Internet Transactions Act and Philippine E-commerce

Samantha Isabel A. Mendoza

The Philippine e-commerce market is experiencing continuous growth. E-commerce sales are expected to grow at a compound annual growth rate of nine percent (9%). Against this backdrop, Republic Act No. 11967, or the Internet Transactions Act of 2023 (“ITA”) was signed into law last December 5, 2023.

The ITA aims to promote and regulate the e-commerce market in the country, to protect consumer rights and data privacy, encourage innovation, promote competition, secure internet transactions, uphold intellectual property rights, ensure product standards and safety compliance, and observe environmental sustainability.

The ITA applies to all business-to-business and business-to-consumer internet transactions which are within the mandate of the Department of Trade and Industry (“DTI”), where one of the parties is situated in the Philippines, or where the digital platform, e-retailer or online merchant is availing of and has minimum contacts to the Philippine market.

Online consumers, e-marketplaces, and other digital platforms are obliged under the ITA to exercise ordinary diligence in all internet transactions.

E-marketplaces and digital platforms must ensure that the internet transactions on their platforms, including promotional offers, are clearly identifiable. They must maintain a list of all online merchants with their relevant information. They are also required to protect the data privacy of consumers. E-marketplaces and digital platforms are directed to provide an effective and responsive redress mechanism for both online consumers and online merchants.

E-retailers and online merchants must indicate the price of goods and services offered consistent with the Consumer Act, ensure that the goods received by online consumer are in the same condition, type, quantity, and quality as described and shown by them in their online listing and is fit for the particular purpose required, and ensure proper and complete delivery of goods or services to online consumers.

The ITA grants regulatory jurisdiction to the DTI as to the use of the internet for conducting e-commerce by e-marketplaces, online merchants, e-retailers, digital platforms, and third-party platforms, ancillary to any duly constituted regulatory jurisdiction granted to an agency by existing laws.

The DTI Secretary is given the power to issue summons, subpoenas, and compliance orders to require conformity with the ITA. He may issue an ex parte takedown order to remove a listing/offer of a product upon investigation and verification that the same is in violation of the law, as well as establish a list of blacklisted internet platforms that fail to comply with a compliance order or are subject of a takedown order pursuant to the ITA.

The DTI is mandated to establish the E-Commerce Bureau within six (6) months from the effectivity of the ITA, which shall be tasked to formulate policies, plans and programs for the development of e-commerce in the Philippines, monitor compliance with the ITA, as well as to investigate any complaints on internet transactions and violations of the ITA. The E-Commerce Bureau is also mandated to establish an online business database of digital platforms, e-marketplaces, e-retailers, and online merchants engaged in e-commerce in the Philippines within one (1) year from the effectivity of the ITA.

An online dispute resolution (“ODR”) platform shall also be developed by the DTI within six (6) months from the effectivity of the ITA, to facilitate an alternative mode of dispute resolution for online consumers, online merchants, e-retailers, e-marketplaces and other digital platforms.

The ITA allows for extraterritorial application with regard to persons engaging in e-commerce who avail of the Philippine market, notwithstanding their lack of legal presence in the country. Under the ITA, an aggrieved party must avail of the internal redress mechanism of the digital platform, e-marketplace or e-retailer prior to the filing of a complaint before any court or government agency, or resorting to alternative dispute resolution. Such mechanism is deemed exhausted if the complaint remains unresolved after seven (7) calendar days from filing thereof.

E-retailers or online merchants are primarily liable for indemnifying the online consumer in civil actions or administrative complaints arising from internet transactions.

In contrast, e-marketplaces and other digital platforms are subsidiarily liable to the online consumer, to the extent of damages suffered by the online consumer as a direct result of the transaction, if it failed to: 1) exercise ordinary diligence, resulting in loss or damage to the online consumer; 2) act expeditiously, after notice, in removing or disabling access to goods or services that either infringe on another’s intellectual property rights or is subject to a takedown order by any appropriate government agency; or 3) provide its contact details despite notice, for those with no legal presence in the Philippines.

However, e-marketplaces or other digital platforms are solidarily liable if they fail, after notice, to act expeditiously to remove or disable access to goods or services appearing on its platform that are prohibited by law, imminently injurious, unsafe or dangerous.

The ITA empowers the DTI to impose administrative fines of up to PHP 1 million as penalty against online merchants, e-retailers, e-marketplaces and other digital platforms, without prejudice to the civil or criminal liability of the offending party, and in addition to the penalty of takedown, by permanently removing any listing or offer on any internet platform.

As the establishment of the E-Commerce Bureau, ODR procedure, and the issuance of the implementing rules and regulations of the ITA are still pending, the impact of the ITA on e-commerce in the Philippines has yet to be seen. It is hoped that the ITA will further improve e-commerce in the Philippines and strengthen consumer confidence in online transactions.

This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.

Samantha Isabel A. Mendoza is an Associate of the Corporate & Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

[email protected]
(632) 8830-8000

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