Blog

Author Atty. Kathleen Mae C. Tuason  

On March 17, 2020, Luzon, Philippines has been placed under Enhanced Community Quarantine (ECQ) in response to the global COVID-19 pandemic. Under the ECQ, the Philippine Government mandated, amongst others, that a strict home quarantine be implemented all over the island of Luzon, all forms of mass transportation be suspended, and food and health services be regulated.[1]

The ECQ was later on reinforced under Republic Act No. 11469 or the Bayanihan to Heal as One Act, which provides that the President shall have the power to adopt various temporary emergency measures to respond to the crisis brought about by the pandemic, including  ensuring the availability of essential goods by adopting measures as may be reasonably necessary to facilitate and/or minimize disruption to the supply chain, especially for basic commodities and services, and the regulation and limitation of operation of all sectors of transportation, and regulation of traffic on all roads, including access thereto.

As a result, many business establishments such as restaurants, pharmacies, supermarkets, and other brick and mortar stores have been partially or fully closed for the duration of the ECQ. To address this challenge, many business owners, especially those which offer basic necessities to the public, have opted to employ the use of online platforms to address consumer demand. Such online platforms include offering their products through electronic commerce (e-commerce) websites and applications (i.e. Lazada, Shopee, and Zalora), mobile-based delivery companies (i.e. Grab, Foodpanda, and Lalamove), social networking applications (Facebook and Instagram), and through other websites and online platforms. The increased propensity of usage of these platforms gives rise to many legal and regulatory issues faced both by consumers and sellers alike. 

In the Philippines, the laws and regulations governing businesses and transactions conducted online are still limited. For instance, the primary law applicable for e-commerce transactions would still be Republic Act No. 7394 or the Consumer Act of the Philippines which was enacted way back in 1992, and thus has not yet contemplated present issues and challenges governing e-commerce transactions.The Consumer Act of the Philippines defines “sale” or “distribution” as an act made by a manufacturer or seller, or their respective representative or agent, to make available consumer products, services or credit to the end consumers under a consumer sale transaction, and provides for the prohibition against deceptive sales acts or practices and penalties for the same. Under said law, an act or practice shall be deemed deceptive whenever the producer, manufacturer, supplier or seller, through concealment, false representation of fraudulent manipulation, induces a consumer to enter into a sales or lease transaction of any consumer product or service. This would include instances when a consumer product or service is of a particular standard, quality, grade, style or model when in fact it does not – a deceptive practice usually encountered by consumers when dealing with online sellers of goods.

Fortunately, under Republic Act No. 8792 or the Electronic Commerce Act of 2000 (“E-Commerce Act”), the applicability of the Consumer Protection Act was expressly extended to cover e-commerce transactions. The E-Commerce Act states that violations of the Consumer Protection Act and other relevant laws through transactions covered by or using electronic data messages or electronic documents shall be penalized with the same penalties as provided under such law.

A more recent and updated regulation applicable to e-commerce transactions is the Joint Administrative Order No. 01 series of 2008 issued by the DTI, Department of Health, and Department of Agriculture (Joint Order), which requires online sellers (namely, retailers, sellers, distributors, suppliers or manufacturers engaged in electronic commerce with consumers) to adopt fair and reasonable business practices, including compliance with the Consumer Act of the Philippines, and further requires online sellers to provide for online disclosure of information, including accurate, clear and easily accessible information to identify themselves. Information required include the following:

1)   DTI and/or Securities Exchange Commission (SEC) registration;

2)   Name of the owner/proprietor of a retail establishment in case of a single proprietorship and names of
      directors and other officers in case of a corporation;

3)   Principal geographical address of the retailer, seller, distributor, supplier or manufacturer, and when
      applicable, of offices or agents in the Philippines;

4)   Website, e-mail address or other electronic means of contact, telephone and fax numbers, of the retailer, and
      when applicable, of its offices or agents in the Philippines;

5)   Any relevant local or foreign government registration/license numbers such as but not limited to the local
      government unit’s permit to operate, Taxpayer’s Identification Number (TIN), when applicable;

6)   Contact details about any business association or organization membership, when applicable; and

7)   Representative agent(s) in the Philippines for purposes of summons.

This Joint Order further requires that online sellers provide (a) sufficient, clear, accurate, and easily accessible information about the terms, conditions and costs of the consumer transaction, (b) reliable and secure payment mechanisms,  (c) an operation internal complaint-handling mechanism for consumer complaints, and (d)  procedures for filing consumer complaints with the concerned implementing agencies, both for online sellers located in the Philippines and abroad.

As to compliance with tax laws, Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN Law) provides that within five (5) years from its effectivity, and upon the establishment of a system capable of storing and processing the required data, the BIR shall require taxpayers engaged in e-commerce to issue electronic receipts or sales or commercial invoices in lieu of manual receipts subject to the rules and regulations to be issued by the Secretary of Finance upon the recommendation of the BIR Commissioner and after a public hearing has been held for this purpose. It is noted that the Government has yet to establish such system, and has until 2022 to do so.

Interestingly, the Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 55-2013 which provides that existing tax laws and revenue issuances on the tax treatment of purchases (local or imported) and sale (local or international) of goods or services shall be equally applied with no distinction on whether or not the marketing channel is the internet/digital media or the typical or customary physical medium.

In efforts to address the lack of e-commerce regulations in the Philippines, the DTI, in cooperation with the University of the Philippines Law Center, will be drafting the 2022 Philippine E-Commerce Roadmap, and will be working on enhancing consumer and merchant protection policies, including the integration of e-commerce-specific regulations, and online dispute mechanisms. This is in response to the increase of e-commerce targets which is expected by the DTI to account of 40% to 50% of the Philippine Gross Domestic Product by 2022.[2] It is hoped that through the 2022 Philippine E-Commerce Roadmap, up-to-date laws and regulations and improved enforcement mechanisms be put in place in order to address timely issues involving the Philippine e-commerce business landscape.  

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[1] Rodriguez M., (2020-03-16), Home Quarantine, Suspended Transportation + What You Should Know About “Enhanced Community Quarantine”, retrieved from https://www.spot.ph/newsfeatures/the-latest-news-features/81419/enhanced-community-quarantine-luzon-a4362-20200316

[2] Ibanez, J. (2019-10-28), Trade dep’t drafting e-commerce regulations for 2022 road map, retrieved from https://www.bworldonline.com/trade-dept-drafting-e-commerce-regulations-for-2022-road-map/