Philippine e-commerce protections

The Philippine economy has shifted up a gear as a growing middle class flexes its online buying power. Laws are being rolled out to protect this resource.

Surveys show the pandemic gave a tremendous boost to online shopping in the Philippines. According to the Department of Trade and Industry, e-commerce increased the country’s GDP by 3.4% in 2020. In 2022, about one million new businesses were created. This continuing expansion trend is attributed to a growing middle class with purchasing power. It is projected that the country’s e-commerce market will expand by 22.9 % in 2023 to reach PHP615.7 billion (USD11 billion).

Cards have become the most favoured payment method for online purchases, with more than half of all transaction in 2022 being made with credit and debit cards. This situation could have only been made possible by a strong e-commerce ecosystem. This article deals with the state of e-commerce in the Philippines, and aims to give some guidance around the digital infrastructure of the country, the opportunities, and the legal pitfalls.

At the heart of efforts is Republic Act No. 8792, the Electronic Commerce Act. This is the law governing e-commerce in the Philippines and took effect on 19 June 2000. Its objective is: “… to facilitate domestic and international dealings, transactions, arrangements, agreements, contracts, and exchanges and storage of information through the utilisation of electronic, optical and similar medium, mode, instrumentality and technology to recognise the authenticity and reliability of electronic documents related to such activities, and to promote the universal use of electronic transaction in the government and general public”.

This law has its origins in the UN Commission on International Trade Law (Uncitral), the model law on electronic commerce, and the Singapore Electronic Transaction Act. The Philippines act and its implementing rules and regulations affect only the form of transactions and were not designed to replace or supplant any substantive law. The act applies to both commercial and non-commercial activities.

DOING BUSINESS

The country’s administrative agencies have risen to the challenge of meeting an evolving digitised marketplace by issuing pertinent regulations. The business of e-commerce, involving the utilisation of the internet and mobile applications, has many regulated areas. The first and foremost involves ownership and capital investment.

Business registration. There are no restrictions on the type of organisation that can engage in e-commerce – it can be a single individual, corporation or partnership, provided that it has the necessary business licences. Licences are issued by the Securities and Exchange Commission for corporations and partnerships, and from the Department of Trade and Industry for sole proprietorships. Depending on the nature of the business, additional licences may be required from other government agencies. For example, from the Food and Drug Authority for businesses involving food, drugs, cosmetics and medical devices.

Foreign equity. Generally, under the Foreign Investments Act of 1991, foreign equity is limited to 40%. However, certain industries are reserved only for Filipinos, like mass media. There are also industries where 100% foreign ownership is allowed to act as a domestic market enterprise, except for retail trade, provided that the paid-up capital is US$200,000. In the case of retail trade, foreign equity and full control of the company can be obtained if the paid-up capital is US$2.5 million.

TAXATION

Part of the allure of an online presence is the ability to go beyond physical boundaries, to break from traditional rules of communication and transaction. Consequently, revenue agencies have had to curb the enthusiasm of digital age entrepreneurs.

In 2020, the Bureau of Internal Revenue issued a reminder to persons doing business through digital transactions including payment gateways, delivery channels, internet service providers, and other facilitators to:

• Secure their tax identification number;
• Register with Bureau of Internal Revenue;
• Issue registered sales invoices or official receipts for every sale of goods or services;
• Keep registered books of accounts and other accounting records of business transactions;
• Withhold taxes, as applicable;
• File the required tax forms; and
• Pay correct taxes due on time.
• Consumer protection
• The Consumer Protection Act affords wide protections around:
• Consumer product quality and safety;
• Food, drugs, cosmetics and devices;
• Deceptive, unfair and unconscionable sales acts or practices;
• Weights and measures;
• Product and service warranties;
• Labelling and fair packaging;
• Liability for product and service;
• Advertising and sales promotion;
• Regulation of repair and service firms; and
• Consumer credit transaction.

The rules also apply to online transactions. A joint administrative order (JAO) was issued on 4 March 2022 to reiterate the laws and regulations applicable to online businesses and consumers. It holds that e-commerce platforms and e-marketplaces are liable in the same manner as online sellers, merchants and e-retailers. It is the duty of e-commerce platforms to verify the goods sold on their sites.

DATA PROTECTION

The Data Privacy Act of 2012 regulates processing of personal information. Data processing under the act is, in general, consent-based. Consent shall be evidenced by written, electronic or recorded means. It may also be given by an agent specifically authorised by the data subject.

The JAO obliges online sellers, merchants or e-retailers to handle their consumers’ personal data with utmost care and respect. Personal information collected shall be retained only for as long as necessary under conditions in the JAO.

Upon collection and processing of the personal data, online sellers shall inform consumers of their data privacy rights under the act. These include: right to information; right to object; right to access; right to correct; right to erase; right to damages; right to data portability; right to file a complaint.

INTELLECTUAL PROPERTY

Embedded in the Philippine Constitution is a declaration: “The State shall protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations …”

The Philippines has an IP code which took effect on 1 January 1998. It codified separate laws on patents, trademarks and copyright, and created the Intellectual Property Office of the Philippines (IPOPHL).

To combat online counterfeiting and piracy, the IPOPHL created the Intellectual Property Rights Enforcement Office (IEO), which implements its administrative enforcement functions:

• Undertake enforcement functions supported by agencies such as the Philippine National Police, the National Bureau of Investigation, the Bureau of Customs, the Optical Media Board, and the local government units; and
• To conduct visits during reasonable hours to establishments and businesses engaging in activities violating intellectual property rights based on report, information or complaint received by the office.

Responding to complaints against the proliferation of fake goods on the internet, the IPOPHL devised a memorandum of understanding between itself and stakeholders and brand owners. It started last year and to date it has signed up 35 members.

PAYMENTS

A range of payment solutions and options is being made available to facilitate e-commerce transactions including e-wallets, online banking, payment gateways, and credit and debit cards. In this regard, several laws have been promulgated, such as:

• The Access Devices Regulation Act of 1998 (RA 8484, as amended by RA 11449), to protect the rights and define the liabilities of parties in commercial transactions by regulating the issuance and use of access devices; and
• The Philippine Credit Card Industry Regulation Law (RA 10870), which governs all credit card issuers, acquirers and transactions. It declares the state shall institute appropriate mechanisms to protect and educate credit cardholders.

CYBERCRIME

Unfortunately, with rapid growth in e-commerce comes the proliferation of cybercrime. The Cybercrime Prevention Act of 2012 (RA 10175) was enacted to protect and safeguard the integrity of computers, computer and communications systems, networks and databases, and the confidentiality, integrity and availability of stored information and data, from all forms of misuse, abuse and illegal access.

The Philippines has also enacted multiple laws and promulgated rules and regulations for consumer protection. Examples are:

1. 1. RA 10611, or the Food Safety Act of 2013;
   2. RA 10620, or the Toy and Game Safety Labelling Act of 2013;
   3. RA 10667, or the Philippine Competition Act of 2015;
   4. RA 8792, or the Electronic Commerce Act of 2000;
   5. RA 9994, or the Expanded Senior Citizen’s Act of 2010;
   6. RA 9442, or the Magna Carta of Persons with Disabilities of 2006; and
   7. RA 7581, or the Price Act of 1992.

The above-mentioned laws and regulations show how comprehensive the Philippines’ legal framework is to safeguard the rights and welfare of consumers.