Regulations Affecting E-marketplaces, Online or Digital Retailers and Stores under the Internet Transactions Act of 2023

Online business

Republic Act No. 11967, also known as the “Internet Transactions Act of 2023”

The Internet Transactions Act of 2023 introduced specific regulations governing the operations of online stores and marketplaces. The law provides clear guidelines regarding the businesses it covers. Specifically, it addresses internet transactions or e-commerce transactions, which involve the sale or lease of digital or non-digital goods and services over the internet.

Business Covered by the Internet Transactions Act of 2023

The key points covered by the law include:

a) E-Marketplaces: These digital platforms connect online consumers with online merchants. They facilitate the shipment of goods, provide logistics services, and offer post-purchase support. E-retailers (those selling directly to online consumers through their own websites or applications) and online merchants (selling non-financial goods or services through e-marketplaces or third-party platforms) fall under the law’s purview.

b) Digital Platforms: The law extends to various digital platforms, including e-marketplaces, mobile application platforms, online delivery platforms, social media platforms, and travel platforms. These platforms connect producers and users in online environments where goods and services are requested, developed, and exchanged.

c) Business-to-End User Transactions: The Internet Transactions Act covers all forms of internet transactions between businesses (whether natural or juridical persons) and end-users. It emphasizes compliance for transactions involving manufacturers, wholesalers, retailers, and other businesses.

d) Exclusions: Notably, consumer-to-consumer transactions (such as those conducted for personal, family, or household purposes) are excluded from the law’s scope.

Creation of E-Commerce Bureau under the Internet Transactions Act of 2023, to Regulate E-marketplaces, E-retailers and online merchants

Through the Internet Transactions Act of 2023, a new agency under the Department of Trade and Industry, called the E-Commerce Bureau, was created. The E-Commerce Bureau is responsible for creating policies, plans, and programs to ensure the robust and dynamic development of e-commerce. In line with this, it is the responsibility of the Bureau to monitor and ensure strict compliance with the provisions of relevant e-commerce laws and regulations. It likewise enforces the registration of digital platforms and online merchants, collecting necessary information while adhering to data privacy principles. As the administrative body designated to handle consumer complaints, the E-Commerce Bureau receives and refers business and consumer complaints related to internet transactions to the appropriate government agency, and engages with law enforcement and relevant agencies to address cross-cutting issues affecting online consumers and the public, ensuring a balance that doesn’t stifle innovation or restrict competition.

Obligations of E-marketplaces under the Internet Transactions Act of 2023

A summary of the key provisions related to e-marketplaces, based on the Internet Transactions Act of 2023, is provided below:

1. Identification and Transparency.  E-marketplaces must ensure that internet transactions on their platform are clearly identifiable as e-commerce transactions. They should identify the person or persons on whose behalf the transaction is made. Promotional offers (discounts, premiums, gifts) must be clearly described with accessible and unambiguous conditions.

2. Merchant Registration. E-marketplaces should require online merchants (both foreign and Filipino) to submit certain information before listing on their platform. The information to be submitted should include a) name of the online merchant along with valid government identification (for individuals) or business registration documents (for juridical entities), b) geographic address of the online merchant, c) contact details (mobile/landline number, valid email address), and d) for regulated professions, details of membership in relevant professional bodies.

3. Transparency. Except for government identification cards or registration documents and contact details, all other required information should be published or posted on the e-marketplace for transparency. Also, communication channels between online merchants and consumers or links to the OBD (Online Business Directory) can also serve this purpose.

4. Maintenance of Merchant List. E-marketplaces must maintain an updated and verified list of all registered online merchants, containing the information required in the law.

5. Subpoena Compliance. E-marketplaces must provide specific information upon issuance of a subpoena by competent authority, especially if the platform is being used for criminal or fraudulent activities.

6. Data Privacy and Security. E-marketplaces should protect consumers’ data privacy at all times, following the Data Privacy Act of 2012 and relevant information security standards.

7. Regulated Goods and Permits. Sale of regulated goods is prohibited unless online merchants provide necessary permits and license information. Compliance with sale procedures and limitations imposed by law or local government regulations is required.

8. Redress Mechanism. E-marketplaces must establish an effective and responsive redress mechanism for online consumers and merchants to report violations of relevant laws.

9. Product Offer Details. Online merchants must clearly indicate the following in their product offers a) name and brand of goods/services, b) price, c) description and d) condition.

Obligations of E-retailers and Online Merchants under the Internet Transactions Act of 2023

A summary of the key provisions related to E-retailers and online merchants, based on the Internet Transactions Act of 2023, is provided below:

1. Price Transparency. E-retailers must clearly indicate the prices of goods and services, following Article 81 of Republic Act No. 7394.

