Articles

Draft Guidelines for Online Businesses Reiterating the Laws and Regulations Applicable to Online Businesses and Consumers

by

The Department of Trade (DTI), Department of Agriculture (DA), Department of Environment and Natural Resources (DENR), Department of Health (DOH), Intellectual Property Office of the Philippines (IPOPHL), National Privacy Commission (NPC) drafted a Joint Administrative Order (JAO) on “Guidelines for Online Businesses Reiterating the Laws and Regulations Applicable to Online Businesses and Consumers.”

 

The JAO was drafted in order to increase consumer confidence in business-to-consumer (B2C) e-commerce transactions, especially in light of how the COVID-19 pandemic has accelerated the adoption of e-commerce. Additionally, it acknowledged the correlative rise in consumer complaints, fraudulent online transactions, and deceptive, unfair, and unconscionable sales  practices. Thus, the JAO seeks to ensure that e-commerce platforms, electronic retailers (e-retailers), and online merchants are properly guided about the rules, regulations, and responsibilities in the conduct of their online business. Furthermore, it seeks to inform consumers about their rights and mechanisms for redress. 

 

The DTI, along with other government agencies concerned, conducted a public consultation last October 1, 2021, in order to discuss the draft guidelines with the stakeholders, including e-commerce platforms and e-marketplace. The Department accepted inputs and comments on the draft guidelines until October 15, 2021.

 

Scope and Applicability of the JAO

 

The provisions of the JAO will apply to all online businesses, whether natural or juridical, registered or not, that are engaged in electronic transactions, particularly B2C transactions involving the sale, procurement, or availment of consumer goods, digital content/product, digital financial services, online travel services, ride-hailing services and online courier, and education services. Moreover, the JAO will apply to e-commerce platforms, online sellers, merchants, e-marketplace or e-retailers.  

 

Apart from the provisions of the JAO, laws applicable to physical or offline business shall continue to apply to online businesses. These online businesses may also be penalized for violating other laws governing particular industries and commercial activities. 

 

Responsibilities of Online Businesses

 

All online businesses are expected to comply with the following rules, taken from the ASEAN Online Business Code of Conduct: 

 

    1. Fair Treatment of Consumers;
    2. Upholding Responsibilities;
    3. Compliance with Laws and Regulations;
    4. Conformance to Local Standards;
    5. Ensured Quality and Safety;
    6. Honest and Truthful Communication;
    7. Price Transparency;
    8. Proper Recordkeeping;
    9. Review and Cancellation Options;
    10. Responsive Consumer Complaint and Redress System;
    11. Consumer Information Security;
    12. Online Payment Security;
    13. Desistance from Online Spamming;
    14. Non-proliferation of Fake Online Reviews;
    15. Consumer Education on Online Risks;
    16. Disclosure of Information.

 

Protection of Online Consumers Against Hazards to Health and Safety

 

  • Standards Law

The “Standards Law,” and all relevant DTI Administrative such as Technical Regulations shall apply to online businesses. Additionally, all online businesses must comply with DTI Memorandum Circular No. 21-05, series of 2021 which enumerates the 87 products and systems covered under the Bureau of Philippine Standards (BPS) Mandatory Product Certification Schemes. Online platforms, sellers, merchants, or e-retailers selling products covered by the DTI Bureau of Philippine Standards (DTI-BPS) Mandatory Product Certification Schemes shall ensure that such products sold online bear a valid Philippine Standard (PS) Quality and/or Safety Certification Mark, Import Commodity Clearance (ICC) sticker, or any certification mark approved and issued by the DTI-BPS. The manufacturers and importers of the covered products shall secure the PS Mark or ICC stickers, and they shall be the ones allowed to affix the Marks or stickers. 

 

  • Consumer Act of the Philippines

The “Consumer Act of the Philippines” shall also apply to online businesses and electronic transactions. Pursuant to Article 18, Section A of the law, it shall be unlawful for any person to manufacture for sale, offer for sale, distribute in commerce, or import into the Philippines any consumer product which is not in conformity with an applicable consumer product quality or safety standard. 

