When Are Digital Platforms Liable for Defective Online Products?

Introduction

Online marketplaces have made it easier for consumers to purchase goods from sellers located anywhere in the Philippines or abroad. They have also created difficult questions about responsibility when a product is defective, dangerous, counterfeit, prohibited by law, or materially different from its description.

Under the Internet Transactions Act of 2023, the seller remains primarily responsible for the consumer’s loss. However, an e-marketplace or digital platform may also become liable when its own failure to observe legally required safeguards contributes to the consumer’s damage. In the most serious cases, the platform may be held solidarily liable, meaning that the consumer may recover the entire recoverable amount from the platform, the seller, or both, subject to the rules on contribution between liable parties.

What Is the General Rule on Online Product Liability?

The general rule is that the e-retailer or online merchant is primarily liable for indemnifying the online consumer in a civil action or administrative complaint arising from an internet transaction. This rule applies without prejudice to other penalties under the Internet Transactions Act and other applicable laws.

Section 25 of the Internet Transactions Act also provides that the liability of the e-marketplace or digital platform is treated as the same as that of the online merchant when both are, in fact, the same entity. A platform cannot avoid seller liability merely by presenting itself as an intermediary if it is actually the entity that sold, supplied, or controlled the product.

The same principle is consistent with the Consumer Act of the Philippines. A seller commits a deceptive sales act when, through concealment, false representation, or fraudulent manipulation, it induces a consumer to enter into a transaction. This includes representing that a product is new, original, unused, or of a particular quality when it is actually altered, reconditioned, second-hand, or otherwise different from the representation.

When Can an E-Marketplace Become Solidarily Liable?

Section 27 of the Internet Transactions Act imposes solidary liability on an e-marketplace or digital platform that, after notice, fails to act expeditiously to remove or disable access to goods or services appearing on its platform that are:

• prohibited by law;
• imminently injurious;
• unsafe; or
• dangerous.

The provision addresses an extreme form of platform failure. The platform’s liability is not based merely on the fact that a rogue seller used the platform. It arises when the platform receives notice of the prohibited, unsafe, or dangerous listing and then fails to respond promptly by removing the listing or disabling access to it.

The relevant conditions must coexist:

• The product or service must appear on the platform;
• the product or service must be prohibited, imminently injurious, unsafe, or dangerous;
• the platform must receive notice; and
• the platform must fail to act expeditiously after receiving that notice.

Section 27 does not require proof that the platform itself manufactured or sold the defective item. The basis of liability is the platform’s failure to take prompt protective action after the danger or illegality has been brought to its attention.

What Does “After Notice” Mean?

The law does not make every platform automatically liable for every defective product sold by an independent merchant. Notice is an important condition. The platform should have sufficient information showing that the listing or product is prohibited, imminently injurious, unsafe, or dangerous.

Notice may arise from a consumer complaint, a government takedown order, a report by a rights holder, a regulatory finding, a product recall, or other reliable information identifying the product and the danger or illegality involved. A vague allegation that a seller is dishonest may not, by itself, establish the statutory conditions for solidary liability.

A proper notice should ordinarily identify the product listing, seller account, transaction or order number, nature of the danger or illegality, supporting documents, and the action requested. The date and manner of delivery should also be preserved.

What Is the Difference Between Subsidiary and Solidary Liability?

The Internet Transactions Act recognizes different levels of platform responsibility. The distinction is important because subsidiary liability and solidary liability do not operate in the same way.

Type of liability	Legal basis and principal conditions	Practical effect
Primary liability	The online merchant or e-retailer is primarily liable for the consumer’s loss.	The consumer generally proceeds first against the seller.
Subsidiary liability	The platform failed to exercise ordinary diligence under Sections 21 or 22, failed to remove infringing goods after notice, or failed to provide the contact details of a merchant without legal presence in the Philippines.	The platform may be liable for the consumer’s direct damages under the statutory limits.
Solidary liability	After notice, the platform failed to act expeditiously to remove or disable access to goods or services that are prohibited, imminently injurious, unsafe, or dangerous.	The consumer may pursue the entire recoverable liability against the platform or the seller, subject to applicable law.

