Internet Transactions Act: Why it matters

Published December 2, 2020, 9:46 AM

by Lionell Macahilig

E-commerce is relatively nascent in the Philippines. This 2020, however, it saw an exponential growth due to the impact of the COVID-19 pandemic.

As the government imposed quarantine protocols to curb the spread of the viral disease, Filipinos are compelled to stay at home, resorting to e-commerce to purchase and sell goods.

This growth of e-commerce can be seen based on the surge of complaints related to Internet transactions by the Department of Trade and Industry (DTI) amid the pandemic. 

From January to October this year, the DTI got 14,869 Internet commerce complaints or 600% higher than the 2,467 complaints the agency received last year. 

The agency identified the top three common violations involving e-commerce: Price Act violation, delivery of defective products, and deceptive practices.

Addressing these concerns, the House of Representatives recently passed House Bill No. 7805 or the Internet Transactions Act (ITA) on the third and final reading. 

One of the priority bills pushed under leadership of House Speaker Lord Alan Velasco, 232 congressmen voted in favor of the ITA. 

Valenzuela City Rep. Wesley Gatchalian and Ako Bicol Party-List Rep. Alfredo Garbin principally authored the bill.

The ITA seeks to regulate commercial transactions on the Internet to protect both consumers and sellers from fraud and abuses.

Apart from tangible goods, the law also covers transactions involving online travel services, digital media, ride hailing, and digital financial services, which could be business-to-business (B2B) or business-to-consumer (B2C) in nature.

As transactions made on the Internet are far different from those done face-to-face, the ITA also seeks the creation of the e-Commerce Bureau which will operate under the DTI. 

The bureau is mandated to implement, monitor, and ensure compliance with the ITA, and will have the power to investigate, summon, and file charges against those who have violated the law.

Protecting both consumers and merchants online

Under the ITA, businesses and individuals who engage in e-commerce must register through the e-Commerce Bureau. Those that are legally authorized to do e-commerce in the Philippines include:

  • an individual duly licensed to do business as a single-proprietor with the Department of Trade and Industry (DTI);
  • a juridical entity duly registered with the Securities and Exchange Commission (SEC), whether as a corporation, a one-person corporation, or as a partnership;
  • a cooperative duly licensed by the Cooperative Development Authority (CDA);
  • a foreign corporation duly licensed by the SEC to transact business in the Philippines; and
  • a non-resident foreign individual or juridical entity who can set up a domestic corporation or branch office in the Philippines, can appoint a resident agent, or can notify and submits its contact details to the E-Commerce Bureau.

Registered individuals and businesses will get an industry-led eCommerce Trustmark which represents safety and security in Internet transactions. Trustmark will be granted to the website of the registrant. 

Failure to register will be made to pay a fine equivalent to 100% of the amount of the digital goods they sell.

E-commerce platforms like Lazada, Shopee, and Zalora will also be held liable if they fail to exercise extraordinary diligence to prevent any loss or damage to the consumer, fail to publish the details of their merchants, fail to examine goods like food, drugs, and cosmetics.

Aside from protecting consumers, the law also seeks to protect sellers by allowing them to redress if a violation has been committed. 

Riders and delivery service personnel are also covered as the ITA makes it unlawful for customers to unreasonably “shame, demean, embarass, or humiliate” them.

The law makes it illegal to cancel orders for food or grocery items made by ride hailing services that were already paid. A consumer, however, may cancel an order if it was delayed for at least an hour from the expected time of arrival due to the fault or negligence of the delivery service.

Consumers who violate the law may be fined with up to P50,000, while online merchants may be fined with P500,000 to P5 million.

The law, meanwhile, does not cover consumer-to-consumer transactions and those considered petty, one-off, or occasional low-value transactions. This makes the ITA compel consumers to transact only with registered merchants to secure full coverage and protection of the law.

With the Internet Transactions Act, the government aims to formalize and organize e-commerce in the Philippines. This matters as e-commerce will play a vital role in rejuvenating the country’s economy heavily crippled by the pandemic.