Should online re/sellers be penalized by law for not outright posting their prices?

“Price transparency is the extent to which information about prices is available to buyers that
organizes, explains, clarifies, or projects the contextual direction and/or rationale for the seller’s
pricing” (Hanna, Lemon, & Smith, 2018). There has recently been attention on this topic since online
commerce found a morbid resurgence in the age of the pandemic. As people are discouraged from
engaging in real life activities, many businesses have found respite in online platforms. Compared to
brick-and-mortar stores, the regulation of online marketplaces is comparable to the wild west.
Consumers on such platforms now face the “PM sent” culture which harkens back to times where
haggling was the norm and transparency hadn’t taken off. Back then, shopkeepers had to have an
intimate knowledge of the details regarding their goods as to evaluate the proper price to sell their
products (Kenton, 2021). Consumers would also then require an equal amount of expertise to
guarantee that they were buying products at a fair price. Those with little prerequisite knowledge
would often find themselves on the losing side. Such norms would be revolutionised with price
transparency.

One of the most known examples of early price transparency is John Wanamaker’s principle
of “one price and goods returnable” in the 1870s. The invention of the price tag followed to enforce
this in his stores. As there is no room for price negotiation, the business ran smoother and with less
expertise required on both sides, allowing for increased sales volume. Public trust in the store also
increased as consumers felt that they were being treated fairly. The practice then quickly spread
across multiple industries. Most industries today are transparent with their dealings such as retail
stores, the stock market, and others but with varying degrees of intensity.

In the Philippines, price transparency is included in RA No. 7394, the Consumer Act of 1992,
under the right to information of consumers (RA 7394, 1992). As such, infringement and failure to
comply to price transparency already has written punishments and consequences. While this act
predates the rise of e-commerce, I see no reason why it would not apply to online marketplaces. The
inclusion of price transparency is important not only to protect consumer rights, among which is their
right to have the freedom of choice between similar services, but it also ensures that competition
between companies is encouraged (Hanna, Lemon, & Smith, 2018). Companies are inclined to either
decrease prices to match the accepted norm or improve on their quality or services to justify elevated
prices. As such, transparency also drives innovation within an industry. These are the main reasons
that there are advocates of price transparency in online marketplaces and registration of online
businesses with the government to allow regulation and enforcement.

There are two ‘against’ sides that I would like to tackle in the following parts, those who are
(1) against price transparency and those (2) against penalties for online sellers. These two sides are
not mutually inclusive.

For those against price transparency, some studies cite that online marketplaces with high
degrees of price transparency do not necessarily succeed compared to those with low price
transparency, and that in these places the prices aren’t competitive (Soh, Markus, & Goh, 2006). They
state that due to the vast quantity of available information for customers to review, the time it takes
for consumers to purchase a product lengthens accordingly leading to lower sales volume. They also
say that even with all this information present, some consumers still prefer to buy the more expensive
item despite it being similar to another cheaper product because they conflate expensiveness to
quality. For Filipino online sellers who don’t practice price transparency, they see this as an
opportunity to do salestalk and haggling as mentioned before, an honest way to increase their profit
from their sale (Malasig, 2020). These people see those advocating for price transparency to be
misguided as they think that the result of high transparency will be opposite of their intention which is
to benefit everyone by improving market efficiency.
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 The second group is those who are against penalization of online sellers who infringe upon
these rules. This is of course in the context of a global pandemic. They don’t necessarily believe that
price transparency is a negative but do think that law should give some leeway due to the
extraordinary conditions that we are currently in (Terrazola, 2020). During any other normal time, I
believe that these people would agree to the regulation of online marketplaces as a necessary step
to further develop this sector. Most in this camp believe that it is heartless and insensitive for the
government to penalize struggling business owners during a global pandemic.

I personally find myself in this demographic. Despite the evidence put forth by the camp
against price transparency, I still think that the benefits do outweigh the negatives. I think a good
justification for that is that price transparency has become the norm in our society. But I don’t think
that outright penalization of these online sellers is the right way to go about promoting this kind of
behaviour. Imposing such strict legislation on a nascent sector of our economy is akin to shooting
ourselves in the foot. Online commerce is new territory and while the current law should still be
followed, further study in creating a new set of rules and regulation must be done to adapt to this
changing landscape. Once this industry has become stable should we become strict in our
enforcement of the rules. That is why I am glad to see that a happy compromise was made facing
these two sides of the argument. The government has mandated that those online sellers earning a
profit below of P250,000 are exempt from taxes and no penalties would be levied against those who
registered with the government late (Merez, 2020).

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References

Hanna, R. C., Lemon, K. N., & Smith, G. E. (2018). Is transparency a good thing? How online price
transparency and variability can benefit firms and influence consumer decision making.
Business Horizons. doi:10.1016/j.bushor.2018.11.006

Kenton, W. (2021, April 03). Haggle. Retrieved April 27, 2021, from
https://www.investopedia.com/terms/h/haggle.asp

Malasig, J. (2020, June 01). PM is the key? Dti reminds online sellers to display prices on online
platforms. Retrieved April 27, 2021, from https://interaksyon.philstar.com/trends-
spotlights/2020/06/01/169660/pm-is-the-key-dti-reminds-online-sellers-to-display-prices-on-
online-platforms/

Merez, A. (2020, June 11). Online sellers earning below P250,000 yearly are tax exempt: Palace.
Retrieved April 27, 2021, from https://news.abs-cbn.com/business/06/11/20/online-sellers-
earning-below-p250000-yearly-are-tax-exempt-palace

Soh, Markus, & Goh. (2006). Electronic Marketplaces and Price Transparency: Strategy, Information
Technology, and Success. MIS Quarterly, 30(3), 705. doi:10.2307/25148746

Terrazola, V. (2020, July 22). Gov't should support online sellers amid pandemic. Retrieved April 27,
2021, from https://mb.com.ph/2020/06/13/govt-should-support-online-sellers-amid-pandemic/

THE CONSUMER ACT OF THE PHILIPPINES 1992. RA 7394. (Phil.). Retrieved from
https://lawphil.net/statutes/repacts/ra1992/ra_7394_1992.html