ECEIVED
SIXTEENTH CONGRESS ) 01 JUL 2013
OF THE REPUBLIC OF THE PHILIPPINES
First Regular Session

HOUSE OF REPRESENTATIVES

House Bill No. 803

Introduced by Representative Susan A. Yap

EXPLANATORY NOTE

‘This bill seeks to promote full protection to the tights of consumers in the sale of motor
vehicles against sales and trade practices which are deceptive, unfair, or otherwise inimical to
consumers and the public interest. It recognizes that a motor, vehicle is a major consumer
investment, defines the rights of the buyer and imposes penalties for violations thereof.

Many Filipinos have been victimized by false warranties and they cannot resort to legal
remedies because of the absence of a law addressing their concerns. The warranties available for
vehicles do not allow the return of a defective vehicle with recurring problems, but only continued
repairs, that is, until the warranty period expires. Buyers are at risk of being left with a hunk of junk,
or a “lemon,” while car manufacturers and dealers find business elsewhere, perhaps from another
unwitting victim.

Complaints received by the DTI are generally resolved through mediation because of the
absence of a legislated mechanism wherein remedies are available for the aggrieved consumer
and the manufacturer or vehicle dealer. Republic Act 7394 or the Consumer Protection Law
provides for the protection of consumers from scheming manufacturers and defective
products but it doesn't deal with the problem of defective brand new vehicles.

‘The proposed measure would give buyers of brand-new cars the right to demand a
replacement “with a similar or comparable motor vehicle” if the first vehicle is 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. The measure will
provide the consumers with relief upon purchase of brand new vehicles with factory defects
that substantially impairs their use and safety through a refund of the full value of these
vehicles. It will also define the parameters in handling consumer complaints involving brand
new vehicles.

Under this bill, if the manufacturers or distributor is not able to correct the defects of
the vehicle after four separate repair attempts, the buyer may invoke his right to have the
whole amount he paid for the car refunded. The proposed measure will cover a 12-month
period or the first 20,000 kilometers mileage, whichever comes first. During this period, the
consumer can report any nonconformity with the standards and specifications of the
manufacturer, distributor, authorized dealer, or retailer, and pursue any right provided the law.

‘This bill has been thoroughly deliberated during the last three Congresses, and it is my fervent
hope that we manage to finally enact this proposal into law.

va

SUSAN A.
Representative, 2" D

Tarlac


Socor sHaene

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SIXTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session »:

HOUSE OF REPRESENTATIVES
803

House Bill No.

Introduced by Representative Susan A. Yap

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. Shore Title. — ‘This Act shall be known as the “Lemon Law of 2013”.

SECTION 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.

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

(@) Brand New Motor Vebicle refers to a vehicle constructed entirely from new parts that has
never been sold ot 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 Vebicle refers to a motor vehicle that is identical or reasonably equivalent
to the motot 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 judicial, who is a purchaser, either by cash or
credit, of a brand new motor vehicle.

(©) Dealer ot Seller refers to any person other than a manufacturer which sells motor vehicles 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.

(@) Implementing Agency refers to the Department of Trade and Industry (DT).

() 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.

@ 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.

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() Motor Vebicle 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 AsianUtility Vehicles (AUVs) but excepting motorcycles,
delivery trucks, dump trucks, buses, road rollers, trolley cars, street sweepers, sprinklers, lawn
mowers and heavy equipment such as, blt not limited to, bulldozers, payloadets, graders, forklifts,
amphibian trucks, cranes, and vehicley which run only on rails or tracks, and tractors, trailers and
traction engines of all kinds used e: cheney for agricultural purposes. Trailers having any number
‘of wheels, when propelled or intentled by attachment to a motor vehicle, shall be classified as
separate motor vehicle with no power rating,

(&) Nonconformity refers-t6-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 ot specifications which cannot be repaired, but excluding conditions resulting
from noncompliance by the consumer of his or her obligations under the warranty, modifications
not aythorized by the manufacturer or distributor, abuse or neglect, and damage due to accident or
foreehrajeur.

() 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.

(a) 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:

(@ Noncompliance by the consumer of his or her obligations under the warranty;
(b) Modifications not authorized by the manufacturer or distributor;

(© Abuse or neglect of the brand new motor vehicle; and

(@) 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 with the results of the said repairs, may
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 or her rights under this Act within the Lemon
Law rights period.

‘The warranty booklet issued by the manufacturer, distributor, authorized dealer o 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.

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 which the vehicle was purchased for a final attempt to address the complaint 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

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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 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 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.

SECTION 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 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 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

(6) 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.

Alll 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) Atbitration:

(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:

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

i 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.


SowmriudsHsene

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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.

@) 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.

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 traveled in kilometers and the
purchase price divided by one hyndied thousand (100,000) kilometers, whichever is higher.

SECTION 10. Disclosure on Resale. ~ Should the returned vehicle be made available
for resale, the manufacturer or distributOMghall, 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 return; and

(©) The condition of the motor vehicle at the timeof 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 ofthe 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 the DTI in order to effectively
implement the provisions of this Act

SECTION 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.

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

SECTION 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.

SECTION 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, .