The prevalence of E-Commerce transactions in the Philippines had increased as the pandemic hit the country. But the increase in these electronic transactions between merchants and consumers also paved the way for fraudulent transactions in e-commerce, creating distrust in the Philippine e-commerce system, as well as between businesses and consumers, and against the online platforms where online business transactions are facilitated.
These apparent challenges to the Philippine e-commerce, along with the numerous complaints involving online businesses, the legislators sought a stricter regulation of online businesses and the transactions they enter using internet platforms. Hence, the proposed Senate Bill No. 1846, otherwise known as the Internet Transactions Act of 20221, introduced in the Senate with the following objectives:
- promoting and maintaining a robust electronic commerce environment in the Philippines, by ensuring trust between online merchants and consumers;
- increasing competition and improving productivity by establishing secure and reliable e-commerce platforms where goods and services are transacted online with appropriate transparency and utmost efficiency;
- encouraging the creation of new products, services, business models and processes;
- ensuring effective regulation of commercial activities through the internet or electronic means;
- ensuring consumer rights and data privacy protection;
- encouraging innovation and promoting fair advertising practices and competition; and
- ensuring that online transactions are secured, that intellectual property rights are respected, and that product standard and safety are observed.2
The provisions of the Bill apply to internet transactions between businesses and between business and consumers, including retail of consumer goods and non-financial services through the internet, online travel, online media, and online delivery – leaving transactions between consumers and financial products and services, out of the coverage. Further, under the proposed legislation, entities purposefully availing of the Philippine market for e-commerce activities are considered doing business in the Philippines and shall be subject to applicable Philippine laws and regulations, which shall be ascertained by the accessibility of goods and services to consumers in the Philippines.
The Bill also mandates the creation of E-Commerce Bureau3, augmenting the regulatory powers of the DTI through its Secretary4; as well as the creation of an online business registry5, and the introduction of a Code of Conduct6 for consumer rights and obligations involving internet transactions, imposing liabilities not only to the online merchants, but also to e-marketplaces and other digital platforms as well as online delivery platforms and businesses thru a facility for online dispute resolution7, where consumers can raise their grievances.
The Bill likewise introduces the development and use of an E-Commerce Philippine Trustmark to provide assurance of safety and security in internet transactions; as well as the imposition of penalties8 consisting of fines.
E-Commerce Bureau
The Bill introduces the creation of E-Commerce Bureau under the Department of Trade and Industry for the purpose of regulating commercial activities done through the internet and with the aim of protecting consumers who engage in online transactions, enabling the DTI, through the Bureau to exercise regulatory jurisdiction over qualified e-marketplaces, e-retailers, online merchants, and other digital platforms that sell or allow the sale or exchange of goods, services, or digital services, and are purposely availing of the Philippine market, including the promulgation of rules and regulations covering these activities and to impose fines to compel compliance with such rules.
In its task to regulate internet trades, the Bill confers the Bureau's Director the power to issue summons, subpoena ad testificandum and subpoena duces tecum to the alleged violators or witnesses to compel their attendance and production of documents in investigations or proceedings.
Online Business Registry (OBR)
The Bureau in coordination with the Department of Information and Communications Technology is also tasked to establish, manage and maintain an OBR that will allow the government and the consumers access to data and information of registered online business entities to verify the validity, existence, and other relevant information on business entities.
In connection with this, individuals engaged in e-commerce are also required by the Bill to register in order to encourage the formation of business enterprises, the growth and development of the e-commerce market, and the protection of online consumers. For these purposes, the Bill has laid down the qualifications to be leally authorized to engage in e-commerce in the Philippines, as follows:
- individuals duly licensed with the DTI as sole proprietor;
- juridical entities duly registered with the SEC as corporations, OPC, or partnerships;
- cooperatives duly licensed by the CDA;
- foreign corporations duly licensed by the SEC and non-resident single proprietors duly registered with the DTI, who shall comply with the Retail Trade Liberalization Act; and
- non-resident foreign individuals or juridical entities who had complied with the extra-territorial provisions under Section 5 of the Act.
Powers of the Secretary of Trade and Industry Under the Act
The Bill further delegates upon the DTI Secretary the power to order the takedown, made inaccessible or rendered commercially inaccessible in the Philippines, any website, webpage, online application, social media account, or other similar platforms that are violative of the Act and other applicable laws. The Secretary is likewise conferred with the power to issue Cease and Desist Order of the aforestated platforms from marketing or offering non-financial goods and services that are accessible in the Philippines.
Code of Conduct on Consumer Rights and Obligations Involving Internet Transactions
In order to build trust in internet transactions and to protect and uphold the interests of consumers at all times, the proposed Act mandates all businesses engaged in e-commerce to abide by the principles imbued in the Code of Conduct under Section 17 thereof. This Code shall guide and regulate the consumers and the businesses engaged in e-commerce in their dealings with each other, including the obligations of e-marketplaces and other digital platforms, online delivery service platforms, e-retailers and merchants, as well as the rights and obligations of online consumers.
E-Commerce Philippine Trustmark
An E-commerce Philippine Trustmark shall be developed by the DTI which shall be awarded to merchants that uphold the rights of their consumers and observe responsible business practices. This trustmark shall be developed with a view to ensure the safety and security of internet transactions.
Online Dispute Resolution (ODR)
The Bill further mandates the DTI to develop online dispute resolution platforms which shall become a point of entry for consumers, businesses, online merchants, e-retailers, and digital platforms seeking out-of-court dispute resolution.
Liability of E-Marketplaces and Other Digital Platforms
The Act, to further protect the consumers in internet transactions, imposed liabilities on electronic marketplaces and digital platforms. Under the Act, these platforms shall be subsidiarily liable with an online merchant or e-retailer to the consumer to the extent of damages suffered by the latter as a direct result of the transaction. They may also be held civilly and administratively liable for failure to comply with the obligations set forth by the Code of Conduct.
With the foregoing provisions on protection offered by the Act to online consumers, it seeks to address the prevailing preference of consumers to physical store and cash based transactions, necessarily leveling down the competition between brick-and-mortar merchants on the one hand, and online businesses on the other. This Act also promotes opportunity for e-market places and digital platforms, including online applications and social media accounts to facilitate a secured online transactions between online business merchants or e-retailers and the consumers; while assuring the latter that the product they input into, include, or advertise within their respective platforms for the consumers, are actually and indeed the products being sold by the online merchants and e-retailers. All these, hopefully, would create trust between the parties to the online transactions, which will positively effect the e-commerce industry and system in the Philippines.
Footnotes
1 To know more about the proposed law, you can access https://legacy.senate.gov.ph/lis/bill_res.aspx?congress=19&q=SBN-1846 (date accessed, 07 September 2023).
2 Section 2.
3 Sections 7 and 8.
4 Sections 9 and 10, 12, 13, and 14.
5 Section 11.
6 Section 17 to 24, and 26.
7 Section 25.
8 Section 29.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
