Carlo B. Valerio | Bianca Marie J. Angela M. Rañola
Republic Act No. 11967 or the Internet Transactions Act (“ITA”) was enacted to “promote and maintain a robust electronic commerce (e-commerce) environment in the country by building trust between online merchants and online consumers”. It was enacted in December 2023, with its implementing rules (“Rules”) issued on 24 May 2024.
To “guarantee effective regulation of e-commerce 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 shall regulate the use of the internet for conducting e-commerce by e-marketplaces, online merchants, e-retailers, digital platforms, and third-party platforms.
Below is a primer on the salient provisions of the ITA and how they may affect digital economy players.
Who does the ITA apply to?
The ITA governs the following parties to internet transactions:
- Digital platforms, referring to information and communication technology-enabled mechanisms that connect and integrate producers and users, including e-marketplaces, mobile application platforms, online delivery platforms, social media platforms, and travel platforms.
- E-marketplaces, referring to digital platforms that connect online consumers and online merchants, facilitate the sales, process the payment, facilitate the shipment or provide support within the platform, and which retain oversight over the consummation of the internet transaction.
- E-retailers, referring to persons selling goods or services directly through its own website, webpage, or application.
- Online merchants, referring to persons selling non-financial goods or services through third-party digital platforms.
- Online consumers, referring to persons who purchase, lease, receive or subscribe to goods or services over the internet for a fee.
It applies to business-to-business and business-to-consumer internet transactions where at least one (1) of the parties is situated in the Philippines, or where the digital platform, e-retailer, or online merchant is availing of the Philippine market and has minimum contacts therein. Under the proposed Rules, a party is deemed to have minimum contacts in the Philippines if it allows users in the Philippines to access and use a digital platform and to exchange information, goods, or services while in the Philippines. Broadly speaking, when a party has any interaction with any potential or actual customer located in the Philippines, regardless of residence or citizenship, then the party is deemed to have minimum contacts.
The ITA shall not, however, apply to consumer-to-consumer transactions done for personal, family, or household purposes and not done in the ordinary course of business.
Section 5 of the ITA provides for an extraterritorial application of the law which means that it shall apply to persons who, while not present in the country, engage in e-commerce and avail of the Philippine market to the extent of establishing minimum contact therein.
What are the obligations of parties to internet transactions?
The ITA requires e-marketplaces to:
- Ensure that internet transactions on their platforms are identifiable as e-commerce transactions and that relevant information of the transactions, such as the persons involved and any promotional offers, are clearly identified.
- Exercise diligence in onboarding online merchants by requiring them to submit their information prior to listing their platforms and maintaining a list of all online merchants registered under the platform.
- Protect the data privacy of consumers at all times.
- Ensure that goods sold on their platforms comply with relevant laws and pertinent details such as the price, description, and condition are sufficiently identified.
- Provide an effective and responsive redress mechanism for online merchants and consumers.
On the other hand, the ITA imposes the following obligations on digital platforms other than e-marketplaces:
- Enable consumers to distinguish between commercial and non-commercial or private accounts.
- Ensure that goods sold on their platforms comply with relevant laws pertinent details such as the price, description, condition, and contact information of the online merchant are sufficiently identified.
- Maintain a list of all online merchants registered under the platform.
- Protect the data privacy of consumers at all times.
- Provide an effective and responsive redress mechanism for online merchants and consumers.
The ITA also requires the following of e-retailers and online merchants:
- Indicate the price of goods and services offered consistent with the Consumer Act.
- Ensure proper and complete delivery of goods or services to online consumers and that the goods meet the expectations of the online consumer given the nature of the goods and statements of the online merchant or e-retailer.
- For e-retailers, publish sufficient information, such as trade names, address and contact information, to make themselves clearly identifiable.
- Protect the data privacy of consumers at all times.
- Issue paper or electronic invoices or receipts at all times.
- Provide an accessible and efficient redress mechanism for clients.
