations regarding hate speech and other restricted content?

Expanding a business and products into new markets requires thorough consideration of various legal issues. By addressing these issues prior to entering new markets, businesses can better navigate the complexities of market entry and ensure compliance with local laws and regulations.