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HOUSE BILL No, 2636

Introduced by Representative WES GATCHALIAN

EXPLANATORY NOTE

‘The rise of digital technology saw the emergence of mobile networks and
the rapid advancement in computer technologies. Obviously, the advancement
leads us to where we are today and as Bill Gates said, “it's the center of attention
for businesses, governments and individuals around the world. It has spawned
entirely new industries, transformed existing ones, and become a global cultural

phenomenon”.

The internet has brought with it many forms of businesses and new forms of
marketing such as the e-commerce and the online shopping.

In the Philippines, the online shopping is on its road to big leap. Research
company Nielsen estimated that as of now, we have at least 33.6 million internet
users and the number is still growing.

Our online shopping portal is also on the rise and it won't take a long time,
many will be discovering the convenience of online shopping similar to first world
countries wherein it is already a million dollar industry. Imagine shopping in the
comfort of your home, free from the metropolitan traffic, dangers of handling cash,
where the product will be delivered right at your doorstep and enjoying convenient
shopping 24 hours /7 days a week.

No doubt, there are notable success stories on online commerce, but despite
this hype, it has also its share of weaknesses and limitations and it is for this reason
that this bill attempts to fill in the gap to protect the rights of the consumers and
merchants which in effect strengthen the online commerce. In a country where
online commerce is still in an infant stage and country vulnerable to monetary
scams, it is utmost importance to lay down the rules and regulations of the online
industry as early as now for the sake of future internet users.


This bill seeks to address concerns on state regulations on the industry,
payment options and secrecy of data obtained from the consumers, more
transparency from traders and seeks to eliminate hidden transaction costs, delivery
problems, cancellation of order, refund against cancellation and payment issues to
mention a few.

The bill is certainly not a perfect one, other areas and concerns might not
have been addressed but we cannot afford not to bring order to our lives and this
bill is an effort to craft a law that will foster a smooth functioning social order on
online commerce and trading.

Hence, the urgent approval of this bill is earnestly sought.

Representative
District, Valenzugla City

1!


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

17" CONGRESS
FIRST REGULAR SESSION

HOUSE BILL No. _ 2646

Introduced by Representative WES GATCHALIAN

AN ACT
PROVIDING CONSUMERS AND MERCHANTS
PROTECTION ON ONLINE COMMERCE AND
PROVIDING PENALTIES FOR VIOLATION
THEREOF.

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

Section 1. Short Title - This act shall be known as “Consumers and
Merchants Online Protection Act of the Philippines.”

Section 2. Declaration of Policy - It is the policy of the State to protect the
interests of the consumers, promote his general welfare and to establish standards
of conduct for business and industry for online shopping.

Towards this end, the State shall implement measures to achieve the
following objectives:

a. to develop and provide safety and quality standards for consumer
products, against unreasonable risks or injury associated with consumer
goods;

b. protection against deceptive, unfair and unconscionable sales acts and
practices;

c. provision of adequate rights and means of redress.
Section 3. Definition - For purposes of this Act, the term:
a. Consumer — refers to any natural or juridical person who is a purchaser,

recipient or prospective purchaser of consumer products, goods and
services on online portals or internet.


b. Service Provider - refers to natural or juridical person whose business is
facilitating sales of products, goods or services through their online
portals or internet.

c. third party seller. refers to a natural or juridical person that--

aa) sells, manufacture goods, or offers for sale, any good or service
on the Internet;

bb) solicits the purchase of such goods or services on the Internet
through a service provider after the consumer has initiated a
transaction with the service provider; and is not-- (1) the service
provider (2) a subsidiary or corporate affiliate of the service provider;
or (3) a successor of an entity described in clause (aa) or (bb).

c. Negative Option Marketing — refers to a commercial transaction where a
seller and service provider interprets a consumer’s failure to take an affirmative
action, either to reject an offer or to cancel an agreement as affirmative assent to be
charged.

