How Can Online Shoppers Protect E-Retailers from Fraud?

Introduction

Online transactions provide convenience, but they also expose e-retailers and online merchants to cancelled orders, delivery losses, fraudulent refund requests, and disputes over payment or product condition. Philippine law addresses part of this risk by requiring online consumers to exercise ordinary diligence in internet transactions.

The statutory rule is especially important when an online consumer attempts to cancel a confirmed order after payment, after the goods have entered third-party delivery, or while the goods are already in transit. The law recognizes that an online merchant may incur costs and assume risks before the buyer receives the item.

The principal statute is the Internet Transactions Act of 2023, which also preserves the consumer’s remedies when the merchant fails to comply with the contract, warranty, or applicable consumer-protection laws.

What Is the Online Consumer’s Duty?

Section 19 of the Internet Transactions Act of 2023 requires an online consumer to exercise ordinary diligence in any internet transaction. This means that the buyer must act with the level of care reasonably expected from a prudent consumer under the circumstances.

Ordinary diligence may include reviewing the product description, price, delivery terms, cancellation policy, payment information, and order details before confirming a purchase. It also includes providing accurate delivery information, being reasonably available to receive the goods, and avoiding conduct intended to obtain an unfair refund or replacement.

The duty is not an absolute guarantee that every online order must be completed regardless of circumstances. Rather, it establishes a standard of conduct for consumers while preserving specific statutory exceptions and remedies.

When May a Buyer Not Cancel a Confirmed Order?

As a general rule, an online consumer may not cancel a confirmed order when the goods have already been paid for by the consumer and are already in the possession of a third-party delivery service, or when the goods are perishable and are already in the possession of the delivery service or otherwise in transit.

This restriction applies unless one of the statutory exceptions exists:

• Electronic or digital payment despite cancellation. The consumer uses electronic or digital payment and authorizes the crediting of the amount despite the cancellation;
• Reimbursement of delivery costs. The consumer reimburses the third-party delivery service as a precondition for cancellation;
• Contractual cancellation fee. The transaction expressly allows cancellation upon payment of a fee; or
• Agreement of the parties. The online consumer and the online merchant otherwise agree to the cancellation.

These conditions are found in Section 19 of the [Internet Transactions Act of 2023](#L1.21). The statute therefore does not create an unrestricted right to cancel after dispatch or during delivery.

Why Does the Rule Protect E-Retailers?

After an order is confirmed, the merchant may purchase or reserve inventory, prepare packaging, pay platform charges, arrange transportation, and incur delivery expenses. These costs may be difficult to recover if the consumer cancels without a lawful basis.

The risk is greater for perishable goods, customized products, limited-stock items, and goods that cannot easily be resold after opening or attempted delivery. By restricting certain cancellations, the law prevents the consumer from shifting all transaction costs to the merchant without regard to the merchant’s actual loss.

The rule also protects delivery providers. Where goods are already with a third-party courier, cancellation may require return transport, additional handling, storage, or disposal. The statute expressly recognizes reimbursement of the delivery service as one lawful condition for cancellation.

What Should an E-Retailer’s Cancellation Policy State?

An e-retailer should maintain a clear cancellation policy that reflects the Internet Transactions Act of 2023 and the actual logistics of its business. The policy should be presented before checkout and should not contradict mandatory consumer rights.

A sound policy should identify:

• when an order becomes confirmed;
• the stage at which cancellation is no longer freely available;
• the treatment of goods already paid for, packed, dispatched, or in transit;
• any permitted cancellation fee and how it is computed;
• the consumer’s obligation to reimburse delivery or return costs, when applicable;
• the process for reporting defective, incorrect, damaged, or incomplete goods; and
• the expected period for processing refunds, replacements, or returns.

Terms should be written in plain language. A merchant should avoid presenting a cancellation restriction as an absolute prohibition if the law or the parties’ agreement allows cancellation under specified circumstances.

Are Consumers Still Entitled to Refunds or Replacements?

Yes. The restriction on unjustified cancellation does not remove the consumer’s remedies for a defective or nonconforming transaction.

Section 20 of the [Internet Transactions Act of 2023](#L1.22) provides that, in case of defect, malfunction, loss without the consumer’s fault, failure to conform with a warranty, or another liability of the online merchant or e-retailer arising from the contract, the consumer may pursue repair, replacement, refund, or other remedies under Republic Act No. 7394 and other relevant laws.

The decisive distinction is between a change-of-mind cancellation and a merchant-related failure. A buyer who simply no longer wants the item may be subject to the statutory restrictions and agreed cancellation terms. A buyer who received a defective, damaged, incorrect, or materially nonconforming item may invoke the available legal remedies.

What Happens When the Consumer Chooses Replacement or Refund?

When the consumer avails of replacement or refund, the online merchant is entitled to the return of the original goods delivered. The return must be made without cost to the consumer and within a reasonable period from receipt of the goods, unless the parties agree otherwise.

If the refund has already been paid but the goods cannot be returned because of the consumer’s fault, the amount received must be immediately reimbursed to the online merchant or e-retailer. A proportionate reduction in price may apply when appropriate.

This rule discourages a consumer from retaining both the refunded purchase price and the goods. It also gives the merchant a basis for documenting and contesting refund requests where the buyer fails to return the product or causes its loss or deterioration.

What Evidence Should E-Retailers Preserve?

