CONGRESS OF THE PHILIPPINES

FIFTEENTH CONGRESS
First Regular Session RECEIVE “\
ees a
HOUSE OF REPRESENTATIVES | ate

House Bill No. eh

Introduced by REP. MARK A. VILLAR

EXPLANATORY NOTE

Given the fast-paced nature of our times, owning a motor vehicle now is not
considered a luxury but more of a necessity to cope with our everyday duties and
responsibilities. Complying with this necessity, however, doES not come cheap.
Owning a motor vehicle is a big investment and could take a substantial chunk of one’s
savings. For some unfortunate buyers, an investment in this endeavor has become for
naught after they acquired a “lemon” or those that fail to meet the standards of quality
and performance; they continue with the burden of retaining the “lemon” and paying the
expensive cost thereof, without equitable redress for their unlucky fate.

It is one of the guarantees of the State under our Constitution to protect
consumers from trade malpractices and from substandard products (Section 9, Article
XVI, 1987 Philippine Constitution). \n support of this State guarantee, | believe it
appropriate to recommend the adoption into law of the attached bill that would give
ample protection to buyers of motor vehicles, particularly those that are “lemon”.

The historical antecedents of the lemon law originated in the United States. It was
crafted primarily to return to the consumer the full value of his money. Among others, it
provides that if a manufacturer or its authorized dealer cannot successfully repair a
defective product within a reasonable number of repair attempts, the manufacturer must
either promptly replace or repurchase the product. In sum, the measure provides for
legal remedies to buyers who face the ill fate of lemon automobiles ending up in their
hands.

‘The attached bill seeks to adopt the Philippine version of the US lemon law, with
provisions appropriate to our country's setting.

In view of the foregoing, | reiterate my recommendation for the approval of this
bill

i ee

MARK A. VILLAR
Representative, Lone District of Las Pitas City


CONGRESS OF THE PHILIPPINES
FIFTEENTH CONGRESS
First Regular Session

HOUSE OF REPRESENTATIVES

introduced by REP. MARK A. VILLAR

AN ACT STRENGTHENING CONSUMER PROTECTION IN THE PURCHASE OF
BRAND NEW MOTOR VEHICLES AND FOR OTHER PURPOSES

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

SECTION 1. Short Title. - This Act shall be know as the “Philippine Lemon
Law of 2010."

SEC. 2. Declaration of Policy. — Itis hereby dectared the policy of the State
to promote full protection to the rights of consumers in the sale of motor vehicles
against sales and trade practices which are deceptive, unfair or otherwise inimical to
the consumers and the public interest. The State recognizes that a motor vehicle is a
major consumer purchase or investment. The consumer rights should thus be clearly
defined including the means for redress for violations thereof.

SEC. 3. Definition of Terms. — For purposes of this Act, the following terms
‘shall mean:

(a) “Brand new motor vehicle” refers to a vehicle constructed entirely from
new parts that has never been sold or registered with the Department
of Transportation and Communications (DOTC) or an appropriate


(b)

(©)

(d)

()

(9)

(h)

@

agency or authority and operated on the highway of the Philippines, or
in a foreign state or country;

“Collateral charges” refers to the fees paid to the Land Transportation
Office (LTO) for the registration of a brand new motor vehicle and other
incidental expenses, including the cost of insurance pertaining to the
said vehicle;

“Comparable motor vehicle” refers to a motor vehicle that is identical or
reasonably equivalent to the motor vehicle to be replaced, in terms of
specifications and values subject to availability, as the motor vehicle
existed at the time of purchase: Provided, That there shall be an offset
from this value for reasonable allowance for its use;

“Consumer” refers to any person, natural or juridical, who is a
purchaser, either by cash or credit, of a brand new motor vehicle;

“Dealer” or “Seller” refers to any person other than a manufacturer who
‘sells motor vehicles to the public;

“Reasonable allowance for use’, for purposes of this Act, shall mean
twenty percent (20%) per annum deduction from the purchase price, or
the product of the distance traveled in kilometers and the purchase
price divided by one hundred thousand (100,000), whichever is higher;

“Distributor” refers to any person or entity other than manufacturer who
sells brand new motor vehicles to their duly authorized dealers or
retailers;

“Implementing agency’ refers to the Department of Trade and Industry
(OTN);

“Lemon Law rights period” refers to the period ending twelve (12)
months after the date of the original delivery of brand new motor
vehicle to a consumer or the first twenty thousand (20,000) kilometers


0)

(k)

0)

of operation after such delivery, whichever comes first. This shall be
the period during which the consumer can report any non-conformity,
as defined in paragraph (k) herein, to the standards and specifications
of the manufacturer, distributor, authorized dealer or retailer, and
pursue any right provided for under this Act;

“Manufacturer” refers to a person, partnership, association, corporation
or entity engaged in the business of manufacturing or assembling
motor vehicles, or of distributing motor vehicles to motor vehicle
dealers;

