Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 4725

Introduced by Rep. Precious Hipolito Castelo

EXPLANATORY NOTE

The worsening traffic situation in the country, along with unreliable mass transport systems
that the commuting public endure day by day, makes it imperative for the government to
push for initiatives that will help alleviate the urban dwellers’ suffering pending the
development of efficient transportation network.

Recent technological innovations saw the rise of online-enabled transportation services,
otherwise known as Transportation Network Companies (TNCs), providing more options for
commuters to obtain safer, cleaner, and more affordable modes to move around the metro.
Using the Global Positioning System ("GPS") on smartphones, these online applications
connect passengers with drivers in real time, hence eliminating the uncertainty of waiting for
long hours when an available taxi would arrive. This, coupled with stories of robbery and
rape committed by taxi drivers, made TNCs a popular choice among commuters.

Since the launch of these TNCs, the government has been grappling with how to regulate
them, initially calling for the stoppage of their operations.’ Taxi operators, who are subject to
regulatory requirements, have been pushing for the regulation of TNCs to level the playing
field. In response, the Department of Transportation and Communications issued
Department Order No. 2015-011 (DO No. 2015-011), introducing a new type of public
transport classification called “Transportation Network Vehicle Service” (TNVS) that allows
TNCs to conform within the present regulatory framework. With this issuance, the Philippines
became the first country to roll out the world’s first framework of regulations for app-based
ride-hailing.? However, the regulations put in place through DO No. 2015-011 might be
contrary to the Public Service Act as held by the Supreme Court in the case of Kilusang
Mayo Uno Center v. Garcia, Jr. et al.’ Further, the DO is interim in nature, as it directs the
Land Transportation and Franchising Regulatory Board (LTFRB) to accredit TNCs ‘while
awaiting guidance from the legislature regarding regulation of this new industry.”

This proposed bill seeks to provide such guidance by creating a separate regulatory
framework for TNCs. TNCs are classified as common carriers who, by reason of the nature
of their business, should observe extraordinary diligence in the vigilance for the safety of the
passengers transported by them. Other key provisions include the following:

* Jose Bimbo F. Santos, Stop! LTFRB not happy about latest transport apps craze Uber and Tripi
Interaksyon, February 11, 2014, available at htip://ww.interaksyon.com/motoring/stop-ttirb-n
happy: latest-transport-apps:
7 Sabrinna Toppa, Uber Is Now Legal Everywhere in the caret Time, May 12, 2015, available at
http:/Rime, com/3854958/uber-leqal-philippines-ride-

2 this case, the Supreme Court ruled that LTFRB cannot authorize transport operators to fx its fare
rates within a range prescribed by the Board, as this is tantamount to an undue delegation of
legislative authority (G.R. No. 115381, 23 December 1994).



Prohibiting the operation of TNCs without a permit granted by the LTFRB;
2. Requirements that TNCs must comply with for the grant and maintenance of
permit;

Standards for TNCs’ operation, and penalties for the violation thereof;

Regulation of TNCs’ dynamic pricing, otherwise known as “fare surging"; and
Authority for LTFRB to determine the maximum number of vehicles allowed to
operate under a TNC.

gee

The undersigned author believes that regulation of TNCs is necessary for the prevention of
unfair or predatory practices by unscrupulous transportation network service providers and
the promotion and protection of public safety and welfare while recognizing that a strong,
viable, private sector transport industry has a role in efforts to improve transportation
mobility. Thus, the approval of this proposed measure is eamestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session
4725
HOUSE BILL NO.

Introduced by Rep. Precious Hipolito Castelo

AN ACT
RECOGNIZING TRANSPORTATION NETWORK COMPANIES, PRESCRIBING
REQUIREMENTS, GUIDELINES AND STANDARDS FOR THEIR OPERATION,
PROVIDING PENALTIES FOR VIOLATION THEREOF

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

CHAPTER I.
GENERAL PROVISIONS

SECTION 1. Short Title. This Act shall be known as the “Transportation Network
Service Act.”

