Digitally Safe and Secure: A Guide to the Internet Transactions Act of 2023 

In this New Normal, Philippine-based netizens, Filipinos and foreigners alike, have expertly ridden the surge of internet transactions, and have embraced its convenience, literally, at the tip their fingertips. Most unfortunately, scammers have likewise capitalized on the practical anonymity that global internet transactions brings, in order to deceive netizens to part with their hard-earned money. 

The good news is that the Philippines has now taken a significant step in regulating internet transactions and protecting “Philippine-based” netizens, through the passage of Republic Act No. 11967 or Internet Transactions Act of 2023 (“ITA”), approved by President Ferdinand Marcos Jr. on 05 December 2023.

The salient provisions of the ITA are as follows:

Coverage and Extraterritorial Application 

DTI is now mandated to regulate all business-to-business and business-to-consumer internet transactions where: 

1. one of the parties is situated in the Philippines, or
2. the digital platform,¹ e-retailer,² or online merchant³ is availing of the Philippine market and has minimum contacts therein.⁴

Delineation of the DTI’s Regulatory Powers 

To implement and enforce the ITA, the DTI is now empowered to issue (1) subpoenas, (2) compliance orders, (3) takedown orders, and (4) blacklist online businesses, made publicly accessible.⁵

Moreover, the DTI has regulatory jurisdiction over the use of the internet for conducting e-commerce by e-marketplaces, online merchants, e-retailers, digital platforms, and third-party platforms.⁶

For example, the DTI may issue an ex parte takedown order directing the removal of listing or offer for sale or lease on a webpage, website, platform or application regardless when such transactions or activities online threaten public or personal safety or compromises financial or personal information for a maximum period of thirty (30) days.⁷

Finally, the DTI is mandated to develop a platform for Online Dispute Resolution for online consumers, merchants, e-retailers, e-marketplaces, and other digital platforms.⁸

Creation of the E-Commerce Bureau

Within six (6) months from the ITA’s effectivity, the E-Commerce Bureau shall be created under the DTI.⁹ 

And within one (1) year from the ITA’s effectivity, the E-Commerce Bureau is tasked to establish a database of digital platforms, e-marketplaces,¹⁰ e-retailers, and online merchants engaged in e-commerce in the Philippines, providing the government and online consumers access to contact information of online businesses.¹¹

Philippine-based netizens may, upon the creation of the E-Commerce Bureau, expect it, to: (a) receive and manage their complaints, (b) investigate violations, (c) develop consumer education programs.¹²

Obligations of Parties in Internet Transactions and Compliance Period

A. Obligations of Parties in Internet Transactions

1. Online Consumers

Online consumers are required to exercise ordinary diligence in internet transactions, and if the transaction involves goods delivery, they are prohibited from canceling confirmed orders once paid or if the items are perishable and in transit unless specific conditions are met.¹³

The ITA outlines the remedies available to online consumers in cases of defects, malfunctions, or loss without their fault, allowing for repair, replacement, refund, or other remedies as per relevant laws, with provisions for the return of original goods and reimbursement in case of a refund.¹⁴

2. E-Marketplaces

E-marketplaces refers to digital platforms with oversight powers over the consummation of internet transactions.¹⁵

As such, E-marketplaces must ensure transparent e-commerce transactions by clearly identifying them as such, specifying the parties involved and conditions for promotional offers.¹⁶

They are also obligated to collect detailed information from online merchants, maintain a verified list, protect consumer data privacy, prohibit the sale of regulated goods without permits, provide a redress mechanism, and enforce clear product information, all subject to penalties for non-compliance.¹⁷

3. Digital Platforms

Digital platforms without oversight over transaction consummation must distinguish between commercial and non-commercial accounts, prohibit the sale of regulated goods without proper permits, and enforce clear product information.¹⁸ They are also mandated to provide an effective redress mechanism, maintain an updated list of e-commerce accounts, safeguard consumer data privacy, and adhere to information security standards, with penalties for non-compliance under the ITA.¹⁹

4. E-Retailers and Online Merchants

E-retailers and online merchants are mandated to transparently display prices, ensure goods meet specified conditions, and provide necessary information.²⁰ Additionally, they must publish essential details on their homepage and protect consumer data privacy in compliance with the Data Privacy Act of 2012 and relevant government standards.²¹

B. Period of Compliance and Effect of Non-Compliance 

The ITA allows a generous eighteen (18) – month grace period from its effectivity date for online merchants, e-retailers, e-marketplaces, and digital platforms to align its company policies and procedures to the ITA’s mandate.²²

DTI is further mandated to impose administrative penalties for the parties’ non-compliance to the above obligations, depending on the gravity and duration of the violation.²³

Liabilities of Parties in Internet Transactions

1. Primary Liability of E-retailers or Online Merchants

E-retailers or online merchants are primarily liable for compensating online consumers in civil or administrative complaints related to internet transactions.²⁴ The liability of e-marketplaces or digital platforms is considered the same as the online merchant’s if they are determined to be the same entity.²⁵

2. Subsidiary Liability of E-marketplaces or Digital Platforms

E-marketplaces or digital platforms facilitating internet transactions are subsidiarily liable to online consumers under specific circumstances.²⁶ These include the failure to exercise ordinary diligence, neglecting to promptly respond to notices related to intellectual property rights or legal presence, and a lack of contact details for an online merchant without legal presence in the Philippines.²⁷

Subsidiary liability is limited to damages directly resulting from the transaction, with no prejudice to other liabilities under the law. Digital platforms are not held liable for relying in good faith on an online merchant’s information if they demonstrate efforts to verify its accuracy.²⁸

3. Solidary Liability of E-marketplace or Digital Platform

E-marketplaces or digital platforms share solidary liability if they fail to promptly act on notices and remove or disable access to goods or services on their platform that violate laws, pose imminent harm, or are unsafe.²⁹

Legally Locking ITA In: E-Commerce Market Players Urged to Timely Adapt to the ITA

Considering the far-reaching implications of the new law, E-Commerce market players are urged to proactively adapt to its regulatory framework and maximize its benefits to ensure digitally safe and secure online transactions.  

E-Commerce businesses must review and adjust their operational procedures and policies to comply with the ITA’s comprehensive requirements and avail themselves of its benefits, in less than eighteen (18) months from the ITA’s effectivity date.

As the regulatory landscape evolves, stakeholders should closely monitor further guidance from the DTI and relevant authorities to ensure ongoing alignment with the ITA.

Timely adjustments to business practices will not only facilitate compliance but also position businesses to thrive in the dynamic and consumer-centric environment envisioned by the ITA.

Securing legal consultation is crucial for e-commerce businesses, navigating the complexities of the ITA. Legal professionals can provide tailored advice to assist businesses in aligning their operational procedures and policies with the specific requirements outlined in the ITA.

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A copy of the ITA may be accessed at: https://www.officialgazette.gov.ph/downloads/2023/12dec/20231205-RA-11967-FRM.pdf

For any questions or concerns related to the ITA, you may contact our firm.

Prepared by Christian Justin B. Streegan and Thea Ruth L. Magallanes.

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FOOTNOTES