Section 26 limits subsidiary liability to the damages suffered by the consumer as a direct result of the transaction. It also protects a platform that relied in good faith on the merchant’s representations or registration documents, provided that the platform can show good faith and reasonable efforts to verify and maintain the accuracy, authenticity, and truthfulness of the submitted information.

That protection does not necessarily defeat Section 27 liability. Good-faith reliance on seller documents is materially different from ignoring a specific notice that a product is dangerous or illegal.

What Duties Must Platforms Perform Before Liability Arises?

E-marketplaces must perform several duties under Section 21 of the Internet Transactions Act. These include verifying and maintaining merchant information, prohibiting the sale of regulated goods without the required permits and licenses, maintaining a list of registered merchants, providing redress mechanisms, and requiring product offers to disclose the product name or brand, price, description, and condition.

Other digital platforms that do not retain oversight over the consummation of the transaction have comparable obligations under Section 22. They must distinguish commercial from private accounts, prohibit regulated goods without the required permits and license information, require product disclosures, maintain an updated list of accounts used for e-commerce as far as practicable, and provide a responsive complaint mechanism.

In performing these duties, covered platforms must observe ordinary diligence. Failure to do so may result in penalties and, where the statutory conditions are present, subsidiary or solidary liability.

How Does Product Misrepresentation Affect Platform Liability?

A seller may be liable when it markets an altered, reconditioned, reclaimed, second-hand, or defective product as new or original. The Supreme Court recognized this principle in Autozentrum Alabang, Inc. v. Bernardo, et al., G.R. No. 214122, 2016, which involved a deceptive sales act under the Consumer Act of the Philippines.

The case illustrates that deception may arise from words or conduct. A seller need not use an express verbal falsehood if the overall presentation induces the consumer to believe that the product has a quality, condition, approval, or characteristic that it does not possess.

For a platform, however, the seller’s deception alone does not automatically establish solidary liability. The consumer must still show the conditions applicable to the platform, particularly notice and the platform’s failure to act expeditiously when the product was prohibited, imminently injurious, unsafe, or dangerous.

Examples of Conduct That May Support Solidary Liability

Solidary liability may be considered in circumstances such as the following:

• A platform is notified that a seller is offering an unsafe electrical device subject to a government recall but leaves the listing accessible and continues permitting orders.
• A platform receives credible notice that a seller is offering prohibited medicines, unregistered medical products, or other regulated goods without the required permits and does not disable the listing.
• A platform is informed that a product is dangerous and has already caused injury, but merely forwards the complaint to the seller without removing the listing or restricting further sales.
• A government agency issues a takedown order involving an illegal or dangerous product, but the platform fails to remove or disable access to it promptly.

These examples are conditional. The final determination depends on the evidence of the product’s character, the adequacy of notice, the platform’s response, and the causal connection between the delay and the consumer’s loss.

What May Not Be Enough to Establish Solidary Liability?

The following circumstances may not, standing alone, establish solidary liability:

• The mere fact that the product was sold through the platform;
• a seller’s failure to deliver the item on time;
• a buyer’s dissatisfaction with the product’s quality without evidence of danger or illegality;
• a general complaint that the seller is unreliable; or
• an isolated defect that was not reported to the platform before the harm occurred.

These circumstances may support a claim against the seller, a consumer complaint, or a claim based on the platform’s failure to exercise ordinary diligence. They do not automatically satisfy the stricter conditions for solidary liability under Section 27.

What Evidence Should Consumers Preserve?

A consumer pursuing a claim should preserve evidence showing both the seller’s conduct and the platform’s response. Relevant records may include:

• screenshots of the product listing, description, price, condition, and seller information;
• proof of payment, order details, delivery records, and receipts;
• photographs or videos showing the defect, injury, or dangerous condition;
• product recalls, regulatory notices, test results, or medical records;
• complaints sent to the platform and the platform’s responses; and
• proof that the platform continued displaying or selling the product after notice.