 

  • Food and Drug Administration Act 

The “Food and Drug Administration Act of 2009″ shall also apply to online businesses. They are not allowed to manufacture, import, export, sell, offer for sale, distribute, transfer, non-consumer use, promote, advertise, or sponsor any health product that is adulterated, unregistered or misbranded, beyond its expiration, and/or unregistered although requiring registration. 

 

Protection of Online Consumers Against Deceptive, Unfair, and Unconscionable Sales Acts or Practices 

 

Online businesses will also covered by provisions in the Consumer Act and the Intellectual Property Code which declare deceptive acts or practices by a seller or supplier in connection with a consumer transaction as violations. 

 

 These violations shall occur before, during, or after the transaction in cases where:

    1. A consumer product or service has the sponsorship, approval, performance, characteristics, ingredients, accessories, uses, or benefits it does not have;
    2. A consumer product or service is of a particular standard, quality, grade, style, or model when in fact it is not;
    3. A consumer product is new, original or unused, when in fact, it is in a deteriorated, altered, reconditioned, reclaimed or second-hand state;
    4. A consumer product or service is available to the consumer for a reason that is different from the fact;
    5. A consumer product or service has been supplied in accordance with the previous representation when in fact it is not;
    6. A consumer product or service can be supplied in a quantity greater than the supplier intends; service, or repair of a consumer product is needed when in fact it is not;
    7. A specific price advantage of a consumer product exists when in fact it does not;
    8. The sales act or practice involves or does not involve a warranty, a disclaimer of warranties, particular warranty terms or other rights, remedies or obligations if the indication is false;
    9. The seller or supplier has a sponsorship, approval, or affiliation he does not have;
    10. The seller or supplier of a product or service has used a trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, without the authorization of the owner.


The provisions on unfair or unconscionable sales acts or practices shall also apply when the seller induces the consumer to enter into a sales or lease transaction grossly inimical to the interests of the consumer. Likewise, they also apply in transactions which are grossly one-sided in favor of the online seller, merchant, or e-retailer. Additionally, they apply in transactions where online sellers take advantage of the consumer’s physical or mental infirmity, ignorance, illiteracy, lack of time or the general conditions of the environment or surroundings. 

 

Some circumstances that will be considered when determining whether an an act or practice is unfair and unconscionable are: 

 

    1. That the producer, manufacturer, distributor, supplier or seller took advantage of the inability of the consumer to reasonably protect his interest because of his inability to understand the language of an agreement, or similar factors;
    2. That when the electronic transaction was entered into, the price grossly exceeded the price at which similar products or services were readily obtainable in similar transaction by like consumers;
    3. That when the electronic transaction was entered into, the consumer was unable to receive a substantial benefit from the subject of the transaction;
    4. That the transaction that the seller or supplier induced the consumer to enter into was excessively one-sided in favor of the seller or supplier; and
    5. That the consumer was misled into purchasing a product or availing of a service by reason of the unauthorized use by the supplier or seller of a trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, and which thereby falsely purports or is represented to be the product or service of another.

 

Responsibilities of Online Businesses on Consumer Product and Service Warranties, Price Tag Placement, and Labeling 

 

  • Consumer Product and Service Warranty

The provisions under the Civil Code and under Title III of the Consumer Act will also apply to online businesses.

 

  • Labelling Requirements

Online businesses shall also comply with the labelling requirements under the Consumer Act and the Food and Drug Administration Act of 2009. 

 

    1. The minimum labelling requirements for consumer products whether manufactured locally or imported under Article 77;
    2. Additional labeling and packaging requirements necessary to prevent the deception of the consumer or to facilitate value comparisons as to any consumer product under Article 79;
    3. Additional labelling requirements for food under Article 84;
    4. Labeling of drugs under Article 86 and Section 6 of RA 6675, as amended by RA 9502 otherwise known as the “Universally Accessible Cheaper and Quality Medicines Act of 2008”; and
    5. Additional labeling requirements for cosmetics under Article 87.
    6. Breastmilk substitutes and breastmilk supplements shall follow the guidelines set in the Milk Code, in terms of labelling (Section 10 of EO 51).
    7. Toys shall comply with the appropriate provisions on safety labelling and manufacturer’s markings found in the Philippine National Standards for the safety of toys (Section 4 of RA 10620 otherwise known as the “Toy and Game Safety Labeling Act of 2013”).
    8. Household urban hazardous substances must bear warning labels particular to the hazards they present (Chapter IV/Article 91 of RA 7394, Section 1.n. of Presidential Decree (PD) No. 881).
    9. Vaping products and heated tobacco products must bear Graphic Health Warnings (Sec. 1 of RA 11346)

