Provisions of Internet Transactions Act may stifle e-commerce growth, online platforms warn

Vivienne Gulla, ABS-CBN News

Posted at Oct 01 2020 11:58 PM

MANILA - Some provisions of Senate Bill 1591 or the proposed "Internet Transactions Act" may stifle the growth of e-commerce in the Philippines, online platforms have warned lawmakers.

In Thursday’s joint Senate committee hearing, e-commerce platform Zalora urged to revisit the provision holding online shopping platforms “jointly and solidary liable” with online merchants for products sold that do not comply with intellectual property, consumer protection, and other laws.

“These provisions run contrary to the principle of equal treatment between offline and online businesses,” Zalora’s Chief Executive Officer Paulo Campos III said.

“E-commerce should not be placed at a disadvantage in relation to brick and mortar stores or retail formats. We urge the committee to revisit the provisions on damages, prescriptive period for the filing of complaints, joint and solidary liability,” he added.

Atty. Yves Gonzales of Google’s Government Affairs noted that the liability provision, along with the mandatory registration requirement for online merchants and e-commerce platforms, could reduce the vibrancy of the digital economy.

“We would like to manifest our support for the objectives of the bills to promote the growth of e-commerce in the country, to create an e-commerce environment built on trust and to increase the number of participants. We worry that some of the provisions of the bill will inadvertently undermine these objectives,” Gonzales said.

“The Senate bill also introduces the concept that a company one, is liable for the unlawful acts of third party, with which it conducts business, and two, must perform extensive oversight and regulartory compliance functions to ensure such third parties are and remain legally compliant. We believe this places unreasonable liability and unduly burdensome requirements on parties engaged in e-commerce in the Philippines,” added US-ASEAN Business Council senior vice president Ambassador Michael Michalak.

Facebook, meanwhile, called on the Senate to come up with a more flexible approach in regulating e-commerce.

“A one size fits all regulation will, in reality, be difficult to implement effectively and may have unintended consequences of stifling innovation opportunities and investments,” said Facebook’s director for public policy Rahimah Abdulrahim.

“Unlike traditional eCommerce, Facebook does not carry or hold inventory nor is Facebook involved in the dispatch or delivery of the products purchased. Nor does Facebook take payment or partake in the monetary transaction between businesses and customers,” she added.

For Lazada, there are other ways of holding platforms responsible without sharing solidary liability with the online merchant. A sentiment which was shared by Sen. Pia Cayetano.

“Our end goal is to encourage internet transactions and internet business. So what we really want to do is have safeguards in place, but not to the point where we push them out of this space,” Cayetano said.

“Solidary liability is not the only way you can hold them accountable. You can fine them, you can quote other laws that prohibit that they allow the sale of those products,” she added.

Sen. Imee Marcos also expressed concern over the provision.

“It’s really unduly onerous. We don’t impose this on the tiangge, on the sari-sari store. Why are we inflicting it on online (platforms)?” she said.

Sen. Sherwin Gatchalian, meanwhile, defended the proposal to hold e-commerce platforms jointly and solidarily liable with online merchants.

“The rationale there is to make the platform responsible for the goods being sold outside of the country. A lot of these goods are located beyond reach of ordinary consumers. Our ordinary consumers have no recourse if they have bought toxicants, illegal items, or defective items,” he said.

“Just to put more responsibility, and to come up with more protection for the consumers by the platform itself, we proposed that provision, the solidary liability,” Gatchalian added.

Laban Konsyumer Inc. and the Department of Trade and Industry expressed support for the provision.

“In online stores, whoever supplied the product, whoever manufactured the product, we hold the supplier as well as the store liable for any complaint by the consumer,” Trade Usec. Ruth Castelo explained.

“It is not accurate to say that in malls or physical stores it is not done. It is done especially for products under the mandatory scheme of certification of the department of trade and industry,” she noted.

COUNTERFEIT ITEMS SOLD ONLINE
 
According to the Intellect Property Office of the Philippines, there is a growing concern about the proliferation of counterfeit items sold online.

IPOPHL Deputy drector general Teodoro Pascua proposed that relevant government agencies be granted authority to take down from the web online merchants and products violating intellectual property, consumer protection and other laws.

“Perhaps the law can provide like for example the provision on take down and blocking, it can perhaps provide that authority to all current agencies that have jurisdiction over the subject matter,” Pascua said.

He cited data showing counterfeit and pirated physical goods comprising 3.3 percent or around $509 billion of global trade.

Some e-commerce platforms admit it is a challenge to weed out counterfeit goods, but also assured the public that they are improving their systems against it.

“No substandard or no fake product should be circulating in the market place... Do not introduce these products into the marketplace,” Sen. Koko Pimentel said.

“We fully support that position. In fact, that’s why we have an ITP portal for brands to sign up and report,” Lazada CEO Ray Alimurung replied.

“We do recognize that it still occurs. I think the main challenge is because it is very difficult using technology alone to capture which is fake,” he admitted.

“It’s a job that we continue to improve on,” Alimurung assured the Senate.

REGISTRATION REQUIREMENT

The US-ASEAN Business Council recommended the dropping of the provision requiring all e-commerce service providers to register with the e-commerce bureau.

“We wonder if the current Senate bill may overreach somewhat in scope. For instance, seeking to require all companies selling goods and service into the Philippines to have a physical presence because of the requirement to register with the SEC, would be unprecedented within ASEAN, a significant divergence from international practice and very disruptive to foreign service providers as well as consumers and businesses in the Philippines,” Michalak said.

“We don’t believe that it’s practical or necessary for all foreign merchants to register locally,” he noted.

Google noted that the provision may be viewed as non-tariff access barrier.

“Sec. 9, in particular, creates what is known as non-tariff access barriers, increases the likelihood of double taxation that may run counter to treaty obligations of the government of the Philippines,” Gonzales said.

The Department of Trade and Industry, meanwhile, expressed support for the provision, saying it will help consumers go after unscrupulous online traders.

“The difficulty that we have in the fair trade enforcement bureau is that there is no official registry of all online platforms or online sellers in the country, which will be addressed by the Internet Transactions Act. When the seller cannot be found, or has taken down the page or the website, or cannot be located, never provided any physical address, we will have to request consumer to bring the device to us so we can bring it to the CIDG crime division or to the NBI, and then check the IP address. That’s why we require the complete registry of all online sellers, whether it’s an individual merchant or a platform for easier protection to the consumer,” Castelo explained.

“If we’re going to give equal treatment to both online and offline stores, why would registration be restrictive for online platforms and sellers? In the Philippines, we register all kinds of businesses and physical stores, whether foreign or domestic, whether big or small,” she added.

THRESHOLD

Marcos is proposing a P3 million annual transaction value threshold for merchants and platforms to be covered by the law.

“There was a concern that very tiny, stay-at-home moms, who were bartering on the side or selling baked goods on the side will suddenly be inflicted with all kinds of registration and tax requirements,” she explained.

Trade Sec. Ramon Lopez said last September the measure will ensure local online platforms are treated equally as non-resident online platforms.

The government earlier urged online sellers to register in order to ensure safety and protection of both sellers and consumers. The coronavirus pandemic has given rise to the gig economy as consumers turn to digital for their daily and essential needs.