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Parties involved in online business-to-business (B2B) or business-to-consumer (B2C) transactions must take note of the new regulatory regime established under the ITA. In particular, e-commerce participants should review and make necessary changes to their procedures and policies to ensure compliance with the provisions of the ITA.

Quisumbing Torres is able to advise on the regulatory requirements under the ITA and assist in assessing existing procedures and policies, with a view to ensuring compliance with the law.

In more detail

Below are the salient provisions of the ITA:

1. Scope

The ITA applies to all B2B and B2C internet transactions (defined as the sale or lease of digital or non-digital goods and services over the internet) within the mandate of the DTI, where one of parties is situated in the Philippines. It does not apply to online media content and consumer-to-consumer transactions.

• The ITA governs the following parties to internet transactions:

a. Digital platforms, referring to information and communication technology-enabled mechanisms that connect and integrate producers and users, including e-marketplace, mobile application platforms, online delivery platforms, social media platforms and travel platforms. 

b. E-marketplaces, referring to digital platforms that connect online consumers and online merchants, facilitate the sales, process the payment, facilitate the shipment or provide support within the platform, and which retain oversight over the consummation of the internet transaction. 

c. E-retailers, referring to persons selling goods or services directly through its own website, webpage or application.

d. Online merchant, referring to persons selling non-financial goods or services through third-party digital platforms.

e. Online consumers, referring to persons who purchase, lease, receive or subscribe to goods or services over the internet for a fee.

2. Extraterritoriality

• The ITA mandates extraterritorial application and states that a person who engages in e-commerce (i.e., digital platform, e-retailer or merchant) and who avails of the Philippine market to the extent of establishing "minimum contacts" shall be subject to applicable Philippine laws and regulations and cannot evade legal liability in the Philippines despite the lack of legal presence in the country.
• Under private international law, "minimum contacts" with a foreign state are have been required for a foreign court to obtain "personal jurisdiction" over an entity or person in a manner that "does not offend the traditional notions of fair play and substance." To determine whether there are "minimum contacts" in relation to internet transactions, the Philippine Securities and Exchange Commission has used the Sliding Scale Test, which considers the nature and quantity of commercial activity that an entity conducts over the internet (see SEC-OGC Opinion No. 17-03 dated 4 April 2017).

3. The E-Commerce Bureau

• The ITA creates the E-Commerce Bureau under the DTI. The E-Commerce Bureau is mandated to implement the ITA and formulate policies and plans to ensure strict compliance with the provisions of the ITA, as well as to investigate and prosecute violations of the ITA.
• Within one year from the effectivity of the ITA, the ITA also mandates the E-Commerce Bureau to establish a database of digital platforms, e-marketplaces, e-retailers and online merchants engaged in e-commerce in the Philippines.

4. The DTI’s regulatory jurisdiction

• The ITA grants the DTI regulatory authority over the use of internet for conducting e-commerce by e-marketplaces, online merchants, e-retailers, digital platforms and third-party platforms. However, the DTI’s authority is ancillary to and does not diminish the existing regulatory jurisdiction of other agencies or deprive them of such jurisdiction.
• To enforce the ITA, the DTI is empowered to issue the following processes:

a. Summons and subpoenas to alleged violators or witnesses.

b. Compliance orders to require conformity with the ITA, the Consumer Act, and any other applicable trade and consumer protection issuances.

c. Subject to the conduct of investigation or verification, ex parte takedown orders, effective for a maximum of 30 days (unless extended or made permanent by a judicial order or decision), directing the removal of a listing or offer on a webpage, website, platform or application, regardless of the intended nature of the transaction, when it relates to any of the following:

i. Sale or lease of goods or services that are prohibited or regulated under existing laws, such as endangered animals, illicit drugs, fireworks and other explosives, and counterfeit goods, where the prohibited nature of the goods and services is apparent from the photo or description in the post.

ii. Sale or lease of goods or services subject of a cease and desist order issued by an appropriate government agency.

iii. Sale or lease of goods or services online previously subject of a takedown order but subsequently reposted and proliferated online by the seller under investigation.

iv. Such other transactions or activities online, within the jurisdiction of the DTI, purporting to sell or lease goods or services that otherwise threaten public or personal safety, compromises financial or personal information.