SECTION 2. Declaration of Policy. It is the policy of the State to provide and to
promote adequate and efficient modes of transportation in the country. To this end, the State
shall enact measures for the regulation of transportation network services to ensure that the
Paramount interest of the public is protected and conserved, while encouraging free
enterprise and economic development.

SECTION 3. Definition of Terms. As used in this Act

(a) “Board” shall refer to the Land Transportation Franchising and Regulatory Board
(LTFRB);

(b) “Passenger” shall mean an individual who uses a transportation network
company’s service platform to connect to a driver for transportation network
services, including all other persons who accompany said individual for the
duration of such service;

(©) ‘Personal vehicle” shall mean a motor vehicle that satisfies all of the following
conditions: (i) owned, leased, or otherwise authorized to be used by the driver,
and (ji) not a public utility vehicle as defined in Republic Act No. 10586 and other
related laws;

(a) “Service platform” shall mean any intemet site or online-enabled application
software or system that permits the pre-arrangement of transportation network
services;

(e) ‘Transportation network company (TNC)” shall mean an organization, whether a
corporation, partnership, or sole proprietorship operating in the Philippines, that
provides pre-arranged transportation services for compensation using an
intemet-based application or digital platform technology to connect passengers
drivers using their personal vehicles;



() ‘Transportation network driver (TND)” shall mean an individual who (i) satisfies
the requirements provided in Section 15 of this Act; (ji) pays a fee to a TNC to be
connected to a passenger for the purpose of engaging in transportation network
services; and (iii) operates a personal vehicle to engage in transportation network
services for compensation; and

(g) “Transportation network services (TNS)” shall mean transportation of a
passenger between points chosen by the passenger and that is pre-arranged
with a TND through the use of a TNC’s service platform. The TNS begins from
the moment the TND accepts a request for transportation on the TNC’s service
platform and ends when the TND completes the transaction on the service
platform or when the trip is complete and the passenger exits the TND’s vehicle,
whichever is later.

SECTION 4. Nature of Transportation Network Companies and Drivers. TNCs and
TNDs are governed exclusively by this Act and shall not be subjected to any rate, entry,
operational, or common carrier requirements, other than those requirements expressly set
forth in this Act.

TNCs and TNDs are hereby declared as common carriers for purposes of
determining the liability and degree of diligence that must be observed in the course of
transportation network services, and the presumption of negligence in case of breach of
contract of carriage shall likewise apply to them.

CHAPTER Il.
REGULATION OF TRANPORTATION NETWORK COMPANIES

SECTION 5. Issuance of Permits to TNCs. A person, organization, or entity shall
not be allowed to operate a transportation network company without first obtaining a
Permit from the Board upon compliance with the requirements set forth by this Act and
other reasonable conditions as may be provided by the Board.

SECTION 6. Application for Permit. The Board shall grant a Permit to a TNC upon
determination that all of the following requirements are met:

(a) Submission of application in the form prescribed by the Board. The application

shall include the applicant's name, address, tax identification number, and any

other information that the Board may deem necessary to assess the applicant's

qualification;

(b) Proof that the applicant is licensed to do business in the Philippines if the
applicant is a foreign corporation;

(c) Resident agent for purposes of service of process in the Philippines; and

(a) Payment of an application fee to be set by the Board upon filing of the
application.

The applicant shall notify the Board of any material change in the information
included in the application not later than fifteen (15) days after the change occurs. The
Board shall prescribe a form for the disclosure of material changes.

SECTION 7. Term and Renewal of Permit. A Permit issued by the Board shall be
valid for a period of two (2) years unless sooner revoked by the Board for any of the
causes provided under Section 23.

The Board shall prescribe the form and requirements necessary for the renewal of
a permit.


