SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES, y

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No,_ 2248

EXPLANATORY NOTE

This bill was originally introduced as House Bill No. 3869 by the undersigned Rufus
B. Rodriguez during the 15" Congress where it was approved by the Committee on Civil
Service and Professional Regulation and substituted with House Bill No. 6736. It was
subsequently approved on 2” reading, approved on 3” reading and was transmitted to the
Senate where it was not acted upon.

From January to March 2013, there were approximately 45,000 units of vehicles sold
in the Philippines and from these units, there are more or less 100-150 units that were
reported to have factory defects. There have been reports that newly bought brand new
vehicles from dealers suffer from defects that no matter how many times it is brought back
for repairs simply just would go away. Also, major car companies have been initiating recalls
of their vehicles.

For majority of the population in the Philippines, the purchase of a new vehicle is a
huge expenditure which resulted from hard work. And it would be very unjust if all their hard
work would result in something that is defective and they have no recourse in the law.

Also, there have numerous recalls of motor vehicles in the Philippines, and all over
the world. The difference, however, is that in other countries, the buyers are protected by
their laws and have some recourse or remedy that entitles them to be properly
compensated.

‘AS such, it is high time that legislation be enacted to give buyers of motor vehicles
protection and added rights against factory defective vehicles and false warranties.

In view of the foregoing, immediate approval of this bill is earnestly requested.

RUFYS B. RODRIGUEZ

sone JR.


SIXTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No__2248

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 4. Short Title. ~ This Act shall be known as the "Lemon Law of 2013".

SEC. 2, Declaration of Policy. — It Is hereby declared the policy of the State to
promote full protection to the rights of the 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 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 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 judicial, 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 which sells motor
vehicles to the public.

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

(g) Implementing Agenoy 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 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.

() Motor Vehicle refers to any self-propelled four-wheeled road vehicle 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, 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

(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 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 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

(I) Purchase Price refers to the invoice prior 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 labeled, 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 vehiole for ordinary use or reasonable intended
purposes.

SEC. 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:

(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

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 or her rights under this Act.

SEC. 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 or 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, authorized dealer or retailer.

SEC.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


which the vehicle was purchased for a final attempt to address the complaint of the
‘consumer to his or her satisfaction,

't 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 the consumer's availment of his or her 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 (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)-day period but stil 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 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 by the DTI.

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 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 DT! 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 borne 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,

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
not later than forty-five (45) working days from the date of filing of the complaint
with the DTI.

(b) Arbitration
1. In the event of 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-manufacturer to grant either of the
following remedies to the consumer:

a. Replace the motor vehicle with a similar or comparable motor vehicle in
terms of specifications and values, subject to availablity; or

b. 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-manufacturer, the
consumer shall pay the difference in cost.

In both cases of replacement and repurchase, the reasonable
allowance for use, as provided for in 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 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 (100,000) kilometers, 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, or transfer, disclose to the dealer in
9 that

(a) The motor vehicle was returned to the manufacturer, distributor, factory or branch;
(b) The nature of the nonconformity 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 the 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 shalll 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,
SEC. 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 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,