“Motor vehicle” refers to any self-propelled four (4)-wheeled road
vehicle designed to carry passengers including, but not limited to,
sedans, coupes, station wagons, convertibles, pickups, vans, sport
utility vehicles (SUVs) and Asian utility vehicles (AUVs) but excepting
motorcycles, delivery trucks, dump trucks, buses, road rollers, trolley
cars, street sweepers, sprinklers, lawn mowers and heavy equipment,
‘such as, but not limited to, bulldozers, payloaders, graders, forklifts,
amphibian trucks, cranes and vehicles which run only on rails or tracks,
and tractors, trailers and traction engines of all kinds used exclusively
for agricultural purposes. Trailers having any number of wheels, when.
propelled or intended by attachment to a motor vehicle, shall be
classified as’separate motor vehicle with no power rating;

“Non-conformity” refers to any defect or condition that substantially
impairs the use, value or safety of a brand new motor vehicle which
prevents it from conforming to the manufacturer's or distributor's
standards or specifications, which cannot be repaired, but excluding
conditions resulting from noncompliance by the consumer of his
obligations under the warranty, modifications not authorized by the
manufacturer or distributor, abuse or neglect, and damage due to
accident or force majeure;


(m)

(n)

(0)

“Purchase price” refers to the invoice price or the amount of money
which the dealer or retailer actually received for the brand new motor
vehicle, in consideration of the sale of such brand new motor vehicle;

“Warranty” refers to the written assurance, so labeled, of the
manufacturer of a brand new motor vehicle, including any term or
condition precedent to the enforcement of obligations under the
warranty;

“Warranty rights period” refers to the period provided for under the
contract of sale when the manufacturer would guarantee the materials
used, workmanship and roadworthiness of a brand new motor vehicle
for ordinary use or reasonable intended purposes.

SEC. 4. Coverage. —T his Act shall cover brand new motor vehicles with non-
conformity reported by the consumer within twelve (12) months from the date of
original delivery to the consumer or twenty thousand (20,000) kilometers of operation
after such delivery, whichever comes first. The following causes of non-conformity
shall be excluded:

(a)
(b)
(©)
(a)

Non-compliance by the consumer of his obligations under the warranty;
Modifications not authorized by the manufacturer or distributor;

‘Abuse or neglect of the brand new motor vehicle; and

Damage to the vehicle due to an accident or force majeure.

SEC. 5. Repair Attempts. — At any time within the Lemon Law rights period
and after at least four (4) separate repair attempts by the same dealer manufacturer
for the same complaint, the consumer, if still unsatisfied with the results of the said
repairs, may invoke his rights under this Act.

SEC. 6. Notice of Availment of the Lemon Law Rights. — Before availing of
any remedy under this Act and subject to compliance with the provisions of Section 5
hereof, the consumer shall, in writing, notify the manufacturer, distributor, authorized


dealer or retailer of the unresolved complaint and the consumer's intention to invoke
his rights under this Act within the Lemon Law rights period.

The warranty booklet issued by the manufacturer, distributor, authorized
dealer or retailer shall clearly state the responsibility of the consumer under this
section. It shall likewise provide the manner and form of such notice to constitute a
valid and legal notice to the manufacturer, distributor, authorized dealer or retailer.

SEC. 7. Availment of the Lemon Law Rights. — Subsequent to the filing of
the notice of availment referred to in the preceding section, the consumer shall bring
the vehicle to the dealer from which the vehicle was purchased for a final attempt to
address the consumer's complaints to his satisfaction.

It shall be the duty of the manufacturer, distributor, authorized dealer or
retailer, upon receipt of the motor vehicle and the notice of non-conformity required
under Section 6 hereof, to attend to the complaints of the consumer including, as
may be necessary, making the repairs and undertaking such actions to make the
vehicle conform to the standards or specifications of the manufacturer or distributor
for such vehicle.

In case the consumer remains unsatisfied with the dealer manufacturer's
efforts to repair the vehicle, pursuant to the consumer's availment of his Lemon Law
rights, the consumer may file a complaint before the DTI as provided for under this
Act: Provided, however, That if the vehicle is not returned for repair based on the
same complaint within thirty (0) calendar days from the date of notice of release of
the motor vehicle to the consumer following this repair attempt within the Lemon Law
rights period, the repair is deemed successful: Provided, finally, That, in the event
the consumer still remains unsatisfied after the thirty (30) days period but still within
the Lemon Law rights period, the consumer may be allowed to avail of the same
remedies under Sections 5 and 6 hereof.

To compensate for the non-usage of the vehicle while under repair and during
the period of availment of the Lemon Law rights, the consumer shall be provided a
reasonable daily transportation allowance, an amount which covers the


transportation of the consumer from his or her residence to his or her regular
workplace and vice versa, equivalent to air-conditioned taxi fare or in such amount to
be agreed upon by the parties, or a service vehicle at the option of the manufacturer,
distributor, authorized dealer or retailer. Any disagreement on this matter shall be
resolved by the implementing agency provided for under this Act.