CHAPTER Ill.
OPERATION OF TRANSPORTATION NETWORK COMPANIES

SECTION 8. Requirements for Transportation Network Companies. A
transportation network company shall:
(a) Create an application process for a person to apply for registration as a
transportation network driver;
(b) Maintain an updated database of the TNC’s transportation network drivers;
(c) Maintain a website with the following information:
i. The TNC’s customer service telephone number and/or electronic mail
address;
ii, The TNC’s zero tolerance policy established under Section 9 of this
Act;
iii, The procedure for reporting a complaint about a TN
(d) Conduct, or have a third party conduct, a safety inspection of the personal
vehicle that a TND will use before the motor vehicle may be used to provide
transportation network services and ensure compliance with the TNC’s
vehicle safety policy established under Section 10 of this Act; and
(e) Maintain an insurance policy as required under Section 17 of this Act.

SECTION 9. Zero Tolerance for Drug or Alcohol Use. Each TNC shall develop
and implement a policy prohibiting any TND from using drugs or alcohol or any other
substance that may render the TND incapable of driving safely while the TND is
engaged in transportation network services for the TNC or is logged on to the TNC’s
service platform. The TNC shall:

(a) Establish the complaint procedures for reports of suspected violations of the

zero tolerance policy;

(b) Conduct an investigation upon receipt of a complaint that the TND violated
the zero tolerance policy required under this Section and immediately
suspend a TND’s access to its service platform for the duration of the
investigation; and

(c) Maintain records relevant to the requirements of this Section for the purposes
of enforcement.

SECTION 10. Vehicle Safety Policy. TNCs shall adopt a vehicle safety policy to
ensure the comfort and security of passengers using transportation network services.
Such policy shall observe the following minimum standards:

(a) The vehicle must not have a seating capacity of more than seven (7) persons,

including the driver;

(b) The transportation of passengers in numbers exceeding the manufacturer's
designed seating capacity shall be prohibited, notwithstanding the state's
policy of encouraging ride-sharing;

(©) The vehicle must be road-worthy and compliant with vehicle emission
standards but, in any case, not be more than seven (7) years old from date of
manufacture; and

(d) The vehicle must be equipped with proper tools and equipment.

SECTION 11. Fare Setting and Disclosures. A TNC is hereby authorized to set
fares but shall disclose the fare calculation method, the applicable rates being charged,
and the option for an estimated fare to a passenger before the passenger arranges a
trip with a TND.


If a TNC utilizes dynamic pricing to incentivize drivers in an effort to maximize the
supply of available vehicles on the service platform to match the demand for rides and
increase reliability, the service platform must:

(a) Provide clear and visible indication that dynamic pricing is in effect prior to

requesting a trip;

(b) Include a feature that requires passengers to confirm that they understand
that dynamic pricing will be applied in order for the trip request to be
completed; and

(©) Provide a fare estimator that enables the user to estimate the cost under
dynamic pricing prior to requesting the trip.

Notwithstanding the preceding paragraph, dynamic pricing shall be prohibited
during periods of abnormal market disruptions, such as but not limited to any change in
the ground transportation market, whether actual or imminently threatened, resulting
from weather disturbances and natural calamities, failure or shortage of electric power
or other source of energy, strike, civil disorder, war, military action, national or local
emergency, or other cause of an abnormal disruption of the market resulting in a
disaster or the declaration of a state of emergency.

SECTION 12. Electronic Receipt. Within a reasonable time after the completion of
a trip, a TNC shall transmit an electronic receipt to the passenger's electronic mail
address or mobile application containing the origin and destination of the trip; the total
time and distance of the trip; and breakdown of the total fare paid, if any.

SECTION 13. /dentification of Transportation Network Drivers and Vehicles. TNCs
shall make available to each prospective passenger, on its service platform, the
photograph of the TND and the license plate number and description of the TND's vehicle.
TNDs shall display recognizable external markers on the vehicle at all times it is being
used to provide transportation network services.

SECTION 14. Confidentiality of Passenger Information. TNCs shall not disclose a
passenger's personally identifiable information to any other person unless:
(a) The passenger consents to the disclosure;
(b) The disclosure is required by a legal obligation; and
(©) The disclosure is necessary to protect or defend the terms of use of the service
or to investigate a violation of those terms.

