Retail Reboot: Unboxing the Internet Transactions Act of 2023
By: Atty. Ellice Edlyn L. Crescini
The COVID-19 pandemic forced everyone to change the way they shop. Some of those changes, like the urge to hoard face masks and alcohol, were short-lived. But other fundamental changes appear to be here to stay. While e-commerce was a buzzword some years ago, today it is the norm. Long after the easing of COVID-19 restrictions, people continue to engage in online shopping anywhere and everywhere. Whether it’s essentials or indulgences, convenience has become king, and the internet is the proverbial keys to the kingdom.
Unfortunately, the increase in online transactions has also led to the proliferation of fraudulent online activities, as cybercriminals exploit the growing reliance on digital services on one hand and the lack of a regulatory framework on the other. As e-commerce continues to rapidly expand, it becomes vital to keep up and regulate the evolving digital marketplace.
On December 5, 2023, President Ferdinand R. Marcos, Jr. signed into law Republic Act No. 11967 or the Internet Transactions Act of 2023 (“ITA”). The ITA aims to regulate e-commerce by safeguarding consumer rights, promoting fair competition, securing online transactions, upholding intellectual property rights, ensuring product safety and standards compliance, and promoting environmental sustainability. The Implementing Rules and Regulations of the ITA (“IRR”), issued by the Department of Trade and Industry (“DTI”) on May 24, 2024, provides additional regulatory and developmental guidelines that are expected to aid the effective implementation of the ITA.
The ITA applies to all business to business (B2B) and business to consumer (B2C) internet transactions, where one of the parties is situated in the Philippines or digital platforms for as long as they “avail of” or offer products to the Philippine market and has minimum contacts therein. The IRR defines “availment of the Philippine market” as any action or conduct that leads to, or indicates the intention to transact with persons or businesses located in the Philippines. It further defines “minimum contacts” as any touchpoint or interaction with any potential or actual customer, whether an individual, partnership, corporation or business, located in the Philippines, regardless of residence or citizenship. Otherwise stated, there is minimum contact if users in the Philippines are allowed to access and use a digital platform, and permitted to exchange information, goods or services while located in the Philippines.
Among the salient features of the ITA is the creation of the E-Commerce Bureau under the DTI. The E-Commerce Bureau serves as the central authority for policy formulation and monitoring in the digital space, including investigations and prosecution of non-compliance with the ITA. The law also mandates the creation of a centralized public repository of digital platforms, e-marketplaces, and online merchants engaged in e-commerce in the Philippines or an “Online Business Database” within one year from its effectivity.
While the ITA was designed to regulate e-commerce and protect consumers, it faces several challenges. A key challenge is the difficulty of implementing its provisions across various online platforms, especially in areas with limited digital infrastructure. Enforcement is another key challenge, particularly when it comes to tracking and prosecuting online fraud, as it often involves dealing with the anonymity of users and the cross-border nature of digital transactions. Recognizing these, the ITA appears to be laying the groundwork for addressing these challenges. For instance, prior to listing in the Online Business Database, merchants (both local and foreign) are required to register and provide essential information, such as names, at least one valid government ID for individuals, or business registration for juridical entities, their geographical location and contact details. With the plethora of current and verified data, the Online Business Database may mitigate enforcement challenges associated with personality and geographical anonymity.
Another concern is the need for timely updates to the law to keep pace with fast-changing technologies and online practices. Consumer education poses its own challenge, as ensuring that users are fully aware of their rights and how to protect themselves online is difficult. Finally, balancing transparency with data privacy is a delicate issue, as laws must ensure that measures intended to protect do not infringe on personal privacy. To this end, the ITA mandates e-retailers to take the necessary precautions to protect the data privacy of consumers at all times in accordance with Data Privacy Act of 2012, and comply with the minimum information security standards set by the E-commerce Bureau, National Privacy Commission, and other issuances of relevant government agencies.
The convenience of online shopping can only be fully realized when robust measures are in place to secure online transactions. While the ITA is a crucial first step towards fostering a safer e-commerce environment, regulatory compliance is of paramount importance as it helps protect consumers, safeguard systems and prevent illicit activities. As the digital marketplace continues to evolve, it will be essential for businesses, consumers, and regulators to work together, to stay abreast of the evolving landscape, strengthen the system, and timely adopt compliance measures, to ensure that online transactions remain secure, transparent, and beneficial for everyone.
Ellice Edlyn L. Crescini is a Junior Associate and a member of the Corporate and Commercial Law, Technology, Media, Telecommunications, Real Property and Data Privacy departments of the Firm. Her practice includes corporate secretarial and compliance matters before regulatory bodies.
She was admitted to the Philippine Bar in 2023. She received her Juris Doctor degree from Ateneo De Manila University – School of Law in 2023, graduating with honors. She obtained her Bachelor of Science in Management of Financial Institutions from De La Salle University.
