Legal Updates

As Filipinos increasingly rely on technology for their daily transactions, the associated risks also grow. From shopping and financial dealings to communication and entertainment, the internet has undoubtedly become an indispensable tool for the modern society. Hence, there is an undeniable need for regulatory guidelines in order to protect the interests of consumers and businesses engaged in online transactions.

On July 24, 2023, the Philippine Internet Transactions Act of 2023 (the “Act”) was signed into law with a primary goal to promote and maintain a robust electronic commerce (e-commerce) environment. The Act aims to build trust between online merchants and online consumers, covering a broad spectrum of business-to-business and business-to-consumer internet transactions within the mandate of the Department of Trade and Industry (DTI). Its jurisdiction extends to situations where one party is situated in the Philippines, or where digital platforms, e-retailers, or online merchants avail themselves of the Philippine market.

The Act allows for extra-territorial application to ensure accountability and prevent evasion of liability by parties who lack legal presence in the country. However, it is essential to note that consumer-to-consumer transactions, or those conducted for personal, family, or household purposes outside the ordinary course of business, and online media content fall outside the coverage of the law.

Authority and Responsibilities of the Department of Trade and Industry

The DTI exercises regulatory jurisdiction over the use of internet for e-commerce. To facilitate the provisions of the law, an “E-Commerce Bureau”(the “Bureau”) must be created under the DTI six months after the law took effect on 20 December 2023.

The key powers given to the Bureau include enforcing digital platform and online merchant registration, addressing business and consumer complaints, investigating violations, recommending the filing of appropriate complaints, and promoting consumer literacy to combat online fraud. To ease the regulatory function, the Bureau is also tasked to establish a database of digital platforms, e-marketplaces, e-retailers, and online merchants engaged in e-commerce in the Philippines.

The DTI Secretary plays a crucial role in ensuring compliance with the Act, as they are vested with the authority to issue summons, subpoenas, and compliance or takedown orders. A takedown order is deemed necessary if, after investigation or verification, the DTI Secretary deems that a listing or offer on a website, platform or application should be removed. Various transactions may warrant removal, and a takedown order shall be directed at the e-retailer, online merchant, or owner/operator of the e-marketplace or digital platform in the following scenarios:

1. Sale or lease of goods or services where it is apparent from the photo or description that the goods are prohibited or regulated under existing laws (e.g. endangered animals, illicit drugs, fireworks and other explosives, or counterfeit goods);
2. Sale or lease of goods or services subject of a cease and desist order issued by an appropriate government agency;
3. Sale or lease of goods or services online previously subject of a takedown order but which are subsequently reposted and proliferated online by the seller under investigation and;
4. Othe transactions that may threaten public or personal safety or compromise financial or personal information.

In cases of non-compliance with a compliance or takedown order, the DTI Secretary is empowered to blacklist online businesses. This blacklist will be made publicly available and accessible to digital platforms and financial regulators. To avoid this, the DTI is tasked to formulate a Code of Conduct to help businesses engaged in e-commerce understand their roles and responsibilities.

Rights and Obligations of Parties in Internet Transactions

Some of the key provisions of The Internet Transactions Act of 2023 establish obligations for both consumers and businesses engaged in e-commerce to foster a secure online transaction environment.

Under the Act, “online consumers” refer to natural or juridical persons who purchase, lease, receive, or subscribe to goods or services over the internet for a fee. They are expected to exercise ordinary diligence in any internet transaction. For example, subject to certain scenarios that may not be covered, online consumers may not cancel confirmed orders if payments have been made, the goods are perishable, or the goods are already in the possession of a third-party delivery service or in transit to the consumer. In turn, online consumers retain the right to seek remedies such as repair, replacement, refund, or other solutions for defect or malfunctions, all without incurring any additional cost and without fault on their part.

Conversely, “e-marketplaces” share the responsibility of observing ordinary diligence. E-marketplaces are defined as digital platforms that connect online consumers with online merchants and facilitate their internet transactions. The Act mandates e-marketplaces to ensure that the internet transactions on their platform, as well as promotional offers, are clearly identifiable. They can also require all online merchants to submit specific information under the law before listing with their platforms. Additionally, an e-marketplace may be required, through a subpoena, to provide specific details if there is an investigation suggesting that the platform is being used in furtherance of a crime.

Even if the digital platform lacks oversight over the consummation of an internet transaction, the law still emphasizes its obligations to protect both consumers and regulate online merchants for safe internet transactions.

Finally, responsibilities under the Act are also imposed upon “e-retailers” or online merchants. The law primarily requires them to clearly indicate the price, condition, type, quantity, quality, and other necessary information about the goods or services they offer. It is essential that the goods received by the online consumer precisely match the information provided by the online merchant, including all accessories and the functionality expected from the delivered goods unless otherwise provided by law. Digital goods or services providers must also adhere to the same assurance that their products are similar to how they were advertised or described online. The law further mandates e-retailers to publish specific information to achieve its main goal of ensuring seamless and safe internet transactions for all parties involved.

In case of any grievances, parties may avail themselves of the internal redress mechanism available on the digital platform, e-marketplace, or e-retailer before filing a complaint before any court or government agency. Additionally, online dispute resolution may serve as an alternative mode for resolving disputes among online consumers, online merchants, e-retailers, e-marketplaces, and other digital platforms.

Liabilities and Penalties

E-retailers, online merchants, e-marketplaces, or digital platforms are primarily liable for indemnifying online consumers in civil actions or administrative complaints arising from internet transactions. Failure to exercise ordinary diligence may also result in subsidiary liability for e-marketplaces or digital platforms to the extent of the damages suffered by the online consumer. On the other hand, an e-marketplace or digital platform may be solidarily liable in cases of non-removal of prohibited goods or services on their platform.

To further strengthen the Act, consumers may claim damages through legal proceedings, and administrative fines may be imposed against violators.

As the State recognizes the value and potential of the digital economy, the Internet Transactions Act of 2023 aims to effectively regulate and protect consumer rights. This legislative step marks a significant stride towards establishing a safe and secure digital marketplace for all.

This article is only for informational and educational purposes.  It is not intended as a legal advice or opinion.