In addition, a TNC shall be permitted to share a passenger's name and telephone
number with a TND for the sole purpose of facilitating communication between the
passenger and the driver regarding prearranged trips. TNCs shall prohibit the use by
TNDs of a passenger's name, telephone number, or other personal information for any
purpose other than those listed in this Section.

SECTION 15. Requirements for Transportation Network Drivers. An individual may
submit an application to a TNC for registration as a TND.

(a) Before approving an application, a TNC shall:
() Require the individual to submit an application that includes at least all of
the following:
a. The individual's name, address, and age;
b. Information on the individual's driver's license;
c. Proof of motor vehicle registration for the personal vehicle the
individual will use to provide TNS through the TNC;
d. Proof of availability of an off-street parking space for the vehicle that
he will use to provide TNS; and



e. Proof of motor liability insurance coverage as required under Section
17 of this Act.
ii) Conduct a review of the individual's driving history; and
i) Conduct, or have a third party conduct, a criminal background check for
the individual.

(b) A TNC shall not approve an application submitted under subsection (a) of this

Section and shall permanently disqualify an applicant who:

(i) Is below twenty-one (21) years of age;

(ii) As shown in the criminal background check required under subsection
(a)(ii) of this Section, has been convicted within the past five (5) years of
any felony;

(iii) As shown in the driving record review required under subsection (a)(ii) of
this Section, has been found to have committed, within three (3) years
prior to the application, any violation of laws, rules and regulations
governing land transportation;

(iv) Does not possess a valid driver's license;

(v) Does not possess proof of motor vehicle registration; and

(vi) Does not possess proof of motor vehicle liability insurance.

A person whose application as TND has been approved shall be issued a TND
Certificate which shall contain the name, address and picture of the driver, and the
registration plate number of the vehicle that he will use. The form of the certificate shall
be approved by the Board.

Nothing in this Section shall be interpreted to prevent a TNC from imposing
additional standards.

SECTION 16. Drivers as Independent Contractors. TNDs shall be independent
contractors and not employees of the TNC if all of the following conditions are met:

(a) The TNC does not prescribe specific hours during which a TND must be
logged into the TNC’s platform;

(b) The TNC does not assign a TND a particular territory in which to operate;

(c) The TNC does not restrict a TND from engaging in any other occupation or
business; and

(d) The TNC and the TND agree in writing that the driver is an independent
contractor of the TNC.

SECTION 17. Insurance Requirements. TNCs and TNDs shall both maintain
insurance policies to cover claims for incidents involving vehicles and drivers while they
are providing transportation network services. The Board shall determine, upon
consultation with stakeholders, the insurance coverage, including the types of coverage
and the limits for each coverage, that TNCs shall maintain during the validity of their
permit

In every instance where insurance maintained by a TND has lapsed, failed to
provide the required coverage, denied a claim for the required coverage, or otherwise
ceased to exist, the insurance maintained by a TNC shall provide the required coverage.

ATNC shall neither require nor include a hold harmless or indemnification clause
in the terms of agreement with a TND. Such clause, if included in the agreement, shall
be an absolute nullity.

In the event of an accident, a TND shall provide insurance coverage information
directly to interested parties, insurers, and investigating police officers, upon request.


SECTION 18. Street Hails. A TND may not solicit or accept street hails or otherwise
provide transportation for compensation that are not pre-arranged through a TNC’s service
platform.

SECTION 19. Cash Payments. A TND may not solicit or accept cash payments or
tips over and above the fare calculated by the TNC’s service platform and reflected in the
electronic receipt required under Section 12.

SECTION 20. Fleet Service. TNCs shall not be allowed to have their own fleet
service or be authorized to enter into an agreement with a fleet operator to provide
transportation network services. For purposes of this Act, a person who operates more
than one motor vehicle shall be considered a “fleet operator’ and shall not be registered by
the TNC with its service platform.

SECTION 21. Tax Treatment. The Bureau of Intemal Revenue shall determine the
tax liability of TNCs and TNDs and provide the appropriate guidelines for compliance
therewith.

