Online Businesses and Digital Products: Where Legal Risk Really Lies

Running an online business offers incredible flexibility. You can reach a global audience from your laptop, scale without physical inventory, and automate your sales while you sleep. But this ease of entry often creates a false sense of security.

Because the barriers to starting are low, many business owners assume the legal barriers are equally low. It is common to see course creators, e-commerce store owners, and SaaS founders slap a generic "Terms and Conditions" template on their footer and call it a day.

Unfortunately, a generic policy rarely "does the job." In fact, it often creates more liability than having nothing at all, because it promises protections you don't actually have or sets terms that violate Australian law.

Your website isn’t just a marketing tool; it’s a binding contract with every customer who visits and buys from you. When your digital house is in order, it quietly protects you in the background. When it isn’t, specific areas of your business become ticking time bombs.

Here is where the legal risk actually lies for online businesses and digital products.

1. Refunds and Cancellations (The ACL Trap)

The most common misconception in the digital product space is the idea of "No Refunds on Digital Goods."

Many international templates state that because a file is downloadable, it cannot be returned, and therefore, no refund is owed. Under Australian Consumer Law (ACL), this is often incorrect.

If you sell to Australian consumers, you cannot sign away their statutory guarantees. If your online course doesn’t match the description, or if your software has a major failure, you may be legally required to provide a refund—regardless of what your Terms and Conditions say.

The Risk: Misleading consumers about their refund rights is, in itself, a breach of the ACL. The ACCC has come down hard on digital platforms that blanket-ban refunds. Your terms need to walk the fine line between protecting your revenue from "change of mind" returns (which you can usually refuse) and honouring statutory guarantees.

2. Intellectual Property: Who Owns What?

In the digital world, content is currency. But are you sure you own yours?

This risk often hides in two places:

1. Contractors and VAs: If you hire a graphic designer, copywriter, or developer to build your product, they generally own the IP rights to that work unless there is a written agreement assigning those rights to you. Paying the invoice does not automatically transfer ownership.

2. User-Generated Content: If you run a community, membership, or platform where users post content, your terms must clearly license you to use that content. Without this, using a member's testimonial or case study in your marketing could be copyright infringement.

   
   

3. Misleading Claims and "Puffery"

Online marketing moves fast. Sales pages use bold headlines, earnings projections, and transformation promises.

There is a legal difference between "puffery" (exaggerated promotional statements no reasonable person would take literally) and misleading claims.

In the coaching and digital course industry, specifically, income claims are a massive risk area. If you promise a "system to generate $10k months," you must be able to substantiate that claim with evidence. Disclaimers can help, but they cannot cure a misleading overall impression.

4. Data Collection and Privacy

Data is the lifeblood of online business, but it is also a liability.

If your business has an annual turnover of more than $3 million, or if you trade in personal information (which many digital businesses do by selling lists or data), you are bound by the Privacy Act 1988. Even smaller businesses are wise to comply to build trust and prepare for growth.

The risk here isn't just about having a Privacy Policy link in your footer. It is about whether your actual practices match that policy.

• Are you retargeting with pixels?

• Are you collecting email addresses for a waitlist?

• Where is that data stored?

If your policy says you "never share data" but you use Facebook Custom Audiences (which involves uploading customer lists to Meta), you may be technically breaching your own policy.

5. Platform Terms vs. Your Terms

Building a business on rented land (Instagram, YouTube, Etsy, or even Shopify) carries inherent risk.

We often see businesses rely entirely on the platform's terms to protect them. However, the platform's terms are written to protect the platform, not you.

If you sell a course hosted on a third-party site or sell goods via a social media shop, you still need your own direct agreement with the customer. If the platform shuts down your account tomorrow, or if a payment dispute arises, you need your own robust Terms of Sale to rely on regarding liability, delivery, and dispute resolution.

The "Quiet Protection" of Good Design

Legal documents for online business shouldn't be roadblocks; they should be guardrails.

When properly set up, custom terms of trade, privacy policies, and contractor agreements act as a filter. They manage customer expectations before the purchase is made, deter IP theft, and provide a clear roadmap for resolving disputes without expensive litigation.

Don’t wait for a refund request to turn into a consumer law complaint. Review your digital footprint today and ensure your legal infrastructure is as robust as your marketing funnel.