For the longest time, retail commerce in the Philippines was traditionally the brick-and-mortar type, where buyers physically went to the sellers to check or choose what exactly they wanted to buy. Sellers followed the principle of KYC (“know your customer”), and buyers were also instinctively guided by KYP (“know your purchases”).
Based on their previous experience with sellers they already trust, buyers are confident to shift their shopping online. If there were any issues, buyers knew whom to complain to. That buying pattern made practical sense to avoid the hassles of physical travel.
That was before the time of the COVID-19 pandemic. When the lockdowns started in March 2020, Filipinos had to deal with all sorts of surprises every day, most of which had something to do with mobility restrictions. Just as quickly, people turned to everything online, from attending meetings to buying meals and paying bills. Even government agencies stepped up online transactions to sustain the delivery of public services and to avoid compromising the health of their own workers.
All these have led to the exponential increase in the popularity of online transactions and allowed businesses and customers to continue to be active. Indeed, electronic commerce (or e-commerce) has become the practical answer to many challenges of getting things done amid mobility restrictions and health protocols.
E-commerce provides the alternative to traditional ways of doing business. Given the accelerating growth of e-commerce in the Philippines, the Department of Trade and Industry (DTI) announced last year that it is eyeing to further expand the number of e-commerce enterprises in the country to around 1 million by 2022, a rise from 500,000 in 2020. E-commerce is the business model of the future.
Interestingly, DTI Secretary Alfredo Pascual has repeatedly noted the department’s plans to launch an e-commerce platform specifically for small businesses in the country that would enable them to expand and heighten their contribution to the economy.
While e-commerce offers a whole world of options and advantages, however, there is a downside, too.
In view of the absence of real face-to-face encounters in e-commerce transactions, authenticity can be compromised, which gives rise to counterfeits and scams. Unless customers deal with business establishments they actually know and trust, everyone else will become vulnerable to scammers posing as legitimate online merchants.
In e-commerce, the concept of “know your purchases” becomes an immense challenge when the basis for buyers’ decision making is limited to a few photos and some reviews from people who purport to be satisfied customers.
The DTI reported that in 2021, it received more than 12,000 complaints against online businesses that sold deceptive, counterfeit, or pirated products. Earlier this year, the DTI, along with other concerned government agencies, issued a joint administrative order that seeks to increase consumer confidence in business-to-consumer (B2C) e-commerce transactions.
With the objective of protecting consumers against deceptive, unfair, and unconscionable sales acts and practices, the said policy ensures that e-commerce platforms, online retailers, and merchants selling in platforms and social media marketplaces are properly guided about the rules, regulations, and responsibilities in the conduct of their online business.
Then again, it is not only consumers who are affected by the sale of counterfeit goods. Legitimate businesses are likewise harmed by the growing proliferation of such products in the online market.
In turn, this compromises jobs, threatens innovation and fair trade in the online marketplace, and even deprives government of tax revenues. Affected small businesses that conduct operations through legitimate means may even find it difficult to address the problem due to limited resources at their disposal.
While cheaper and lower-quality products, many of which are fakes of genuine brands are more affordable, these are definitely detrimental to the economy as they compromise the rights of consumers and threaten the sustainable growth of legitimate businesses.
Hence, both consumers and especially enterprises that own intellectual property must be protected through enforceable regulations that balances the rights of all e-commerce stakeholders in the supply, distribution, retail, delivery, and customer spectrum.
There are already some safeguards in place such as Republic Act No. 7394 or the Consumer Act of the Philippines. Enacted in 1992, the law centers on consumer protection against hazards to health and safety as well as against deceptive, unfair, and unconscionable sales acts and practices, among others.
However, applying this law in the context of an evolving digital economy where direct transactions between sellers and buyers can happen in a few clicks and in anonymity, the risk of being victimize by fraud is the new reality for both parties of a deal in the online marketplace. Our collective action plan should be enforcement of regulations integrated with a heightened culture of market discipline and ethics as stakeholders of a digital ecosystem.
As the Philippine economy has traditionally been driven by consumer spending, it is imperative for the government to safeguard all e-commerce users. On their part, the general public as well as legitimate business players must work together in making sure that the marketplace is free from disruptive forces that undermine the authenticity of open trade.
Whether they engage in traditional commerce or electronic commerce, consumers have the basic right to protection. This is one sphere that the government needs to guarantee, because the integrity of the market affects the growth and sustainability of its economy.
Venice Isabelle Rañosa is a research manager at think tank Stratbase ADR Institute.