 

  • Price Tag Placement 

Online businesses must also comply with provisions under the Consumer Act with respect to the price of the product or service offered online:

 

    1. Product listings by e-retailers or merchants on marketplace/platforms must contain the price(s) of the product/service in Philippine pesos and must display payment policies, delivery options, returns, refunds and exchange policy, and other charges if applicable;
    2. Total price must be displayed. It must be clear, updated and accurate to avoid misleading online consumers;
    3. Indicate the price in high visibility areas preferably near the product title, or the add-to-cart button and ensure the text used for the price is readable and accessible; and
    4. The practice of providing prices through private (or direct) messages to consumers/buyers is considered a violation of the Price Tag Law.

 

Prohibited or Restricted Items

 

Online businesses cannot produce, import, distribute, market, sell or transport the following prohibited or restricted items without a license or permit from the regulatory agency concerned: 

 

    1. Animals and human parts;
    2. Fertilizers;
    3. Pesticides;
    4. Hazardous chemicals and Wastes;
    5. Imported, Second-Hand or Used Electrical and Electronic Equipment (EEE);
    6. Health products, including food, drugs, cosmetics, devices, biologicals, vaccines, etc.; 
    7. Prohibited Food;
    8. Drugs;
    9. Alcohol;
    10. Tobacco or tobacco-related products;
    11. Ionizing radiation sources and services/activities;
    12. Lottery tickets;
    13. Slot machines;
    14. Goods or items that are embargoed, mislabeled, recalled, stolen, expired;
    15. Used cosmetics;
    16. Counterfeit items;
    17. Currency, credits, and securities;
    18. Precious metals;
    19. Artifacts and antiquities;
    20. Weapons;
    21. Chainsaw;
    22. Equipment and devices critical to surveillance and information gathering; 
    23. Government or Police related items;
    24. Prohibited services;
    25. Obscene, seditious or treasonous materials;
    26. Publications, books, films, videos and/or video games that do not comply with applicable laws in the country of sale and/or delivery;
    27. Blasphemous materials;
    28. Political products;
    29.  Other items that are illegal or risky.

 

The list of items may be amended. Furthermore, online businesses must exhibit the corresponding license or permit number as regards the restricted items for sale.

 

Data Privacy

 

The JAO also defines the responsibilities of online sellers, merchants, or e-retailers under Republic Act No. 10173 or the Data Privacy Act. Specifically, online sellers, merchants, or e-retailers, particularly those that sell through their own websites or through social media marketplaces, are expected to handle all personal data of their consumers with the utmost care and respect. There must be reasonable and appropriate security measures intended for the protection of personal data.

 

A Privacy Notice shall be posted in the websites or online platforms, in order to provide consumers with information regarding the purpose and extent of the processing of their personal data in relation to their transactions. Online merchants operating their own platforms are prohibited from asking unnecessary permissions from consumers to collect or use their personal data. 

 

Prior to the collection of personal data, the online sellers, merchants, or e-retailers must determine the most appropriate lawful criteria for such processing, which in the case of sale-related processing need not necessarily be consent. In such a case, processing may still be lawful if based on a contract or legitimate interest of either or both the seller and the buyer. Personal data provided by customers shall not be used for purposes not authorized by consumers. Upon collection and processing of personal data, the online sellers shall inform the consumers of their data privacy rights.

 

Personal data shall be disposed of or discarded in a secure manner that would prevent further processing, unauthorized access, or disclosure to any other party or the public, or prejudice the interests of the data subjects. Furthermore, personal information collected from consumers shall be retained only for as long as necessary: 

 

    1. For the fulfillment of the declared, specified, and legitimate purpose, or when the processing relevant to the purpose has been terminated; 
    2. For the establishment, exercise or defense of legal claims; 
    3. For legitimate business purposes, which must be consistent with standards followed by the applicable industry or approved by appropriate government agency; or 
    4. As provided by law; 

 

Liabilities of Online Businesses

  • Liability for sale of defective product and service

Online businesses may be liable for sale of defective products and services under the Consumer Protection Act. Specifically, in such case, online merchants or sellers will be liable: when it is not possible to identify the manufacturer, builder, producer or importer of a defective product; when the product is supplied, without clear identification of the manufacturer, producer, builder or importer; and when the perishable goods were not adequately preserved. 