What are some special requirements for e-retailers or online merchants who sell or provide particular goods or services?
For e-retailers or online merchants who are digital goods or services providers, they must ensure that such digital goods or services have the qualities and performance features which are standard and normal for goods or services of the same type as advertised or described.
For those who are engaged in delivery service, they may require its online consumers to provide a valid e-mail address or mobile phone number before entering into a transaction.
What are the liabilities of parties under the ITA?
E-retailers or online merchants shall be primarily liable for indemnifying online consumers in civil actions or administrative complaints arising from an internet transaction.
Subject to certain requirements, e-marketplaces or digital platforms that facilitated the internet transaction subject of a civil action or administrative complaint may also be subsidiarily liable to online consumers.
E-marketplaces or digital platforms shall be solidarily liable with the online merchants or e-retailers if they fail, after notice, to act expeditiously to remove or disable access to goods or services appearing on their platform which are prohibited by law, imminently injurious, unsafe, or dangerous.
What are the remedies of online consumers?
Online consumers shall have the right to pursue repair, replacement, refund or other remedies provided by law in case of defect, malfunction, or loss without their fault or where the online merchant or e-retailer fails to conform with any warranties or liabilities arising from the contract. If the online consumer opts to replace or refund, he or she may return the original goods delivered without cost to him or her.
What are the remedies of aggrieved parties?
Aggrieved parties must avail of the internal redress mechanism of the digital platform, e-marketplace, or e-retailer before they may file a complaint before any court or government agency, or resort to alternative dispute resolution. If the issue remains unresolved after seven (7) calendar days from availing of the same, such mechanism is deemed exhausted. They may then claim damages by filing a case before the court or seek the imposition of administrative penalties by filing a complaint with the Department of Trade and Industry (“DTI”) within two (2) years from the time the cause of action arose.
What are the powers and duties of the E-Commerce Bureau and the DTI?
Under the law, an E-commerce Bureau shall be created under the Department of Trade and Industry (DTI) which shall have the power to receive complaints on internet transactions. It shall also be empowered to investigate, motu proprio, and recommend the filing of cases for violations of the ITA.
What are the enforcement powers of the DTI?
The DTI Secretary shall have the power to issue summons, subpoena ad testificandum, and subpoena duces tecum to alleged violators of the ITA and may also issue compliance and takedown orders directing the removal of a listing or offer from a webpage, website, platform, or application when the sale or lease of goods or services are prohibited or regulated under existing laws, such as endangered animals, illicit drugs, fireworks and other explosives, and counterfeit goods. The ITA likewise authorizes the DTI Secretary to blacklist an online business.
An online dispute resolution platform shall also be developed by the DTI to facilitate alternative mode of dispute resolution for online consumers, online merchants, e-retailers, e-marketplaces and other digital platforms.
What is the E-commerce Philippine Trustmark?
The law likewise mandates the development of an E-commerce Philippine Trustmark to provide assurance of safety and security in internet transactions. The Trustmark signifies that the products, goods, or services sold online are trustworthy, among others. The DTI shall issue separate rules governing the application for the Trustmark.
What is the period for parties to comply with the ITA’s provisions?
A transitory period of eighteen (18) months from the effectivity of the ITA shall be provided to all affected online merchants, e-retailers, e-marketplaces, and digital platforms to comply with their obligations under Parts II, III and IV, and Chapter V of these Rules. The enforcement of these Rules during the transitory period against online merchants, e-retailers, e-marketplaces, and digital platforms shall likewise be stayed in such instances as otherwise expressly stated in these Rules.
If you wish to know more how the ITA will affect your business, you may reach out to our firm’s IP Enforcement team:
Carlo B. Valerio
Email: [email protected]/[email protected]
Bianca Marie J. Angela M. Rañola
Email: [email protected]
Tel. No.: +632 8810 5858
Fax No.: +632 8810 3838