Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
First Regular Session

House Bill No._ i397

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

EXPLANATOR’

OTE

‘This bill aims to strengthen the Consumer Protection Act, specifically on the
purchase of brand new motor vehicles.

There have been bitter stories of love lost between car owners and their car
dealers with the former complaining about defects on their newly purchased cars.
According to the Bureau of Trade Regulation and Consumer Protection (BTRCP), car
buyers complain about defective products and services, product and service warranty, and

i s. Records of the BTRCP show that in the period of

received by the agency
across the country handle and resolve actual consumer complaints.

¢ Department of Trade and Industry (DTI) regional offices

Primarily, this measure seeks to give buyers of brand-new cars the right to
demand a replacement with a similar or comparable motor vehicle if the first vehic!
discovered to have a factory defect. The buyer may also opt to return a defective vehicle
and get a refund of its purchase price and collateral charges such as the vehicle
registration fee (Lemon Law Rights). Furthermore, the bill provides parameters in
handling and resolving consumer complaints involving brand new motor vehicles.

This bill has been filed and re-filed in several past Congresses and has even
approved by the Committee on Trade and Industry of the House of Representatives in the
15th Congress.

For the foregoing reasons, the immediate passage of the bill is earnest]y-sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
eerie Sear 97

House Bill No.

EEE

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

AN ACT
STRENGTHENING COMSUMER 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:

1 SECTION 1. Short Title. - This Act shall be known as the “Lemon Law of
2 2013”.

3 SECTION 2. Declaration of Policy. - \t is hereby declared the policy of the

4 State to promote full protection to the rights of consumer in the sale of motor vehicles

5 against sales and trade practices which are deceptive, unfair or otherwise inimical to the
6 consumers and the public interest.
1 ‘The State recognizes that a motor vehicle is a major consumer purchase or
8 investment, The consumer rights should thus be clearly defined including the means for
9 redress for violations thereof.

10 SECTION 3. Definition of Terms. - For purposes of this Act, the following

11 terms shall mean:

12 a) Brand New Motor Vehicle refers to a vehicle constructed entirely from new parts
13 that has never been sold or registered with the Department of Transportation and
14 Communications (DOTC) or an appropriate agency or authority and operated on

15 the highway of the Philippines, or in a foreign state or country.


19

20

2h

22

23

24

25

26

oh

28

29

b) Collateral Charges refer 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
specification and values, subject to availability, as the motor vehicle existed at the
time of the purchase; Provided, That there shall be an offset from this value for
reasonable allowance for its use.

d) Consumer refers to any person, natural or juridical, who is a purchaser, either by
cash or credit, of a brand new motor vehicle.

e) Dealer or Seller refers to any person other than a manufacturer who sells motor

vehick

s to the public

£) Distributor refers to any person or entity other than a manufacturer who sells
brand new motor vehicles to their duly authorized dealers or retailers.

2) Implementing Agency refers to the Department of Trade and Industry (DTI).

h) Lemon Law Rights Period refers to the period ending twelve (12) months after the
date of the original delivery of a brand new motor vehicle to a consumer or the
first twenty thousand (20,000) kilometers of operation after such delivery,
whichever comes first. This shall be the period during which the consumer can
report can report any nonconformity, 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.

i) Manufacturer refers to a person, partnership, association, corporation or entity
engaged in the business of manufacturing or assembling motor vehicles or
distributing motor vehicles to motor vehicle dealers.

j) Motor Vehicle refers to any self-propelled four-wheeled road vehicles designed to
carry passengers including, but not limited to, sedans, coupes, station wagons,

convertibles, pick-ups, vans, sports utility vehicles (SUVs) and Asian Utility

Vehicles (AUVs) but excepting motorcycles, delivery trucks, dump trucks, buses,


16

17

18

19

20

21

22

23

24

25

26

a

28

29

road rollers, trolley cars, street sweepers, sprinkles, 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.

k) Nonconformity refers to any defect or condition that substantially impairs the use,
value or safety of a brand new motor vehicle which prevents it from confirming 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 or her obligations under the warranty, modifications not authorized by the
manufacturer or distributor, abuse or neglect, and damage due to accident or force
majeure.

1) 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.

m) Warranty refers to the written assurance, so labelled, of the manufacturer of a
brand new motor vehicle including any term or condition precedent to the
enforcement of obligations under the warranty.

