Philippines Enacts New E-Commerce Regulation

On December 5, 2023, the Philippines government adopted the Internet Transactions Act of 2023 (ITA), a new law governing the country’s e-commerce industry.

The ITA, officially titled An Act Protecting Online Consumers and Merchants Engaged in Internet Transactions, Creating for This Purpose the Electronic Commerce Bureau, Appropriating Funds Therefor, and for Other Purposes, stipulates the rights and obligations of consumers, online merchants, e-marketplaces, and other digital platforms in the course of e-commerce transactions.

The ITA will apply to all business-to-business (B2B) and business-to-consumer (B2C) transactions carried out online in which at least one of the parties is located in the Philippines, or “where the digital platform, e-retailer, or online merchant is availing of the Philippine market and has minimum contacts therein”.

Online media content and consumer-to-consumer (C2C) transactions are not covered by the ITA.

Formulation of E-Commerce Bureau

The Internet Transactions Act of 2023 mandates that the Department of Trade and Industry (DTI) set up a new E-Commerce Bureau under its purview within six months of the Act’s effect.

The new Bureau will be responsible for various tasks to oversee the Philippine’s e-commerce industry. These include formulating policies, plans, and programs to develop the e-commerce industry and enforcing and ensuring compliance with the Internet Transactions Act of 2023.

It will also be tasked with tracking complaints of legal violations during e-commerce transactions (whether they are violations of the Act or another law) and referring them to the relevant authority.

Within one year of the Act coming into force, the Bureau must also establish an Online Business Database (OBD) of digital platforms, e-marketplaces, and online merchants engaged in e-commerce in the Philippines to provide transparency to consumers and the government.

While the Bureau will be responsible for overseeing the e-commerce market, the DTI maintains authority over the enforcement of legal matters related to the e-commerce industry, such as regulating the use of the internet for conducting e-commerce transactions, issuing subpoenas, compliance orders, takedown orders, and blacklisting online businesses.

The DTI is also required to set up an Online Dispute Resolution (ODR) platform within six months of the ITA’s effectiveness to facilitate alternate routes for dispute resolution for e-commerce stakeholders.

Obligations of various stakeholders

The 2023 ITA outlines the rights, obligations, and liabilities of consumers, e-commerce marketplaces other digital platforms, and e-commerce merchants during e-commerce transactions.

To help stakeholders navigate their rights and obligations, the DTI is required to provide a Code of Conduct for all businesses engaged in e-commerce, and issue guidelines, rules, and regulations for the industry when necessary.

Obligations of consumers

Online consumers are required to exercise “ordinary diligence” when carrying out internet transactions. This means that a consumer cannot cancel an order after they have paid for it, or, in the case of perishable goods, when the goods have already been transferred to a third-party delivery service. However, a consumer may cancel if:

• The consumer uses a digital payment method and authorizes the crediting of the payment despite cancellation;
• The consumer reimburses the third-party delivery service;
• Cancellation is permitted for a fee; or
• The parties agree to the cancellation.

Nonetheless, consumers are entitled to remedies if, without fault of their own, the product is defective, malfunctioning, or lost, or if the merchant or e-retailer fails to fulfill warranty requirements or other liabilities stipulated in the contract.

Obligations of e-commerce marketplaces

E-commerce marketplaces, or “e-marketplaces” as they are called in the ITA, are responsible for ensuring that transactions that occur on their platforms comply with a variety of requirements on overseeing the merchants and products that feature on their platforms.

E-marketplaces have a relatively broad scope within the ITA, as they are defined as any digital platform that:

• Is engaged in business is to connect online consumers with online merchants;
• Facilitates and concludes the sales, and processes the payment of products, goods, or services through the platform;
• Facilitates the shipment of goods or provides logistics services and post-purchase support within such platforms; and
• Otherwise retains oversight over the consummation of the transaction.

The e-marketplaces are responsible for ensuring that transactions that are carried out through their platforms adhere to certain requirements. This includes (but is not limited to ensuring that transactions:

• Are identifiable as e-commerce transactions;
• Identify the person or persons on whose behalf the e-commerce transaction is made; and
• Identify promotional offers and ensure that the conditions for qualifying for the promotional offers are accessible, clear, and unambiguous.

As far as possible, e-marketplaces must also require all merchants using their platform (both foreign and domestic) to submit certain information and documentation before listing on their platforms, including:

• Name of the merchant accompanies by at least one valid government-recognized document (ID card for individuals and business registration for businesses);
• Address of the merchant;
• Contact details of the merchant (mobile or landline number and e-mail address); and
• For merchants selling services related to a regulated profession, proof of membership registration with a related professional body.