2. Goods Condition and Quality.  Goods must be delivered to online consumers in the same condition, type, quantity, and quality as described. They should possess the functionality, compatibility, interoperability, and fitness for their intended purpose. If a sample, picture, or model was shown to the consumer, the actual goods must match that description. Also, goods should fit the specific purpose communicated during the contract.

3. Delivery and Packaging. Goods must be delivered with all accessories, packaging, installation instructions, and user manuals. Relevant information should be provided in both Filipino and/or English.

4. Standard Qualities and Performance. Goods should meet standard qualities and performance capabilities. Public statements or testimonials about the goods should be accurate unless corrected.

5. Digital Goods and Services. Digital goods/services must meet standard features (functionality, compatibility, interoperability, accessibility, continuity, and security) as advertised.

6. Digital Platform Services. E-retailers offering digital platform services must fulfill contracts as advertised.

7. Homepage Information. E-retailers must publish on their homepage the following information: a) the e-retailer’s corporate/trade name, address of physical shop/business, contact details (phone, email) for efficient communication, details of professional membership (where applicable)

8. Data Privacy and Security. E-retailers must protect consumer data privacy according to Republic Act No. 10173 and comply with minimum information security standards.

These obligations of E-marketplaces, E-retailers and online merchants should be submitted to the E-Commerce Bureau along with valid proof of identity.

Internal Dispute Resolution Must be In Place

The Internet Transactions Act of 2023 requires that E-marketplaces, E-retailers and online merchants have existing internal redress mechanisms in place to resolve disputes involving online consumers and their transactions. In fact, resorting to these internal redress mechanisms are necessary prior to filing a complaint in court or before the government machinery. The government was however cognizant of the possibility that such internal redress mechanisms may not be effective or may not even exist, in which case, it is also provided in the law that if any complaint remains unresolved after seven (7) calendar days from filing, such internal redress mechanism is deemed exhausted.

Liability of E-retailers, Online Merchants, and E-marketplace or Digital Platforms for Non-Compliance

E-retailers and online merchants are primarily liable for indemnifying the online consumer in civil actions or administrative complaints arising from the internet transaction. This liability is independent of additional or subsequent impositions and penalties which may be imposed upon them under other existing laws, such as the Consumer Act, the Civil Code of the Philippines, among others. 

On the other hand, the e-marketplace or digital platform that facilitated the internet transaction subject to a civil action or administrative complaint shall also be liable (albeit subsidiarily) together with the e-retailer or online merchant, if:

(a) The digital platform or e-marketplace was negligent with its obligations and such negligence resulted to loss or damage to the online consumer.

(b) In cases of intellectual property infringement, the digital platform or e-marketplace failed, after notice, to act expeditiously in removing or disabling access to goods or services that either infringe on another’s intellectual property rights or is subject to a takedown order by an appropriate government agency.

(c) The online merchant has no legal presence in the Philippines and the digital platforms or e-marketplace failed to provide the contact details thereof despite notice.

It must be noted that the liability of the e-marketplace or digital platform shall be treated as one and the same as the online merchant upon a finding that both are the same entity.

However, as is normally the case where the e-marketplace or digital platform merely serves as a platform for online retailers, their liability becomes mitigated or removed if they claim and are able to prove that the e-marketplace or digital platform merely relied in good faith on an online merchant’s representations, warrantless, or submitted registration documents regardless if such information or documents are later proved to be inaccurate, false, or untrue. However, such reliance must be coupled with actual proof of reasonable effort that it exerted to ascertain and maintain the accuracy, authenticity and veracity of the documents or information submitted by the e-retailer or online merchant.

Penalties for Violations and Non-Compliance

Aside from a claim for damages which may be awarded to an online consumer either by the court or by the Department of Trade and Industry, E-retailers, Online Merchants, and E-marketplace or Digital Platforms may also be subject to administrative fines ranging from Twenty Thousand Pesos (P20,000.00) to One Million Pesos (P1,000,000.00) if found guilty of any deceptive, unfair or unconscionable sales act or practice done through the internet, or for willfully or unreasonably refuse to comply with the takedown order issued by a government body, depending on frequency and severity of the violation. As these are in the nature of administrative penalties, the acts or omissions of E-retailers, Online Merchants, and E-marketplace or Digital Platforms may also be subject to other sanctions. Hence, the application of these penalties are in addition to civil or criminal liability of the offending party under other laws or regulations.

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