• Other regulatory agencies may also request the DTI to issue takedown orders, or they may issue other orders (e.g., cease and desist orders) in the exercise of their regulatory authority.
• The DTI is authorized to establish a publicly accessible blacklist of websites, web pages, online applications, social media accounts, or other similar platforms that fail to comply with compliance orders or takedown orders of the DTI, or cease and desist orders of other regulatory agencies.

5. Obligations of parties to internet transactions

• The ITA imposes the following obligations to e-marketplaces:

a. Ensure that internet transactions on their platforms are identifiable as e-commerce transactions and that relevant information of the transactions (including the online merchants and the goods) are clearly identified.

b. Exercise due diligence in onboarding online merchants and maintain a list of all online merchants registered under the platform.

c. Protect the data privacy of consumers at all times.

d. Ensure that goods sold on their platforms comply with relevant laws.

e. Provide an effective and responsive redress mechanism for online merchants and consumers.

• On the other hand, the ITA imposes the following obligations to digital platforms other than e-marketplaces:

a. Enable consumers to distinguish between commercial and non-commercial or private accounts.

b. Ensure that goods sold on their platforms with relevant laws.

c. Ensure that the goods offered on their platforms are sufficiently identified.

d. Maintain a list of all online merchants registered under the platform.

e. Protect the data privacy of consumers at all times.

f.  Provide an effective and responsive redress mechanism for online merchants and consumers.

• The ITA also requires the following of e-retailers and online merchants:

a. Indicate the price of goods and services offered consistent with the Consumer Act.

b. Ensure proper and complete delivery of goods or services to online consumers and that the goods meet expectations of the online consumer, given the nature of the goods and statements of the online merchant or e-retailer.

c. For e-retailers, publish sufficient information, such as trade names, address and contact information, to make itself clearly identifiable.

d. For e-retailers, protect the data privacy of consumers at all times.

e. Issue paper or electronic invoices or receipts at all times.

f. Provide an effective and responsive redress mechanism for online merchants and consumers.

6. Redress mechanism, liability regime and penalties

• In case of dispute, an aggrieved party is required to avail of the internal redress mechanism of the digital platform, e-marketplace or e-retailer prior to the filing of a complaint before any court or appropriate government agency or resorting to alternative dispute resolution. Such mechanism is deemed exhausted if the complaint remains unresolved after seven calendar days from filing thereof.
• The DTI is also mandated to develop an online dispute resolution platform to facilitate an alternative dispute resolution for online consumers, online merchants, e-retailers, e-marketplaces and other digital platforms.
• E-retailers or online merchants are primarily liable for indemnifying the online consumer in civil actions or administrative complaints arising from internet transactions, without prejudice to the imposition of administrative fines under the ITA and penalties under other laws.
• Without prejudice to liability under the ITA and other laws, e-marketplaces and other digital platforms that facilitated the internet transaction subject of a civil action or administrative complaint are subsidiarily liable to the online consumer (i.e., they become liable if those primarily liable are unable to pay), to the extent of damages suffered by the online consumer as a direct result of the transaction, under any of the following circumstances:

a. The e-marketplace or other digital platform failed to exercise ordinary diligence in complying with its obligations under the ITA, resulting in loss or damage to the online consumer.

b. The e-marketplace or other digital platform 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 any appropriate government agency.

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

On the other hand, e-marketplaces or other digital platforms are solidarily liable (i.e., they are also primarily liable) if they fail, after notice, 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.

• Digital platforms or e-marketplaces shall not be held liable for their reliance in good faith on an online merchant’s representations, warranties or submitted registration documents. However, the digital platform or e-marketplace must show evidence of good faith and that reasonable effort was exerted to ascertain and maintain the accuracy, authenticity and veracity of the documents or information submitted.
• The ITA empowers the DTI to impose administrative fines of up to PHP 1 million as penalty against erring online merchants, e-retailers, e-marketplaces and other digital platforms.

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Please contact QTInfoDesk@quisumbingtorres.com for inquiries.

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