Recognising that strengthening the trust between online merchants and consumers is vital in the continued growth of its budding e-commerce industry, the Philippines recently enacted Republic Act No. 11967 or the Internet Transactions Act of 2023 (ITA). The ITA aims to provide an effective framework regulating e-commerce transactions by safeguarding consumer rights and data privacy while simultaneously promoting innovation, competition, and sustainability.
Key features of the ITA
While the new law applies to all business-to-business (B2B) and business-to-consumer (B2C) internet transactions where one of the parties is situated in the Philippines, it specifically excludes online media content and consumer-to-consumer transactions. The ITA also provides for extraterritorial application, as any person engaging in e-commerce who avails of the Philippine market to the extent of establishing minimum contacts shall be subject to domestic laws notwithstanding the lack of legal presence in the country.
The ITA identifies the following parties to internet transactions and establishes rights and obligations among them:
- Digital platforms – ICT-enabled mechanisms that connect and integrate producers and users in online environments where goods and services are requested, developed, and sold, and data is generated and exchanged. These include e-marketplaces, mobile application platforms, online delivery platforms, social media platforms, and travel platforms.
- E-marketplace – a digital platform that connects online consumers with online merchants, facilitates and concludes sales, processes their payment, facilitates their shipment, or provides post-purchase support, and otherwise retains oversight over the consummation of the transaction.
- E-retailers – persons selling goods or services directly to online consumers through their own website or application.
- Online merchants – persons selling non-financial goods or services to online consumers through an e-marketplace or third-party digital platform.
- Online consumers – persons who purchase, lease, receive, or subscribe to goods or services over the internet for a fee.
The law grants the Department of Trade and Industry (DTI) regulatory jurisdiction over the use of the internet for conducting e-commerce. Accordingly, it can issue compliance orders, takedown orders, and order the blacklisting of online businesses in certain circumstances. To facilitate the handling of complaints, the agency will also develop an online dispute resolution platform. The DTI is expected to promulgate a Code of Conduct for all businesses engaged in e-commerce, consistent with international trends, developments, standards, and best practices.
The obligations and liabilities created among the parties involved in internet transactions are anchored by general tenets of consumer protection, online safety, and user privacy. Failure to adhere to these obligations may subject not only e-retailers or online merchants to liability but also e-marketplaces or digital platforms in some instances.
E-commerce in the Philippines
The ITA is expected to foster the continued development of the digital economy in the Philippines, which has been on the upswing over the last few years. In 2022, the gross added value of e-commerce in the country amounted to PHP 416.12 billion (USD 7.43 billion). Growth has been accelerated by the COVID-19 pandemic, which pushed businesses to adopt digital methods of doing transactions and has been complemented by a surge in the use of digital payment platforms.
Nonetheless, the potential of e-commerce in the Philippines remains high as a large chunk of the market remains untapped. The share of e-commerce vis-à-vis the total value of retail in the Philippines stands at just 5%, with the estimated number of e-commerce users at 39.2 million – only a third of the country’s population.
Undoubtedly, the passage of the ITA would further spur the shift to digital commerce. By improving the level of trust among actors engaged in electronic-based transactions, the law creates an enabling environment that encourages more people to conduct their transactions through digital means. With consumer protection being the paramount policy consideration advanced by the law, consumers who are more averse to transacting digitally may now be more willing to do so, knowing that ample and potent safeguards exist that could protect their interests, thus strengthening the protections guaranteed under the Consumer Act and the Electronic Commerce Act.
The adoption of a law regulating digital transactions in the Philippines is aligned with similar developments in the region that serve to recognise the need for an e-commerce governing framework. As early as 2019, the Southeast Asian region concluded the ASEAN Agreement on Electronic Commerce, which established common principles and rules to promote the growth of e-commerce in the region.
With ASEAN envisioning the creation of a single market in the coming years, convergence in e-commerce legislation guided by a common regional framework could help achieve the goal of a regionally integrated digital economy, especially as the region continues to undergo rapid growth in e-commerce activities.
For more information about the law, its implications, and the prospects for businesses it opens, please contact Carlo Agdamag at [email protected]