Nothing herein shall be construed to limit or impair the rights and remedies of
a consumer under any other law.

SEC. 8. Remedies for Dispute Resolution. - The DTI shall exercise exclusive
and original jurisdiction over disputes arising from the provisions of this Act. All
disputes arising from the provisions of this Act shall be settled by the DTI in
accordance with the following dispute resolution mechanisms:

(A) Mediation

(1) The principles of negotiation, conciliation and mediation towards
amicable settlement between the manufacturer or distributor and the
consumer shall be strictly observed;

(2) In the course of its dispute resolution efforts, the DT! shall endeavor to
independently establish the validity of the consumer's outstanding
complaint. The DTI shall likewise retain the services of other
government agencies or independent private entities in the
ascertainment of the validity of the consumer's complaint. Any cost
incurred in establishing the validity of the consumer's complaint shall
be bore jointly by the consumer and the dealer manufacturer,

(3) The complaint shall be deemed valid if it is independently established
that the vehicle does not conform to the standards or specifications set
by the manufacturer,


(B)

4)

(5)

Upon failure of the negotiation or mediation between the manufacturer
or distributor and the consumer, the parties shall execute a certificate
attesting to such failure; and

At any time during the dispute resolution period, the manufacturer or
distributor and the consumer shall be encouraged to settle amicably.
All disputes that have been submitted for mediation shall be settled not
later than forty-five (45) working days from the date of filing of the
complaint with the DTI.

Arbitration

(1)

(2)

In the event there is a failure to settle the complaint during the
mediation proceedings, the parties may voluntarily enter into arbitration
proceedings, likewise to be supervised by the DTI. The DTI shall rely
on the independent findings as to conformity to standards and
‘specifications established herein;

In case a non-conformity of the vehicle is found by the DTI, it shall rule
in favor of the consumer and direct the dealer-manufacturer to grant
either of the following remedies to the consumer:

() Replace the motor vehicle with a similar or comparable motor
vehicle in terms of specifications and values, subject to
availability; or

(i) Accept the retum of the motor vehicle and pay the consumer the
purchase price plus collateral charges.

In case the consumer decides to purchase another vehicle with
a higher value and specifications from the same dealer-manufacturer,
the consumer shall pay the difference in cost.


in both cases of replacement and repurchase, the reasonable
allowance for use, as defined in this Act, shall be deducted in
determining the value of the non-conforming vehicle.

(3) __ Incase a non-conformity of the vehicle is not found by the DTI, it shall
tule in favor of the dealer-manufacturer and direct the consumer to
reimburse the dealer-manufacturer the costs incurred by the latter in
validating the consumer's complaints.

‘SEC. 9. Determination of Reasonable Allowance for Use. ~ For purposes of
this Act, “reasonable allowance for use" shall mean twenty percent (20%) per annum
deduction from the purchase price, or the product of the distance traveled in
kilometers and the purchase price divided by one hundred thousand (100,000),
whichever is higher.

SEC. 10. Disclosure on Resale. — Should the returned vehicle be made
available for resale, the manufacturer or distributor shall, prior to sale, lease or
transfer, disclose to the dealer in writing that:

(a) The motor vehicle was returned to the manufacturer, distributor, factory
or branch;

(b) The nature of the non-conformity which caused the return; and

(c) The condition of the motor vehicle at the time of the transfer to the
dealer.

It shall be the responsibility of the dealer to make the same disclosure in
writing, in turn, to the next purchaser prior to sale. The responsibility of the dealer
under this section shall cease upon the sale of the affected motor vehicle

to the first purchaser.

‘SEC. 11. Penalty. - The manufacturer, distributor or dealer adjudged to have
violated the provisions requiring disclosure as mentioned in the preceding section
shall be liable to pay a minimum amount of One hundred thousand pesos


(Php 100,000.00) as damages to the aggrieved party without prejudice to any civil or
criminal liability they and/or the responsible officer may incur under existing laws.

SEC. 12. Assistance by Other Agencies. — The DOTC and other agencies,
political subdivisions and local government units, including government-owned and -
controlled corporations, shall render such assistance as required by the DTI in order
to effectively implement the provisions of this Act.

SEC. 13. Implementing Rules and Regulations. - The DTI shall promulgate
the necessary implementing rules and regulations within ninety (90) days from the
effectivity of this Act.

SEC. 14. Separability Clause. - If, for any reason, any part or provision of
this Act is declared invalid, such declaration shall not affect the other provisions of
this Act.

SEC. 15. Repealing Clause. - All laws, decrees, executive orders,
issuances, rules or regulations or parts thereof which are inconsistent with the
provisions of this Act are hereby deemed repealed, amended or modified
accordingly.

SEC. 16. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) national newspapers of general

circulation.

Approved,