An e-retailer should preserve records showing what the buyer ordered, what terms applied, and what occurred after confirmation. Useful records include:

• the product listing and its descriptions, specifications, photographs, and warranties;
• the buyer’s order confirmation and payment record;
• the time the order was packed, dispatched, and transferred to the courier;
• tracking records and delivery attempts;
• communications concerning cancellation, refund, return, or replacement;
• photographs or videos showing the condition of the goods before dispatch; and
• proof of delivery, returned goods, and inspection results.

These records can help establish whether the buyer cancelled before or after dispatch, whether the product was defective, whether the buyer caused the loss or damage, and whether the merchant complied with its own stated policy.

What Are the Merchant’s Related Obligations?

The Internet Transactions Act of 2023 imposes obligations not only on consumers but also on e-retailers, online merchants, and platforms.

Among other duties, e-retailers and online merchants must provide identifying and contact information, protect consumer data, issue paper or electronic invoices or receipts for sales, and maintain an accessible and efficient redress mechanism for complaints. They must also ensure that the goods or services possess the qualities and performance features represented to the consumer.

These obligations matter in cancellation disputes. A merchant cannot rely on the consumer’s duty of ordinary diligence while concealing material product information, failing to issue transaction records, misrepresenting delivery conditions, or refusing to address a legitimate defect claim.

The relevant requirements appear in Section 23 of the [Internet Transactions Act of 2023](#L1.30) and [Internet Transactions Act of 2023](#L1.31).

Who Is Primarily Liable for Consumer Claims?

Section 25 of the Internet Transactions Act of 2023 provides that the e-retailer or online merchant is primarily liable for indemnifying the online consumer in civil actions or administrative complaints arising from the internet transaction, without prejudice to other penalties under the statute or other laws.

Where the e-marketplace or digital platform and the online merchant are the same entity, their liability is treated as one and the same. This provision reinforces the importance of accurate merchant identification and effective complaint handling.

The rule on primary liability appears in the [Internet Transactions Act of 2023](#L1.33).

Can an E-Marketplace Also Be Liable?

An e-marketplace or digital platform may be subsidiarily liable when it facilitated the transaction and any of the statutory circumstances exists. These include failure to exercise ordinary diligence in complying with its legal obligations, failure after notice to remove or disable access to infringing goods or goods covered by a takedown order, or failure to provide the contact details of a merchant without legal presence in the Philippines.

The platform’s subsidiary liability is limited to the damages suffered by the consumer as a direct result of the transaction. A platform is not automatically liable merely because a transaction occurred on its site.

The statute also protects a platform that relied in good faith on a merchant’s representations or registration documents, provided that the platform can show good faith and reasonable efforts to determine and maintain the accuracy, authenticity, and truthfulness of the submitted information.

These limitations and conditions are provided in the [Internet Transactions Act of 2023](#L1.34).

How Should Merchants Handle a Suspected Bad-Faith Refund?

A merchant should avoid automatically rejecting every disputed refund. Instead, it should classify the request and apply the appropriate legal and contractual process.

First, determine whether the request is a prohibited post-dispatch cancellation, a valid defect or nonconformity complaint, a delivery failure without consumer fault, or a possible fraud attempt. Second, preserve the relevant records and communicate the basis for the decision in writing. Third, where a return is required, provide clear return instructions and identify the period within which the goods must be returned.

If the buyer received a refund but failed to return the goods because of the buyer’s fault, the merchant may demand reimbursement consistent with Section 20 of the Internet Transactions Act of 2023. The merchant should document the demand, the condition of the product, and the factual basis for attributing the non-return to the consumer.

Examples of Common Situations

Order already with the courier. A buyer cancels a confirmed order after the goods have been paid for and handed to the courier. Unless the buyer authorizes payment, reimburses the delivery service, pays an agreed cancellation fee, or reaches another agreement with the merchant, the statutory restriction on cancellation applies.

Defective electronic device. A buyer receives a device that does not function as represented. This is not merely a change-of-mind cancellation. Subject to the applicable warranty and consumer-protection rules, the buyer may seek repair, replacement, refund, or another lawful remedy.

Refund without return. A buyer receives a refund but keeps the goods and cannot return them because of the buyer’s fault. The buyer must immediately reimburse the amount received, subject to a proportionate reduction in price when appropriate.

Perishable goods in transit. A buyer attempts to cancel a perishable order after it has entered the delivery process. The statutory restriction is particularly relevant because delay or refusal may cause the goods to spoil and become unsalable.

Final Recommendations

E-retailers should align their checkout terms, cancellation policy, refund process, and customer-service scripts with the Internet Transactions Act of 2023. Restrictions should be disclosed before purchase and should distinguish unlawful or unjustified cancellations from legitimate claims involving defects, loss, or nonconformity.

Merchants should also use reliable order and delivery records, issue invoices or receipts, maintain a functioning complaint mechanism, and preserve evidence of the condition of goods before dispatch. These measures do not eliminate disputes, but they can reduce fraudulent claims and make the merchant’s position easier to establish.

For online consumers, ordinary diligence means reviewing the transaction before confirmation, providing accurate information, accepting delivery responsibly, and returning goods when a refund or replacement is granted. Philippine law protects consumers, but it does not permit a buyer to obtain both the purchase price and the goods through a bad-faith refund request.

About Nicolas and De Vega Law Offices

 Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.