The Philippines, with its rapidly expanding digital economy, has become an attractive destination for foreign SMEs looking to tap into new markets. One of the recent legal developments that will significantly impact foreign businesses engaging in e-commerce is the InternetTransactions Act (ITA) of 2023 and its Implementing Rules and Regulations(IRR). This article delves into the key aspects of the ITA, emphasizing issues pertinent to foreign SMEs considering operations in the Philippines.
Overview of the Internet Transactions Act (ITA)
The ITA was enacted to enhance consumer protection, promote fair competition, and boost the digital economy by establishing a legal framework for online transactions. It aims to regulate all business activities conducted over the internet, ensuring that both consumers and merchants engage in safe and secure transactions.
Key Provisions Affecting Foreign SMEs
1. Scope
The ITA applies to business-to-business and business-to-consumer internet transactions, as long as at least one of the parties involved is located in the Philippines. The ITA does not cover online media content and consumer-to-consumer transactions, which are for personal, family, or household use and not part of regular business activities.
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 their 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
Notably, the ITA applies to transactions that occur outside of the Philippines. It applies to all business-to-business or business-to-consumer e-commerce transactions (whether for the sale or purchase of digital or non-digital goods or services) where:
・at least one of the parties is situated in the Philippines, or
・the digital platform (including e-marketplaces, e-retailer or online merchant) is availing of the Philippine market or has minimum contacts there.
The IRR defines “availing of the Philippine market” as any action that shows an intention to transact with persons or businesses located in the Philippines, such as advertising specifically for the Philippine market, soliciting or receiving orders from there, making deliveries there, or providing technical or customer support to customers in the Philippines.
Additionally, the concept of "minimum contacts" in the Philippines refers to any form of interaction with potential or existing customers within the country, regardless of their residence or citizenship. According to the IRR, this interaction is considered to be established if users in the Philippines can access and utilize a digital platform for exchanging information, goods, or services while physically located within the country.
3. Obligations for E-marketplaces
Transaction Identification: Ensure that all transactions on their platform are clearly marked as e-commerce transactions and provide all relevant details about the transactions, including information about the merchants and the goods.
Merchant Onboarding: Carefully vet new merchants before allowing them to sell on the platform and keep an up-to-date list of all registered merchants.
Merchant Registration: E-marketplaces should require all merchants, whether local or foreign, to register by submitting business registration documents and relevant information such as their address and contact details before listing them on their platform.
Data Privacy: Always protect the privacy of consumer data.
Legal Compliance: Ensure that all goods sold on the platform comply with relevant laws.
Complaint Handling: Provide a reliable and effective system for handling complaints from both merchants and consumers.
4. Obligations for Other Digital Platforms (not e-marketplaces)
Account Distinction: Help consumers distinguish between business accounts and private accounts.
Legal Compliance: Ensure that all goods sold on the platform comply with relevant laws.
Product Identification: Clearly identify all goods offered on the platform.
Merchant List: Keep an up-to-date list of all registered merchants.
Data Privacy: Always protect the privacy of consumer data.
Complaint Handling: Provide a reliable and effective system for handling complaints from both merchants and consumers.
5. Obligations for E-retailers and Online Merchants
Price Indication: Clearly indicate the price of goods and services, including any extra costs like delivery fees.
Delivery and Quality: Ensure that goods or services are delivered as promised and meet the consumer's expectations based on the merchant's descriptions.
Business Information: E-retailers must provide sufficient information, such as trade names, address, and contact details, to make themselves easily identifiable.
Invoicing: Issue paper or electronic invoices or receipts for all transactions, either on paper or electronically.
Complaint Handling: Provide a reliable and effective system for handling complaints from both merchants and consumers.
Recommended Actions
Foreign SMEs engaging in online business-to-business (B2B) or business-to-consumer (B2C) transactions in thePhilippines must stay informed of the new regulatory framework under the ITA.It is crucial for e-commerce participants to review and adjust their procedure sand policies to ensure compliance with the provisions of the ITA and its IRR.
Trustiics has vetted lawyers that can provide specialized advice on the regulatory requirements of the ITA and can assist in evaluating existing procedures and policies to ensure full legal compliance. Contact us today to safeguard your operations and leverage the growing opportunities in the Philippine digital economy.