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

SECTION 4. Coverage. - This Act shall cover brand new motor vehicles with
nonconformity 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 nonconformity shall

be excluded:


19

20

21

22

23

24

25

26

27

28

29

a) Noncompliance by the consumer of his or her obligations under the warranty;

b) Modifications not authorized by the manufacturer or distributor;

c) Abuse or neglect of the brand new motor vehicle; and

d) Damage to the vehicle due to accident or force majeure.

SECTION 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 within the result of
the said repairs, many invoke his or her rights under this Act,

SECTION 6. Notice of Availment of 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
her 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 manner and form of such notice to constitute a valid and
legal notice to the manufacturer, distributor, and authorized dealer or retailer.

SECTION 7. Availment of Lemon Law Rights. - Subsequent to filing the
notice of availment referred to in the preceding section, the consumer shall bring the
vehicle to the dealer from where the vehicle was purchased for a final attempt to address
the compliant of the consumer to his or her satisfaction.

It shall be the duty of the manufacturer, distributor, authorized dealer or retailer,
upon receipt of the motor vehicle and the notice of nonconformity 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 consumer's availment of his or her Lemon Law rights, the
consumer may file a complaint before the DT! as provided for this Act: Provided,

however, That if the vehicle is not returned for repair, based on the same complaint,


10
in
12
13

14

20
21

22

24
25
26
27
28

29

within thirty (30) 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 thirty (30) -day period but still within the Lemon Law rights
period, the consumer may be allowed to avail of the same remedies under Section 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 equivalent to first class taxi fare as evidenced
by actual receipts, or a service vehicle at the option of the manufacturer, distributor,
authorized dealer or retailer. Any disagreement on this matter shall be resolved under by
the DTI.

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

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

a) Mediation:

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

(2) In the course of its dispute resolution efforts, the DTI 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 bome jointly by the consumer and

the dealer-manufacturer;


10

i

13

14

15

16

17

18

20

21

22

23

25

26

27

28

29

(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;

(4) 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

(5) At any time during the dispute resolution period, the manufacturer or
distributor shall not be precluded from offering easier remedial terms to
the consumer to reach amicable settlement at any stage of the dispute
mechanism.

All disputes that have been submitted for amicable settlement shall be settled

no later than forty-five (45) working days from the date of filing of the

complaint with the DTI.
b) Arbitration:

(1) 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.

(2) In case a nonconformity of the vehicle is found by the DTI, it shall rule in
favor of the consumer and direct the dealer or manufacturer to grant either
of the following remedies to the consumer:

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

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

In case the consumer decides to purchase another vehicle with a higher

value and specifications from the same dealer or manufacturer, the

consumer shall pay the difference in cost.


10

1

12

13

14

1S

16

7

18

20

2i

22

24

25

26

27

28

2;

In both cases of the replacement and repurchase, the reasonable allowance
for use, as provided for this Act, shall be deducted in determining the
value of the nonconforming vehicle.

(3) In case a nonconformity of the vehicle is not found by the DTI, it shall
tule in favor of the dealer or manufacturer, and direct the consumer to

reimburse the dealer or manufacturer the costs incurred by the latter in

validating, the consume

complaint.

SECTION 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 travelled in
kilometers and the purchase price divided by one hundred thousand (100,000) kilometers,
whichever is higher.

SECTION 10. Disclosure on Resale. - Should the returned vehicle be made
available for resale, the manufacturer or distributor shall, prior to sale, 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 nonconformity which caused the retum; and

(©) 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 same disclosure in writing, in
tur, to the next purchaser prior to the sale. The responsibility of the dealer under
this section shall cease upon the sale of the affected motor vehicle to the first
purchaser.

SECTION 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 (P100,000,00)
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.

SECTION 12. Assistance by Other Agencies. The DOTC and other agencies,

political subdivisions, local government units, including government-owned and —


controlled corporations shall render such assistance as required by DTI in order to
effectively implement the provisions of this Act.

SECTION 13. Implementing Rules and Regulations. - Within sixty (60) days
from the effectivity of this Act, the DTI Secretary shall promulgate the rules and
regulations necessary for the effective implementation of this Act.

SECTION 14. Separability Clause. - If any of the provisions of this is declared
invalid or unconstitutional, the remaining parts or provisions hereof not affected thereby
shall remain in full force and effect.

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

SECTION 16. Effectivity Clause - This Act shall take effect fifteen (15) days
after its complete publication in the Official Gazette or in at least two (2) newspapers of
general circulation.

Approved.