CHAPTER IV.
ENFORCEMENT

SECTION 22. Regulatory Authority. The authority of the Board shall be limited to
the issuance of permit to and regulation of TNCs to ensure compliance by TNCs with the
provisions of this Act. Such authority shall not include jurisdiction to adjudicate private
causes of action arising from the provision of transportation network services.

SECTION 23. Disciplinary Proceedings. The Board, after due notice and hearing,

may deny an application for a permit, limit, suspend, or revoke a permit if the TNC:

(a) Makes a material misrepresentation in any application filed under this Act or
rules of the Board;

(b) Fails to comply with the provisions of this Act or any rule promulgated
pursuant to this Act;

(c) Violates any other law that substantially relates to the operation of TNCs;

(d) Fails to cooperate with the Board, or fails to timely respond to a request for
information by the Board, in connection with an investigation pursuant to this
Act; or

(e) Fails to maintain the qualifications for a permit.

In addition to denial of application or other action under the immediately preceding
paragraph, the Board may assess against a TNC for each violation enumerated
thereunder, a fine not exceeding One Hundred Thousand Pesos (100,000.00).

SECTION. 24. Limits on Number of Transportation Network Drivers (TNDs). The
Board shall be authorized to determine the maximum number of TNDs allowed to
provide transportation network services. TNCs who apply for permits in excess of the
cap set by the Board under this Section shall be required to prove public necessity in a
hearing to be conducted by the Board for such purpose.

SECTION 25. Penalties. The Board shall determine the amount of the
administrative penalty to be imposed on a person, firm, corporation or entity found
violating the provisions of this Act, after considering the following factors:

(a) The seriousness of the violation or failure to comply, including the nature,

circumstances, extent, and gravity of the violation, and the harm or injury that
may arise as a result of the violation;


(b) The history of contraventions of or failures to comply;
(c) The efforts made to correct the violation; and
(a) Any other factor that may be just and reasonable under the circumstances.

SECTION 26. Fees and Other Charges. The TNCs shall be subject to an annual
supervision fee, to be determined by the Board and subject to the approval of the
Secretary of the Department of Transportation. The Board shall promulgate rules and
regulations governing the collection of such fees, which shall likewise be reviewed
periodically and any proposed increase shall be published in two (2) newspapers of
general circulation.

SECTION 27. Records. All TNCs shall maintain passenger trip records for at
least one (1) year from the date the trip was completed. TNCs shall also maintain all
records concerning each TND for at least two (2) years after the date on which the TND
ceases to engage in transportation network services for the TNC.

The Board shall have the authority to examine the records of TNCs for the purpose
‘of enforcement of this Act, including a random sample of the TNCs’ records related to
prearranged rides and TNDs. Such examinations shall be conducted during working hours
and shall not occur more than two times per year unless necessary to investigate a
complaint. Records obtained by the Board pursuant to this Section shall be kept
confidential, except as may be required by law.

SECTION 28. Reportorial Requirement. A transportation network company shall
transmit a quarterly report to the Board providing an accounting of the number of
vehicles it has registered to operate, number of trips provided, estimated number of
Passengers served, gross revenue, and any other information that the Board may deem
necessary for the effective enforcement of this Act.

CHAPTER V.
FINAL PROVISIONS

SECTION 29. Implementing Rules and Regulations. Within sixty (60) days from the
effectivity of this Act, the Board shall promulgate the implementing rules and regulations as
may be necessary to ensure the efficient and effective implementation of this Act.

SECTION 30. Separability Clause. If any provision or part hereof is held invalid or
unconstitutional, the remainder of the provision not otherwise affected shall remain valid and
subsisting.

SECTION 31. Repealing Clause. Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to, or inconsistent
with, the provisions of this Act is hereby repealed, modified or amended accordingly.

SECTION 32. Effectivity. This Act shall take effect after fifteen (15) days following its
publication in at least two (2) newspapers of general circulation

Approved,