The Internet Transactions Act of 2023

On Dec. 5, 2023,  Republic Act No. 11967 or the Internet Transactions Act of 2023 was approved.

The law declares that the policy of the state is to promote and maintain a robust electronic (e-commerce) environment in the country by building trust between online merchants and online consumers. It aims to do this by effectively regulating e-commerce to protect consumer rights and data privacy, by encouraging innovation, promoting competition, securing internet transactions while upholding intellectual property rights and ensuring product standards and safety.

The Act applies to all business-to-business and business-to-consumer internet transactions but not to non-business consumer-to-consumer transactions. It also covers transactions where one of the transacting parties is located outside the country, provided the digital platform, e-retailer or online merchant is catering to the Philippine market.

Internet transactions refer to the sale or lease of digital or non-digital goods and services via e-commerce while an online consumer is a person or entity who purchases, leases, receives or subscribes to goods or services over the internet for a fee.

The Act defines the following:

• Digital platforms – information and communication technology mechanisms that connect and integrate producers and users online. Examples are e-marketplaces, mobile application, online delivery, social media or travel platforms;
• E-marketplaces – a digital platform that connects online consumers and merchants. It processes the sales and payment goods and services, facilitates the shipment of goods, provides post-purchase support, and retain oversight over the transaction.
•  E-retailer – one selling goods or services directly to online consumers through its own website or application; and
•  Online merchant – seller of non-financial goods or services to online consumers through an e-marketplace or third-party digital platform.

The E-Commerce Bureau

The law creates the E-Commerce Bureau within the DTI whose duties and responsibilities include formulating of policies, plans and programs for the development of e-commerce; monitoring compliance with the Act; enforcing registration of digital platforms and online merchants; gathering of information, consumer complaints on e-commerce transactions; prosecuting violations of the Act, and coordinating and working with other government agencies.

The DTI

The DTI has regulatory jurisdiction over the use of the internet for e-commerce and it performs this function together with other government agencies such as the Department of Information and Communications Technology, the Bangko Sentral ng Pilipinas and the National Privacy Commission. The DTI secretary is given the power to:

• Issue subpoenas, under pain of contempt, to compel attendance of witnesses and production of documents and information;
• Issue compliance orders;
• Issue take down orders directing the removal of a listing or offer online for prohibited goods and services or when the transaction or activity will threaten public or personal safety or compromise financial or personal information; and
• Create a blacklist of online businesses that have not complied with a compliance order or those that are the subject of a takedown or a cease and desist order issued by another agency.

Online consumers must also do their part and exercise ordinary diligence in conducting internet transactions. They should not cancel transactions that (a) have already been paid for, (b) when the goods are perishable in nature, or (c) when the goods are already with a third party delivery service. The exceptions to non-cancellation are when the consumer agrees to reimburse the delivery service or when cancellation is allowed under the agreement.

E-marketplaces, digital platforms, e-retailers are obligated to provide the proper information, protect data, ensure that goods and services offered are properly licensed and authorized and provide a responsive and effective redress mechanism.

E-retailers and online merchants shall ensure that the goods are received by the online consumer, that they are in the same condition, type, quantity, and quality as described and stated and possess the functionality, compatibility, interoperability and be fit for the purpose for which they were intended as agreed by the seller and buyer.

Internal redress mechanisms

Consumers are required to avail of and exhaust internal redress mechanisms of digital platforms, e-marketplaces, or e-retailers before they can file complaints with any government agency or courts.

Primary & subsidiary liabilities and solidary liability

E-retailers or online merchants are primarily liable for indemnifying consumers from complaints arising from internet transactions while the e-marketplace or digital platforms that facilitated the internet transactions shall be subsidiarily liable to the consumers if they failed to exercise ordinary diligence in complying with their obligations except if they fail, after notice, to act expeditiously to remove or disable access to goods or services appearing on their platform that are prohibited by law, injurious, unsafe or dangerous, in which case they will be solidarily liable with the e-retailers and online merchants.

Below are some notable provisions in the Act which may need clarification in their application though.

1. Extra-territoriality

The Act provides that a person who engages in e-commerce who avails of the Philippine market shall be subject to Philippine laws and regulations and cannot evade legal liability in the Philippines despite the lack of presence in the country.

While this would be a welcome development as there are numerous sellers in various platforms which are based abroad, it is not clear how this will be enforced. Perhaps these sellers may be subject to a takedown order for as long as they fit the limited grounds under the Act.

2. Equality provision of online and offline

The Act provides for an equality clause which provides that that those engaging in e-commerce shall not enjoy any beneficial treatment that is more favorable nor be placed at a disadvantage in relation to other enterprises. Real world application of this is not clear and we will probably have to wait and see what type of cases will arise and how this provision will be applied.

3. Online business database

The E-Commerce Bureau shall establish an Online Database of digital platforms, e-marketplaces, e-retailers, and online merchants engaged in e-commerce in the Philippines that will provide consumers access to contact information of online businesses. To create this database, the Bureau shall utilize existing databases and coordinate with other agencies that already maintain the same or similar database. The Act does not however provide how it will achieve completeness to include informal online sellers nor does it provide for compulsory inclusion by all online platforms, marketplaces, retailers and merchants.

4. Take down order

The Act gives the DTI the power to issue a takedown order, after investigation or verification, directing the removal of a listing of offer on a webpage, website, platform or application under specific circumstances. However, this order shall only be effective for a maximum period of thirty days. Any extension shall be made only upon a court order.

Considering that many transactions are of values which may not justify filing a case in court, erring sellers may simply wait out the 30-day period.

The implementing rules and regulations which are yet to be formulated may provide some clarity on the implementation. In the meantime, online merchants, e-retailers, e-marketplaces and digital platforms are given eighteen months from the effectivity of the Act to comply with the provisions of the law.

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)