Section 4. Application/Renewal of license of Service Provider - An
applicant for a license to operate as a service provider with the Department of
Trade and Industry must possess the following:

a. Must be a Filipino citizen, if single proprietorship. In case of partnership
or a corporation, at least seventy-five percent (75%) of the authorized
capital stock must be owned and controlled by Filipino citizens;

b. The owner, partners or the officers of the corporation must be of good
moral character and not otherwise disqualified by law;

Section 5. Service Provider requirements from the Third Party Seller -
The service provider shall require the third party seller to submit a duly
accomplished application form with the following requirements:
a. the identity of the third party seller and the geographical address of the
place of business to which the consumer may address any complaints;
b. adescription of the goods or services being offered;
c. the price of the goods or services including all taxes;
d. Undertaking by the third party seller that he is the owner of the goods to
be sold or owner of the service company or is authorized by the real
owner accompanied by a proof of ownership.

Section 6. Action on the Application - Upon receipt of the application, the
service provider or his duly authorized representative shall evaluate the documents
submitted by the third party seller and shall act accordingly whether to post the
goods or services for online commerce.

Section 7. Information requirements for online contracts - Before the
consumer is bound by an online selling contract, or any corresponding offer, the
service provider shall provide the consumer with the following information in a
clear and comprehensible manner:


*

description of the goods or services being offered;

b. the goods or products conform to product standards;

c. the identity of the third party seller, service provider, the geographical
address of the place of business to which the consumer may address any
complaints;

d. the total price of the goods or services inclusive of taxes, or where the
nature of the goods or services is such that the price cannot reasonably
be calculated in advance, the manner in which the price is to be
calculated

e. where applicable, all additional freight, delivery or postal charges and
any other costs or, where those charges cannot reasonably be calculated
in advance, the fact that such additional charges may be payable.

f. In the case of a contract of indeterminate duration or a contract
containing a subscription, the total price shall include the total costs per
billing period. Where such contracts are charged at a fixed rate, the total
price shall also mean the total monthly costs. Where the total costs
cannot be reasonably calculated in advance, the manner in which the
price is to be calculated shall be provided;

the arrangements for payment, delivery or performance;

the existence of a right of cancellation

the period for which the offer or the price remains valid;

where appropriate, the minimum duration of the contract, in case of

contracts for the supply of goods or services to be performed

permanently or recurrently;

k. inform the consumer and subject to the latter’s approval if he proposes,
in the event of the goods or services ordered by the consumer being
unavailable, to provide substitute goods or services (as the case may be)
of equivalent quality and price;

|. inform the consumer that the cost of returning any such substitute goods
to the supplier in the event of cancellation by the consumer would be
met by the supplier;

m. information about any after-sales services and guarantees.

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Section 8. Online selling contract — The service provider shall provide the
consumer with a copy of a signed contract or the confirmation of the contract
through an electronic document as provided under the Electronic Commerce Act or
on any durable medium within reasonable time.

Section 9, Payments —The service provider shall seek the express consent of
the consumer and comply with Sections 7 and 8 of this act before it charge or
attempt to charge any consumer's credit card, debit card, bank account, or other
financial account for any good or service sold in a transaction effected online or
internet.

Section 10. Requirements for online sale payments - It shall be unlawful
for any third party seller and the service provider to charge or attempt to charge
any consumer's credit card, debit card, bank account, or other financial account for
any good or service sold in a transaction effected on the Internet, unless:


a. the third party seller and the service provider has clearly and
conspicuously disclosed to the consumer all material terms of the
transaction provided in Sections 7 and 8 of this act.

b. the third party seller and the service provider has received the express
informed consent for the charge from the consumer whose credit card,
debit card, bank account, or other financial account will be charged by--

(1) obtaining from the consumer--
(i) the full account number of the account to be charged;
(ii) the consumer's name and address and a means to
contact the consumer;
(iii) card security code
(iv) expiry date of the card

(2) requiring the consumer to perform an additional affirmative
action, such as clicking on a confirmation button or checking a
box that indicates the consumer's consent to be charged the
amount disclosed.

Section 12. Right to cancel payment - The consumer shall be entitled to
cancel a payment:

a. where fraudulent methods has been made of his payment card in
connection with a contract to which this act applies by another person not
acting, or to be treated as acting, as his agent;

b. where the consumer exercised the right to cancellation and payment was
made.