In addition, e-marketplaces are required to keep a list of all the merchants registered on their platforms, including all of the information listed above.

Importantly, the e-marketplaces are also responsible for protecting the privacy of consumer data in compliance with the Philippines’ Data Privacy Act of 2012. The e-marketplaces must ensure minimum information security standards set by the E-Commerce Bureau, the National Privacy Commission (NPC), and other government agencies.

Ensuring that merchants comply with their obligations is also a responsibility of the e-marketers, who are required to ensure that they correctly list their product offerings, including the name and brand of the goods and services, price, description, and condition.

Finally, e-marketplaces are also obliged to prohibit the sale of regulated goods without the appropriate licensing and provide a mechanism for both consumers and merchants to report users who violate the relevant laws.

Obligations of merchants and e-retailers

Merchants and e-retailers (hereinafter referred to as “merchants”) are obliged to ensure that their products and services meet requirements on price tags stipulated in Article 81 of the Consumer Act of the Philippines (which prohibits the sale of a product without an appropriate price tag or selling at a price higher than that stated on the price tag). Merchants must also issue paper or digital invoices for all sales.

Merchants are required to ensure that the consumer receives the goods purchased online and that the goods meet the following requirements:

• Complies with the description provided and the purposes for which it is intended;
• Complies with the sample, picture, or model of the goods shown to the consumer upon request and any additional details provided to the consumer upon request; and
• Is fit for the purpose required by the consumer as communicated by the merchant.

All goods delivered must also be delivered together with all the necessary accessories, and any user manual must be printed in either Filipino, English, or both.

There are certain requirements for the type of information that a merchant must publish on its homepage on the e-marketplace. This information includes:

• Corporate and trade business name;
• Address of physical shop or place of business;
• Contact details, including phone number and email address; and
• Details of membership in a professional body if the merchant sells regulated products or services.

As with e-marketplaces, merchants are also required to protect the privacy of consumer data in compliance with the Data Privacy Act of 2012.

Liabilities and penalties for violations

Consumers have the right to claim damages by filing a case with the DTI within two years of the incident taking place.

Merchants and e-marketplaces may be liable to penalties, takedown notices, cease-and-desist orders, and blacklisting for violations of the ITA.

Take-down orders

The DTI may issue a takedown order to a merchant and e-marketplace requiring them to remove a listing or offer on a webpage, website, or application if it is found to sell or lease:

• Prohibited goods or services;
• Goods or services subject to a cease-and-desist order;
• Goods or services previously subject to a takedown order; and
• Goods or services that otherwise threaten public or personal safety, or compromise financial or personal information.

Entities that receive a takedown order have 48 hours to be heard, and the order will be in effect for a maximum of 30 days unless otherwise extended.

Blacklisting

Websites, webpages, online applications, social media accounts, or other platforms that fail to comply with a compliance order or receive a takedown order or cease and desist letter may be added to the blacklist maintained by the DTI. The blacklist will include the specific violation committed by the entity, and, if the violation consists of failing to abide by a compliance order. This blacklist will be made publicly accessible and provided to digital platforms and financial regulators.

If the entity corrects the violation, then the DTI may remove the entity from the blacklist of its own accord or upon request, without the need for a hearing.

Penalties

Merchants and e-marketplaces may be liable to a fine if they are found to violate certain provisions of the ITA. These fines range depending on the severity of the violation and the number of offenses that the entity in question has previously committed.

The penalties include:

• A fine of PHP 20,000 (US$356) to PHP 1 million (US$17,811), depending on the number of offenses committed, to merchants that are found guilty of deceptive, unfair, or unconscionable online sales;
• A fine of PHP 20,000 to PHP 1 million, depending on the number of offenses committed, to merchants, e-marketplaces, or digital platforms that refuse to comply with a takedown order;
• A fine of PHP 100 (US$1.78) to PHP 20,000, depending on the value of the goods in question, to consumers who violate the ITA’s regulations on returns and to merchants who violate the ITA’s regulations on warranties; and
• A fine of PHP 50,000 (US$890) to PHP 100,000 (US$1,781), depending on the number of offenses committed previously, to e-marketplaces, digital platforms, and merchants found to fail on certain obligations.

The DTI will adjust the above fines every five years. Takedowns will be implemented in conjunction with the related fine.

Transition period for complying with the Internet Transactions Act of 2023

The ITA took effect 15 days following its publication, which was on December 5, 2023.

Affected companies and merchants will have 18 months to comply with the new requirements. Meanwhile, a committee of relevant government departments will have a period of 90 days from the ITA taking effect to formulate the rules and regulations required to implement the law.

• Previous Article Navigating Personal Data Protection in Indonesia
• Next Article Understanding Singapore’s 2024 GDP Forecast