 

  • Liability for sale of Counterfeit and pirated goods

The online sale of fake and/or pirated goods is a violation of R.A. No. 8293 and R.A. No. 8203, or the “Special Law on Counterfeit Drugs.” 

 

A person who finds that their IP protected products are being infringed by unauthorized sellers or merchants online may request the online e-commerce platforms being used by the infringer to take down the infringing products. The platforms have the authority to enforce the rights of the IP holder, in accordance with their internal guidelines. However, the complaints shall also be transmitted by the DTI to the brand owners so that they may check and report the same to the IPOPHL for action. The complaints may also be brought before other regulatory agencies having jurisdiction over the same such as, but not limited to, the Optical Media Board and the Food and Drug Administration. 

 

  • Liability of e-commerce platforms and e-marketplaces

E-commerce platforms and e-marketplaces shall be considered, and shall be held liable in the same manner as, online sellers, merchants, and e-retailers, when they exercise direction or control over the selling practices of the actual seller, when the latter commits any violation of these rules. 

 

However, e-commerce platforms and e-marketplaces shall be given a period of 10 calendar days from written notice to take down the post of the online seller, merchant, and e-retailer that violates the rules. If the e-commerce platform and e-marketplace refuse or neglect to take down the posts, the applicable department or agency may proceed against the e-commerce platform and e-marketplace as a principal violator of the rules.

 

Furthermore, e-commerce platforms and e-marketplaces are prohibited from:

    1. Disseminating or causing the dissemination of any false, deceptive or misleading advertisement for the purpose of inducing or which is likely to induce directly or indirectly the purchase of products or services; 
    2. Advertising any food, drug, cosmetic, device, or hazardous substance in a manner that is false, misleading or deceptive, or is likely to create an erroneous impression regarding its character, value, quantity, composition, merit, or safety; 
    3. Advertising any food, drug, cosmetic, device, or hazardous substance, unless such product is duly registered and approved by the concerned department for use in any advertisement; 
    4. Using registered marks as well as copies or reproductions thereof in marketing emails and advertisements, without the authority of the trademark owner; 
    5. Benefitting from an infringing activity, after having been notified of said infringing activity and having the right and ability to control the same; 
    6. Inducing, causing, or materially contributing to the infringing conduct. 

 

Concerned Government Agencies

 

The provisions of the JAO shall be implemented by the following government agencies:

    1. Department of Trade and Industry (DTI)
    2. Department of Agriculture (DA)
    3. Department of Environment and National Resources (DENR)
    4. Department of Health (DOH), through the Food and Drug Administration (FDA)
    5. Intellectual Property Office of the Philippines (IPOPHL)
    6. National Privacy Commission (NPC)

 

Registry of Online Businesses

 

The E-Commerce Office of the DTI shall create and maintain a Registry of Online Business (ROB) in a DTI-hosted site where important business information should be uploaded to safeguard against fly-by-night and unscrupulous online business. 

 

Remedies of Consumers

 

Complaints against online businesses may be filed before the DTI. Online consumers may filed their complaints before the national or provincial offices, or through the consumer care hotline, SMS, messengerial services,, or electronically through the DTI website, Facebook page, or email.

 

Penalties

 

Online business may be penalized in cases of violations of certain laws, rules and regulations governing their industries and their commercial activities or transactions. The penalties, depending on the law violated, may include:

 

    1. Seizure, forfeiture, or condemnation of the products 
    2. Cancellation or revocation of any permit, license, authority, or registration granted by DTI
    3. Payment of damages
    4. Impounding of sales invoices and other documents evidencing sales 
    5. Injunction 
    6. Destruction without compensation of the infringing material 
    7. Imposition of fines
    8. Imprisonment

 

The full draft of the Joint Administrative Order can be accessed here 

-18

Post a Comment