Section 11. Prohibition on Data-Pass Used To Facilitate Certain
Deceptive Internet Sales Transactions - It shall be unlawful for a service
provider and third party seller to use, disclose a credit card, debit card, bank
account, or other financial account number, or to disclose other billing
information that is used to charge a customer for use in any other Internet-based
sale of any goods or services.

Section 12. Prohibition on Negative Option Marketing - It shall be
unlawful for any service provider or third party seller to charge or attempt to
charge any consumer for any goods or services sold in a transaction effected on the
Internet through a negative option feature unless the service provider or third party
seller-

a. provides text that clearly and conspicuously discloses all material terms
of the transaction before obtaining the consumer's billing information;


b. obtains a consumer's express informed consent before charging the
consumer's credit card, debit card, bank account, or other financial
account for products or services through such transaction; and

c. provides simple mechanisms for a consumer to stop recurring charges
from being placed on the consumer's credit card, debit card, bank
account, or other financial account.

Section 13. Issuance of Receipts — Within reasonable time, the service
provider and the third party seller are required to issue official receipts through an
electronic document under the Electronic Commerce Act or any durable medium
for sale of goods, services rendered and commissions in accordance with the
National Internal Revenue Code.

Section 14. Liability- The liability of the service provider and the third
party seller for any and all claims under this act shall be joint and several.

Section 15. Delivery- Unless the parties have agreed otherwise the delivery
of the goods or services sold under this act shall be by transferring the physical
possession or control of the goods or fulfilment of the services to the consumer
within 30 days from the conclusion of the contract.

Where the service provider and the third party seller failed to deliver at the
time agreed upon, the consumer has the option to give an additional period of time
appropriate to the circumstances or to cancel the selling or service contract in
which case the consumer shall be reimbursed of all sums paid under the contract.

Section 16. Right to Cancellation — The consumer shall have a period of
five (5) days to cancel from the conclusion of the contract without giving any
reason by any means of digital or electronic communication.

Section 17. Carriers liability- the third party seller and the service provider
shall be liable for damage, delay or loss in connection with the carriage of goods.

Section 18. Applicable Law. — The provisions of the Civil Code and other
related laws on Sales, Conditions and Warranties shall be applicable.

Section 19. Relation of the Act to Other Rights. — The provisions of this
Act shall apply notwithstanding any agreement to the contrary but shall not restrict,
limit or derogate from any other rights or remedies of a consumer under the
Consumers Act and other related laws.

Section 20. Penalties.

a. Any person who shall violate any provision of this act shall upon
conviction, be subject to a fine of double the amount involved in the
transaction but in no case less than Twenty Thousand pesos
(P20,000.00) or imprisonment of not less than six (6) months but not
more than two (2) years, or both upon the discretion of the court. If
the offender is an alien, he shall be deported after service of sentence
and payment of fine without further deportation proceedings.

b. In case the offender is a naturalized citizen, he shall, in addition to the
penalty prescribed herein, suffer the penalty of cancellation of his


naturalization certificate and its registration in the civil register and
immediate deportation after service of sentence and payment of fine.

c. Any director, officer or agent of a corporation who shall authorize,
order or perform any of the acts or practices constituting in whole or
in part a violation of this act, and who has knowledge or notice of
noncompliance received by the corporation from the concerned
department, shall be subject to penalties to which that corporation
may be subject.

In case the violation is committed by, or in the interest of a foreign
juridical person duly licensed to engage in business in the Philippines, such
license to engage in business in the Philippines shall immediately be
revoked.

Section 21. Construction — The best interest of the consumer shall be
considered in the interpretation and implementation of the provisions of this Act,
including its implementing rules and regulations.

Section 22. Implementing Agency — The Department of Trade and Industry
shall enforce the provisions of this act.

Section 23. Implementing Rules and regulations — The Department of
Trade and Industry shall promulgate rules and regulations to implement the
provisions of this act.

Section 24. Separability Clause. — If for any reason any article or provision
of this Act or any portion thereof or the application of such article, provision or
portion thereof to any person, group or circumstance is declared invalid or
unconstitutional, the remainder of this Act shall not be affected by such decision.

Section 25. Effectivity. — This Act shall take effect thirty (30) days from the
date of its publication in any newspaper of general circulation.

Approved,