Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSEBILL No. 4532

Introduced by Honorable CARMELO F. LAZATIN
EXPLANATORY NOTE

The protection of consumers against trade malpractices and from substandard products is
guaranteed under our 1987 Philippine Constitution. The consumer satisfaction is a measure
of quality standards and services in a given product or service. Without this element of
satisfaction from consumers, the expansion of business is affected. Conversely, when there
is a positive consumer satisfaction to a particular product or service, business expands.

Specifically in the auto industry, the prevatence of substandard brand new vehicles in the
local market fad caused undue damages to many unsuspecting Filipino buyers. To address
this problem, this propose bill aims to protect consumer protection in buying brand new motor
vehicles by defining rights of the buyer, institution of mechanism for redress and providing
penatties for violations thereof.

in line with the above, the approval of this bill is eamestly sought.

reas

First District,



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSEBILL No, 4532

Introduced by Honorable CARMELO F. LAZATIN

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 known as the “Philippine Lemon Law of 2010".

SEC. 2. Declaration of Policy, - It is hereby declared 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 agency or authority and operated on the highway
of the Philippines, or in a foreign state or country.

(b) “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.

(c) ‘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.


{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) “Deaier” or ‘Seller’ refers to any person other than a manufacturer who sells motor
vehicles to the public.

{f) ‘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 {P100,000.00), whichever is higher.

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

{h) ‘implementing agency” refers to the Department of Trade and Industry (DTH)

{i) “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
shalt 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.

(j) “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.

{k) “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

(I} *"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) “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.

(n) ‘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.

{0} “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. - This 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 shalt be excluded:

{a) Noncompliance by the consumer of his 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 an accident or force majeure.

SEC. 5. Repair Attempt. - At any time within the Lemon Law rights period and after at least
one (1) separate repair attempt by the same dealer- manufacturer for the same complaint,
the consumer, if unsatisfied with the result of the said repair, 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


compiaints to his satisfaction.

It shall be the duty of the manufacturer, distributor, authorized dealer or retailer, upon
teceipt 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
fepairs 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 retumed for repair based on the same complaint 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 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 shail 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 Resotution. - The DTI shail 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 amicabie
settlement between the manufacturer or distributor and the 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 compiaint shall be borne jointly by the consumer



and the dealer-manufacturer:

(3) The complaint shail 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 and the consumer shall be encouraged to settle amicably,

Ail disputes that have been submitted for mediation shall be settled not later than forty-
five (45) working days from the date of fling 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 DT1. The DTI shall rely on the independent findings as to conformity to
standards and specifications established herein;

(2) 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-manufactures to grant either of the following remedies to
the consumer:

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

(ii) Accept the return 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-manufactures, 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;
and

(3) in case a non-conformity of the vehicle is not found by the DTI, it shall rule 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 (100,00), 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:

(b} the natisre of the non-cointormity whict caused'the return: ala” “~
(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
tum, 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 DT! shall promulgate the necessary
implementing rules and regulations within ninety (90) days from the effectivity of this Act.

SEC. 14. Separabitity 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
fegulations 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,