The most important evidence in a Section 27 claim is often the chronology: when the platform was notified, what information it received, what action it took, and how long the listing remained available afterward.

What Should Platforms Do Upon Receiving Notice?

A platform should promptly assess whether the report concerns a prohibited, unsafe, dangerous, or imminently injurious product. Where the report is credible and sufficiently specific, the platform should consider temporarily disabling the listing while conducting its review, particularly where continued sales may expose consumers to immediate harm.

The platform should maintain an internal record of the complaint, investigation, communications with the merchant, product permits or licenses, takedown decision, refund or recall measures, and final resolution. A documented and prompt response may help establish compliance with the ordinary-diligence requirement and demonstrate that the platform did not ignore a known danger.

Platforms should also maintain effective consumer and merchant redress mechanisms, verify regulated-goods permits, and ensure that their procedures are consistent with the Internet Transactions Act, the Consumer Act of the Philippines, and the Data Privacy Act of 2012.

How Does Data Privacy Affect Complaints and Investigations?

Platforms commonly process consumer and merchant information when investigating complaints, refunds, fraud reports, product safety incidents, and takedown requests. The Internet Transactions Act requires e-marketplaces and covered digital platforms to protect consumer data in accordance with the Data Privacy Act of 2012 and applicable National Privacy Commission issuances.

Disclosure of information should therefore be limited to what is necessary, proportionate, and legally authorized. A platform should avoid publicly exposing a seller’s personal information merely because a complaint has been filed, while still preserving records and responding to lawful requests from competent authorities.

In MAF v. Shopee Philippines, Inc., NPC 21-167, 2022, the National Privacy Commission recognized that processing information may be lawful when it is necessary for a legitimate interest connected with resolving an online transaction. The decision also emphasized the importance of proportionality in the processing of personal information.

Can Corporate Officers Be Personally Liable?

Corporate officers are not automatically personally liable for the platform’s obligations. Separate corporate personality generally protects officers and stockholders from personal liability for corporate debts and acts.

Personal liability may arise when the evidence establishes fraud, bad faith, gross negligence, direct participation in the wrongful act, or another recognized ground for disregarding the corporate entity. In Virata, et al. v. Ng Wee, et al., G.R. No. 220926, 2017, the Supreme Court discussed circumstances in which the corporate veil may be pierced where the corporate form is used to perpetrate a wrong or evade legal obligations.

The specific liability of an officer will depend on the officer’s participation, authority, knowledge, and conduct. The mere designation as a director, officer, or compliance employee is not by itself sufficient.

Practical Takeaways

For consumers, the strongest case for platform liability generally requires more than proof that an online purchase went wrong. The consumer should show that the product was prohibited, unsafe, dangerous, or imminently injurious; that the platform received adequate notice; and that it failed to remove or disable access promptly.

For platforms, the principal risk arises from continuing to host or sell a dangerous or illegal product after receiving credible notice. A prompt, documented, proportionate response is materially different from ignoring the report, merely forwarding it to the seller, or allowing additional transactions to proceed.

For sellers, the platform’s possible liability does not reduce the seller’s primary responsibility. Sellers remain accountable for accurate descriptions, lawful permits, product safety, warranties, refunds, and damages caused by defective or misrepresented goods.

Conclusion

Digital platforms do not become automatically liable for every defective product sold by an independent merchant. The Internet Transactions Act places primary liability on the e-retailer or online merchant and generally subjects platforms to duties involving verification, product information, regulated goods, redress, and data protection.

Solidary liability arises in the more serious situation covered by Section 27: the platform receives notice that goods or services appearing on its platform are prohibited, imminently injurious, unsafe, or dangerous, and nevertheless fails to act expeditiously to remove or disable access. Consumers should preserve evidence of the danger and the notice, while platforms should maintain effective monitoring, complaint-handling, takedown, and documentation procedures.

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.